Bajaj Mobility AG (BMAG) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and a warm welcome to today's earnings call of Bajaj Mobility AG, following the publication of the first half year figures of 2026. I'm delighted to welcome CEO, Gottfried Neumeister; and CFO, Petra Preining, who will guide us through the presentation shortly, followed by a Q&A session, where we would be happy to take your questions. And with that, we are starting the presentation.

Good evening, everybody in Asia. Good afternoon in Europe, and good morning in the U.S. This is Gottfried Neumeister. I'm really happy and thankful that you took the time to follow Petra and myself for this earnings call for our half year statement, which we've released this morning. We will quickly lead you through a presentation, followed by, as always, a question-and-answer session to really deep dive into any concerns or questions you might have. So really, first half year and most importantly, not only the half year but also Q2 and the trend of Q2 was really great. We have shown a positive EBITDA in the first quarter, and we have now managed to show a positive EBIT in Q2. I think this is really a super strong reassurance of the path, which we started to take at the beginning of the year. And we have proven that we cannot only continue and hold up to this but really even accelerate. What you will have realized is that we have managed to increase our sales substantially on one side, mostly, and I think this is an important remark for the whole presentation, always to bear in mind, when you look to our '26 numbers is that in 2025, we still had the bicycle business in our numbers, and Petra will really point out the details and the shortfalls, which we've completely compensated. So even in top line, I think those achievements are great. If you are following our especially European competition, one of our competitors has just announced minus 3% in the first half year. The other one, minus 7%. So also in light of this, I think our development really is outstanding. I said it's stemming from the motorcycle business. If you look to Q2, you will be then able to see that we've managed to increase our sales in units, but managed to increase our revenues even higher, which means that we are selling more motorcycles for a higher price, which is stemming from the fact that we just still -- I mean that we don't have to give as many discounts as in the past. Combined with a much lower fixed cost and overhead structure, it leads to breaking even in EBIT already in Q2 2026. So this is, in a nutshell, really the summary of the first half year. We have extended our Management Board, Stephan Reiff, who has joined us 1st of April. He's coming from BMW, is now responsible for marketing and sales. And Christof Lischka was already announced, will join 1st of October, being responsible for R&D and our product development and therefore, we really believe that we have found a very sound setup also leading this company to the future. Last point clear commitment to MotoGP. We have proven that we can really step up with the best and even set examples. There was a lot of rumors and question marks at the beginning of the year, which, of course, if you're losing money, there is this question mark, should you be in motorsports or not? There is a clear commitment for the whole company, not only in MotoGP, but also in off-road racing, because more than for any other company, winning on Sunday and selling on Monday is really a core thing at KTM. So the motorsport commitment, which is literally the platform to develop all our technologies and innovations for us here in production is a differentiator and USP, which we're definitely keeping not only in light of Liberty Media entering and boosting, maybe the equity values of such teams as already in the last call, this is not what we're here for. We're here to race, and more importantly, we're here to win, and therefore, also a clear commitment to MotoGP. And all the rumors that we would sell parts of our teams are also gone. We keep the team, we keep the full equity value, and we're really very confident in looking to the next season. We were the first to develop the 850 engine. And yes, the first test results were really great. And yes, we are leading the pack with the rest in terms of evolution. So this is -- I said I didn't want to take away too much of financial details, which Petra will elaborate in a minute. But if we jump to the next slide, you see the 4 pillars of our -- not only restructuring, the 4 pillars of restructuring, pointed out in the first quarter. Now we're taking a step forward. So it's about delivering. This is what we've tried to show you, back on track with our strong sales results. We are still working on simplification. So focus and simplification remain essential to streamline the company and make it even more efficient so it starts with our product portfolio, but it's also about our legal entities and our complete overhead structure. You've noticed that at the beginning of the year, we decided to lay off 500 people. We are -- have almost finished this process and therefore, the fixed cost reduction, which you can already see in the first half year is sustainable and will continue to take place also in the future. Stabilize. I think this is also one of the most important news, one of our big burdens of the past were the high inventory levels, which we had globally. Just to remind everybody, we had up to 270,000 motorcycles, both with dealers and importers and in our own stock, more than a year's production, and we had to really slow down and stabilize those inventory levels. We've managed to take out 100,000 already last year. We keep can continue to take out inventory in the first 