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Hello, and welcome to the XFAB third quarter 2025 results conference call. My name is George. I'll be a coordinator for today's event. Please note, this conference is being recorded, and for the duration of the call, your lines will be in a listen-only mode. However, you will have the opportunity to ask questions towards the end of the presentation, and this can be done by pressing star 1 on your cell phone keypad to register your question. If you require assistance at any point, please press star 0, and you'll be connected to an operator. I'd like to call over to your host, Mr. Rudy de Winter, CEO, to begin today's conference. Please go ahead, sir.

Thank you. Welcome, everyone. In the conference call today, we also have Alba Morganti, CFO. In the third quarter of 2025, we recorded revenues of $229 million, up 11% year-on-year, and 6% quarter on quarter, which is well above the guidance of 215 to 225 million. We also progressed well in our core markets, automotive, industrial, medical, with a revenue of 216 million, up 14% year on year, and 5% quarter on quarter. Our core business now represents a share of 94% of the total revenue. Now breaking it down by end markets, in the third quarter the automotive revenue was 147, up 1% year-on-year and 2% quarter-on-quarter. The third quarter industrial revenue was 48 million, up 51% year-on-year and 1% sequential, reflecting the overall recovery of our industrial end market. The gradual recovery of the silicon carbide business contributed to this positive evolution. Now for the medical business, the revenue in the third quarter hit a record high of $21 million, up 74% year-on-year and 40% quarter-on-quarter. The growth was mainly driven by contactless temperature sensors, DNA sequencing, and echography applications that altogether did very well in the past quarter. Now looking at it by technology, in the third quarter, the CMOS revenue recorded a growth of 10% year-on-year and 4% quarter-on-quarter, mainly due to the extra capacity that came online for the 180 nanometer BCD on SOI. and the 350 nanometer CMOS node demand was weaker. Microsystems revenue was up 27% year on year and 9% sequentially. This is based on a broad set of customer specific microsystem technologies that we co-created with our customers. Also, the amount for new developments in the microsystems remains strong, and this is an area where we will continue to see above average growth. Our silicon carbide business continued to recover, and revenue grew strongly by 30% year on year and 21% quarter on quarter. The number of sick wafers produced in the third quarter more than doubled compared to a year ago. The revenue did not follow the same way due to the product mix and also the ratio of consigned substrates that was much, much higher past quarter than a year ago. The positive trend in the evolution of our silicon carbide business is underpinned by increasing bookings attributed to sustained demand from data center, electric vehicles, and renewable energy applications. We also see good traction on our new technology platforms that we released at the end of 2024. Many customers are developing their new generation products based on this platform that will give improved performance and lower system costs. The fact that we offer full supply chain for silicon carbide in the US is well perceived by our US customers that are designing in products for high value assets such as data centers, industrial equipment and electric energy systems. Quarterly prototyping for the past quarter was 20 million, down 16% year-on-year and 6% down quarter-on-quarter. The order intake for the third quarter amounted 163 million, down 25% year-on-year and down 21% compared to the previous quarter. The booking in the industrial segment was good. The weakness is primarily due to inventory corrections by automotive customers as well as broader macroeconomic uncertainties resulting from geopolitical tensions and trade disputes. These factors have led to more cautious ordering patterns while customers also take advantage of shorter cycle times placing orders later than usual and with reduced lead time. As a result, feasibility is still restricted. The backlog for the third quarter came in at 347 million compared to 413 million at the end of the previous quarter. Let's now move to the operations update. In September, we had the inauguration of the new cleanroom in Malaysia, which will increase the site's manufacturing capacity from 30,000 to 40,000 wafer starts per month. Production at the new facility is being scaled up progressively, with the full increase in capacity anticipated by the fourth quarter of 2026. The expansion will effectively double our capacity for the popular 180 nm BCD on SOI technology, which is particularly suited for applications such as smart motor drivers, various drivers such as piezo actuators, LED drivers, and battery management systems. The recovery of the silicon carbide business is supported by the existing capacity at our Texas facility. The current installed capacity will enable us to do more than double the wafer starts. The capital expenditure for the third quarter was $23 million, bringing total year-to-date CapEx to $179 million, and the full-year capital expenditure is projected to be less than $250 million. Let me now pass the word to Alba for the financials.

