Washtec Ag Augsburg

Good afternoon, ladies and gentlemen, and welcome to Washtec's earnest call on the results of the first half year 2026. My name is Kevin Lorenz, Investor Relations Manager at Washtec, and with me I have today our Chief Financial Officer, Andreas Pabst. We will provide a brief update on two important current topics of Washtec and guide you through our results. Following his presentation, the floor will be open for questions. You may already queue now if you want to ask questions in person or write down any question you might have. But without further ado, I'm now handing over to our CFO, Andreas Pabst.

Thank you, Kevin. Hello, everybody. Also very warm welcome from my side. I'm really happy that you took time today to listen to the latest news and figures on WashTech. Thank you for the audience. Before I come to the figures, there are two items WashTech is working very intensively on. One is the optimizing of our production footprint and the other one is everything in connection with the ongoing rollout of our smart care. Let's start with the optimization of our productions. Optimization of our production is clearly one of the biggest levers we currently have in the company. That in general does not only include the new site in Jurany close to Pilsen in the Czech Republic, but also has a huge impact on our sites in Augsburg. Recently, I visited once again our site in Jurany and brought these pictures to show you our progress. and believe me, I was personally deeply impressed by what our Washtec colleagues have been doing here over the last months. The upgrading of Czech facilities is not just a construction project. It is a key element of how we are reshaping Washtec's industrial footprint for the next phase of profitable growth. At Neurany, we are building up a modern and clearly focused production and logistics setup Our facilities will take over a central role in module production, pre-assembly and material preparation. This allows us to bundle activities that can be standardized, scaled and industrialized more efficiently. The whole site consists out of three plants, where number three is the newest one and is currently furnished, whereas number two will be closed mid of next year. Not everything is as of today in full functionality, but major steps forward have been made in this quarter. For example, the logistics section, meaning goods received, goods dispatched, as well as production supply processes are now fully active. Necessary assembly areas from plant two have been fully integrated in plant three. Smart care pre-assembly and electrical production are moved too. This gives room for further optimization of plant one, building up here a central sheet metal warehouse with short transport distances. and this was only the description of movements within our three sites in Czech. Further movements to optimize the whole production flow are also necessary in Augsburg and in Derking, close to Augsburg. All this is not only related to the shift of 85 workplaces, it is a lot more. You see, WashTech is doing here a real big thing and you can imagine that within such a huge project, not everything is 100% in cost and in time. but we are doing quite well and we strongly believe that at the end we will be able to cash in the expected additional profitability. This brings me now to the update on my second topic, our new rollover. SmartConnect, a completely new digital operating service and operator experience. You know, we have launched SmartCare Connect in May 2025. And given the figures, it is a big success. In Q2 2026, we did, for the first time, the majority of our rollover revenues with this brand new equipment, 54%. And in terms of units, we celebrated recently the 1,500 machine produced. The rollover development impressively shows that the market is accepting the product excellently. and we are still moving forward with developing additional features for our SmartK Connect. Some weeks ago, we built the first prototype with a height of 2.90 meters. You can see it here in the picture. The machine is painted in pink and I can assure you that it was really a delight to see this one moving along our production stations and to see the pride in the eyes of our employees. On the other side, everyone who has ever introduced a complete new product line knows that there are some obstacles. Sure, at the beginning, we had some quality topics which we now have under control. Also, the installation costs gave us some headache. As you can see on the columns at the upper right side on this slide, installation costs overall increased quarter by quarter. But our implemented installation task force shows positively results. Since this year we could stop further increase. Now we need to do the next step and bring down the overall installation cost to a better level. So overall SmartCare Connect keeps us busy, but given the results from the market in a very positive way. Now let's come to the figures of H1 2026. Summing up H1 in a statement. Revenue, especially in equipment in North America, is quite good. A new all time high for the first six months. In terms of profitability, a clear improvement compared to Q1 2026, but further efforts are necessary. Stepping now into more details. I'm pleased to report that we achieved a new record level of revenue in the first half of 2026, reaching 248 million, which represents an increase of 6.6% compared to the prior year. This growth was mainly driven by the continuous strength of our equipment business, with higher sales volume across both our Europe and other segments, as well as North America. The result demonstrates that our new products, not only the Manchester SmartKey