6 months, more than 10,000, and we have now reached really, let's say, I mean healthy is always a very difficult word, but we've really, I would like to use it still, we've managed to stabilize those inventory levels, and we reached now our desired and targeted levels, at least for the revenue we are currently having. And this is something which anyway we'll then over time brief. We are definitely -- this is what I will just show you on a couple of slides. We're definitely hungry to grow, but the first task was to get profitable again before it starts scaling. This is the exercise of 2026. And yes, therefore, let me just quickly go through also the inventory we've provided that slide that showed you where we were coming from. In gray, you see our group stock. In orange, you see the dealer and importer stock. And as you can see, with 103,912, we are now very, very close to the stock levels, which we think we need to have in order to operate. Stock is not necessarily bad. If you want to operate in Australia, if you want to operate in the U.S., you cannot achieve the same stock turns as in Europe. Therefore, it's necessary also to have some. And the picture shows you, on one hand, how much we were able to reduce it already and how close we are to our desired levels. Most importantly, for growth, our new products and that those products are also well received in the market. So what you can see here is the pipeline, which we will initiate at the year-end. There will be also our factory additions for the U.S. So we will have new models both for Husqvarna and for KTM. Some of them are off-roaders. As you can see, we have a 450 [indiscernible], which is also new in. There is new GASGAS. So in all our 3 brands, we're bringing new products. The KTM 1390 SUPER DUKE RR, which is like a lighthouse or pinnacle product, which also sets really our image and the expectations. And there is an even higher one, the track version of that SUPER DUKE RR with no headlights. If we look closely in front, which looks even more aggressive. We introduced them in Q2, same as the KTM 790 DUKE and also as a little outlook because we will soon launch it, the KTM 1390 SUPER DUKE GT. So those are only the new models of Q2. I said, we have still in a pipeline, a further lineup, which we're about to launch, and we're also working on new platforms for the years to come, which should be also growth drivers for the future. As I told you, winning on Sunday, selling on Monday. Here is just a summary of some of the successes we already had. I mean, the season is not even over and we were already able to secure quite a few World Championship titles ahead of time and ahead of year-end. So SuperEnduro, EnduroGP, you see those world champions. We won the Dakar at the beginning of the year, [indiscernible] won the Dakar because Daniel Sanders broke his collarbone. Nevertheless, Daniel Sanders after finishing even on fourth place at the Dakar with this collarbone is now leading the World Championship, and we are quite confident that we can also win this title, together with many more, but this is just a flavor that you can see KTM. There's no historic feelings of the past that we were good. We are setting standards every day, and we're winning and really having the products, which luckily also the customers are desiring. MotoGP, I touched upon it. There are 3 in principle brackets. One is about sponsors. We've managed to extend our long-standing partnership with Red Bull, and we have also won [indiscernible] as a new sponsor. We're also getting really multiple millions over the next 4 years as additional sponsorship income. We have extended our commitment for the next 5 years together with [indiscernible]. [ Guntetaner ], for those of you who know him, he has taken over the Tech3 satellite team. He would have been able to choose a partner and any engine to go forward, but he decided to stay and continue with KTM because he believes in our technology is also very good news that we continue to have a satellite team and [ Alex Marcus ] and [ Fabian ] are new drivers for our factory racing team for the season 2027. So I think really great drivers. [ Alex Marcus ] was second in the World Championship last year. [indiscernible] was, for a very long time, the best performing Ducati. So we really have a great riders lineup. And therefore, I said confidently, look forward to the next season. Yes. Here, just a summary, which I told you, Stephan Reiff and Christof Lischka, both very important additions to our management team, together with Petra, the 4 of us will lead KTM AG, and Petra and myself will continue to lead the stock-listed entity. And this is now the time where I would also like to hand over to Petra, who will now in detail guide you through our financials. No, there is one slide, which I almost forgot to show the development of our restructuring efforts. I mean, this is nothing which I would normally celebrate out, but it shows you really how -- I mean where we are coming from, more than 6,000 employees, and we managed to really streamline the company and cut short down to 3,400. And if you look very closely, you see an addition of -- from 32 to 180, these are temporary workers because we need to increase our production in the second half of the year. We already started getting temporary people in to cope with the peak of our production needs, but all in all, most importantly was to really manage to cut out middle management and also the -- yes, overhead and administrative workforce, down by 435, which we have already achieved. There is a little bit more to come towards the end of the year. But as said, this was at least the last slide from my side, and I'm now handing over to Petra to lead you through the financials.

