Hello, and good afternoon, everybody. Warm welcome to the Hönle AG earnings call for the third quarter of the current fiscal year 2025/2026.

Today's speakers will be Dr. Franz Richter, the CEO, and Robert Stark, the CFO of the company.

They will walk us through the company's performance of the first nine months of this current fiscal year. Before we dive in, a few side notes: this conference call is being recorded, and you will have the opportunity to review it later on ResearchHub.

If you have any questions, please feel free to submit them using the chat box on the lower right-hand corner, and you will also have the opportunity to ask questions live once the presentation is done. Please make sure, if you ask questions live, to also state your name and your company name so that the companies know so they're talking to.

With all this in mind, I will hand it over to Dr. Richter and Mr.

Stark. It's all yours.

Thank you very much, and good afternoon to everybody also from our side. I will go through two introductory slides, and Robert will then talk a little bit more in detail about the numbers, and then we will go into the Q&A session.

The nine-mother month figures were published this morning. We basically have revenues at the same level compared to prior year, last year, 1% below.

Of course, we have seen an overall hesitance or reluctance for investments in general, especially in equipment, in the engineering. As we'll see later, a little bit different from consumables, but the investment part is still a little bit under pressure.

We did take efficiency measures during the last year and made sure that we achieve a certain cash flow and profitability level. The basically safe and earnings increase, we did see mainly in the adhesive and the disinfection, and, of course, the curing is still suffering, and we'll come to that in a minute.

Profitability has been increased by €0.9 million, although we have on the same revenue top-line level, we could increase our EBITDA level. If we look to the business units in general, the adhesive, as I mentioned, also here, the equipment market for the adhesive, so as you recall, we offer adhesive and also the equipment for curing the adhesive.

Adhesive equipment still challenging, also here a hesitance to invest. It's below our expectations, but the adhesive itself, the material sales, well above prior year.

Here we have growth, and the whole business unit also had an increase due to the adhesive increase. We are also going through a transformation in the adhesive system, and that means we basically focus on certain focus fields: medical, optics, electronics as target markets and focus more and more on scale so that we have less small volume orders, and focus on higher volume, as you probably recall from our previous discussions.

The cost is basically in the formulation, in the qualification of the material, and then, of course, it depends whether that order comes in with a kilogram or a ton. A ton is, of course, much more profitable as gross profit margins are usually with the adhesive pretty high.

To gain higher volume orders, we have to set up a team structure in that way. We have to talk to key customers, OEM customers, from engineering to engineering level.

It's not just a sales approach, it's also kind of collaboration. If we support our customers with their challenges, then we become a partner, then we are designed in, and then we can benefit from higher volumes in that application.

That is well on its way. Of course, it takes some time, that is nothing you can do within a quarter, but we do see an increase in engineering discussion with key customers.

Curing, here we have a little bit a split between the classical sheet-fed print application, which is still suffering, we do see a decline compared to previous year in the volume. Right now, the last weeks and months, the activity has been increasing, but the quotation volume is going up.

There is more activity coming, also from the published numbers from our customers. It looks that there is a light coming back to that market.

We see already an increase in order intake, the order intake in the industrial application for curing has been increased. We are about, I think, about 15% above previous year year to date in the order intake, and significant number of these orders are coming from the US.

We are increasing our market presence, expanding distribution network in Brazil, Mexico, Gulf region. We increase also sales force in the US because there is activity and there is demand.

The whole transformation for that curing business unit, of course, is to get into positive results, and to, yeah, avoid the drain of money in that business unit. The goal here clearly is to get into a profitable level.

Again, the disinfection basically is pretty stable. We are also increasing our sales force because in some regions we were weak.

In disinfection, application is coming from water, water disinfection, water and surface. That will be also the main focus for going forward.

With ultrapure water, ultrapure water is for process water cleaning, semiconductor fabs, and others. That is basically where we see growth coming, and we are here in qualification processes.

