SCHMID Group N.V. Class A Ordinary Shares (SHMD) Q2 2026 Earnings Report, Transcript and Summary

Ladies and gentlemen, we warmly welcome you to the H1 26 Results Conference Call and webcast of the SCHMID Group. I am pleased to welcome the CFO Arthur Schütz, and CSO, Roland Rettenmeier, who will guide us through the presentation shortly, after which we will move on to the Q&A session. Before we begin, I would like to remind everyone that today's discussion will contain forward looking statements within the meaning of applicable securities laws. These statements are based on current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from those described in these forward looking statements. Please refer to our filings with the US Securities and Exchange Commission, including our annual report on Form 20-F for a discussion of these risks and uncertainties. We undertake no obligation to update any forward looking statements except as required by law. In addition, today's discussion may include certain non GAAP financial measures. Reconciliation to the most directly comparable GAAP measures can be found in our earnings materials and findings. And with that, I am handing over to you, Arthur. Arthur Schütz: Thank you, Mara, and good morning, good afternoon, everyone. I would like to start by giving you the headline of the first half of 2 thousand 26. In short, this has been 6 months of significant transformation, We prepared the balance sheet, Our cost program has been executed. We are seeing real momentum in order intake. Let me walk through the 4 numbers that tell the story. €33 million of new net capital was raised to our convertible and SEPA, €31 million of debt was reduced to a debt to equity swap announced in May. €4 million of fixed costs were taken out through our Sprint program, and €52 million of orders we saw in 8 weeks. 2026 remains a transition year, but the foundation is now in place for a strong second half of 26 and a promising 2027. Let me now walk you through the P and L of the first half. First of all, this the Q1 was a slow start. It tends to be seasonally weak, but it was weaker than expected. We have seen 18.2 million revenues in Q1, which increased to 27.8 million revenues in Q2. Out of this, equipment revenues was 10.7 million in the first 6 months last year, which was a very weak half year. To 39.4 million in h 2 thousand 26. Spare parts and services increased their revenues from €5.9 million to €6.4 million year on year. Our gross profit margin of 21.2% was lower than expected, This is partially due to the lower scale. But then also a shift towards China where we have slightly lower margins and which we expect to reverse in the second half to more German production based revenues. Our G&A expenses increased by more than €3 million because of the Sprint restructuring, share based compensation, and capital structure items. I will talk more about that on the next page. Other income and other expenses include about €1.7 million foreign exchange losses, This was a 6.3 million gain in the first half of 25. The financial results losses reflect the accounting treatment of the ex-JHAB liability, which we converted into shares in January. And to a lesser extent, also the fair value movements of the company's warrants. It also includes, for your information, about 875 thousand of interest on our debt. Now let me move to the next page and walk you through how we get to our adjusted EBITDA. So the adjustments include about €420 thousand of Sprint restructuring costs, share based compensation reflects 2026 and 2027 c level rewards for shares and options. And the IFS, these had to be recognized mostly in h 1 of this year. Capital structure restructuring costs reflect the fact that we had 22 f filings this year. This half year, We are still under the Nasdaq monitoring period, which means higher filing requirements until February 2027. We also had some costs that came with the debt to equity conversion. Let me now talk about our sprint program. We concluded sprint 1. We produced head count for full time equivalents of more than 40 in our German overhead functions. Most of those departures will happen in Q3. We had or we will have about restructuring costs about €700 thousand of which I mentioned, 400 thousand was expensed in the first half, This is mostly for paid leave again, running into Q3, mostly, and then some small severance payments. The run rate has been achieved for about €4 million expenses, savings in labor costs, and this also reduces our fixed costs and lowers our breakeven point. Now we have started moving to the second phase of our sprint program, which is a purchasing cost savings program >50% of our total expenses are purchasing materials. And our target for savings are 5% of those purchasing expenses. At least 5%. As we now see a period of increasing volumes for purchasing, this is a good time to renegotiate terms and conditions. We think that most of those 5% minimum savings can be achieved by year-end, However, we also redesigned some high cost components, and this design to cost will take us a bit of time and will be something more for 2027. Let me then walk you through cash flow and working capital. We have €29.3 million of operating cash outflow in h 1, which was mostly the €26 million of investments in new working capital. As you can see, we had negative working capital in December. Of last year. We now had about 14% of LTM sales by the end of June. Now medium term, we think we can reduce this back to something more like ≤10%. We also believe that the absolute amount of working capital is something that we can keep flat or reduce by year-end. We spent about €800 thousand on CapEx. We are typically running at 1.5 million of annualized CapEx. Obviously, in the second half, we will start seeing some of the spending on the Chinese factory, which total will be for about €11 million and this is land plus building. it is not so much the machineries that we effectively have already. And as I mentioned before, we raised about €33 million to the convertible and the SEPA. That leads me to the balance sheet. We did a 30.8 million debt to equity swap announced in May. Has meant the total debt has been reduced from 53 million to about 23 million. Which we believe is sustainable level and also means that we actually now have some depth capacity. And can fund some of our growth in debt rather than in equity. Additionally, obviously, we have this convertible, the PACFOR convertible 2.5 million. Euros that matures in March. Of the $30 million convertible issued in January, $11 million remaining. And we have $20 million convertible that was raised in July. As part of the convertible financing, we now have additional debt capacity for China, as long as this is nonrecourse to the Germany subsidiary or to our topco. So that means, for example, the Chinese factory can be financed on a 1-recourse project basis with debt. We can also raise additional working capital or bank loans up to the €20 million level. The average cost of funding for our Chinese debt the new debt, will be around 2.7%, so very attractive rates. Additionally, we still have $21 million of standby equity remaining We have not drawn on that in the second half of this year and are not intending to draw on this the rest of the year. With that, I now hand over to Roland who will give an operational update and talk about our order intake situation.

