ELEAF (ELEAF) Q2 2026 Earnings Report, Transcript and Summary

Good afternoon to everyone, and welcome to EL.En.'s Conference Call to present the First Half 2026 financial results. Today's call will be recorded and there will be an opportunity for questions and answers at the end of the presentation. With us on the call today are Andrea Cangioli, El.En's Chief Executive Officer; and Enrico Romagnoli, El.En's Chief Financial Officer and Investor Relations Manager. Before we begin, please note that during this conference call, management will make certain statements regarding future expectations, plans and prospects. These statements may include forward-looking statements and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. Certain statements in this call, including those addressing the company's beliefs, plans, objectives, estimates or expectations of possible future results or events are forward-looking statements. Forward-looking statements involve known or unknown risks, including general economic and business conditions in the industry in which we operate. These statements may be affected if our assumptions turn out to be inaccurate. Consequently, no forward-looking statements can be guaranteed and actual future results, performance or achievements may vary materially from those expressed or implied by such forward-looking statements. The company undertakes no obligation to update the contents or the forward-looking statements to reflect events or circumstances that may arise after the date hereof. [Operator Instructions]. Thank you for joining us today. We will now begin the conference call, and I would like to give the floor to Andrea Cangioli. Andrea, please go ahead.

Thank you. Thank you, Nicola. Thank you, Bianca, and good afternoon, everyone. Thank you for joining us in this call. As usual, Enrico Romagnoli will hold the call with me. I'll try to limit the number of figures, financial figures and just to speak on a description of what has been going on in these 6 months and leave the financial part to leave the financial part to Enrico. We have several interesting topics to talk about in this first half of 2026. On one side, the excellent performance of our current activities. And on the other one, the announced divestiture of the Laser Cutting division. The first half confirms the strength of the group growth trajectory and the direction we have been pursuing for some time, an increasing focus on the medical sector. Following last year's sale of Penta Laser Zhejiang,, we took a further step finalizing at the beginning of August an agreement for the sale of the majority stake of Cutlite Penta and of the residual part of our laser cutting business to the market leader, TRUMPF. To put this deal in the appropriate frame, Cutlite is leading the laser cutting division of the EL.En Group, which includes a few distribution companies, including the long-term owned Cutlite do Brasil. And in 2025, accounted for EUR 121 million and change in revenues and EUR 2 million in EBIT, basically breaking even in terms of net income also due to interest expense on a net financial debt of about EUR 16 million. In both the year 2025 and the first 6 months of 2026, the business has been somehow struggling amid a complex market situation. Among others, I would like to recall the uncertainties and fluctuation cast on our main market, the Italian domestic market, but the announcements of tax policies supporting CapEx that have been not timely followed up by the actual implementation of such policies. But most important, it's now more than 2 years that Cutlite and the company, the group has been operating under an imminent M&A condition. At first, when it was supposed to be sold together with our Chinese business and based on such news, probably, it's risk to lose its U.S. business and recently when word of mouth concerning the possible sale to TRUMPF has been leveraged by competitors to undermine customers and potential customers' confidence in Cutlite. By having Cutlite entered the TRUMPF's world, we are positive. We are giving to Cutlite and its more than 200 employees the best opportunity to enhance their unique capabilities within an organization, which is fully focused on the same business area and that will create the right environment and synergies for Cutlite to continue its growth with the success it deserves. The transaction itself provides a handover of the business at terms that take into consideration its low profitability and material indebtedness. Therefore, as the price will be set according to future performance also the currently foreseeable price corresponds to a certain loss in terms of P&L, considering the current value of the asset. While on a merely financial profile, the net financial position impact is already widely positive as we are releasing the financial net. What's more relevant for our future is the strategic repositioning effect of the sale on our business scope with the medical sector's weight within our revenues growing from 72% in 2025 to 92% in the first half of 2026 according to the new perimeter. This said on laser cutting, I will complete the industrial sector picture before moving to Medical. Following the laser cutting divestment, our remaining activities in the industrial business are now organized around 3 pillars: marking, laser sources and the conservation of artistic heritage. Marking is carried on by Lasit that specialize in systems for identification and decoration of typically small surfaces and by solid-state laser sources. Small logos, barcodes, QR codes are the typical output of a Lasit marking system, while the outlet markets cover a range that goes from automotive to the promotional and the fashion world from medical devices to electronic consumer goods. Ot-las covers the large surface systems for decoration and for selected technical applications. EL.En itself with its industrial division is providing mid-power CO2 laser sources and sophisticated scanning systems to Ot-las and also to third parties, also developing and engineering special purpose systems, which involve both our laser sources and out of scanning know-how. The conservation of artistic heritage is by far the most exciting and rewarding business in terms not of financial satisfaction, but based on the beauty of the master pieces that our technologies are returning to life. Business-wise is expanding, but it is and it isn't stay tiny. These businesses altogether will contribute to consolidated revenues for around EUR 40 million in 2026. In terms -- I mean for the whole year. In terms of sales, this business runs on margins that are more similar, sometimes even higher than in the medical field. The same could apply to EBIT and EBIT margin upon achievement of certain volume thresholds that were not met this