Connect, but also the new JetBay Connect or our Magic Care consumables line, as well as our strategic movement towards our solution provider, contribute to this growth despite an uncertain market environment. Looking at profitability, EBIT came in at 70.7 million, essentially on par with prior year's 17.6 million. giving the higher sales. This results in a lowered EBIT margin of 7.1% compared to 7.6% in the prior year. Here, we are not satisfied with the result, but we took some measures to improve. For more detailed analysis, please wait some slides to come. Turning to cashflow, free cashflow amounted to 40 million. the decrease of 6 million versus the prior year. This development was primarily driven by higher trade receivables resulting from the strong revenue growth in the second quarter. Importantly, this reflects working capital timing effects rather than any deterioration in the underlying business. Overall, compared to the first quarter of this year, we, the management team, see a clear improvement in second quarter. Now, we need to keep going further. Let me now turn to our second quarter's performance. As I already intimated when I spoke about the first six months, second quarter showed a significant improvement. Revenues up to a new quarterly record of 137 million, representing a 10.4% increase year over year. Similarly to the first quarter, growth was primarily driven by higher equipment sales volumes across Europe and North America. At the earnings level, EBIT increased by 9.4% to now 13.9 million, what led to an EBIT margin of 10.2%, essentially in the line with 10.3% reported a year ago. pre-cash flow also showed a very encouraging development. At 6.7 million, pre-cash flow was up by 90% year over year. The strong increase was driven by higher net income, as well as the reimbursement of investment income tax, supporting both liquidity and financial flexibility. So summing up, Q2 2026 was basically good. Let's move further in that direction. Let me now provide you some more details on the development of our business lines, which clearly illustrates the drivers behind strong revenue growth in both the first half and the second quarter. The key growth engine continues to be our equipment business. In the first half of 2026, equipment revenue increased by 13.4%, 128 million. compared to 130 million one year ago. In the second quarter alone, equipment revenue grow even faster rising 18.7%. Despite we are happy in all regions and all customer segments, meaning key accounts and directs, it is worth to mention that the growth with key accounts in North America was outstanding. In the service business line, revenue increased by 3.2% to $81 million in the first half, while second quarter revenue grew by 5.7%. Especially the strengthening of our service technicians network pays out here step by step. In consumables, revenue amounted to $36 million in the first half, a decrease of 5% compared to the prior year. The decline primarily reflects weather-related lower wash volumes across several markets. Encouragingly, the reduction in consumables revenue was less pronounced than the decline in average wash volumes, demonstrating the resilience of our pricing and customer relationship. Or in short, we still have a strong market position and are seen as trustworthy business partners to our customers. So overall, the revenue growth was driven by equipment reflecting strong investment activity by our customers. Consequently, the share of recurring revenues, meaning service and consumables, declined slightly on a year-on-year basis to now 47.2%. However, the installation of new equipment further strengthens the installed base and lays the foundation for future recurring revenues. Let me now discuss the performance of the two reporting segments. Starting with Europe and other, revenue in the first half increased to €230 million, up by €10 million or 4.9% compared to the prior year. After a comparatively modest first quarter, we saw a significant acceleration in the second quarter, with revenue growing 8.7%. However, profitability in the segment remained impacted by the overall product mix and the ongoing efficiency initiatives. As a result, first half EBIT decreased and EBIT margin declined by 150 base points to 7.9%. While the expected benefits from our efficiency programs have not yet fully materialized due to implementation delays and additional project costs, the management took further corrective actions during the second quarter. Among those actions are sharpening the overall focus on key projects, very restrictive hiring, and ignite cost sensitiveness in every team meeting. Our investments, both in terms of capital and management capacity, are starting to bear fruit. Second quarter EBIT margin drop was significantly lower to now 60 basis points. Turning to North America, the development was particularly positive. Revenue increased by 18.1% in the first half to 37 million, driven primarily by strong equipment sales with key accounts. In the second quarter alone, revenue grew even stronger by 23.4%. The revenue growth translated into a significant improvement in profitability. segments EBIT improved from a loss of 1.5 million in the prior year to a profit of 0.8 million in the first half of 2026. This corresponds to an EBIT margin improvement of 700 basis points reaching now 2.2 million percent. Let me now provide some additional color on the development of our EBIT margin and the key factors influencing profitability in the first half of 2026. Our EBIT margin of 7.1% reflects a combination of positive structural developments and temporary headwinds. Starting with the product mix. If we compare our business lines, contribution