Thank you, Rudy. Good evening, ladies and gentlemen. We will now go through the financial update. I would like to start this section by highlighting that the third quarter, we succeeded in increasing our sales by 6% quarter-on-quarter, which were the highest since almost two years, totalizing $228.6 million, and which is well above the guided $215 to $225 million. Our EBITDA grew by 4% quarter-on-quarter, and 7% year-on-year, being the highest this year. Our EBIT was almost $24 million, down 5% year-on-year, but increasing by 10% if we compare it to Q3 last year. Third quarter EBITDA was almost $54 million, with an EBITDA margin of 23.6%. If we exclude the impact from revenues recognized over time, the ABDA margin would have been 24.2% within the guided range of 22.5% to 25.5%. Our profitability remains unaffected by exchange rate fluctuations as we continue to be naturally hedged. At a constant US dollar-euro exchange rate of 1.10, as experienced in the previous year's quarter, the BDA margin would have been unchanged at 23.6%. In the third quarter, we reported a financial result of minus 5.6 million, mainly due to interest results of US dollar 4.3 million dollar. And realized foreign exchange losses arising from the re-evaluation of the Euro denominated debts amounted to $800,000, but of course it's a non-cash item. Cash and cash equivalents at the end of the third quarter amounted to $174.2 million, which means an increase of $16.5 million compared to the previous quarter, while net debt decreased by $21.1 million dollar quarter on quarter. Despite the peak of capex expenditures payments in the first half of 25, our financial situation remains solid. As anticipated and now visible, our capex are now significantly decreasing, which translates into an improvement of our net debt position, which trend is inversely for the first time since a while. Especially in the current context of uncertainties and geopolitical tensions, it's important to keep our financials strong. And to conclude this financial section, I would like to share our next quarter's guidance. Our revenue is expected to come in within the range of $215 to $225 million with an ABDA margin in the range of 22.5% and 25.5%. This corresponds to a full year revenue in the range of $863 to $873 million for the full year 2025. This guidance is based on an average exchange rate of $1.17 US dollar to euro and does not take into account the impact of the IFRS 15. And now I would like to give the word back to Rudy.

Thank you, Alba. I'm glad about the solid increase in revenue for the third consecutive quarter amid the challenging microeconomic environment. This is significant interest. There is significant interest in our specialty technologies. Our silicon carbide business has made measurable progress with growing design activity on our latest silicon carbide technology platform. Additionally, our microsystems division continues to advance with collaborative co-creation projects enhancing our growth pipeline. While visibly continues to be limited, I am confident in XFAP's position that supports sustained long-term business success. Besides the third quarter results, I announced today that I will be passing on the CEO role to Damien Mac, today COO, on the 6th of February 2026, after the full-year results call. Damien is very well prepared, and the board of directors and myself have full trust he is the right person to lead XFAB. I will make sure there is a smooth transition. I will be supporting him in my role as a member of the board and, of course, for the future. Operator, we are now ready for taking questions.

Thank you very much, Mr. De Winter. Ladies and gentlemen, as a reminder, if you have any questions, please press star one on your telephone keypad and just make sure that your line is not muted. Our very first question this afternoon or this evening will be coming from Mr. Michael Roeg of the group Matercam. Please go ahead.

Yes, good evening. Well, first of all, congratulations on taking the next step and, well, spending a bit more time in the Board of Directors. Thank you. looking down on your successor and guiding him. But of course, I will leave you with a couple of tough questions. So the first one, bookings have come down strongly and prototyping sales have also come down based on the chart in your PowerPoint presentation. So should we expect a slow start in 2026?