The qualification usually takes a little bit time, but that is all in good shape, and it's ongoing. Overall, I think what we see in the last weeks and months is an increase activity in all these three business, also in curing, where we expect better numbers going forward.

Then I will hand over to Robert, and please, Robert, go through the numbers in more detail.

All right. Thank you, Franz, and also good afternoon from my side.

As mentioned, I will take you through the financial performance of our last quarter. In the first in the third quarter, our revenue increased to €23.7 million compared with €22.6 million last year.

In the same time, EBITDA rose significantly from €0.5 million to €1.7 million in the quarter, resulting in a quarterly EBITDA margin of 7.3%, as shown on this slide. For the first nine months cumulated, our revenue remained broadly stable at €69 million like last year, but EBITDA increased by 26% to €4.5 million, and EBIT returned in a positive territory to €0.4 million.

The main drivers behind that were a more favorable product mix, no, more adhesive sales, and in the product mix, we had cost-saving measures already implemented and getting traction. Therefore, the material cost ratio improved from 37.6% to 35.9%, and our other operating expenses decreased by around €0.6 million.

Not yet. Basically our equipment sales, as Franz already mentioned, remained under pressure, whereas adhesives, UV lamps, components, and spare parts developed more positively.

Turning to the business units, adhesive systems delivered a recovery. Revenue increased by 6.8% to €26.6 million.

EBITDA rose significantly to €4 million. Industrial adhesives projects in electronics and in medical technologies did more than compensated the continued weakness in the adhesives curing equipment.

For the curing, revenue declined by nearly 19% to €20.9 million. EBITDA amounted to -€2.2 million.

The main factors, as already mentioned, weak investment activity in the mechanical engineering, especially in the printing segment, and a lower business also with Manroland Sheetfed following the bankruptcy proceedings. Also in relation to last year, the discontinuation of the solar simulation business.

There, yes, we had cost savings on the profitability side. They are visible, but they could not compensate the decline in the volume.

For the disinfection, continued its positive development. Revenue grew by 12.6% to €21.5 million.

EBITDA increased to €2.7 million, and the growth was particularly supported by higher sales of UV lamps and components, especially for the water disinfection and surface treatment in the food industry. To our cash generation, cash generated from operations increased by 23% to €4.6 million.

Our investing cash flow was -€1 million. These investments were, yeah, fully financed and covered by our operating activities.

In our financing cash flow, the -€2.7 million mainly reflects our repayments of bank liabilities and lease liabilities. Therefore, cash amounted at the end of the quarter to €7.2 million, a decrease of €0.5 million since the beginning of the financial year.

For the net financial debt declined further to €37.4 million compared with 38.4 at the end of September last year. Basically here, we see a clear trend since 21/22.

We have reduced our net financial debt by €12 million. A large part of this relates to our investments in our own commercial properties with interest rates long-term secured.

At the same time, equity ratio improved to 53%, and our long-term debt decreased basically by 6.2%. Mainly we will continue to focus on our positive cash flow and gradually deleveraging our structure.

Coming to the guidance, based on our current market environment, we revised our guidance in July 22nd. At this time, we maintain definitely our full-year figures.

We expect a revenue of 92 to €95 million and an EBITDA between 5 and €6 million. Basically, for the whole business year, there are uncertainties or they were uncertainties also in the mechanical and plant engineering hit the curing business unit especially.

At the same time, we expect adhesives and disinfection continue for this year contributing positively, supported by our efficiency measures and cost savings management. For our next financial update will be beginning of December, December 8th, we will publish the preliminary results for the whole business year.

Before then, we will attend at three, yeah, capital markets conferences, and we'll be publishing end of January our full-year annual report of this business year. At this point, from our side, thank you for your attention, and we are now happy to take your questions.

Thank you so much, Dr. Richter, Mr.

Stark, for the insights that you have shared with us. Let's go into the Q&A, and this time we have something that's slightly different from the previous calls that we have made.

