Tecan Group

Ladies and gentlemen, welcome to the TCAN Group Half Year Results 2026 Conference Call and Live Webcast. I am Sandra, the Chorus Call Operator. I would like to remind you that all participants have been listed in only mode and the conference has been recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and 1 on your telephone. Webcast viewers may submit questions in writing by the relative field. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Martin Brandle, Senior Vice President, Corporate Communication and Investor Relations. Please go ahead, sir.

Thank you. And good morning, everyone. Thank you for joining our conference call this morning. We are pleased to share and discuss our results for the first half of 2026 with you. Joining me on the call today are our Chief Executive Officer, Monica Manotas, and our Chief Financial Officer, Camila Japur. Before we begin, let's quickly go over a few formalities as usual. The press release announcing our financial results was issued this morning at 7 a.m. Central European Summer Time. Both the press release and the 2026 Interim Report are available on our website, tecan.com, under the Investor Relations tab. Additionally, the PDF of the presentation slides, which we will be discussing during this call, is available for download. I'd like to remind you that this call is being webcast live on our homepage, and the link to the replay will be available shortly after the live webcast on our investor webpage. With that, let me now turn it over to Monica Manotas. Monica.

Thank you, Martin. Good morning, everyone. And thank you all for joining us for our 2026 Have Your Results presentation. As Martin just said, I'm joined here today by Camila Japur, our new CFO. Welcome, Camila. You hit the ground running from your start on June 1st, and it is great to have you here and also as part of the leadership team. Together, we will take you through our performance for the first half of 2026, our views for the rest of the year and beyond, and also give you an update on our transformation program rewired. At our capital markets update in March, we explained to you how we intend to reignite growth at TECAN with our rewired transformation program. And I am pleased to say that our solid results with above market growth in the first half gives us good reason for confidence. Let me quickly walk you through today's agenda. I will start with a short introduction and the headline financial highlights for the first half of 2026. Camila will then take you through the financial results in more detail. And after that, I will come back to give you an update on our rewired transformation program outlook for the rest of the year and our targets for 2028. As always, at the end, we will have time for your questions. Our performance in the first half was solid. I'm pleased about the above market growth in both segments. Profitability is sound, yet reflects the cost of our rewired program and of IT investments. A look at our results. Group sales came in at 427.5 million francs, up 3.4% in local currencies, with both our life sciences and partnering segments contributing to comparable growth. Order entry was 444.3 million francs, up 3% in local currencies, keeping our book-to-bill ratio above one in both segments. Adjusted EVA DA was 64.5 million francs, corresponding to a margin of 15.1% of sales, slightly ahead of last year. Basic EPS was 99 cents, and adjusted EPS was 2 francs and 62 cents, both below last year's levels. Here, FX was an important headwind, but Camila will take you through the drivers. Operating cash flow was 17 million francs. As Camila would explain in more detail, the significant decrease in the first half of 2026 was mainly due to changes in working capital. These factors are non-structural. Operating cash flow has historically been strong, and it will remain strong in a future-proof TECAN. Overall, a solid first half with good above-market growth. There are areas for improvement, which we are addressing with rewired, but we remain financially very strong, and this allows us to invest in future-proofing our company while returning capital to our shareholders in line with our capital allocation strategy. Let's now take a look at our end markets. As a reminder on the format of this slide, this slide is intended to show how we expect our end markets to perform this year. The arrows in each customer segment represent the expected change versus last year. There are two arrows for each segment representing the lower and the upper end of the expected range. Overall, In H1 trends developed as we expected. Markets have been largely constructive and continued to recover. Now let me share some color on how we performed in each segment in H1. I will start in the middle with the biopharma and diagnostics since they are the most relevant for us. In biopharma we grew high single digits. We are seeing the recovery we were expecting. The diagnostic segment continued to grow steadily, and we delivered mid-single-digit growth in this segment. Now, moving on to academia and government, there we saw a double-digit decline. Relative to our expectations, our view is that for lab automation, this segment performed on the lower end of the range. And finally, in medtech, we grew in the mid-single digits. We continue to see healthy growth in the market for this segment. However, concentration of our business among a few customers means our growth can reflect single customer decisions more than the overall market dynamics. Now looking out to the second half of 2026, while we have seen some signs of acceleration in the market, we believe it is too early to call a change in trend. So with that, our assumption is that for the full year 2026, the markets will perform as we anticipated at the beginning of the year. On the whole, I'm pleased with the development of TECAN and of the market environment so far this year. Our performance has been solid. We are confident in our ability to grow above the market, yet we remain prudent. And with this, I'd like to hand over to Camila Japur, our CFO, for the detailed discussion of our results.