year, but that were met in the past, also in the recent past by Lasit, which is the largest of this organization, which is worth just shy of EUR 30 million of revenues per year. Now let's look at our main business. Within the medical sector, performance was strong and broad-based across our operating units, Deka, Quanta Systems, Asclepion, ASA and our appreciation segment and our application segments, they all contributed positively. The Aesthetics segment stood out with double-digit growth, driven particularly by anti-aging applications, where we hold an international leadership position, thanks to our micro-ablative CO2 technologies and other innovative noninvasive platform like Onda Pro and Red Touch Pro. And also a variety of pico and nanosecond short pulse systems that are extensively used for the tolling application, especially in the Far East areas. The growth in the Aesthetic segment is especially meaningful given the headwinds we face in the hair removal segment, a trend that is now taking place from several years and that in this 2026 has continued also due to uncertainties that the wars are imposing on the Middle East area, which is one of the most important markets for us. And believe me, we are not leaving any stone unturned to launch this segment, which still represents roughly 1/3 of our Aesthetic system sales. Just to give you an example, we had planned months ago to participate to the Dubai Derma exhibit this week exhibition, investing both in the exhibition booth and in the traveling of our staff and our selected KOLs, but the booth had to stay with our distributor only in a barely visited venue and our staff could not fly to the area. Also, it's not written in my notes. I would like to tell you that the success of Onda in this moment, which, for sure, is one of the main drivers of the growth in last year is so strong that for the first time, we are experiencing a large number of competitors that are trying to blatantly copy our device, especially certain Far East manufacturers made great effort in trying to copy Onda, and they are trying to distribute systems, which are really -- I mean, they try to copy Onda without even getting close in terms of performance, but of course, by creating lots of confusion on the market. I just received a report. This is why I'm mentioning to you, which lists 19 copies available on the market for to Onda Pro. Of course, we are fighting with the appropriate legal means this trend. But I mean, it is something that has never happened before for any product in our product range. So back to the fact that in Aesthetics, we grow double digits, notwithstanding the decline in the hair removal sales, I have to add that the good news here is that even with the declining performance of hair removal, we are doing very well. And furthermore, the overall margins in the segment are improving since the declining revenues involve the most competitive application segment, while our flagship innovative anti-aging systems bear higher margins as their value proposition is well accepted on the market, as I just mentioned. Surgical applications also performed strongly, supported by neurology and by CO2 laser solution, both for ENT and gynecology. Urology system sales achieved by far the largest sales volume within the Surgical segment and the continuous expansion of the installed base is also the driver for future sales of consumables. Each surgical procedure performed by an urology laser system requires a sterile optical fiber, and we provide such consumable to our customer base. Therefore, in combination to system sales, fiber sales are nicely aligning to a growth trend, which is materially accretive to our profitability as the sales and marketing and operation expense involved in the sales of sterile fiber are much lower than the expense and effort involved in selling a laser system. In the first half of 2026, we started up an important activity in the urology field at the expiration of the distribution agreement with its historical distributor in the United States, Quanta System moved to establish its own distribution and logistics hub in the United States, which started its operation in the second quarter. The positive effects of the subsidiaries operation on our business and our P&L are evident from the very beginning with Quanta U.S. providing additional sales volume, gross margin and EBIT and consolidating Quanta Systems' leadership within the EL.En Group in terms of both of sales volume and profitability. The Therapy segment contributed positively as well with a minor growth. A very significant agreement with our U.S. distributor was signed in July, moving to a closer cooperation between our company in charge of the Therapy business, ASA and its historical distributor and by far, our largest customer. ASA jointly with EL.En funded the distributor with a convertible loan that is expected to convert at first in 20% of the shares of the distributor, also triggering an option to further increase our equity stake in the future. It's a small transaction for the group, but it's a very relevant one for the ASA business and for the Therapy business. We also experienced in the 6 months, a very important organizational change with the resignation for personal reasons of our General Manager, Paolo Salvadeo, whose deployment was concluded in this month of July. I would like to thank him for the valuable contribution he made to our activities and also for his excellent job in improving the managerial performance of several individuals working close to him. Based on these new capabilities, we were able to design a new organizational structure, particularly in EL.En and Deka business unit, where Paolo was operating here in our premises in Florence, where certain managers emerged to higher responsibility, reporting directly to the executive directors without the need of replacing the general manager position. The outlook on our markets remains positive. I'm not telling you anything new. We feel very confident in our capabilities and in the organization that we have crafted for pursuing the growth that our outlet markets seem to be able to sustain. We are now experiencing a phase of high profitability, and this is not taking place at the expense of the investments, and I mean also P&L investments, especially in R&D. I see the products that are granting our current success like Onda Pro, I know how they have been designed, built, generated and brought to success on the market. And I know that we have the capabilities to bring them to the market new products that based on new technologies or on improvements of the effectiveness of existing technologies will be able in the future to replicate the success of our flagship devices. I give the floor to Enrico for the comments on our financial performance.