margin three, meaning cross-profit including selling expenses, is the one to compare. On a group level, this KPI is about 15.6%. From the indicative columns on the right upper side, you can derive that consumables and service contribute with higher margins than equipment. That means our strong growth in equipment business by 13.4% year over year, where we are all happy with, puts relatively pressure on the total group margin. or this growth motivates our consumables and service guys to do even more. A second positive factor is a strong development in North America. Revenue in the region is up by 18.1% and North America share of group revenue increased from 13.3 to 14.7% in the first half. despite significantly improvement EBIT margin, this one is still below comparative number in Europe. Also here, mathematically stronger top line growth in North America puts pressure on crude profitability or in other words, motivates our colleagues on the other side of the Atlantic to bring up their profitability even faster. Then we need to speak about our ongoing efficiency programs. Overall, we remain satisfied with the strategic direction and expected long-term benefits of these initiatives. Some of them are close to be finalized, e.g. our quality program, which is now inherited in our DNA, or the good progress with our global scope configurator. However, some of the projects are currently progressing more slowly than originally anticipated or require higher implementation costs. to be named in installation costs or the optimization of production footprint. As a result, the associated expenses are still burdening our profit and loss statement by a low single-digit million euro amount in the current year. In addition, administrative expenses increased, primarily driven by higher IT-related spending, including major transformation projects such as our S4HANA or the Field Service Solution implementation. Also here, we have already done countermeasures, so that the overall additional IT expenses of around €1 million are not fully seen directly in our P&L. Looking at the workload, WashTech Management is overall satisfied with the engagement of our team and the enthusiasm performed on all those topics. Now we need to focus more and identify the real contributing items. We will do so. So I guess the overall explanation to our P&L took this time a little bit longer. That's important to understand that we have some special items, but we are on a quite good path. Coming now to some additional more financial KPIs in short. With net income of 11.3 million Euro, we have on par with prior year. To the buyback of 100,000 shares, the earnings per share increased by 1 Eurocent to now 85 Eurocent. As mentioned, we had a very strong revenues in Q2 2026. and Michael Drolshagen. Approximately 4 million Euro in the first half year and expect a slightly higher number in the second half year, mainly related with the optimization of our production flow and further digitalization offerings. With regards to the equity ratio, we see a decline of 2.8% to now 20%, which is, to my understanding, still a very solid number. The comparatively lower number is mainly caused by the paid dividend as well as the share buyback program. Fixed assets ratio is quite stable, so I skip this one and guide your eyes on the composition of the increase of our employees year on year. It's important to acknowledge that from our increase of 75 employees, 27 are in the sales field and 25 in service, meaning mainly direct employees. also from the remaining 23 must be, all must be attributed to the supply chain. Most importantly, if you compare the number of colleagues from end of Q1 to end of Q2, the headcount only increased by nine colleagues. Here you can see, here you can start to see the impact of some of the measures we took in Q2. Next slide. To make this one very short, WashTech has a strong order backlog. Indexing 2022 for this long-term analysis, we are now 9% over the amount of 2022, 13% above the amount of end of 2025, and also 2% above the amount end of Q2 2025. and let me remind you that 2022 was for WashTec a year where we saw significant catch-up effects after the pandemic and some unusual high order intake from key accounts. If we would choose 2023 as a starting point, the long-term increase would be much higher. Looking a little bit more in detail, we see a very positive double digit growth in orders received in North America, where in Europe, the orders received are only slightly down. So overall, order backlog is in good shape and gives us a good view of the top line in the coming month. Let's now turn to our guidance 2026. In general, WashTec confirms its guidance for 2026. We expect revenue growth in the mid single digit percentage range, which is strongly supported by the current order backlog. EBIT should grow disproportionately higher than revenue growth. Given the results for the first six months, WashTech needs to speed up. But we expect that the delays in the efficiency projects can still be made good over the course of the year. Exactly this is where we, the management, and the complete team need to focus on. Furthermore, we need to follow the additional measures mentioned before. In terms of free cash flow, we expect an amount of 35 to 45 million euro and ROSI should come in with a higher rate than 2025. As always, I must state that this guidance is subject to uncertainties and all these figures reflect our expectations based on current knowledge and current macroeconomic situation. Any significant deviations in either direction are not factored in here. This concludes my remarks. Thank you for your interest so far. Now handing back to Kevin.

