X-Fab Silicon Foundris Se

Ladies and gentlemen, welcome to the X-Fab second quarter 2026 results conference call. The speakers will be Damien Macq, CEO, and Alba Morganti, CFO. For the first part of the conference call, the participants will be in listen-only mode. During the question and answer session, participants are able to ask questions by dialing pound key 5 on their telephone keypad or through the hand raising option on the player. I will now hand the conference over to Damien Macq, CEO. The floor is yours. Please, go ahead.

Thank you, Gaïa. Thank you, everyone. Good evening, everyone, and thank you for joining us today. The second quarter of 2026 showed another quarter of disciplined execution in a market environment that remains mixed. The revenue came in at 199.8 million USD, down 7% year-over-year and up 2% sequentially. Excluding revenue recognized over time, revenue was 196 million USD within the guidance. Booking reached 173.3 million USD, up 2% quarter-on-quarter. while backlog ended at $291.8 million. Importantly, excluding the temporary impact of the Erfurt end-of-life program, our underlying book-to-bill ratio returned above for the first time since Q2 2024, providing an encouraging sign that demand conditions are gradually improving. Our core markets of automotive, industrial, and medical represented 93% of revenue, totaling 182.1 million US dollars. Automotive revenue was 160 million US dollars, down 19% year-over-year, and 5% sequentially, reflecting continued inventory normalization. However, booking improved significantly and automotive book-to-bill reached its highest level in almost two years. Combined with a growing number of design wins, this supports our view that the market is gradually recovering. Industrial revenue was $45.2 million, down 4% year-over-year and 13% quarter-on-quarter. primarily due to temporary order volatility from a major silicon carbide customer. Medical continue to perform strongly, reaching 21 million US dollar, up 39% year over year and 9% sequentially. This is driven by pacemaker and ultrasound applications. In smart CMOS and SOI, Revenue reached 156.7 million USD. During the quarter, we saw a significant increase of new automotive opportunities, particularly in Europe, and one of our top 10 customers renewed and extended its long-term commitment in pressure sensing. We continue to see healthy demand in battery management systems in China. while opportunities like link to robotics are becoming increasingly visible. We are also seeing growing demand from AI-enabled infrastructure where our technology address power management, sensing, infrastructure control, cooling, and connectivity applications. The broader manufacturing landscape is also evolving. AI-related demand is driving the reallocation of capacity at several 8-inch fabs in Asia, while supply resilience and geographic diversification have become increasingly important for customers. With the completion of our Malaysia expansion and availability capacity across Europe, the US, and Asia, its fab is well positioned to benefit from these trends. In microsystem and photonics, Revenue amounted to 28.7 million USD, up 14% year-over-year. We secured a new high-volume microfluidics application for blood analysis. We continue to see healthy MEMS demand and expanded opportunity for our aluminum nitride platform. Photonics remain a particularly exciting area. We are making progress in co-packaged optics, data communication, augmented reality, virtual reality, and quantum computing related applications. Through our collaboration with LIGENTECH, we have established advanced business interaction with emerging photonics and quantum computing leaders in Europe and the United States. We continue to expect photonics volume production to start in 2028. A major milestone during the quarter was the award of €127.4 million under the European Ship Act to support the expansion of microsystems and photonics manufacturing in Erfurt. Together with the launch of Fab4Micro, this investment reinforced our specialization strategy and positions Erfurt as a key growth engine for MEMS, microfluidics and photonics. Turning to wideband gap, revenue was $10.6 million, up 34% year over year. While quarterly demand remained somewhat volatile, we secured three new silicon carbide design wins, expanded our opportunity pipeline, and continued to advance customer programs towards future production. Execution of our gallium nitride roadmap remains on track, and customer interest continues to increase. Looking ahead, one of the most exciting opportunities for ISOP is the rapid growth of AI-driven data center infrastructure. We see opportunities across all three business units, including power conversion, sensing, photonic connectivity, silicon carbide, and gallium nitride technologies. Based on today's pipeline and customers' engagement, We estimate a long-term revenue potential of approximately $300 million annually for data center applications. Finally, the AirFox end-of-life program remains fully on track, and we continue to expect substantial completion during the first half of 2027. Together with Fab4Micro, this transformation supports our specialization strategy and creates the foundation for future growth. At the same time, we continue to execute our cost control and productivity initiative with discipline across the group. And now I will hand over to Alba for financial updates.