Thank you, Arthur. Let me give you an operational update. We executed well in the first half of 26. And we also delivered 1 of our first InfinityLine H+ for 700 by 700 millimeter panel level packaging to a US based customer. In addition to that, to grow with our customer, we decided and started to consolidate and expand our Chinese manufacturing campus. We will move the currently leased 2 locations to 1 bigger SCHMID owned manufacturing campus in Zhongshan, Guangdong Province, which is the same province as today, And with this, we are consolidating our current operation and will double our production capacity in China. The total investment is about €11 million the new facility is expected to be operational by Q4 27. Our Malaysian facility is successfully established, up and running, and currently expanding to fulfill the demands of our growing key customer in this region. Our order intake is accelerating In our investor call in May, I have stated that Q1 was rather slow due to new factory planning of our flip chip BGA substrate customer. And I expect that some momentum in the market through flip chip BGA substrate capacity investment in the second half of 26. We already recognized this momentum in late Q2, and we do see continuing market demand through the rest of 2020 and the full year 2027. Due to these flip chip BGA substrate, and continuing AI server board capacity investments, We already achieved a €52.3 million order intake in Q3. and are totaling 96.6 million order intake year to date. These high end equipment orders also balance the loading of our German and Chinese manufacturing locations as Arthur has previously explained. We published and raised our order intake guidance for 2026 in July this year, to €125 million to €150 million, And based on what I currently see and information I have, I do expect us to land in the upper area of that guidance. With this, I am handing back to Arthur. Arthur Schütz: Thank you, Roland. So looking at our new guidance, the revenue guidance remains unchanged. For the full year, we expect at least €100 million in revenues but a >12% gross margin. For the full year. We now expect 6% to 9% margin EBITDA margin adjusted EBITDA margin for the full year. And then order intake as Roland just mentioned, within the €125 million to €150 million range, we now expect to be at the upper half of that range. With that, we conclude our presentation, and I hand back over to Maura to organize the Q and A session.

Yes. Thank you very much. So, ladies and gentlemen, we come to the Q&A session now. Now it is your turn. If you would like to ask your questions in person via audio line, please click on the raise hand button. And if you are dialing in by phone, please press 9 to raise your hand. And 6 to unmute yourself. Additionally, you are also welcome to ask your questions in our chat box. And we will read them out loud for you. But we will start today with our audio line, and I have a raised hand from Sebastian Naji from William Blair. I just sent you the allowance to unmute yourself. You may do so. Sebastian, are you there? Can you hear us?