Yeah, before we start our Q&A session, let's have a quick look at our communication cycle for 2026. You can see that the first half of the year has been quite busy. We not only went to the HIT conference in Hamburg and for a roadshow to the Nordics, We also hosted two more capital markets webcasts. The first one in March was focusing on our business line service, and the second one described in detail our newly developed strategy for North America. Feel free to watch the recordings, which are all available on our Investor Relations website. Looking at the coming months, we are pleased to participate at the Bern-Beck-Goldman Sachs German Corporate Conference in Munich in September and the German Eigenkapital Forum in November in Frankfurt. We're looking forward to see you there. Besides that, we are currently discussing some further ideas. Sign up for our email distribution list so we can keep you posted once these are final. And with that, we would now start our Q&A session. So if you wish to ask a question, you may use the Q&A function in the webcast and follow the instructions. Also, feel free to write any question you might have. We can read them for you. And I see there is already one question from from Discover Capital. is asking, can you quantify how adjusted EBIT margin in Q1 or H1 would have been without the ongoing one-off efficiency costs? This would give a clearer picture for the margins.

Thank you. Thank you, Moritz, for asking that question. I anticipated that somebody would ask it. understand that we do not give very, very detailed numbers on every single project we are doing. But what I already said in the presentation is that it is a lower single digit million number. So something around between two or three million in that direction you have to think about.

And maybe before we move on to the next question, can you quantify... Oh no, sorry, this was the question. So then we have a remote from Stefan Augustin. Mr. Augustin, you should be live now. Can you hear us? Hello, thank you.

Upcoming my questions.

I recognize that the smart care share of the installation has gone up quite quickly. And to my understanding, there is a connection between more smart care, digitalized processes, bundled contracts, more consumables and service business sales. So my question is, we, especially in the consumer books, haven't seen a pickup and we related that to weather. But should there not be also this underlying positive trend? And let's say, how do you feel is the weather situation so far in Q3? My personal perception is the weather is quite okay, a bit hot, but okay. So when Do we start to see the growth rate in the consumables business?

Okay, so thanks for those questions, Stefan. So maybe one thing in respect of SmartCare Connect and our sale of consumables. There's another thing I would guide your thinking. So you know that we are currently introducing the Global Scope Configurator, which is a tool which Empowers and forces our sales reps in the field that they sell the machine and also sell digital projects. For example, they also sell the consumable long term contracts. That is something which we have in place now. This is not only attributable to the SmartCare Connect. SmartCare Connect is a fully digital machine, so that helps a little bit. But the boosting will come, to my understanding, by this machine, but even more by this change in how we sell our offerings. And then the second question was, when do we see higher consumable revenues? Hopefully very soon, smiling a little bit, you know, but if you compare, maybe it's also important to understand if we compare this year with last year and last year, it was really outstanding the amount which we could sell in the first four or five months as that is now on a normal level. What is important for us is, if we look back in this year, we see that overall the wash counts are going down a little bit, but the number of our consumables customers increased. So that gives me a positive impression for the second half year, meaning with a huge installed base, with a good connection to the customers, with doing the right things in the sales process, I expect that the consumables will come up again.

Okay, you already hinted here part of where I was actually targeting. So when you say the number of customers increases, if you'd be willing to share a little bit by how much and actually also make a small difference as a tunnel consumes a lot more consumables than a rollover. So maybe a bit into Do we see that on the rollover side or do we see both increasing consumers or customers? Sorry. on the tunnel and the rollover sites that are connected.

So it's it's it's this question sounds easy. The answer is difficult. So there's a there's a designated task force in place to approach tunnel customers because we can imagine that tunnel needs much more consumables than a rollover. But on the other side, we are also teaching our sales reps to to address each and every rollover which we know and which we have in our portfolio. For tunnels, we are also really attacking third party machines. Let's put it that way.

And a statement on how much increase we have in the customer base.

May I not answer to those detailed questions about our customer structure? There's an increase in the low single digit percentage, but I do not want to name how much we have.

All right, very fine. That's okay. Then coming back a little bit on the margins and the progression here. I understand that the installation efficiency program and the, let's say, Relocation to the Czech Republic takes time and the efficiency gains will come a bit later. My other question would then also be, we have a bracket on the modularization and the scope in the supply with the smart ramp up. Is that materializing as you had expected it?