Well, first of all, the prototyping is something that fluctuates. There are milestones on projects and so forth. So I think the prototyping is at a good level. Remember, this starts from zero every quarter and it's all about new contracts and new activities. So it's still a substantial... business development activity ongoing, so I'm quite happy about that. The production bookings, they indeed are weak. We still have quite a good backlog. That represents roughly almost two quarters or a bit less. It's, of course, too early to say, but it's a sign of weakness in the market. So our guidance for the Q4 is still good. It's in the range of where we were now. uh beyond that visibility is low and um yeah so we we could see uh maybe a weaker start for next year okay and is there a decent amount of backlog for way deep into 2026 or is most of it typically scheduled for q1 q2 this this backlog is so customers they order now typically when they need the goods. So typically all this backlog is mostly to execute on deliveries in the quarters to come.

Okay, that's reassuring at least. Dan, I have a question. If I compare your sales in Q3 with those of Q2, then they've grown by 13 million. Yet the sequential trending gross profit is minus two. And this is not explained by depreciation and normalization because that was the same in the two quarters. So something was in your cost of sales, something strange. Can you explain that?

Yeah, there is an effect of inventory. So the work in progress, I mentioned we have shorter cycle times because we have improved capacity. The cycle times come down in the fact that is very much appreciated by our customers so we can deliver faster. But as a result, the work in progress is lower. And that has, in the quarters where we decrease this WIP, has a negative effect on the profitability.

And is that something that only hits your P&O once to the lower work-in-progress level, and then if it remains at that level in Q4, then you will not have that?

Yeah, so this is an effect that we have when the WIP... So this is a typical effect when the activity in the fat decreases or the cycle times go shorter and the valuation of the WIP decreases. When we come back to a steady state, then this effect is not there. But you can also have the opposite effect. If bookings go up, loading in the FAP goes up, you have the opposite effect where the revenue is not yet there but the WIP increases and the WIP is valued and therefore it has a positive effect, could have a positive effect on the margins.

With the calculations, it's around 4.5 to 5 million impact in the quarter. This is above average, I guess, for normal trends, correct?

Yeah, so this is, if we look at the full year, it's even bigger. So we also have inventory corrections in the previous quarter. Okay.

Okay.

I think it is coming to a stabilization by the end of the year.

Okay. Then my next question is about Texas. You mentioned in the press release that there will be capacity expansion in 2026 towards the end of the year. How much CAPEX is there involved with this particular expansion program?

There is no CAPEX involved. What is mentioned there is that these equipments that are already delivered and paid for that will be qualified and will be added to the operating and the production lines.

Okay, so this is part of the existing program that has just been completed, so there is no additional expansion program currently planned?

No, for now there is no expansion with additional cash out planned.

Okay, and during the capital markets day, you mentioned that there would be discussions about further automation of four of the six FABs. Is there anything that came out of that or a midterm plan for that?

Well, this is an ongoing process that we're working on more automation. This is mostly, yeah, labor and IT and that kind of things to a lesser extent related to capex. There may be some capex, but that is minor compared to the equipment investments we do.

Okay. Then my final question, very quick one. There was two million of other income in the OPEX. Can you explain what that was for?

There was a sale of a tool. Okay. Good.

That's it from my side. Thank you.

Thank you. Thank you very much, sir. Next question will be coming from Emmanuel Matteau of OdoBHF. Please go ahead.

Hello, Rudy. Hello, Alba. Thank you. I have three questions. First, for Rudy. Could you comment about your decision to step down from your role of CEO? What are the motivations behind that very important decision for you? Second, it's too early to guide for next year for sure, but with the current visibility you have and the ramp-up of significant production capacities, Are you confident at this stage for further sales goals next year? And third, I wanted to know if you compete in some spaces with global funders, because it has just announced a significant capacity expansion in Germany, and I wanted to have your view on that. Thank you very much.