Can you guys hear me now?

Yes. Perfectly. Hello.

Great. Well, congrats on the solid results here and the continued build of the pipeline. I just wanted to ask maybe first on the order guidance for this year. So you have talked about kind of the upper half of this $125 million to $150 million range. You already have, you know, nearly €97 million through mid August. So maybe if you could just expand a little bit on what gives you some of the confidence that you can get that remaining portion as we move through the rest of the year. And how much of that is tied to identify projects already in negotiation versus just, you know, broader pipeline.

Thank you for your question, Sebastian.

I think mostly or I know that most of the projects are mostly the order intake projected for the rest of the year is already in negotiation. So this project is already in negotiation.

Great. Okay. And then maybe to clarify. Arthur Schütz: So, obviously, most of the orders are in. there is a few small remaining but we know exactly which machine we are going to manufacture in Germany and China. Most of the orders that we received recently or in the next few months really goes into 2027. Got it. Okay.

that is helpful. And then just on the, the financing you know, following this $20 million convertible, do you believe your balance sheet and, you know, in combination with some of the customer prepayments that are tied to these orders are sufficient to fund your growth outlook here or could you need additional financing down the line? Just maybe what are your thoughts there? Arthur Schütz: Yeah. So we are we are pretty well financed at the moment. And, yes, we will get customer payments For the next 6 months, I do not see any issue raising new equity at least. As I said, we now have the ability and find it very attractive to raise debt in China. So, for example, working capital requirements that we may have in China whereas some of the payment terms, especially on the receivable sides, are pretty long. We can finance with debt in China. And also indirectly effectively finance the German business. So we do not see any finance requirements other than some of the debt in the next 6 months.

Okay. Great. And maybe just on the topic of the China capacity, that you guys are buying. I guess, what kind of revenue level can this enlarged footprint support? And does moving from rented to own capacity improve your unit economics at all? Arthur Schütz: So, basically, at the moment, we have 2 facilities. Both rented, which are a few kilometers apart. there is an inherent inefficiency as we have to ship stuff between the 2 facilities. The new facility is not quite double as big, but with the increased efficiency we think that the real capacity effective capacity, let's say, is double. And roughly speaking, we would we can do about €50 million of revenues in the old 2 factories. And the new factory, we can do about a €100 million revenues. So it is a significant increase. We think that if we as long as we can increase the current let's say, run rate, and we were effectively running at million in China, certainly in the second half. In the 0.520%, the unit economics are starting to look better than the current plant. And so it and, obviously, with the current rental facilities, we always have a risk of rent increase while with the old facility we have basically, you know, expecting little people to pay for this. Got it.

Okay. And maybe just last question, just more on the product side. And specifically just on glass core substrates. I guess, what technical or customer milestones should investors be watching for to know that market is moving from, you know, proof of concept and qualification into a volume capacity cycle. And what exactly are some of the bottlenecks? Is it, you know, TGV formation, mineralization? Is it yield? Is it just simply end customer qualification? Just any thoughts on that?

Well, the technical bottleneck is for sure the metallization of the TG TGBs. This is something we have also very strong solution for. Then, of course, the customer and qualification is another thing you want to watch for.

Okay. Fair enough. Thank you. that is all I had.

Thank you very much also from my side. We have another raised hand by David Williams from Needham. I just sent you an alliance to unmute yourself.

Can you hear me?

Yeah. We can hear you. Hello.

Thanks. Thanks. Again, thanks for letting me ask a question here. Guess, maybe firstly is just on the demand trends, and you talked about the acceleration over the 8 weeks. What do you attribute the new demand from relative to the first half? Just given the strength we are seeing across the markets generally, and more broad based, What do you attribute the recent demand from?