Thank you, Andrea. Good afternoon to everybody. As usual, we will briefly comment the first half financial results released yesterday. The half year report has been prepared in accordance with IFRS accounting standard, classifying the contribution of the Industrial Cutting division of Cutlite Penta in the discounted asset, liabilities and income statement result according to the IFRS 5 for the current year. While for the previous year, the reclassification concerned only the income statement due to the binding agreement seen and communicated on August 7, which provides for the sales of 80% of the Laser Cutting business division. In the first half of 2026, the group closed with revenues exceeding EUR 246 million, up more than 9% compared to the same period in 2025, EUR 226 million, confirming the positive performance of the first quarter. In the first half of the year, the Medical segment posted growth over 10%, driven by strong performance in the second quarter, plus 11.4% versus 9.2% in the Q1. Conversely, revenue in the remaining industrial sector declined. Gross margin for the first half stood at EUR 122.8 million, up 12.4% compared to the EUR 109.2 million on June 2025. The improved sales margin recorded in the quarter reflects the more favorable business mix supported by the growing impact of the medical sector, which following the sales of the laser cutting business now represent over 92% of the revenue. Operating expense to EUR 26.9 million are substantially unchanged from the EUR 26.5 million in 2025 with their impact on revenue decreasing from 11.8% to 10.9% and highlighting a positive operating leverage effect. Staff costs amounting to EUR 47.1 million increased by 4.4% compared to the EUR 45.1 million in 2025, while the impact on revenue decreased from 20% to 19.1%. [ International ] cost for employees stock option plans amounted to EUR 0.5 million for the period compared to EUR 1 million in 2025. EBITDA amounted to EUR 48.7 million, up over 30% from EUR 37.5 million in the first half 2025. EBITDA margin increased from 16.6% in 2025 to 19.8% in 2026. Depreciation, amortization and provision decreased from EUR 5.9 million in 2025 to EUR 5.3 million in June 2026. This change is the net effect of higher depreciation and provision for risk alongside lower provision for credit risk. EBIT stood at EUR 43.4 million, a significant improvement compared to the EUR 31.6 million in the first half 2025 with an EBIT margin rising from 14% to 17.6%. In the context of the presentation of the consolidated income statement according to IFRS 5 due to a purely accounting technique, EBIT burs a penalty of approximately EUR 1.4 million, net of which the half year result would have been approximately EUR 45 million. The impact of this cost on the income statement is then neutralized by revenue of an equal value recorded in the line of discontinued operation, ensuring that the accounting technique has no effect on the net result. Financial income amounted to EUR 1.7 million compared with a loss of EUR 2 million recorded in the corresponding period of the previous year. The improvement was primarily attributable to the net foreign exchange result, which shift from a loss of EUR 3.4 million in June 2025 to a gain of EUR 0.3 million for the current period. The residual amount was generated by returns on the group's cash holdings, which are invested in short and midterm financial instruments. The share of profit loss -- profit and loss of associated company was mainly attributable to the combined effect of the group's shares in Elesta, positive result amounting to EUR 93,000 and the share of loss in reported by Penta Laser Zhejiang in China, EUR 0.6 million and with us in Japan, EUR 0.3 million loss. The majority interest of these 2 companies were disposed during 2025. However, they continue to report negative results also in 2026. The negative balance of other net income and expenses was attributable to the full impairment of the investment in Epic International Inc. held by the parent company, EL.En. Pretax income showed a positive balance of EUR 43.4 million, a significant increase compared to the EUR 29.3 million on June 2025. Result from discontinued operation is primarily attributable to the contribution of the cutting division [ upliftment ] in accordance with IFRS 5. Specifically, it includes the net loss of the business unit and an extraordinary loss of EUR 3.9 million attributable to the impairment of the recurring amount of the discontinued operation based on the price to be received under the existing agreement. Finally, a positive component -- as a positive component, the item includes the different accounting classification to the application of IFRS 5, which requires that the economic effect of the sales of the sale need to be summarized regardless of their nature in a single entry of the income statement result from discontinued operation immediately before the period result. This positive amount neutralized the negative amount mentioned before when we are talking about EBIT. The group net result amounted to EUR 26.1 million compared to EUR 17.9 million in first half, an increase of 45.4%. The tax rate for the period is 32%. In this chart, we can see the pro forma income statement without the IFRS 5. So with the consolidation of the cutting division that are discontinued in the previous version. Without the application of IFRS 5, revenue for the first half of 2026 would have been EUR 300 million compared to EUR 285 million of the first half 2025, plus 5.2%. Under this income statement configuration, the industrial sector would have seen a poor performance, minus 8% versus minus 4% due to the cutting segment. As regard gross margin, the same drivers highlighted in the previous version of the income statement continue to apply, particularly the higher contribution of medical revenue to the total turnover and the more favorable sales mix within the Medical segment. Even including the cutting segment, EBITDA and EBIT recorded strong double-digit growth of 23.6% and 29.7%, respectively, together with an improvement in both margin as impact on sales. Moving now to the balance sheet. The comparison with the beginning of the year are affected by the fact that the cutting business unit was reclassified as discontinued operation only on June 30, 2026. In terms of invested capital, there is a slight decrease. The net working capital on sales ratio is in line with the last year's figure, while ROCE shows a significant improvement. Investments during the first 6 months were EUR 7.5 million. Moving now to the analysis of the cash flow and net financial position. The group net financial position increased by approximately EUR 12 million during the first half of the year, rising from EUR 172.2 million as of December 2025 to EUR 184.5 million as of June 2026. As illustrated in the chart, the increase in net working capital is a recurring feature of the group's business cycle during the first half of the year and absorbed approximately EUR 15 million of cash. Capital expenditure already mentioned amounted to EUR 7.5 million, while dividends distributed in May by parent company and certain subsidiaries amounted to EUR 21.3 million. The contribution to the net financial position arising from the asset held for sale reflects the recognition of the net financial debt on December 2025 for EUR 16 million relating to the discontinued business. Revenues increased across all medical application segment. The Aesthetics segment performed strongly, plus 11%, driven by anti-aging system despite weakness in hair removal. Surgical activities recorded the most significant performance, plus 15%, mainly supported by the growth of system for urology. The Therapy segment also performed positively plus 1%. The slower revenue growth for aftersales service and sales of consumables reflect the loss of revenue from without last year, EUR 1.5 million, net of which growth would have amounted to 6.2%. Within the segment, nearly 60% of revenues is attributable to sterile optical fibers for urological surgical procedures, which recorded a 12.1% increase in revenue over the half year. For the industrial application sector, revenues for the period were significantly lower than in the previous year, mainly due to the disposal of the laser cutting business, which reduced the scope of the operation. For the Industrial Application sector, the chart doesn't show the discontinued cutting division anymore. The performance of the residual division were negative, marking minus 17% and laser sources minus 15%, while aftersales service and components revenue was particularly positive, recording a turnover of EUR 5.7 million in the first half 2026, up 34% on the EUR 4.3 million in the corresponding period of last year. The contribution of these activities also reached 30% of the residual overall industrial turnover, confirming the growing weight of the most recurring and visible revenue components. A more complete representation of the business trend, it should be noted that the turnover for the first half of 2026 attributable to the laser cutting sector was equal to EUR 53.8 million, down from the EUR 60.2 million recorded in the first half of 2025, minus 10.6%. Geographically, the medical sector decline of 16% in Italy compared to the robust growth in Europe, plus 8% and particularly strong performance in non-European market, plus 17%, which accounted for the main growth area in the consolidated revenue during the period. In Europe, a extensive network supported encouraging result in the DACH region, while non-European market growth was driven primarily by the Far East. Industrial sector showed a strong recovery in Italy, plus 8%, thanks to Lasit, while it registered a decline in Europe, minus 15%. In European market, the trend is stable. Andrea, please go ahead on the guidance.