Thank you, Damien. Good evening, ladies and gentlemen. We will now continue with the financial update. From a financial point of view, Q2 was a quarter of disciplined execution in a still challenging market environment which weighed on revenue development and capacity utilization. Nevertheless, we delivered revenue within our guided range. Our EBDA was of $33.6 million with an EBDA margin of 16.8%. If we exclude the impact of revenue recognized over time, the EBDA margin would have reached 17.6% within the guided range of 17 to 20%. Our second quarter profitability mainly reflected the softness in the automotive and market, which limited our capacity utilization. As already mentioned by Damien, our cost savings program is progressing as planned with expected positive effects towards the end of the year. We also continue to manage our cash carefully with cash and cash equivalents of $163.6 million at the end of the quarter. In the second quarter, we recorded a non-cash tax impact of $11 million related to the derecognition of deferred tax assets in Malaysia, which affected our net results but had no impact on our cash. Overall, our financial priorities remain unchanged. Preserving liquidity, improving operational efficiency, and supporting the group's long-term growth opportunity in automotive recovery, data centers, microsystems, photonics, and wideband gap technologies. Looking ahead, I can only repeat what Damien said. We remain focused on cost efficiency, cash, Our business continued to be naturally hedged and our profitability remains unaffected by exchange rate fluctuations. At a constant US dollar-euro exchange rate of 1.13 as experienced in the previous year's quarter, the EBDA margin would have been 0.1 percentage points higher. Our capital expenditures in the second quarter amounted to $24.2 million bringing first half 26 capex to $50.2 million. Cash and cash equivalents totaled $163.6 million at the end of the quarter. while our net debt amounted to 312.3 million dollars, which is an increase of 20.9 million from the previous quarter. And to conclude this financial section, I would like to share our next guidance. For Q3, 2026, our revenue is expected to come in within the range of 195 to 205 million dollars with an ABBA margin in the range of 17 to 20%. This guidance is based on an average exchange rate of 1.14 US dollar to Euro and does not take into account the impact of IFRS 15. I would like to conclude this financial section by saying that we remain confident in the medium term outlook and our strong operating leverages Diversify Technology Portfolio and Long-Term Customer Relationship Position ask very well to benefit from a recovery in the demand. And now I would like to give the board back to Damien.

Thank you, Alba. As we step back from quarterly fluctuations, four messages stand out. The first one is our demand is stabilizing. We reached the bottom with underlying book-to-bill returning above 1.0 for the first time since Q2 2024. The second is data center opportunities are accelerating across CMOS, Photonics, Silicon Carbide, and Gallium Nitride. Third, our specialization strategy continues to gain momentum supported by Fab4Micro, Airforce Transformation, and our growing photonic position. And fourth, execution remains strong, demonstrated by the new silicon carbide design wins, our progress in gallium nitride, and a successful cost control initiative, and last but not least, the Euro 127.4 million chief tax funding award that we confirmed. Taken together, this development reinforced our confidence that its fab is increasingly well positioned for the next growth cycle and for sustainable long-term value creation. Thank you, and we are now happy to take any of your questions.

Ladies and gentlemen, if you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, dial pound key 6. You can also ask a question by using the hand-raising option on the player. We will take the question from Narahari Narasapur. Your line is now open. Please unmute your microphone.

Hello. Hi. Good evening. Thank you so much for a wonderful call, wonderful updates. My question is, I think we are still not I think the food capacity is like 1.3 billion, if I'm not wrong. When do you expect this to go up? And second question is, I recently, because of some social media posts, Big Fab stock has seen a lot of movement, crazy movements. How do you, how does the management see this? And can the company benefit from this somehow? Thank you.

Okay, thank you Nahari for the question.