Well, we have seen in the first quarter, we have recognized or let's put it that way, In the last quarter of 25, we have recognized a short in IC substrate. This is what I mentioned with flip-chip BGA substrates. And in the first quarter of 26, big substrate manufacturer were making plans to stop and stop the incremental investments and made plans for staged investment through new factories. And this took some time in Q1, and they made it on the way in Q2, and this is what we currently recognize These new factories are being built and are being equipped with new equipment. And this is what we started to recognize in the late Q2 and already in Q3.

Great. Thanks so much. And then as you kinda think about your capacity, and what you are doing in China, but more broadly, how do you think about capacity and the ability to meet the demand you have in front of you And maybe what are the constraints to outperforming the guidance range? Arthur Schütz: Yeah. So it is it is it is quite different situation in Germany than in China. In China, we do have a building capacity restraint that we are solving in Q4 next year. We have been hiring I think, March, April, we hired in more than 100 people. Which is not without challenges, but that is kind of done in China. In Germany, we have a lot of space I do not see any capacity issues there. We obviously, labor is always the bigger capacity constraints. By the way, there is no machinery. Also, on your side there with little machinery in manufacturing, so that is never a constraint. Labor would be the main constraint in Germany. And what we are targeting to do for probably next year when we anticipate to have some capacity issue on the labor side is to hire effectively contract workers to supplement our working our labor here in Germany. that is the main constraint I would see. And, obviously, training them and lead times is sort of the main challenge.

Okay. Thank you for the time. I appreciate it. Best of luck in the second half.

Thank you. Thank you.

Thank you so much. We have another raised hand by Ms. Katherine Thompson from Edison Group. I just sent you an invite to unmute yourself. You may do so now.

Yes.

Perfect. Hello.

Great. Thank you. I saw in July that Intel made an announcement about a partnership with Lens Technology talking about glass core substrates. I just wondered what kind of conversations you have been having with your customers over the last few months on glass core substrates?

Well, glass is solving a lot of a lot of topics over composite materials. A lot of players in the Intel supply chain, in the NVIDIA supply chain, AMD supply chain, you name them. Putting an eye on glass core substrates as it is better in terms of its flatness, its smoothness in terms of diverse constants, like dielectric constants, signal integrity, So we are engaged with most or the major supply chain players, and we are supporting them with our technology and equipment to make glass core substrates real.

Okay. Thank you. I think the question for Arthur, I just wanted to understand a little bit more detail on building the new Chinese manufacturing facility. I think you have said the cost of that will be €11 million. Are you able to just give me a sense of over what time frame you expect to spend that money? Arthur Schütz: Yeah. So effectively, we are now finalizing plans with the architects We actually have not purchased the land, although that is all agreed and signed up. But I think in about a month or 2, we would expect to start construction. And effectively, we it is a typical construction loan that ramps up with the building, but I from all I know, it is it is roughly in equal amounts I would say, from September, October this year for about 12 months.

Great. Okay. that is helpful. Thank you very much.

Thank you very much, Ms. Thompson. We have another raised hand by Mr. Andrew McGrath from Linden I just sent you an invite to unmute yourself.

Thank you. Good morning or afternoon. Hope you can hear me okay. And, yeah, question I would I think it is come up a few times, but as you see architectural shifts and panel of packaging emerge, do you see the opportunity specifically for you and kind of any product shifts?

Or is it kind of your customer deployment of PLP and some of these other elements changing your products and kind of gross margin mix, or is it less specifically driven to that? Well, panel level packaging is an important piece of our domain. Our domain is panel as SCHMID is producing panel level equipment. We see different kinds of flavors of panel level packaging. Initially, a few years back, some players entered panel packaging for cost reason. To save cost on a larger substrate. Nowadays, we recognize panel level packaging is used for performance reason, like glass core substrates like the 310 by 310, which we currently see in Taiwan, and larger kind of panels for getting the performance of a larger package. So currently, it is done for the package size and not so much for cost reason. So this is what we see in the market and what we support in the market.

Okay. And I guess on the back to, again, the kind of order intake, how does the gross margin of that product mix compare to the first half and kind of historical?

Well, this is a different segment of customers. This is semiconductor customers. Who are typically used to pay higher prices for the products. They also expect higher service levels and they are used to pay for this. So this would affect our gross margin in a positive way.