Okay. So you see that we confirmed basically the guidance. We're going to grow revenues over 5%, and we are going to improve EBIT margin. We're going to improve EBIT margin on the previous year. This deserves maybe a few more words at Board level, we had this discussion about the message surfacing from the confirmed guidance, apparently disappointing since you would have expected once the least performing business unit is removed from financial reporting that better financial results are achieved and therefore, a stronger guidance would be released. Let me clarify why that's not the case and why we are guiding you to a very strong financial results. Our guidance, the one we released in March was and is defined in terms of improvement with reference to the previous year. Part of the recovery in sales and in profitability that we were expecting in 2026 was to be generated by a strong recovery in the cutting business, whose performance was quite weak in 2025 and loss in the second half. Therefore, under the new scope, the benchmark is much more demanding, also considering the outstanding performance of the Medical business in the second half of 2025. So by confirming the numbers of the guidance with a different benchmark, we are confirming that the results in the second half will be extremely strong. And at this point, we are -- we closed our prepared remarks, and we are open to answer your questions.

[Operator Instructions]. The first question comes from Giovanni Selvetti from Berenberg.

Congratulations for the results. I have a couple of questions. The first one is what's driving the weakness in the Americas sector in Italy? And if you expect any improvement in H2. The second is maybe just to kind of remind us with the new capacity expansion of optical fibers in Samarate with Quanta, what will be the maximum revenue that can be generated in this field? In your H1 report, you also mentioned higher efficiencies and automation in this new plant. So I was wondering if it's reasonable to assume that optical fibers run at an EBIT margin, which is higher than the 20% of the overall medical sales. The third is maybe about Quanta, if you can elaborate a bit more about what you were mentioning before that you start to see already positive results. And I was wondering if you will use Quanta distribution sales also for Asclepion in Surgical that based on your financial report has already some new FDA-approved devices. And the last one is more strategical in the sense that you have been doing an excellent job in, let's say, disposing assets recently. I was wondering if given also the cash position, which increased further and is going to increase further in H2, do you also have some targets for buying something or if you just prefer to invest inorganic growth?