Yeah. First of all, with respect to the organizational change and me stepping down as CEO, we as a manager or as the founders of the company, we always had in mind that it's important to grow succession and then move on. I think the team is very well prepared and Damian Mac is ready to take that role in my view and therefore I decided or started thinking about this a while ago and I think now is the right moment to for him to take over, and I think he's very well placed to do it. Second question, sorry I didn't know the question, was Global Foundries, there was a question on Global Foundries. Dresden, so Global Foundries, Dresden, they're in different, I don't see this as a competition to XFAP, Maybe also doing automotive stuff, but that's more into ECU type processors and FD SOI for other applications. It's a different type of SOI. So XFAP is also doing a lot of SOI, and we are very successful in SOI, but it's high voltage SOI. that has different characteristics than the FD SOI, which is more used for lower voltage systems and lower power applications. And the third question was?

It's about the visibility you have now, which could be limited, but also we can expect significant production capacities next year, On products, you are fully loaded, so... Yeah, so... Next year, or you don't want to comment at all?

Well, today, the capacity, we are not in allocation anymore as compared to a year ago. So... The revenue, the output is mainly driven by the demand in the market that we are following one-to-one now. And so if demand is there, we'll be growing. So we will follow the demand. So we're able to, if demand is there, we're able to anticipate on it, take advantage and grow. If it's not there, of course, so we're now dependent on the market and, of course, all the new projects that we are in the pipeline and we're gradually rolling out.

Okay, thank you very much.

Thank you very much, sir. I want to move to Robert Sanders of Deutsche Bank. Please go ahead, sir.

yeah good evening um and hi rudy welcome best of luck with your next role um and and welcome to damien um i just had a question about an experience so you're you're in the european automotive supply chain there's been a lot of warnings around line stoppages from both european and non-european oems talking about significant risk weeks of inventory can you just give us your take on how severe and serious the situation is based on what you can pick up. And I have a few follow-up questions.

Yeah, I'm following this, of course, also closely, but I also, most of it is what I also pick up in the press. So what I know is that Nexperia is indeed more seems like low-tech components, but they're very good at it and they're producing that in very high quantities. And so they're having some area significant market share. I think for most of those components, there are replacements. But yeah, it's a question whether these if there are shortages, whether the replacements can be ramped up quickly enough. I have no... To my knowledge, there is not yet line stops, but I cannot tell how far it is of... Yeah, I mean,

based on your experience, I mean, what they do is they do small signal logic components like diodes and BJTs and stuff like that, but that they are used in like body comfort, lighting, BMS interfaces, sensors, safety, just a lot of low value components. As you say, they have very high market share. I mean, based on what you've seen in your previous job, I assume you would be looking at six to nine months to requalify on a competitor. Is that the sort of timeline?

Well, I think that also if you look back at the COVID situation, if the market is normal, then all these things take time. However, if there is a threatening line stop, things can change quickly and there is a lot of agility and creativity. So I think it is more, I think it's not so much a matter of qualifying it. I think there is most of the cases people are very agile and flexible to move if it's really needed. But it's more a matter of are the components in sufficient quantity there from alternative sources. Now I also typically see there has been cases in the past also when a Sumitomo plant was blown up years ago that was producing 50% of these particular chemicals that were absolutely needed everywhere in the semiconductor industry. They had 50% market share, but also there the dynamics, the agility of the whole market then that came in motion and finally it's sorted out. So let's see how this will turn out.

And then just a question about China. Obviously, since we last spoke, you know, China has turned downwards. There's been production cuts at BYD and Li Auto and all these other guys. too much unsold inventory. How have you seen that manifest in your business, whether it's direct with Chinese customers or indirect through Melexis?

I think that's too early to say. We're somewhat further in the supply chain. It's difficult. We don't have a good visibility, except that we see our bookings in the third quarter that were lower than the previous quarter, particularly in the automotive segment a bit across the board, as I mentioned. The bookings in industrial, they were good. Yeah, so it's It seems to be more on the automotive side that I see the weakness.

And just one last one on OPEX. How should we think about the impact on OPEX of all these various different expansions, whether it's on GNA or just on your cost base more generally? Thank you.

That we do not expect an effect except the fact that once these expansions are active and producing, then they come into the depreciation, so it will have an effect on our depreciation.

Got it. Thanks a lot.