Got it. Thanks. And then last 1 for me, just on working capital. And kind of cash balances. Recognizing kind of Sprint 1 and 2 and some of the other liability offsets. Any-- it sounded like you are you are expect working capital to stay flat, if not be a cash benefit. Again, any added color you can provide to the cash management component? Arthur Schütz: Yeah. I mean, maybe if you look at the working capital items, you know, the cash advances have not increased as much as you would have thought. We do require guarantees in Europe. Something that we at the moment cannot get I think this will change over the next 9 months. Maybe it is fall, maybe it is spring. So there are actually contracts in Europe where we do not get any cash advances, which is obviously not great for the working capital. that is 1 thing that hurts capital at the moment a little bit, I would say. Other than that, in general, what you see is that China both the receivables are late, but also the payments are late. So the whole working capital gets expanded. The more business we do in China, but net is it is it is actually not a dissimilar form. From Europe. And then, of course, some of these items are lumpy. You know, we sometimes have some lumpier contracts, for example. And there, it really can depend on the exact But, obviously, in general, we do get the cash advances before we order and then pay for the parts which is important. Maybe the other point to make is because of the issues that we had end of last year, Some of the payment terms were pretty harsh that we had to our suppliers, I. E, we had to pay in advance for some of the parts. that is mostly resolved but also only recently, and that will also help the working capital. To get to more normal level, I would say. So it is a little bit higher than what I would expect it in a normalized situation.

Got it. Thank you very much.

Thank you so much. We have 1 more raised hand by Ms. Sattis. You may unmute yourself now.

Okay. Can you hear me okay?

Yes. Perfect. Hello.

Okay. So I wonder if you can talk a little bit, I mean, guess you hinted at it, the margins on the backlog or just approximately like give us a sense And is this more of a mix or a volume ramping up story to get the margins you know, by 2028 or 2029. You know, longer term, up closer to where some other guys in the industry are. Arthur Schütz: Yeah. I mean, obviously, we do have a certain amount of fixed costs R&D, and actually our listing costs are not insignificant and that is a fixed cost block which at the current revenue level is pretty significant. So that is definitely a huge scale benefit As I also hinted at, we some of the newer products and depending on the customer, we have big margin differences in terms of contribution margin. So I think we will see both Clearly, the order intake that we are seeing now mostly flows into 2027 And if you look at the order backlog, €89 million, that is pretty much a record. So there will be big scale benefits but also the new products, the more we can sell the new products, the higher will be the contribution margin.

So it is hard to say what is more important, but it is both going to be quite critical for the improving margins And then just 1 longer term also. Can you give us any sense about how your, capacity is scaled? Do you have enough scale, you know, after the China factory is done? To get to say 500 million of orders. Or can you give us any sense of where you would need to really ramp up your capacity? Or where you could get to today just based on I am not asking for a forecast. But just based on the capacity you have today. Thank you. Arthur Schütz: Yeah. So as I mentioned, we have lots of space here in we are in the middle of Black Forest, so the 1 thing is good. You have a lot of space also. We used to have solar operations, etcetera, and we still have that space effectively. So to speak. So space is not a constraint. Machinery is not a constraint. It is people. And there is no sort of capacity limit as such whereas, let's say, there are things. As much as we can grow But there will be a sort of the challenge operationally if we continue to grow very fast, we will need to train and hire and, again, maybe use contract workers fast enough to make sure that we can deliver. On the quality that we need to deliver. I would say that is most challenging. it is not I do not see we have discussed a third site You know, I do not think that is anywhere imminent though because, again, we can go pretty fast pretty far here on the German side.

Okay. Great. Thank you very much.

Thank you so much, Ms. Sattis. We have not received any more raised hands nor do we have any questions in our chat box. Therefore, I would say, we come to the end of today's earnings call. Thank you very much for your participation and your interest in SCHMID Group. If you have any further questions at a later time, please feel free to contact Investor Relations. A big thank you over to you, Arthur and Roland, for your presentation and the time you took to answer all those questions. Wish you all a successful day. Thank you, and bye. Arthur Schütz: Thank you very much, everybody.

Thank you very much.