Thank you, Giovanni. So taking the questions in order. Medical sector in Italy, yes, we had a decline in revenues. We are quite confident. The main component of the decline comes from the Professional Aesthetics. Last year, we also had onetime sales, quite extensive onetime sales. I mean we had a burst of sales generated by a very uncommon lead, let's say. We know that we are recovering in this segment in the Professional Beauty segment, and we already did in July and August also closing -- almost closing the gap. And we know that also in medical, where we sell through the network of Deka, the Renaissance brand, which covers both Deka and Quanta has a very strong backlog. And I don't know if we will be able to completely catch up, but for sure, we will be able to close -- to make the gap much smaller in the second half of the year. About the sales of fiber optics, the sterile, they were up about -- I mean, more than 10% in the half -- in the first half. This is a trend that should be maintained and will not count on any production capacity improvement because we still have enough capacities until the 1 year from now because the investment in the new fiber optic manufacturing facilities, it is articulated. We started with the real estate, then we put in the white room, then we installed the automation, which is already in place, but it will take longer to get the full certification to provide this medical device and the full certification for the plant to be active is not expected until the second half of next year. In the meantime, I mean, we expect, especially based on the continuous sales of systems and so the enlargement of the installed base, this growth trend of sales in fibers to continue, as I said, without the need of increased capacity because we can get there with the current capacities. But with the new capacity being ready to step in 1 year from now when the quantities will be materially higher than today if everything goes according to the plan. The new distribution in the United States for Quanta is one of the investments in terms of internal growth on the internal growth path also to -- that's in relation to your fourth question, Giovanni. This company is a hub managing more than direct sales, it's more managing other distributors, and this is the job that was doing the former distributor. And I mean, they accounted for about EUR 6 million of sales in the quarter because we are talking of a quarter only, even though we are making comments on the 6 months, but the company wasn't operating until the beginning of the second quarter. And so this will be a big contributor to the sales in the Surgical business. And concerning Asclepion sales, you are right. Asclepion is getting the FDA clearance for the new device, which has certain peculiarities, which diversify it from the Quanta offer. But no, there are no plans to have the Quanta distribution hub to be used also for Asclepion system at the time. According to our business strategy, Asclepion and Quanta compete, of course, compete on the market. And the only place where they share a distribution network is in Italy, where Deka Renaissance streamlines the products of Quanta System. And it was like that in Germany also. But recently, Quanta System decided to exploit a different distribution channel, and they are also running by themselves unless something changes. But I mean, in principle, you know that our brands compete mildly, but compete worldwide. And so they don't use the same distribution partners. Finally, M&A, cash, you're right. The net financial position is improving and will improve. There is nothing new about any possible transformational M&A transaction. As we did in the recent past, we are targeting smaller transactions in which we feel more comfortable in widening, especially our distribution footprint. I can tell you we are examining new transactions both in Europe and in the Far East, both with Quanta and with other companies. We are quite active according to our standards in pursuing initiatives under this point of view, but none of the initiatives we have on the table today is expected to be of a size that, I mean, uses a considerable part of our cash. So this is the answer. There's nothing really new under this point of view from what we have been always saying in the last years about the attitude of the company to expand. We are expanding nicely in our own business, and we are making all that is needed to expand this. We didn't find yet anything interesting to put down a sizable investment. It's not that we're not looking for it. But as I explained to you, we want to be very cautious because when becoming much larger, there are certain complexities, a certain number of complexities, which are driven on the management of the group and on the market position of the group that we want to make sure we are not getting into by investing a lot of our cash and creating problems in the organization of the group. So it's not that we are not thinking at all, but we are very cautious in making a very important step.

And now the next question is from Carlo Maritano from Intermonte.

I just have 3 questions from my side. The first one is on the Medical business. As you said before, Italy was a little bit weak in the second quarter, while the rest of the world was strong. You mentioned the Far East. I was wondering if you could provide us more color on the countries that are performing the best. And if you can update us on the situation in the Middle East, if the situation is going back to normal after the first quarter or if the current situation is still causing some disruption. The second question is on the marketing business that remained fairly weak in the second quarter. But if I look at your results, it seems that gross margin and EBIT are basically at the same level of last year. So I was wondering if you can provide us some color on the drivers behind the higher profitability despite the lower sales. And the final one is on duties. I don't remember exactly how duties work for you, but asking other companies, some are reporting the reimbursement of some duties. So I was wondering if you had any news on this.