Good morning, everyone. Thank you, Monica. I'm pleased to present a detailed overview of TECAN's financial results for the first half of 2026. Let me start with sales and order entry on slide 6. On the left top of the slide, you can see the reported sales for the Group of 427.5 million Swiss francs, representing a decrease of 2.7% reported figures, but an increase of 3.4% in local currencies. Growth momentum was sustained in the second quarter, with sales up 3.4% in local currencies. Moving to order entry, the first half reached 144.3 million Swiss francs, up 3% in local currency with book-to-bill ratio of 1.04 and above 1 in both business segments. Important to say that Q2 order growth was stable year-on-year in local currencies, despite a tougher comparison base and Q2 orders exceeding Q1 levels. Moving to slide 7, where you look at segment performance. Let's start with the life science business. Sales grew 3.1% in local currencies, outperforming the broader lab automation market. The growth was driven by continuous strong performance in the biopharma and agnostic customer segments, with sales in academia and government decline as expected. The life science business was sequential improvement, with Q2 sales increase of 4.6% in local currency year over year. From a regional perspective, half-won sales in Europe remained stable, while the U.S. delivered approximately 1% growth in local currency. Both regions experienced an acceleration of growth in the second quarter. Asia was the main growth driver, with Japan posting very strong results and China achieving mid-single-digit growth. In Asia, liquid handling instruments, including both standard platforms and our LabWorks customized solutions, were major contributions to this positive development. Now, let's talk about our partner in business. Sales increased by 3.6% in local currency, supported by solid growth in diagnostic and medtech. Q2 delivered growth of 2.4% in local currencies despite an increasing challenging comparison base. Looking at our different offerings, we saw continued growth, good growth in Synergen services for complete system and we saw the highest growth in our Paramit CDMO services which also benefit from a lower comparison base in prior year. In CAVRO OEM components, sales decreased again as we had some supply challenge and we were unable to ship all of the planned backlog. Order entry was solid as reflected by a book to be ratioed above one in both segments during the first half. Now let's change gears to profitability. Before we talk about EBITDA, I would like to comment about our gross margin and OPEX. Gross profit margin declined year-over-year from 36.2% to 33.9%, driven mainly by material cost inflation, inventory valuation, FX, and tariffs. The declining gross margin was partially offset by a lower OPEX that had the benefit from FX and reduced accrual and improvements from rewired. Our adjusted WTDA reached 64.6 million Swiss francs, just 1.1 million below year-over-year. The adjusted WTDA margin increased to 15.1% is likely above the 15% reported in half one 2025. This was achieved despite headwinds from FX and tariffs, which had combined negative impact of 170 basis points. Nevertheless, underlying profitability improved by 108 basis points, primarily as results of sales volume increase, a favorable product mix, and the first benefits realized from the wire transformation program. Let's move to page nine. I want to introduce this new slide to provide greater transparency on the reconciliation from reported to adjusted WTDA, clearly outline the impact of our transformation and IT investments. You can see in the table on the left side that the difference of $17.9 million to adjusted WTDA is mainly explained by the cost of $7.6 million related to rewired transformation program, including restructuring expenses. In the second bullet, we see investments to upgrade our SAP R32 S4 HANA and the new CRM system. This project, named Elevate, was launched in 2024. In the last line of the table, we also have the positive effect from the TARIS refund of half a million. As you may saw in the press release, we expect a further refund of around six million and a half too. Now, let's talk about rewired. As previously communicated, implement rewired requires upfront investment. These costs are a combination of cash and no cash items and are necessary to deliver the sustainable improvements and returns we expect from the program. The total OPEX to deliver rewired is estimated at 45 to 60 million Swiss francs and in half one we booked at $7.6 million. Our savings from rewired are materializing, increasing our confidence that the program will generate long-term value. My focus in