You are able to ask questions live using your microphone in addition to, of course, the chat tool that we've had all the time. In case you do feel like you want to ask questions using your microphone, please write the term "question" into the chat box.

I will then permission your microphone, and you will be able to, and that's the same with every system, permission the system to use your microphone, then unmute it and go live, and then we will be able to hear you. I will leave this slide up for a little while, but already dive into the questions that we received.

We did receive some questions on the various business units that you were talking about, and let me start out with the adhesives business. There we have a question: "How many meaningful qualification projects are currently active in adhesives, and if you could tell us a little bit more about the approximate addressable annual revenues that they could convert into, and what percentage historically convert into serious production from the order intake or from projects that you're working on, and when should we expect the first material revenues?"

Four questions wrapped into one, maybe let's start out with how meaningful qualification projects you currently have in the adhesives business.

There are quite a number of meaningful qualification processes. The question is then what the volume in the end will be because usually there are more than one suppliers if we talk to bigger customers.

They usually have two or three suppliers, and then it's a question who gets the order and or let's say who gets which part of the order. There is probably a handful of qualifications ongoing.

I'm talking about meaningful, which means which would really go into higher volume. Whatever higher volume means, I know that everybody is waiting for an order in the range of tons, me included, but that is hard to say.

We have to be realistic. Qualification, especially these high-volume, that takes almost a year to qualify and to get signed in, so that is taking time.

Smaller orders go faster, I would expect that we would have within the next year some meaningful numbers which we can report, but it's too early now.

Do you have any feeling as to looking at the sales funnel, what goes in and what eventually comes out in the end that turns into revenues percentage-wise? If you have a project, can you say that 50% of those usually end up in sales, or 30%, or is that a very difficult number?

That's difficult to say. It's different in equipment.

Of course, here I would say from the orders, because if you look to the equipment and the discussions with customers, we have a history with those customers. There usually you can say it's a question of timing, and if the investment goes through, but then I think we are probably in the range of 10, 15, 20% conversion rate.

Also here, it's usually that you place three quotes for three lamps or two lamps or, so that is, yeah, it's usually if we are in an intense discussion, that becomes a quoting process, usually something comes out of that. I would say probably a gut feeling is 10, 15% conversion rate.

Thank you. Let's move on to the curing business.

We've seen that the curing business, even though restructuring was working, was not able to offset the decline in revenues that you were showing, and the question is regarding, are you taking any new measures besides the actual restructuring to stabilize the curing segment, and when do you expect to return to year-over-year growth and ultimately EBITDA break-even?

Of course, the goal definitely will be that within the next year we will come to the point. Depends very much on the top line.

As we also expected last year already in growth, it was planned grow, but then, of course, with all the international conflicts and the non-investment mode of our customers, that slowed down everything. You can see it also in the adhesive.

It's usually if there is a hesitance, then the investment, customer have to decide to spend a budget, investment budget, that is then held back, whereas consumables, of course, it's an ongoing process. Consumables continue, also we see it in the curing business, for example, spare parts.

Spare parts still is working, but the not investing in new equipments then takes it down, takes the order entry down. Usually, also from the experience, that goes for a while, a customer can hold back a year or two years, and that is what we see right now, that significant more, I think our total order, quoted volume has increased significantly compared to last year.

There is much more activity, hence, assuming there's not another big international conflict, you never know, then I expect definitely an increased top line for the curing this year, which then pretty easily should bring us also into a positive range in the EBITDA. Of course, uncertainty is still there.

When you're talking about this year, you mean fiscal year 2025/2026? Because I have a question that...

No, no, this is this year. I'm talking about the next year.

This year, we have already given our guidance, what Robert just said, and that includes, if you look from the business units itself, we will have a negative EBITDA on the business unit curing in the running year. I'm talking about the coming year.