Okay. Again, in due order. Far East and Middle East, we are very strong in Far East, for sure, the most successful country for us in this moment is Korea, which especially in the Aesthetic business, it's something extremely significant. Because as you know, there is a shift in this moment in the trend when you look to Aesthetic procedures, which puts Korea as one of the main sources of the Aesthetic trends in the world. So being able to sell a technology in a country where there are -- there is plenty of technology developers. I mean, many of them are engaged in copying our systems today is a sign of great vitality and great strength. We -- I mean, when we talk about Middle East for Aesthetics, the most relevant countries typically are Korea, Japan and Thailand. And also now we are doing very well in Indonesia, which is something new, but which is by far the most relevant country in terms of population, most part of China is the most relevant country in terms of population. So this is the Far East. Middle East, what is normal and what is not normal, the war, I was mentioning before, and I'm seeing the Dubai Derma exhibition being held, our distributor with all these people inside the booth. I mean, we're getting used to something which is not a war, but close to a war in that area. Bottom line, there are certain countries in the area, which are performing very well. There are -- there is commitment to continue. We're expecting several visitors for the Deka Academy, which is an academy we hold from time to time here in Florence, they are coming from Iraq. They're coming from Saudi Arabia. But I mean, overall, the sales in the Middle East continue to be weaker than last year. They didn't drop to 0, but they are just weaker compared to last year. The market business, I'm not sure at the numbers you are looking to in terms of profitability. But I can tell you that this year, we had smaller sales both in Lasit and in EL.En where Lasit is 100% marking, even though it has its service part as well. And EL.En has both marking and laser sources as it manufactures both laser sources than the laser scanning heads. We had a higher volume of sale in Ot-las, which is the company that manufactures large surface marking systems. And so they Ot-las recovered in profitability. Lasit lost in profitability. This is the situation. Maybe we can we can see together where you have seen an improving in the profitability of the marking business, I believe it should be in overall a little bit, I mean, more or less on the same situation because even though high margin is improving, the volume wasn't enough to cover. So maybe when I said that they have high margins, margins comparable to the medical system, I was referring not to EBIT margin, but to gross margin. This is the -- what I was referring to. And they have -- historically, Lasit has EBIT margin, which is comparable to the medical system and gross margin, which is even higher. The other companies have high gross margin, but due to the missing leverage effect, they never reached interesting EBIT margins in the past. So I'm very prepared on tariffs because I talked to our distributor actually in -- for the cutting business systems, but -- which is, I mean, somehow in the past. But still, I mean, we work with him, and it's an important customer for Cutlite. We are not operating -- we're not operating any company in the United States when the tariffs kicked in. Now the only operational company we have in the United States is Quanta Inc., which starts, as I say, operating in April 2026. The companies received reimbursement in the month of July and in the month of June for the tariffs. They paid under the first round of tariffs, the one that the Supreme Court deemed unconstitutional and by this way, allowing the path for reimbursement of these tariffs. The other tariffs that have been levied on the companies based on different principles are currently be paid. We -- I mean, our U.S. distributors didn't tell us if they get reimbursed for this part of the tariffs they paid. Probably they have tried to hide this information to us because, of course, they were claiming they had higher cost and they wanted us to somehow participate in the past to this undue expense that out of the blue emerged on the transaction between them and us. I expect that they have been reimbursed for the share of the tariffs paid for that period, but I don't have evidence today. Anyway, it's not us. We don't receive any wire from the [ IFRS], because we are not directly operating any activity in the U.S. and the tariffs were levied and paid by our distributors.

Just a final question is on interest rates that are increasing in the past months. So I was wondering if you have any evidence of a slowdown from your clients, especially in the U.S. or if demand is so strong right now that interest rates don't come so much?

In this moment, in the U.S., overall, we are going very well. We have some, let's say, minor concern, but it's not a general concern that is a specific concern or certain line of products. I -- we will meet our distributors in the next weeks and have a clear picture about this. At the time being, we are not being, let's say, we don't receive any claim, any request based or any excuse because of order not being placed or being postposed related to the rise of interest rates and to higher cost for customers that keeps customers away from purchasing our system. So for the moment, there is no effect under this point of view.

We now -- we have another question from Andrea Bonfa from Banca Akros.

Congratulations for the results, Andrea, Enrico. Very quickly, some of my questions have been answered, by the way, but I would like to know a quick update on your side on the timing to close the disposal of the metal cutting business. And then a clarification on the performance of Medical Services because if you are claiming that the fibers keep growing double digit and although there is some perimeter effect, the services is flat. So if you can maybe comment on that. And we would love to have a pro forma EBIT for '25, if that's possible or we can try to figure it out. And more or less, these are my questions for the being, in case I will add something at the end.

Okay. The pro forma EBIT for '25, we get it soon. I mean it has not been physically prepared. We will [indiscernible] on them. Yes, the service had an excellent performance in fibers for urological business, has a weaker performance in general in the Aesthetic field. I mean, it's basically time and material and has a onetime effect that we are deconsolidating -- with us. We had the Japanese company that -- of which we sold the majority in March 2025 was still accounted for in the 2025 financials in the first 2 months and was -- actually, they had relevant contracts on the installed base. They were -- I mean, their revenues was seen in service only. And so there is a deconsolidating effect, which is worth, I believe, something like 3%. Net of this effect, the growth would have been 6-point something. And we believe that concerning certain Aesthetic devices, also there is a reduction in the consumption of -- in the cost because we are selling more devices that are less demanding in terms of maintenance and continuous expense and less of devices, which are more demanding in terms of maintenance and continuous expense, especially you have to consider that the high-power hair removal lasers is a high consumer of service because it needs replacement of laser lamps and laser head, which is not only a consumable, but is also a relevant technical service that needs to be performed by qualified service technicians. And so as the market for these devices is comparatively reducing with respect to the other sales of simpler systems, we are also experiencing a lower demand under this point of view. But in general terms, I expect the whole aggregate to be growing more or less in line with the rest of the business when we will get the rest of the year -- at the end of the year.