the coming months will be on establishing disciplined cost-based tracking and developing a comprehensive understanding of all underlying cost drivers to position TECAN for sustainable growth and improved profitability. I will be happy to share more quantitative progress of our rewire execution with you. Changing to Project Elevate, I would like to stress that while rewire is a comprehensive transformation program, Elevate is our ERP and CRM modernization project. Elevate's non-recurring costs in the first half were 9.9 million Swiss francs. Differently from REWIRED that we are invested in the first year in the reset phase, for ELEVATE we are moving to the final stage of the project with goal life anticipated in the first half of 2027. Both REWIRED and ELEVATE are critical to strengthening our foundation and supporting our strategic ambitions. I hope this view helps to increase transparency of our strategic investments. Now moving to our segment profitability on slide 10. Let's start with life science business. As illustrated in the chart in the bottom of the page, the adjusted WTDA margin was 13.8% of sales. This segment absorbed most of the negative impacts from effects and tariffs that were partially offset by positive contributions from higher volumes and operation improvements under the rewired program. In the partnering business, the adjusted EBITDA margin increased to 18.7%, driven by higher volumes, a favorable product mix, and operational improvements resulting from rewired, despite adverse effects and tariff impact. On slide 11, we will talk about net profit and earnings per share. Before talking about adjusted figures, I want to explain the factors that impacted the non-adjusted earnings. All reported earning figures include EBIT, net profit, and earning per shares were affected by higher costs related to rewired transformation program and Elevate project. Reported net profit of 12.3 million Swiss francs was also impacted by negative effects on effects hedging below the operating profit line. Now I will talk about the adjusted numbers that you can see in the chart. Adjusted net profit declined by 3.5% to 32.5 million Swiss francs. Adjusted earnings per share were 2.62 Swiss francs, down 1.5 year on year. The decline in adjusted earnings per share is lower than the decline in adjusted net profit as the number of outstanding shares was reduced through the ongoing share buyback program. In my last slide on page 12, I will talk about cash flow. Before diving into the numbers, I would like to highlight that TICAN maintain a strong financial position to continue investing our transformation program to future-proof TICAN. while also returning value to shareholders through dividends and our share buyback program. Let's start with operating cash flow that is positive but significantly lower at 17 million Swiss francs with cash conversion also declining compared to previous periods. This was mainly due to higher accounts receivable for increased sales late in the period An inventory build-up to enhance operational resilience amid supply chain challenges and higher payments, including tax payments related to a prior period. These factors are non-structural and operating cash flow has historically been strong. Day sales outstanding, increases slightly from 45 to 47 days, mainly reflect the higher accounts receivable concentrated in the end of the quarter. The change corresponded to a normal fluctuation. I also want to reinforce the message that cash flow generation is a key focus area for me and will continue to drive actions to maintain healthy working capital. Now, moving to investments. In the first half, it amounted 4.3 million Swiss francs. This includes 25.7 million invested in property, plant, and equipment and other intangibles which cover the new consumable production line in the US and investments related to Elevate project. Cash flow from finance activities in the first half include the dividend payments of 37.2 million Swiss francs and the purchase of treasury shares of 30.5 million Swiss francs. This reflects our commitment to attractive shareholder returns while ensuring the capital strength to transform and expand our business. I also want to talk about net liquidity in the last 12 months, comparing June 2025 versus June 2026. We saw a decline to 73.5 million Swiss francs in the first half, reflecting the combined impact of all mentioned effects. Before I hand back to Monica, I would like to reiterate my confidence in Tika's strong position and our ability to successfully navigate this transformation journey. I'm confident that as part of Rewired, we can deliver sustainable, profitable growth. Thank you. Thank you, Camila.