Thanks a lot, Gottfried, and a warm welcome also from my side. I'm happy and very, very proud to present the half year 2026 financials. We have splitted the first intro slide into what has happened and the key focus topics of the half year as well as Q2. Mentioning that very great performance of revenue increase of 65% actually is only half the truth because when we talk about half year 1 '25 to half year 1 '26, you have to note, and Gottfried has mentioned already, that in the half year 1 '25, we still had the sale of the bicycle. We still have MV Agusta sales, and we still had [ gross for sales ] in the revenue. Sorry, restate for a second. So the 65% actually is the number doesn't give it away. We'll show it to you shortly. Overhead reduction in the first half '26 versus half year '25, -- we have managed a little shy of almost EUR 66 million in comparison, reflecting all the topics Gottfried has already addressed. And this still caters for significant cost when it comes to garden leave and the 500 headcount we had to let go in the first half. There are lead times to separate. So we will see the full impact then in the second half. That all has led to a very strong EBITDA margin of 5.4% for the first half 2026. We already were able to record a positive EBITDA in the first quarter and have now increased it even further. Cash flow improvement, the number is quite nice. The trend is also quite nice. But rest assured, we are very well aware that we are still negative when it comes to free cash flow of minus CHF 22 million. However, the improvement compared to the previous year is visible and will forward-looking -- show us a very positive trend. The successful refinancing we spoke about in Q1 already. You might recall that we have successfully at very, very good and favorable terms, been able to secure EUR 550 million on KTM AG level, which has led to a very positive impact when it comes to the financial result, firstly, because we have repaid the KTM loan and have also reduced the loan on the PMAG level in order to support our financial results. All of this came besides monitoring all the exogenous factors the entire world has to suffer. So we talk about the Middle East crisis. We talk about the consequences of the Middle East crisis when it comes to supply chain disruptions, inflation, interest rates, still ongoing uncertainty when it comes to tariffs and the like, higher raw material costs when it comes to aluminum and steel, but also when it comes to logistics costs, but also lead times and delivery times. All of this, we feel we tackle quite well and have been monitoring and mitigating as good as possible, of course, and we spoke about that already in Q1 on the back of a little higher working capital because we have pulled in orders. The focus on the topics of Q2 are very similar. The revenue increase, similarly strong, 60.5% compared to the previous quarter of 2025. The revenue increase in motorcycles and here, we have laid it out. When we spoke about the motorcycle revenue, we talk about KTM, Husqvarna and has increased more than 117.5%. I'm doing that job for quite a while. I have never had the chance to report such a huge increase because we almost doubled or more than doubled the revenue from one quarter to the next. All of that came on the back or caused a positive EBIT in Q2 already. Over the page, we have now given the same information in a more graphical way. You can see half year 1, half year 2, the 2 orange bars in half year 1, you see on top in yellow, the EUR 52 million of the bicycle business -- so like-for-like, we talk EUR 372 million compared to EUR 700 million in euro terms revenue, very strong increase. And you can also see the adjusted EBITDA improvement. We took the liberty to take out the insolvency gain in order to present to you like-for-like and compare apples-to-apples how big the increase and the improvement of the EBITDA has been. Not the forward-looking -- please go ahead. For the quarters and years to come, the bicycle business will be reported, but the driver, of course, is the motorcycle business. And therefore, the bicycle business is only for regulatory reasons reported, but it has no significance anymore. We also do see in the quarterly comparison, so Q1 '25 versus Q1 '26 and Q2 '25 versus Q2 '26, an improvement quarter-over-quarter, year-over-year, very strong from quarter 1 '26 to quarter 2 '26, an improvement of roughly EUR 40 million already in euro terms also here. So we see in the year a very strong improvement. and 1.7% EBITDA margin in Q1 '26 and 8.7% EBITDA margin in Q2 stand-alone quarters. Next page, please. Talking about a little about numbers and KPIs in the upper part, you can see the comparison half year, half year and Q2, Q2. In