And on the timing to close the...

The timing to close, Andrea, yes. There are certain conditions that need to be fulfilled. I actually had meetings today with a potential buyer. They have expectation to close very quickly. I mean, the contract has a 6 months long stop -- so-called long stop period. Really, I mean, today, I would say that we are very confident that we will close within the end of the year. If within the end of the year will be October, November, December, it's hard to say at this moment. But I mean, it shouldn't be a matter of several months, just this period. I really count that we will be closing as soon as possible. I mean we would like to close in the month of October, if it could be possible. We have to see if we get all the related permission and small things that are missing in order to finalize the deal in the way and the form that needs to be finalized.

We also have a question from Valentin-Paul Jahan from Stifel.

You answered a lot of questions I had, but I can probably follow up a little bit on the industrial segment. Maybe if you could please give more color on the decline in marking the rest of Europe and elaborate on what are the exposures of marking by end market such as automotive manufacturer or stuff like that. This is for the second -- the first question. Second, could you please give more color on the current gross margin level of industrial now that cutting has been put up as a for-sale business. And the potential -- indication of the potential [ normative ] EBIT margin so following the disposal of cutting activities. And the third one would be what are the synergies between industrial activities that are still within the group, marking, laser sources and others and the medical activities? And does it will make sense to further stream the portfolio around medical activities? And considering capital allocation, should we expect the company to use its M&A firepower for bolt-on M&A only in medical? Or could you also see opportunities in industrial markets?

Okay. Let's start from the last question this time because I believe it's relevant. The synergies between the Medical and the Industrial business are quite small, and they're all mainly technical. The factory that manufactures the low-power RF CO2 laser sources, which are used in all the CO2 lasers of the group are here in Florence, and it's the same technology that is used by the factory that manufactures low and mid-power CO2 laser sources for industrial application. In fact, they work somehow together. In fact, when we had production peak for one business, we use the facility of the other business, even though the facilities are physically separated, but they work on a similar technology. And in fact, the R&D for the laser source is one which is then applied to the same kind of technology, but to the 2 different level of parts. And this is one important technological synergy. The second important technological synergy is the scanning system capabilities, which reside in the Industrial division, of which the Medical division is a customer. The scanning systems that are operated by and headed by Ot-las are made on galvanometers that we manufacture in our facilities, both in Florence and in our Castellammare di Stabia facility. And also the industrial team manufactures all the scanner for the thousands of laser systems that use a scanner for medical application, which is all the CO2 lasers, all the Red Touch lasers and also most of the high-power surgical holmium lasers manufactured by Quanta System and by Asclepion, which use the galvanometer manufactured in EL.En as a device for -- I mean, which is a device which is needed in order to switch the 4 laser sources that -- of which the laser is made of. And so of course, they would be detachable. I mean there is nothing which each of them would make it survive if they should divide. But in this moment, we are not actively seeking for the dismission of any of these facilities. The entity which has less strategic interaction with the rest of the group is Lasit because Lasit does not use apart from really from time to time, EL.En CO2 laser sources and they have their own technology. And so they are completely independent technologically speaking. So the marking business of Lasit is strategically more independent than the marking business as said of Ot-las, which depends and relies on laser sources and scanners made by them. And so we do not have any acquisitive ambition today in the marking business. We are managing it as a historical business. I mean it's something which in the past allowed also improvement in the technology for the medical applications for the moment. We don't feel any compelling reason to pursue any further designation on any assets in the industrial business. The first and second questions were somehow tied and you wanted to have some color on the reduced volume of the marking business. The marking business declined in revenue, especially in Europe. In Europe, it's where we have our facilities. Lasit has distribution facilities in France, Spain, Poland, U.K. and Germany. I believe there -- from these countries, we had a weaker performance in sales. Also, there were some large accounts, large sales that had to be postponed to the second to the third quarter. Currently, we can say that probably the budgeted amounts will not be reached for the year, but we are confident that our market position is not jeopardized by any other market event apart from the fact that there was a weaker overall demand. You wanted to know which are the end user markets. Generally speaking, it's manufacturing. It changes among our most important customers, we have manufacturers of the automotive, not directly the car manufacturers, but the manufacturers of components for cars. We have, as an important customer, Magneti Marelli, just to to say a very known name and Brembo. I mean those are 2 very relevant component manufacturer for the automotive business. And also, we sold some of the most sophisticated marking systems for the motor heads also to Ferrari and Maserati. So we are in the automotive business, which, of course, is not being particularly brilliant in this phase. We sell also to industrial manufacturer -- electrical components manufacturers like Schneider. We -- one of the largest customers for continuous -- that is continuously purchasing from us is Bosch. And so we go to consumer electrical components. And then we have also a market in the medical devices. By the way, we founded our German distribution company in the area of Tübingen and Tübingen is the area of Germany where most of the surgical steel devices components are manufactured. But generally speaking, Lasit depends provides marking to every manufacturing activity. So if we look every month, the sales laser systems by Lasit, they touch completely different systems all in the manufacturing area. We do not depend on a single, let's say, market segment. I do not remember what you were saying about margin and gross margin, Valentin-Paul, could you please repeat your question on this?