I would now like to give you an update on our Rewired transformation program and share our outlook for the remainder of 2026 and beyond. As a reminder, we launched Rewired in the first quarter to future-proof TCAN and to help us excel in both innovation and execution. This three-year program is designed to generate more than 4% CAGR versus our 2025 baseline, taking us to our 2028 targets of 1 billion francs in sales and 20% adjusted EBITDA margin. It's built around three pillars. First, it's portfolio discipline. We're building on our strengths, investing in scalable, differentiated segments, and exiting non-core businesses to drive focus from a talent and innovation perspective. Second, commercial excellence. We're building an organization that outperforms the markets with sharper segmentation, value-based pricing, and a more agile go-to-market approach. And third, operational excellence. Creating scalable, resilient operations on a lower cost base and which convert growth into margin and cash. And underpinning all three pillars is a performance culture. Successful execution relies on ownership, accountability, and collaboration across the organization. Now let's look at the progress we have made against each of the three pillars since our last update. Here are some highlights. On portfolio discipline, We closed our Boston design site in April. This was the site we acquired in 2021 as part of the pyramid acquisition that housed dedicated early stage design functions for medical devices. We have also advanced the planned exit from selected TECAN genomics activities with the process progressing as planned and our customers continuing to be served seamlessly throughout. On commercial excellence, We're building out the ecosystem to position TCAN as the partner of choice for AI-powered labs. The first concrete milestone is agentic AI for introspect as part of our NVIDIA partnership. We're also collaborating with NVIDIA on the further development of physical AI capabilities. In parallel to the NVIDIA partnership, We are advancing a growing portfolio of AI-driven initiatives with technology partners and customers where we position TECAN products as key enablers of AI-powered laboratories. For example, in Japan, TECAN collaborated with a customer to develop a biofoundry, which is a highly automated factory for biology that integrates robotics, AI, synthetic biology, genome engineering, high-throughput testing, and Data Analytics. TCAN technology serves as a core component in this innovative setup. In terms of geographic expansion, in May we expanded our direct presence in India with a new local sales and service team based near New Delhi, an important step in one of the world's most dynamic life science markets. Operational excellence is focused on scalable, Resilient operations that convert growth into margins and cash. Efficient operations and a lower cost base are a priority for us. At the end of March, we divested our position machining site in California and consolidated that manufacturing capability in Vietnam. Our U.S.-based pipette tip production has been operational since Q2, giving us more responsive, resilient supply for the U.S. market, including a meaningful reduction in CO2 emissions. and we continue to advance on our previously initiated investment in a harmonized SAP enterprise architecture. The project is an important step and as Camila explained, its cost is recorded under the Elevate program. To drive the work on all three pillars, we have also made progress in strengthening our performance culture. Examples from the first half of the year include clear P&L ownership by the businesses with aligned incentives, ownership of the innovation roadmap by the businesses also with aligned incentives, and tighter cost discipline. My first year as CEO has clearly confirmed the potential of TCAN. To realize this potential, to future-proof the company, and to drive long-term value, we launched our rewired transformation program in the first quarter of this year. Following the implementation of initial measures in the second quarter, We expect these to contribute to our full-year performance and serve as the foundation for accelerated growth and profitability. We will continue to share proof points as we progress with Rewired. With this, let me turn to our financial outlook for 2026. We continue to expect sales growth in the low single digits in local currencies for the year, and our aim is to grow above the market. Our results in the first half confirm our confidence in our performance and in our adjusted EDA margin outlook of 15.5 to 16.5 for the full year 2026. We now expect a slightly lower negative impact from tariffs than previously assumed. At the same time, we expect positive effects from higher sales volumes, a favorable product mix, and the initial benefits from our rewired transformation programs. Based on these developments and based on what we delivered in the first half, we currently expect to close the year towards the upper end of our guided range. And now looking forward beyond 2026, we also confirm our outlook and targets for 2028. 1 billion francs in sales representing a CAGR above 4% from our 2025 baseline in local currencies and a 20% adjusted EBITDA margin. Beyond 2028, We confirm our ambition of mid to high single-digit sales growth and an adjusted EVA-DA margin above 20%. To sum up the first half, I am pleased about the progress we achieved. We grew above the market. We have good momentum in life sciences and partnering is on track. We have a significant opportunity to realize the full potential of TCAN. Rewired is progressing well and we expect it to contribute materially in 2027 and 2028. While I'm pleased about our performance in H1, I'm still prudent about the market recovery and continue to expect it to be gradual. What I am certainly confident about is our ability to execute and deliver on our commitments. We're now very happy to take your questions.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the telephone. You will hear a tone to confirm that you have entered a queue. If you wish to remove yourself from the question queue, you may press star and 2. Questioners on the phone are requested to disable the loudspeaker mode and eventually turn off the volume of the webcast while asking a question. Webcast viewers may submit their questions in writing by the relative fields. In the interest of time, please limit yourself to two questions. Our first question comes from Morgan Stanley. Please go ahead.