the bottom part in the box, we again have taken the decision to show you the comparison on an adjusted level, adjusted means the exclusion of the insolvency gain. And here, you can see a massive improvement. So EBIT adjusted, so the second line in the box, half year 1 minus EUR 256 million to minus EUR 25 million this year in 2026. So we talk about an improvement of more than EUR 230 million, which is a massive step forward towards the restructuring and the sanity of the company. Similarly or even stronger in Q2. Here, the improvement Q2 '26 versus Q2 '25, EUR 166 million within the quarter. The headcount reduction, Gottfried has already mentioned, minus 10%. Already included the buildup of the temporary workers in the 3,416, the white-collar reduction almost on the numbers that has been announced in January this year. As we always are very often receive questions on overhead development, we have brought on slide showing you these are only the first 6 months of each year, so half year 1 from 2019 to 2026 and how the overhead cost has developed, again here without a restructuring gain and impairments, to have an apple-to-apple comparison. And only in the last year, we have been able to reduce by EUR 66 million, the overhead cost within the last 12 months. If you even go further up, that number increases even more so. On the balance sheet, overall, very flattish total balance sheet amount, only 0.4% deviation. So not major deviation. The 2 points I would like to address is we see an increase in trade accounts receivables that comes on the back of the higher turnover, the higher revenue, in particular, in Europe and North America, and an increased debt coming from the refinancing and the peak, so the accruals of interest on PMAG side. Overall, equity ratio still above 20% -- 21.5%, and the gearing of 243.2%. The consolidated free cash flow, partially already mentioned. The highlights, clearly, year-on-year comparison, a very strong sign of the -- or improvement of the operative free -- sorry, of the operating cash flow. On a year-on-year comparison, the negative deviation comes from the investing activities due to the IFRS 5 recognition of EUR 70 million in half year 1 '25. Such an event is obviously a onetime and will not be repeated every year. Therefore, if you would exclude the EUR 70 million, we would also here be seeing a significant improvement. In total, an improvement of the free cash flow is still negative. We noted we will work on this, but the improvement is clearly visible and shows towards the right direction. Working capital, one of the topics which we follow very, very closely. I said the same already for Q1, we have here the half year development. The 30.79% is clearly not what I'm looking forward to. That has to come down significantly. We are positive and very confident that on the back of an increased trade payables in the future, we will bring that down significantly. The trade payables still are very low in comparison to the past. That is due to the fact that we have had to prepay starting last year by re-ramping the factory and in the [indiscernible], almost all the components when ordering it from our suppliers. That has been reduced significantly, but we have to digest the prepayments that we have made. We're currently starting the off-road production or in the midst of the off-road production, has high demand from the factory side. So there's still some volume to digest. But clearly, the direction goes for a lower working capital compared to the last 12 months' revenue. Maturity profile, financial position. We have a very solid financial structure. In total, EUR 172 million. If you add up the cash and the unused credit lines, which is a strong and solid outlook forward-looking higher than in the same period last year. Please note that last year, end of June, the prepayment phase has not started in full for the production, and we still had the sell-off from the inventories we had on stock. So this is uncomparable those 2 periods. But if you compare it also already with Q1 2026, you see an upward trend. Achievements. I think just to round it up. A slide that we have almost in the same way presented to you in Q1. Everything still valid, everything still in place. We have taken the liberty to [indiscernible] because on the back of all the topics we have tackled already for the last 12, 18 months to come to the point where we are right now, we have translated all of those measures in a significant improved profitability and growing EBITDA margin. That should not only be a clear sign for everything we have told you, but also to have a signal that the turnaround is in full swing and that message is still valid. With this, I have come to an end. [indiscernible].