So on your first question, when do we see a full utilization? At this stage, end of Q2, the utilization was at the 60% level. So we anticipate a gradual increase of this capacity utilization. The model that we are developing for the company goes for a steady capacity increase, and we want to reach levels in the In the region, 85% to 90%, 85% would be a good capacity level. The question is about when. I think it's all about the market conditions and how fast the market evolves. We have seen in the past some substantial evolutions. You know that we are on a relatively long supply chain, particularly, for example, in automotive. We have a set of tiers between ourselves and the OEM and this can create swings in the demand. My anticipation at this stage and from all the KPI that we have, we see that the demand is recovering. Now, how fast this recovery takes place, it's difficult to predict. If you look at our model and based on the growth that you see on our markets, we believe that we have enough capacity for the next two to three years. And we continuously monitor how the demand is evolving. And based on that, we see how we need to take into consideration possible next capacity increase. But I would say for the next two to three years, the capacity that we have in hand is sufficient. Regarding the question about social media, I must say this sudden interest that the post created was a big surprise to us. Reading the post there was a lot of information that was in fact not totally new. The post created some combination and some Yeah, it was a compilation of a lot of news that were already on the market. And, you know, this has created maybe a significant interest in our company. We see that to some extent positively because, you know, we are working on the different areas that were covered by the post regarding photonic, regarding wideband gap. The interest for some of our high voltage and CMOS technologies that could also be relevant for a growing application like in data center. That's why here we provided a bit of an update. And if you look at the PowerPoint material that is provided for this goal, there is a bit of more data on this. The feedback that we provided to the post was, from our side, no specific new news. And I think it's up to the market to make their own conclusion on how to utilize the different information. You could say that some of the information was maybe created some shortcut between certain actions that we are taking, for example, in the context of the photonics fab and certain large companies. but nothing was fundamentally wrong in the statement that were posted all together in one shot, in one single post. So that's my comment about this specific post on X. Does that answer your question?

He disconnected but he can enter the queue again if he has some more questions.

So maybe we can try with Luc now.

Yeah, the next one is coming from Luc Deserte. Your line is open. Please unmute your microphone, Luc.

I cannot hear it.

In the meantime, we have another question. It's coming from Tryon Reed from Berenberg. Your line is now open.

No, thanks. Hopefully you can hear me. It's Tryon here from Berenberg. I just have a couple of questions the first was just on the data center opportunity that you highlighted you talked about 300 million dollar long-term opportunity obvious question would be could you give us a bit more detail on the timing is there any particular area you listed a few of any particular area which is going to be a bigger contributor and how much revenue do you have today so what does that 300 million dollars And then the second question was just on the robotics opportunities that you mentioned are becoming a bit more real. Just be interesting to get a view on that. Is that essentially via Melexis or is it other customers? And if you can help us to quantify the opportunity, that would be great.

Okay, so today our estimate on the data center is that we have a relatively modest revenue, mostly coming from what we do on Silicon Carbide, from also an area that we have in Photonics, and some business that we run on CMOS. Estimate is in the range of 20 to 30 million. It's a relatively large range, but if you look at it from... The 300 million is based on the number of opportunities that we tag and that we flag that are directly connected with data center evolution How fast and how quick could we get to these 300 million? That's a good question and I will not be able to answer today. It is significantly linked to also the success of some of the customers we are interacting with in this domain. And also we know that the data center deployment, particularly the new architecture of data center, is driven by a multiple dynamics that we do not control directly from an HR perspective. So that's the reason why we stay relatively prudent about providing more accurate view within our different business units and in terms of timing. But as soon as we get some substantial and significant news on this, we will definitely be able to provide you more insight on this. So that's the answer on the data center. On robotics, it's not only Menexis. So we see multiple customers in automotive but also in the industrial area reporting the interest in robotics for the device that we are producing. So we produce sensors. We produce a position sensor. We produce also our customer produce with our technologies actuators. And so we have also customers in the industrial sector who are also reporting a nice growth in robotics. And it's a global growth, so it's also happening in China, but it's also a global growth that we see in robotics. So it's difficult to cite this at this point, Trajan. But likewise, as soon as we get a bit of more visibility, we will share that with you. It's only, we thought it was worth mentioning that we see some of these traditional automotive players. I think Alexis gave also some insight on what they see in robotics. But we see also the same feedback from industrial customers. Hope that answers your question.