We are making good progress. This is also a huge program which has a lot of difficult milestones. I would say that as of today, some of the milestones we are really fully in plan. Some others are a little bit delayed, but not really what I would say is significant. So overall, yes, we are pleased with that program.

All right. Thank you very much. That would have been it from my side.

Thank you Stefan. And we have a follow-up question from Moritz Walz regarding his question on the adjusted EBIT margin. He's asking regarding the one-off costs, low single digit number for Q2 or H1 2026? For H1. So we hope this is answered. Then let's go to Mr. Specht from Bernberg. He's asking, hi, what slows the order book growth in Europe? Do you expect a rebound in invests in H2? Can you quantify the tax reimbursement in Q2? Okay.

So in general, the order intake, I started with growth. So I started with the order intake, order backlog, which we have in general. So in general, the order backlog is higher than one year ago. It is Thank you very much. intake as well as the order backlog is still in a very, very good condition. So it's it's just. Let's say more or less slightly lower than last year, so nothing which really gives us some some headaches. In terms of the tax reimbursement, you see in the cash flow statement probably, that has to do with our dividend, where we always have to pay some taxes and then get it back. It's quite a complicated topic. If you like, I can explain it to you in a separate way, but it has to do with the dividend which we paid.

There's also one more question from Mr. Specht. He was asking if we expect a rebound in inventory in H2.

So what we have done in the first half here, when we saw that there was a conflict starting in the Gulf region, We looked at our inventories and increased slightly our safety stock, meaning we bought from some parts where we thought there might be some shortage in the future. We bought some of the parts where we thought There might be price increases, but that is done. We are currently on a good way. And the amount I'm speaking here about is it's three to five million. So not really a big number in terms of inventory. So depending on how this conflict is going on, we also will reduce this amount again.

Okay, then we have a couple more questions from Claudio de Rainiere from Albemarle Asset Management. He's first of all asking, what should the P&L EBIT benefit of your optimization of the manufacturing footprint look like in the coming years, meaning 2026 to 2028?

I guess that we already said in one of our capital markets webcasts. So there are a lot of direct and indirect facts. If you just think about the number of employees, which or workplaces, not employees, the number of workplaces we are shifting from Augsburg to Czech Republic. means that you have savings of about 30,000 to 35,000 euros per year per every workplace. So we are shifting 85 workplaces from here to there. So that all in calculates to roughly 3 million. On the other side, there might be some additional costs. Now we have three plants in check on the one hand side. On the other side, combining all these things, there also will be some benefits from process optimization. So overall, the rough number which we are calculating is 3 million.

Mr. Strecht is asking for the detailed answer, by the way. You're welcome. Okay, then another question from Mr. De Ranieri. You confirmed your full year EBIT guidance despite flattish H1 EBIT. What are drivers that would let you achieve your target, which imply a high single-digit, double-digit EBIT growth in H2? Looking at H1 headwinds, efficiency programs, etc. What would stay and what would go away in H2 2026?

Why we believe in the guidance is there are multiple reasons. One reason is we really have a strong order backlog. We are seeing that our products are very well received in the market. I think that is really important, a key statement. On the other side, we see that we are moving onwards with our efficiency programs. They kick in step by step. It's improving, so that also will contribute. And then I mentioned it somewhere in between the lines. In Q2, also the management really took measures, meaning reducing costs, ignite cost sensitiveness, being much more prudent in new hirings. Only eight, I explained. So that is where we also will save additional spendings. And that is why we believe that we can manage the guidance for 2026. Great.

And the one last question from Mr. Neri. North America, nice sales development in H1, but still low profitability, low single digit. What is the short term and midterm outlook for profitability in North America? When will you get the decent high single digit margin here? Is that a matter of quarters or a matter of years?

So maybe there. You are probably aware that we did capital markets webcasts recently only focusing in North America. Nonetheless, I think it's important to state that now we have in North America 2.2% EBIT margin. I'm not happy with that one, but it is really a big improvement compared to last year. So we want to So far, there are no further questions. And I guess we've answered all of them. Thank you. Thank you, everybody. Thank you for asking those questions. I'm really happy to answer them. I hope you get all the answers you wanted to know. Having said that, on behalf of the management, really thank you all for attending today's earnings call. I know it's pretty hot outside, so therefore it might be I'm even more thankful that you joined today. Stay in touch. Bye-bye. Thank you very much.