[Operator Instructions] And we have the first raised hands by [ Sandown ]. The stage is yours. You can now accept the permission to speak. And also, yes, unmute yourself.

Yes. My first question was about related party transactions with Bajaj. Now that we are a full-time subsidiary, wholly owned -- sub 25% owned subsidiary of Bajaj. Has there been any changes? Or is it continuing pre-crisis levels? And a follow-up to that would be what are the royalties that we get on the 125 to 390 cc bikes that are produced by Bajaj and sold in India?

So allow me to start with the second part of your question. Unfortunately, this is something we do not disclose to the market. This is on the back of our agreement. Nothing has changed, that much I can tell you before and after a change of control, so everything has remained as is. On the broader picture, forward-looking related parts, I would hand over to Gottfried.

I said for the time being, I'd also say that nothing has changed dramatically. We are continuing to explore really what are the strengths and benefits of each partner in each field. And I can just really reassure you that everything would ever be done on a complete arm's length conditions. But nothing has up to now dramatically changed. Of course, we are trying to work closely together and use also supply chains and source and get benefits out of volumes, but nothing really has changed so far.

Okay. Understood. Understood. My second question would be about our free cash flow and deleveraging targets. What would -- could you just point -- give us some targets that you have in mind about deleveraging?

So allow me to answer first, the free cash flow situation. Due to the fact that there is -- there was -- I would even call it frozen cash due to the prepayments, the current picture doesn't reveal the situation forward-looking because we have to digest the prepayments that we have still in the books. The situation, however, has changed significantly with our suppliers when we re-ramped the factory a year ago, almost 100% was on prepayment that has come down significantly, significantly. So that is not comparable anymore. We will see that over the next 2 quarters, even stronger. The other topic that we currently see, of course, there is more working capital bounce in comparison to the last year same time to the top line development, which is in general positive trends. And also here, we will see and see already a way smooth picture when it comes to cash availability, liquidity planning. So everything is now becoming very stable and predictable forward-looking. Deleveraging the free cash flow, you need to elaborate more what you mean on that end. Because coming from where we have been a year ago, the cash flow clearly is significantly improving by the operating result already. And the onetimer of Q1 2025, the EUR 70 million, I have explained we feel quite comfortable, that, of course, the aim is to have a positive free cash flow, similarly to improving the profitability coming from a positive EBITDA to a positive EBIT. And yes, in the quarters to come, we will not guide, but in the quarters to come, also positive net income.

Understood. So you have a positive net income, is the target to -- that is the way we will deleverage. Understood. Any particular quarter you have in targets for the positive net income?

You're trying very elegantly, but we are not guiding to -- I have to come back on that question once we have our guidance out.

6 Understood. Second question was -- a follow-up was, do we have any tax losses from our restructuring that we can use for a benefit or a loss in the restructuring?

Yes, we do.

Could you quantify those losses that we can use for tax benefits?

We are -- we'll come back on that. We're not -- we'll come back on that.

And we will move on to the questions of [indiscernible]. You should be able to unmute yourself now on [indiscernible].

Congratulations, Gottfried, Petra and the entire KTM team on the splendid performance. And thanks for taking us through the developments in the business in a detailed way. I have a couple of questions. So as of H1 '26, for the half year, the off-road and the street mix that we see in the product is -- off-road is around 25% and street is 70%. So what can the mix be expected when the business is fully normalized? -- between off-road and street?

Very good question and an important one to elaborate, because the picture you see at the moment is a little bit -- there is a seasonality behind it because we are now just started to produce our new off-road generation. And therefore, you will also see over some regions -- North America is, usually, 65% our sales is off-road and only 35% street. So now with the second half of the year, this is usually a stronger area also where you will see the growth in the off-road. So the majority of the off-road growth will now come in the second half of the year, where usually the seasonality effect for street in the first half year is the stronger one. And therefore, you will see a shift, fully normalized, you should expect roughly, I would say half-half. This was -- those were the historic levels, but as we're now initiating also new street models, there should be -- definitely the segment in the area where there is growth happening to a much larger extent than in off-road. So there will be then a shift going forward in the years to come to the 60-40, where the street will become stronger. But of course, we are also trying to bring new models and new platforms, but what you are now seeing is stemming from the seasonality.

I mean, that is well understood. The second question is about when I look at the realizations in Q2, be it off-road and street, there is a 5% -- close to around 5% decline in the average realization. So is that understanding correct? And if yes, what could be the reasons why we see a decline in the realizations?