Thank you. What's your question, Mr. Sanders? Ladies and gentlemen, as a reminder, if you have any questions, please press star 1. We'll now go to Guy Sips of KBC Securities. Please go ahead.

Yeah, most of my questions were already answered. They were also an experience related. I have one question on the data center. Do you see there the positive trend? Do you see that accelerating or is it just on a continuous pace as it was over the last quarter? Or do you see a real improvement since, let's say, the capital market day? Thank you.

Well, I think it's in the revenues, we see a gradual progress. So in the beginning of the year, we saw strong activity in data center that continues, but it is complemented now also with better demand for industrial and renewable, so inverters for renewables and also a bit of automotive. So the silicon carbide activity is broadening and I think that a lot of the data center growth still has to come. So first of all the architectures architectural change that uses more silicon carbide in data centers still is coming. And I think also all the announcements on CapEx and so forth, they start to build buildings, but they're not yet installing the infrastructure yet.

And can you put a kind of a time frame on this?

No, I cannot. I think some of the customers of us who have announced activities with the data center companies on 800 volt architectures and so forth, they're rather talking about real ramps in 2017.

Okay, thank you.

Thank you very much, sir. Next question will be coming from Mr. Luc Dessaut, who is a private investor. Please go ahead, sir.

My question is actually the following. If AI is applied, let's say, on the development of prototypes, is it possible to substantially reduce the throughput time for the development and the prototyping?

That's a good question. That's not really the case. In the digital world, there is more activity on automating design environments and so forth. I think that it could have an effect. On the analog mix signal designs that we're doing so far, there are people looking at it at research institutes, but nothing that is practically usable to my knowledge.

Okay. And then I've got a second question. Is the automotive business part of it? Is it coming to end of life and that has to be replaced by new products, new components? Or in which stage are we?

Not particularly. There is of course a continuous flow of innovation, but we have existing products that exist already a couple of years that are also being designed in electric vehicles in certain functions, so that continues. It's not that there is an abrupt end of life of certain components. Of course, if combustion engines are used to a lesser extent, if you have applications like a lambda sonder or pressure sensors that go into an exhaust system of a combustion car, that will gradually phase out. But yeah, as you hear, there is a push in Germany to extend the lifetime of combustion engines and so forth. So I do not see an abrupt change in the next, see this rather as a gradual change over the next 10 years.

Okay. And could you elaborate a little bit more on the Chinese market for our business?

Yeah, so as X-Swap, we have direct Chinese business. It's around 10% of our business. But indirectly, we have also customers selling into China. So I think the direct and indirect business of X-Swap, it's maybe closer to 35% or so of our revenue. that goes into china now what what our customers do i have less that's a bit farther away as i have i would have to refer to the conference calls of our customers what we sell directly in in in china are predominantly technologies that are to a lesser extent available in China. So that's typically our BCD on SOI for high voltage smart systems for like motor drivers, battery monitoring systems and so forth. And there we see continued interest also for new designs with our customers because these technologies are not immediately available in foundries in China.

Okay, thank you.

Thank you very much for your question, sir. Ladies and gentlemen, as a final reminder, if you have any questions or follow-up questions, please press star 1 at this time. We'll now move to Tryon Reid of Berenberg. Please go ahead.

Hi there. Yes, Trion here from Berenberg. Just also wanting to add my best wishes really for whatever you're going to do in the future. I had two questions on the results. The first was just around the fact that, you know, you talked about the results being strong, but the order intake weak. I'd be interested to have any comments around the pattern of orders through Q3. You saw a sort of any trend or you're just seeing more lumpiness or short-term ordering. Just be interested to get any more color on that. And then my second question was just on the capex, which was pretty low in Q3, but your Q4 guidance seems to suggest it will actually ramp up quite significantly in Q4. Just to understand why that is and what that sort of implies for next year as well.