What is your current gross margin level in the Industrial segment -- in the Industrial division? And yes, go ahead.

It's higher than in medical today basically typically, both Lasit and Ot-las can sell with margins above 50%. And because this is what the market is calling and only from time to time, we approach a different sale method because we don't rely on distributors. While in the Medical segment, if we consider the end user price, gross margin would be much higher, but we sell through distributor and distributor have considerable discounts. Therefore, the gross margin is reduced a lot. In the Industrial segment, we have more often direct access to sales, see, for instance, in -- for Lasit where we have all these distribution companies in Europe. And for this reason, we are able to grab higher margins. The issue with EBIT margins is that we need to get to a certain volume of sales. And as you noticed, the beginning of 2026 wasn't that brilliant under this point of view. But we don't see any structural issue. We see that the relation with our customers, the potential deals to a certain extent, also the backlog are moving in a way that makes us hope and count on a recovery in the second half of the year.

Sorry, we have one more question from Andrea Bonfa from Banca Akros.

My question is, let's say, a generic one, Andrea. Considering the state of-the-art and, let's say, the competitive environment on hair removal, is it fair to assume that, let's say, the mix of your product will continue to expand, let's say, in the most performing one, if I may express in this way, or volume-wise, the balance is set to remain the same?

Today, I would say yes. My answer today, I would say yes. This is the feeling that we get from the market, the feeling that tells us that still we are more requested to provide anti-aging or general dermatologic devices than hair removal devices. So it should continue. Then we are working on new developments in order to improve the performance of our systems. We know that competitors also, I mean, not the Far East low-cost competitors, but also the main players in this segment, which are Candela, Cynosure Lutronic, Lumenis and Alma are let's say, trying to relaunch the market segment by introducing to the market new devices. We will improve the performance of our devices, and we might maybe invert somehow the decline of this segment. But for the time being, your statement is fair. I don't expect the structure of our product mix within Aesthetics to change in the very next quarters. Of course, we are exposed to competition in each and every segment. And so we are now experiencing the benefits of selling our high-margin products in the anti-aging arena. Of course, I told you how invitations are flooding the market for our own [indiscernible] systems. This is a hint to how competition is moving, trying to compete against us and trying to avoid us to gain further market share and further increase in the margins. So what we cannot say it's difficult to say and how the competitive environment will be 6 months from now, not in our mix, but in our competitors' mix and if we will be able to maintain the same trend at the same margin in each and all the same segments. This, as you know, is very difficult to say because it's a market in which innovation is brought very often to the end users. We do it constantly. It's our strength, but also our competitors do it constantly and not necessarily, we are always winning in this competition. So we have all the weapons to compete effectively. We are very successful today. We look forward to being very successful in the future, but it's not so deterministic.

I would like to come back again to Valentin-Paul because maybe I switch off his microphone too early. Do you have another question, Valentin?

No, thank you. I'm okay.

Okay. Then we have no more questions at this time. But before closing the Q&A session, I would like to ask once again if there are any further questions from investors still connected. Just a moment, I have another -- yes, we have Andrea Bonfa again.

I was going to ask Andrea, if there is any update on the MonaLisa Touch. What's the state of the art there?

MonaLisa Touch itself is performing. I mean with now -- I mean, it is performing well. I mean, but the volume now is reduced. We are not -- we don't believe that today, a very large investment to return on exactly this technology in the United States where we had such a large success until 2017 is worth. We are investigating other technologies to be used together or an alternative to the CO2 laser technology to effectively perform the vaginal atrophy treatment together with the CO2 laser. So we -- the market, the demand for this kind of treatment is high, is relevant. CO2 is not so popular anymore. In the next years, I would say, we might be deciding to face the market with a new technology that would be an innovation for us and for the market as well. But as of today, I mean, I cannot disclose what we are thinking of, and I don't have a date, of course. But maybe if you continue asking me this question, not next quarter, but 6 months or 9 months from now, we will have something new to tell about this market segment.

Andrea, no further questions at this time. Then if you have any other inquiries in the future, please do not hesitate to contact Enrico Romagnoli, who will be happy to assist you. Thank you very much for attending today's conference call. We hope to have you with us again next time. Goodbye, everyone.

Bye-bye.

Bye-bye. Thank you very much.