What do you mean declined by realizations?

Okay. So when I see Q1 of '26 and the off-road -- the value of the sales from off-road is around EUR 78 million. And if I divide it by the number of off-road bikes sold, that number is EUR 7,300 per bike for off-road. That number has come down to EUR 7,089. That is around 5% decline. So that is how I calculated. Between Q1 and Q2, there is a 5% decline in realizations both in off-road and the street bikes.

Yes. So this is also nothing to worry. That's a natural development, which you will see throughout any new model year. So at the beginning, when you start with the new model year, and this is what we are now starting with off-road, you start giving 0 discounts. Everybody is waiting for the new motorcycles to arrive. So I would say in the first 6 months, a certain percentage, the so-called sell-through rate, you're selling immediately without any discounts for people who are waiting. And then there's a certain percentage which you would then sell over the next 6 months. And before a new generation is initiated, and this is exactly Q2 of every year for the off-road. We're not talking only for the off-road segment. So in Q2, this is literally the last season -- or the last quarter before the new generation is started, and this is where usually you start giving some discounts and incentives to clear out the floor because why both model years are then there, the model year '27 and the model year '26, what should be the incentive to go for a model year instead of the '27, if they're priced the same time. So last quarter of an off-road generation because, other than street, in the off-road, you have a yearly model change, which is really visible with CTG change because this is the riders who simply want to perform the next super season and everything. So there is like in some other industry, really, this yearly change over. And therefore, this should be the explanation why you see here such a development in the last quarter as we are now going forward and starting to sell the new seasons, those should pick up if we're doing everything right.

That's very interesting. And could you give this retail sales number for Q2? I mean the number that you have given is for the wholesale or cycle sales.

Yes. The issue with the retail is the availability of the data because half of our business to off-road. There are no registrations. So this is something where -- once the motorcycle is sold, we cannot really count them. In some countries, we get some feedback. But for really the vast majority of our products, those are never registered, and there is no official retail data. We have to look at that, of course, for our street motorcycles, but not for the off-road.

Right. So that number was given in Q1, so this practice has been stopped from this quarter?

We have not yet included it in our half year report. Let me double check and come back to this question.

Okay. And lastly, about -- could you please talk a little bit about what is the early signs of improvement that you see on the customer satisfaction because there has been some area of concern in the past? And your team has definitely taken a lot of actions when it comes to dealer excellence and also bringing the riders on the [ orange bolt ] and making availability of spare parts -- making it available on demand. So what do you see in terms of early satisfaction scores from the customers and the decrease in the customer complaints?

So there's definitely -- we had, of course, and this is something which was not yet mentioned, was very emotional. I think on the last call where I explained that it was not really triggered this dealer scandal, which was out in the media. And our marketing team has decided that some of these data is for sure is biased. What we are doing, and this is what we have really -- there is a huge company-wide program to improve customer experience. This is one of our -- to be close to our customers, to listen to our customers. We mentioned [ Orange Board ]. We have significantly improved. So this is what the data has shown in availability, in spare parts, how quickly do we respond to our customers. We were coming from numbers as low as 70% in spare part availability, now back to 95%, which is really also -- is costing money because we have found working capital, but those have dramatically increased. We have now over the summer a team because of this dealer scandal contacted. I think, unfortunately, the NPS scores the last quarter, which will then which takes a while and which then moves up, and it's also a question when, how, and these questions are conducted. But as said, what we are looking at is the raw data, which is for me the only one, how many complaints do we have, how quickly are responding? And do we see an improvement, and that's something which we said we're doing.

And we will move on to the next person in [indiscernible], you should be able to unmute yourself now. Please click on the microphone in the left corner of your window. And we may come back to you later. [ Johan Vanden Hofen ], you would be next in line. Please unmute yourself, question to speak. Yes.

[ Jan Valentin ], [ Anderson Group ]. A few perhaps more detailed questions, financial questions. Of course, you brought down the headcount to around 3,400. And if I understand correctly, whole restructuring is not finalized yet. So what kind of number do you have in mind where you sort of aim to end up with, headcount wise?