Good morning, Monica, Camila, and Martin. Thanks for taking my question. My first one is on the rewired program. Could you give us a feel for the sustainability of the cost savings you've generated from this program? and could there be upside to this program versus when you first announced this program and what are the one-off or restructuring costs you've earmarked for the period versus the 8 million you booked in the first half? And then my second question is a bigger picture one on AI, which I noticed you've highlighted a lot more in this quarter presentation with this NVIDIA partnership, which all sounds very exciting. How are customer conversations trending here? Do you see this resulting in, for example, higher automation requirements, expanded project discussions, etc.? And when do you think this could materialize more concretely in your order growth? Thank you.

Thank you for the questions, Aisha. Let me start with the rewire piece, and I can give an overall context, and maybe Camila you can add some perspectives as well there. Overall, I am happy with the way things have started on Rewired. On your question around sustainability of savings from what we've seen so far, if you actually take a look at the first savings that we've seen have been really through the exits of the businesses that we talked about also in March and what we've started to execute. So those costs come out of the system. Those are certainly... So that's a permanent kind of cost out that we will see out of those. As we continue to execute, you will start to see more of those coming through. I mean, as we said, we launched the program in Q1, so we technically really just have one quarter under our belt. And yes, you're right. I mean, we do continue to review So just to complement this before you mentioned the AI piece, so

On top of that, I want to highlight that the focus in coming months will be to establish a discipline cost-based tracking and develop a comprehensive understanding of all underlying cost driving that we have in the company. This will also enable us to give more transparency about the numbers, how they trend, right? But I need a bit more time. And then you also asked about the cost, the restructuring cost. I would say For rewired program, 2026, it will be similar level in the second half. We reported the total cost, and for 2026, it's a bit lower than the average for the three years.

And then I'll turn over to the second question around AI. This is a really, really exciting topic. And certainly we see it on the side of the opportunity of how automation can play a role and just seeing the excitement from a customer's perspective. And I would say maybe two sides. I mean, certainly what I see on the customers, primarily on the clinical diagnostic side, I've been really excited to see the capabilities that we've added to our Introspect tool because these customers tend to have larger fleets in their labs and they really are focused on kind of efficiency and optimization. They don't have the ability to have manual processes, just something that relative to the volumes that they handle just wouldn't work, so they definitely rely on automation. and a tool like this really allows them to truly understand all the opportunities from an efficiency perspective of . We have more things coming as part of the collaboration with NVIDIA. I mentioned physical AI, but there's another piece that we're talking about that we're calling Discovery Introspect that will allow for faster processing of larger subsets of data so again something very much targeting this subset of customers. And then on the side of our biopharma customers also they are very excited to see how they embed AI in their drug discovery process and here we help them by ensuring that we make the validation of the results as optimal as possible. Again there is no way for them to be able to manage all of this if they are accelerating the in silico bit if the validation doesn't leverage automation and AI as well. But the connection of those two to create that closed loop is where our value add from an AI perspective comes into play and they're interested in the concept of autonomous labs. So all of that is certainly in the conversations. You ask how much of this is truly Thank you so much.

Thank you very much for taking the questions. As we start to think about 2027 growth, I have some sort of related questions on what we're seeing on the order entry side. So I guess order growth I think we've slowed from 6.7 in Q1 to stable in Q2 although I appreciate the book to build was above one and there was a sequential improvement but just trying to understand with tougher comps and the order side also into H2 how should we think about orders as we move into H2 with you know we're seeing the underlying improvements in certain areas of the market but also the tougher comps and then maybe by division I noticed you said life sciences orders accelerated in QE2 so is the sort of broader slowdown maybe to do with your largest customer and partnering or does it reflect any sort of underlying slowdown? Really just trying to get a sense of confidence in terms of the orders and the backlog in H2 as we start to think about 27 growth. Thank you.

Thank you for the question, Harry. I'll give you an overall view. So a lot to unpack there. I would maybe start by saying I feel good when I think about the launch point into H2. I feel good about what I'm seeing, a combination of the order behavior, but also the continued expected recovery of the markets. Maybe that is a high level. You're right in what you're saying that sometimes you have to take into account the comp that is slightly different in the different segments. So when I think about life sciences maybe as a start, I'd say that definitely we saw an acceleration. I think you mentioned and we mentioned it in the prepared comments in Q2 versus Q1. And I think the Kind of underlying that is it goes to the recovery that we are seeing in the market because we did see better results out of the instrumentation part of the portfolio. So with orders accelerating in Q2, I feel good about the second half. Of course, we want to keep an eye on how the markets continue to recover. and there were a couple of things from a comp perspective, particularly consumable side as customers prepared to take advantage of the new capability in the US. We know that they placed some orders in the first half that perhaps we're not going to see in the second half. So I still expect consumables to grow higher than the overall average. but I know that there are some dynamics there that will have an impact in H2. But overall feel good, particularly on the side of what we're seeing in terms of acceleration of the instrumentation part. I think that's a good signal for market recovery. On the partnering side, you made the point around the largest customer. That is definitely playing a role. We always knew that this year was going to be a little bit skewed from a growth perspective just given how the comp worked out in 2025. So H1 was always going to be stronger than H2 and I think that is reflected in the order entry levels. So no surprise there. We continue to stay obviously very close to that customer as we think about H2 and then obviously the prospects going forward. When I think about What we're seeing on the Synergen side, I feel good that our customers are seeing also the recovery that we're seeing. And I feel good about the expectations for the second half. We see some of our big customers having strong success in the market. So that's going to reflect well for us. And then as Camila made the comment around CAVRO, We have a backlog that we couldn't ship in the first half, so that would add to the expected results in H2 is that we have a catch-up that we need to do there, so that will help overall the H2 results. And it's exciting to see what some of our customers, both on diagnostics and life sciences, are doing in terms of components. So I feel good about that business as well. I hope that gives you an overall sense of how to think about H2.