That's what I understood as well, just wanted to clarify that point. If you look into the next year 2026/2027 in curing, basically you are implying that there might be a return to organic growth in that year, because that's one of the questions that we got, if you see that return to organic growth next year.

That is the response from the sales force, that is the response from the total volume of quoted equipment. That is the first measurement.

Usually a quotation quote, if it's fast, turns into an order in three months, if it takes longer, it's six months. We basically expect an increase in order intake within this first or second quarter of the next year, and then, of course, to be able to ship the systems then within that year.

That, of course, also would mean that the whole group will be able to return to organic growth, correct?

Absolutely, yeah.

Great. Thank you.

Just one question. The growth we saw in adhesive was eaten up by the curing and also discontinued business like the solar business was taken out.

If we get the curing business onto a growth path, then, of course, the whole group is expected to grow as well.

Great. Looking a little deeper into curing as well, the print business has been weak for some time.

Do you see any indication that the bottom of demand has been reached in that space?

It's what I basically said. If I look to the request for quotations from customers, also from different applications, there is the classical print, where especially sheet-fed offset, that's one thing.

Also here, we see an increased activity, and where we have seen growth already is in the industrial application. We had in the running year until now, year to date, we have, as I said, about 15% higher order intake in that industrial segment.

The industrial segment is only half of the volume of the print, therefore, of course, is the relative added order size is lower. We do see an increased order intake and increased in activity in the whole business unit.

It's correct.

Thank you. Looking into the business units also on the ultrapure water aspect, can you give us more color on the qualification projects in ultrapure water and semiconductors?

Here it is basically a process where this goes into infrastructure of the building, that's not in equipment. That's basically into the buildings, and that, of course, has a longer lead time.

We were a little bit expecting to be faster here, but there are some situations where the whole investment goes through that is just postponed for the time being and should come, but it's also here the overall let's say holding back of the investment in infrastructure and equipment in buildings was also here the main reason for postponing of those orders. It is just a little bit out of our hands.

We are in good shape here, but it depends when the investment goes through in these semiconductor fabs.

Thank you. I come to the last question that was entered into the chat, and once again to everybody who is attending, if you do want to ask a question, you can do so either by typing the question into the chat, and we will pick it up and address it, or you can ask a question live.

If you want to use your microphone, please type in "question" into the chat, and we will entitle your microphone. Coming to the last question: the fiscal year 25/26 is almost coming to an end.

You've got nine months in the bag, and you have a guidance, of course, for the full year, which implies a somewhat softer Q4 EBITDA with a margin of somewhere between 2% to 6% after about 7.3 in the third quarter, basically on the same top line. What exactly drives the sequential step-down in margin in the fourth quarter?

It should be pretty in line with the Q3 between the 6% and the 7.3%. There's not much a big gap.

For sure, we are a little cautious, but I think we will hit in this small range the upper end. That should be in line with our expectations and with our business here and the Q3.

There was no specific expectation that we have a weaker fourth quarter. When we had to adjust the guidance, we took it down a bit, but the third quarter was already, yeah, relatively strong.

Good to hear. I don't have any more questions at this point, and I will talk for a few moments to give people the last chance to maybe enter a question.

It doesn't look like anybody's typing, I'm very close to closing this call, thanking, of course, you, Dr. Richter, and you, Mr.

Stark, for your insights. Hönle AG's Investor Relations, Mr.

Weinert, is more than happy to answer additional questions you might have, is our analyst, Abert, who stands ready. With all this in mind, I appreciate the insights, the questions that were being asked, and wish you all a great afternoon, and hand it over to the management of Hönle for the last words.

Thank you very much for this discussion here, and, of course, we will, as we showed in one of the last slides, probably have the opportunity here and there in the next months to have a live discussion in one of the conferences, and then we will talk again in preliminary figures in early December. Okay.

Thank you very much for joining us, and have a nice afternoon.

Thank you. Have a nice afternoon.

Goodbye, everybody.