Yeah. So your first question with respect to the bookings, yeah, so the, yeah, that is what it was in the third quarter. So far, if you ask what happened in October, yeah, that's somewhat a continuation of the Q3. The peak or the low amount of capex in Q3 is indeed less than what we forecasted. This has to do rather with we're not pushing the throttle on our expansions in Malaysia. This is just a delay. There are no We have not cancelled anything. It's just that there is a slower rollout and therefore also the invoices come in slower and so the cash out is also somewhat less. So in Q4 we expect that it will increase. This is not new CapEx but it's just a shift of things from Q3 and Q4. We'll have to see. Maybe there will be some shift from Q4 into Q1 next year. But the increase that we can expect in Q4 is not a sign for next year. It is just the balance from Q3 that is shifted into Q4.

Okay, great, thanks. Just to follow up on the order intake, you're suggesting that there was not a decline through the quarter, that the quarter was weak for order intake in all three months?

No, it was somewhat flat over the quarter, yeah. It's not that there was a sudden effect at the end or so. It was somewhat flat over the three months.

Okay, Chris, thank you very much.

Thank you, Mr. Reid. We have a follow-up question, this time coming from Mr. Robert Sanders of Deutsche Bank. Please go ahead, sir.

Yeah, hi. Just on the Kuching ramp and the billion euro expansion that you've done, is the idea to continue to push that ramp, even though the demand is not really there, just to sort of get the economics going? Because, you know, right now it's... a lot of tools but not a lot of revenue, or is the idea to basically freeze that plan until the demand is there?

The plan is to continue with the rollout of the equipment and to install it, qualify it, to be ready for demand that can come. The equipment is mainly for our 180 nanometer BCD on SOI and there we have good design wins. We have a unique position in the market so we feel confident that this will pick up and we want to be ready.

Got it. And is there any plan to reduce or exit any legacy facilities? I think you've already said you're going to end of life foot by the end of 26. So I'm just trying to understand how much of your capacity that's quite old now is sort of going to get wound down as part of this upgrade process.

Well, this is in Erfurt. We're making the transition from, yeah, already for many years, we're transitioning to more microsystems business and gradually exiting the CMOS there. The end of life that we announced there was for 0.6 micron CMOS. Signal CMOS is also as a Y in there. And that will run until end 26, a little bit in 27. And then there will be one clean room there. There are three clean rooms on the site there and there will be one clean room that will be closed.

Got it. And maybe a question for Alba. What is the France run rate annualized at the moment for revenue in just Corbeil?

So yeah, Corbeil is currently at 54 million per quarter at the moment. So yeah, it was the highest quarter that we recorded now in Q3, so it's ramping up significantly. We also invested there in additional tools, as you know, and we are now running only XWAP technologies since a while. So efforts start to pay off.

Got it. And what's the EBITDA of that facility?

We don't give EBITDA breakdown, as you know, because we don't produce everything on one side. Some of the products are shifted from one side to the other, and so it's quite difficult and it's misleading to give EBITDA breakdown by side.

Okay.

You know that we start, some products we start in one factory, then we continue in other factories and so on and so forth. So, yeah, as I said, it's misleading.

Got it. And just last question. If Molexis is able to get BCD on SOI processes from HH Grace in China, what does that mean for you? Does that mean that you will lose 30% of Molexis' business or is that something you don't think is a likelihood?

Yeah, I don't know if Grace has BCD on SOI. I think definitely not in the quality and the features that we are offering. Anyhow, if a customer... designs a new product in another FAP, it takes a lot of time to qualify and transition. And in the meantime, all the existing business typically stays until the products are really end of life. So I don't see an immediate effect.

Got it. Thanks a lot. And thank you very much, Mr. Sanders.

As we have no further questions at this time, Mr. De Winter, I'll turn the call back over to you for the additional closing remarks. Thank you.

Yeah, thank you very much, everyone. So I'm looking forward to hearing you again on the 5th of February for the Q4 results that will then be together with Damien, and I will be then handing over to Damien. Thank you very much, and have a nice evening.

Thank you. Goodbye.

Thank you. Ladies and gentlemen, that will conclude today's conference. Thank you for your attendance. You may now disconnect. Have a good day and a good night.