It does, yeah, that's super useful. Thank you. Thank you, Florian.

As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. Or you can also ask a question by raising the hand on the webinar. We have the next question coming from Arno De Roost. Your line is now open. Please go ahead.

Okay. Thanks a lot. So I do have a question around the financing. I think the uptick in the sector is a bit later than anticipated regarding the announcement of the initial 1 billion investments. And the repayments of the long-term agreements are now generally prepaid. And the first bank financing of 200 million is, I think, is due at the latest, next of at the end of next year. What do you see as the best way to finance this gap? I think that this will be there in the coming one to two years.

Okay. So I will take first the long-term agreement repayment. So we are gradually repaying the long-term agreement prepayments. We still have... a portion which will be repaid this year and another one next year. So it's not all done. And then regarding your question on the first revolving credit facility of 2021 of 200 million euros. Yes, it's correct. Well, actually, the maturity is scheduled For November this year and we already asked for an extension of it by one year as per contract. We had that clause in the contract which we activated and this will help us already to extend by one year. Now, you are also correct by saying that we only with the extension of that line We won't have enough capacity on credit lines for the future, but we already gained one year, and this gives us some room for maneuver to see what would be the best options. to either go for a new revolving credit facility as of next year when this one will expire, or another way, there are a few things that we are looking at, some alternatives as well. And we, as every time, will take the best option from a financial point of view. So we are working on it. That's the conclusion.

There is appetite in the market from the banks to come up with.

Even for the extension of this line, we had really a lot of appetite from the lenders.

Okay, thanks a lot for the clarity.

The next question is coming from Luc Desortes. Your line is now open. Please go ahead, Luc.

Hi again, Sir. Can you hear me now?

Yes, we can hear you, Luc.

I see that you are raising the outlook modestly, let's say from 190 to 25. and then from 200 to 205. As you say, the order intake is now accelerating. Would you expect that for, let's say, the fourth quarter, that it would enhance again, or would it be about the same level?

Yeah, we don't provide guidance for the fourth quarter, but yeah, as I mentioned earlier, We believe we reached the bottom in Q2. And the way we look at the business right now for the second half, as we said already a quarter ago, is that second half will be stronger than the first half. So anticipation is that there will be a prolongation of the recovery. How fast and how high, we are still a bit cautious to see What our customers are planning to do. Talking to our main customers, they seem quite optimistic about Q3 and Q4. And this will likely be reflected in our numbers as well. But so far, we are not in a stage to provide guidance for Q4. Just a reminder, our cycle times are quite short. and we want to be cautious also as I mentioned earlier in the automotive industry when the cycles are long and the supply chain is long you can have really significant swings that can hit so we want to make sure that you know we We get the full visibility on how the year will go before giving a guidance for Q4. But I'm quite optimistic about the fact that the recovery is not just a single shot for Q3.

And then I have a second question. Are you also in a position to be able to start increasing prices?

Yeah, that's a good question. I think right now and in general we are following how the market evolves from a supply perspective. So we see that on the wafer supply there might be some risk and tension coming in our way. So we see that there is a high demand for SOI wafer. We see there is in general demand in the 200mm wafer, so any price increase that comes there will be propagated to our customers. At the same time, we want to make sure our customers are gaining market share and winning new markets. So it's always a trade-off that we need to make and it's done on a case-by-case basis. Thank you.

There are no further questions at this time, so I hand the conference back to the speakers for any closing remarks.

Thank you Gaia, thank you everyone for participating to this call and we remain available for any subsequent questions that you might have and we need to give you an appointment for the next conference call Thank you for your time and with this I wish you a great day and a great evening. Bye bye.

Thank you. Goodbye.

Thank you for joining today's call. You may now disconnect.