Yeah, that was super helpful. Thank you. Could I just ask one more question and then perhaps I can join the queue again. Just it was helpful saying you sort of expected to deliver towards the higher end of the margin guidance. So that's the sort of base case. However, I noticed the sort of underlying improvement you've We are very comfortable with our guidance now and I think the first results of WeWired give strength, our confidence

So this is why I also mentioned that we expect to be more in the upper range of that guidance. But I joined in June, right? So my focus now is to really have a very good grasp and understanding of our core space and attract this in a very disciplined manner. And then we believe that with the solid results in the first half, that this will continue in the second one. but I prefer to take a more like a conservative approach here by guiding the upper range of that reach but not change the guidance.

Thank you, super helpful. Thank you.

Thanks, Erin. The next question comes from Jan Koch from Deutsche Bank. Please go ahead.

Good morning, Monica. Hi, Camilla. Hi, Martin. Thanks for taking my questions. I would like to come back to the phasing in H2, and could you help us to better understand the phasing of especially cells and order intake in Q3 and Q4? Given the tough comparison in Q3, do you expect order intake growth to improve sequentially? And then secondly, great to see the sequential growth acceleration in life science. Aside from exposure to the academic and government channel, Are there any life science businesses that haven't returned to a more normalized growth rate yet? And could you also update us on the current sales exposure to the A&G channel in both the life science and the partnering businesses?

Do you want to take a facing? I can take it. Maybe I'll start on the first part is on the facing of the numbers. I guess maybe as a general comment, I expect this year to look more as how the business was looking before all the ups and downs during the pandemic and following, which means at the very high level, we tend to have a bit more weighing on from a sales perspective on the second half than we do on the first half. So that's kind of the The expectation overall. And then there's really nothing to highlight third quarter versus fourth quarter other than maybe keeping an eye a little bit on the comp that we saw primarily on the partnering business. And for part of the business it was a little bit higher in the third quarter and for the other part of the business it was a little bit higher on the fourth quarter. So that would be the only Watch out as we think about the second half, but as I said, I feel really good about what we're hearing from our customers in terms of the prospects and how they are doing in the markets and to deliver on our commitments in the second half. So I hope that gives you a little bit of color from a phasing perspective. And then if I take the second part of the question, which is on the life sciences, I think you were asking what are the areas where perhaps we're not yet seeing a recovery. And certainly I would say that maybe two aspects there. One is on the academia and government, as I've mentioned in my comments. I think this is the area that is lagging from a recovery perspective. We saw weakness, quite honestly, pretty much across the board in all geographies, perhaps except J-PAC or the Asia region, except China. When we look at what is going on, it is clear that it's not even throughout, right? There are certain institutions that have funding, so it's really a matter of kind of looking where the funding is and really supporting those customers in that perspective and that's really the work that the team has been doing and then we're following very closely the sources of funds and ensuring that we start to see that flow and keeping an eye on that. Maybe the second area in life sciences we're keeping a very close eye is the development of the growth instrumentation and there as I mentioned We did see quite a difference in the first quarter versus the second quarter, so it's really nice to see how that has improved in the second quarter, and I think that's really a good testament of the overall recovery, particularly what we're seeing in the biopharma segment.

Got it. Thank you. One quick follow-up, if I may, regarding the supply chain issues that prevented you from shipping all orders. Could you quantify that impact and have these issues now being resolved?

Yeah, so the issues relate particularly to supply with a couple of major suppliers that we have within CAVRO. We see an improvement overall, but we expect that recovery to kind of Thank you.

Thank you. The next question comes from Sebastian Vogel from UBS. Please go ahead.

Hello, good morning. I've got two questions. The first one is on the margins. I mean, it's not easy, but nonetheless, to think about how margins we're looking in June or May compared to the average of H1 that you gave us. Is there any sort of ballpark indication that you can provide us? The other question I would then take afterwards.

It came strong more in the end of the quarter, but this is because of the fluctuation in revenue that we have more concentrated in the end of the quarter. That's the main reason. And a volume helps, right?

Sure, but do we talk like whatever 50 basis points higher than the average, or more like 100 basis points higher, or is it just some sort of granularity?

We don't disclose on that level, Sebastian.

Sure. Then my second question is with regard to the underlying improvements that you were showing into the waterfall charts. And as you have said, right, you have like 180 basis points in the first half. You guide for 40 to 140 basis points for the full year. So is that just outright overall massive conservatism or is it something to be expected to see these 180 basis points to going something like the midpoint maybe in the 90 camp?

Yeah, so as we mentioned, we are very confident on the guidance for the second half and the full year. And we believe, as Monica mentioned, that we will be more on the upper part. I just started in June, so I want to have a better view of our cost drive, cost base, to feel very confident to change guidance at this stage. But we are confident that we'll be in that range, more in the upper part.

Got it. Many thanks.

Next question comes from Delphine Lelouet from Bernstein. Please go ahead. Yes.

Hello. Hi. Good morning, everybody. Just to be back on the tariff, please, can we get a sense of the seasonality Getting into H2 and to confirm that approximately 90% or 95% so far that we've been seeing into H1 was dedicated to the life science. This is the first question. The second question deals with the investment which is ongoing both regarding AI and regarding IT infrastructure. Can you give us a sense of how big is that for the rewired and the re-ignite and how much we should think about that getting into 27?

Let's start with tariffs here. So in the first half, as you saw in the bridge, it was a negative impact of 50 bps. And we got a bit refund, but it's not visible in the bridge, right, because this is adjusted. For the second half, the impact should be lower. We estimated around 30 bps, which leads for the full year impact of 40 bps. And this reflects the most recent change in the and the tariffs communicated, right? When it comes to investments, for the rewired program, we have, as you know, this is a journey, it's a three-year program, and our expectation is that in 2026 we are more in the lower end of the baseband, 2027 that will increase because there are a lot of transformation going on in the company, so it will be a high impact in 2027. For the IT investments, what we call Elevate Program, that is SAP for HANA and the CRM system, here we are more towards the end of the program, so our expectation is to go live in the first half of 2027, and I expect they spend perhaps at a similar level than we had in the first half of 2026. So that's just to give you an idea.

No, no, but perfect. Thank you. Very useful. Thanks a lot.

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We have now a follow-up question from Harry Gill from Birnberg. Please, go ahead.

Thank you so much for taking the follow-up. I think you noted mid-single-digit growth for the life sciences business in China. Could you maybe just discuss what you're seeing in the different end markets, maybe academia and government versus biopharma, and how sustainable that growth is? Thank you.

Yeah, thanks for the question, Harry. So you're right. We did see that business back to growth. When I think about the market dynamics in China, I don't really think that anything has changed relative to perhaps what we discussed maybe at the beginning of the year and even towards the end of last year. I think that what changed is more our team's understanding of How to win in that market overall. And so when you actually look at the overall results by segment, we see that the driver of the growth for us has been on the biopharma side, which is nice to see. I think I have shared in the past that China is very much at the forefront when it comes to innovation. When we actually first started to see the concept of robotic work cells applied into autonomous labs, it was actually there in China. So our offering there, including what we have through our LabWorks team, resonates very well with the customers over there, and that's why I think that's what's driving growth in biopharma. I mean, I think from a market perspective, I think it is sustainable, so I think it will be a matter of us, you know, continuing to execute well and execute to continue to gain share in business. I think on the academia side, I mean, it hasn't really changed. The concept of local continues to be important, and typically what our customers will need to do is they will have in tenders a certain minimum requirement of the Made in China piece, and then they work with us to figure out how our piece fits within the total to increase their chances of getting the funding. We had a very nice win in the first half from one of our academia customers, a tender that they put out that helped on the orders. We haven't shipped the product, but that should help in the second half from a revenue perspective on the academia side. But as I said, I think when you think about the overarching dynamics, I don't think they have changed. It's really more... We have managed the dynamics and win in that market.

Thank you.

The next question comes from Laura Peiser from Octavian. Please go ahead.

Yes, hi, good morning, everyone. Thanks for taking my questions. Maybe just coming back to the sales guidance, you have not changed the wording and you have not mentioned either that you would expect it maybe to be at the upper end. as you have done with the margin. So here I'm just wondering what degree of conservatism is still embedded in that implied growth rate for H1. I mean, when I take the midpoint, it's probably only like 1% growth required in H2. And what would prevent the strong momentum you have seen in H1 from continuing or maybe even accelerating? And then the second one is on Pyramid, specifically maybe on the largest customer. Can you discuss a little bit more here the sales and order development you have seen and also what we should expect for the rest of the year? I think if I remember correctly in March, you were expecting rather flattish sales trends for the largest customer. Just wondering if that has changed anyhow. Thank you.

Yeah, thanks, Laura, for the question. So I'm going to start with the sales guidance. I would say that here, as I mentioned in the prepared comments, I'm being prudent from a market perspective. We are seeing the recovery, but this is something to be watched just because I'm not ready to call out a change in the trend, and that then plays a role in what we are expecting from a total sales perspective. That's the overall comment from a market perspective. I want to be prudent and continue to see as the market continues to recover. With that said, obviously we do have some differences from a comp perspective to be careful about, particularly on the partnering part of the business, which ties to the second part of the question, which We always knew that we would have a harder come from a second half perspective because our largest customer had a stronger second half in 2025. As it relates to pyramids, yes, so as you said, we have been guiding for a flat number in 2026 versus 2025. We had a really strong growth in the first half, as Camila mentioned, and this was particularly, even more so in Q1, just because a matter of how the comp was actually worked in 2025. So we did see, as we expected, a strong H1 with them. As we reviewed the next six months with them and looking particularly at how they're seeing the product mix, because as you know from a demand perspective, they really have no issue with how they're seeing the growth, which is really great to see. But as we look at our deliveries and how they are expecting product mix, Right now, the latest numbers are coming in just slightly below the 2025 numbers. But that doesn't change at all the expectations of the pyramid or the CDMO business from a full-year perspective. So they will make up that small difference with growth in other customers. But that's what the latest discussions with them are.

Okay, that's helpful. Thank you. We now take the last question for today's call is coming from Daniel Jelofkan from ZKB. Please go ahead.

Good morning also from my side. First of all, Camila, a good start in retrospective. I only heard very positive things from investors when you were with uBlock, so yeah.

Thank you.

And so first question, I didn't really understand the negative hedging I mean, when you lose on the top line and on the margin in terms of Forex, shouldn't there be a positive hedging gain below the EBIT? That's my understanding. So can you maybe explain the bridge, how that happened? First question.

So this is zero versus spot. But we have a... The cash is not impacted, so we have an average, right? This is zero. But then now we have, as the dollar is going up now in the later phase and month, then we also have the negative impact of the hedging contract, right? But this helps in the cash flow. We do have a large exposure to dollar. Net exposure of around 160 million, so it's important that we keep the hedge in contact to mitigate that impact. But we don't disclose more details about it in this call.

Okay, okay. And last question on the academias. I mean, a lot of peers have now said that there is a budget which is geared to 80% 2% to late stage clinical work and 18% to early discovery work at academias. So can you elaborate a bit on the impact on tech on where are you more geared? That would be helpful. Thank you.

I can take that, Daniel. And I assume you're talking about NIH funding. Is that correct?

Yes.

Yeah. So, I mean, we did see earlier this year that there was approval for this fiscal year on a budget that was slightly higher than the previous year. I think what our customers are telling us is they don't necessarily see the actual flow of the funds and there's been data out there showing that. So that's really the key watch out as we look forward in supporting our customers in this segment is how will they and start to see the flow of funds into their projects because one thing that is very clear is that if you think about the priorities in what the administration wants to see accelerated from a research perspective, it's things related to AI and automation. So I think it's how we expect to see those funds flowing through and that's really what they're not seeing Okay, okay, but your exposure...

is more geared to late-stage clinical work or early discovery?

Yeah, it tends to be more early discovery, but when you think about the academia exposure, it's roughly about 15-ish percent of the life sciences business. We really have no exposure on the partnering side, so that works out to be roughly about 5% for total content.

All right, thank you.

Thank you very much. With that, we would like to conclude today's call. Thank you very much for your participation and we wish you a great day. Thank you. Thank you.

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