Cicor Technologies Ltd. (CICN) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Cicor Half Year Report 2026 Conference Call. I am Marina, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Alexander Hagemann, CEO. Please go ahead.

Thank you very much, and good morning, ladies and gentlemen. Thank you for your interest in Cicor for your continued interest. So most of you have done this with us before, and I'm very happy that Peter Neumann, our CFO, and I can present results to you. We'll go to the next slide. Yes. So first, I will give, as usual, some introduction and talk about some of the content of the first half, where Peter will focus on the financial the financial aspects. Now most of you really do know Cicor very well. Therefore, I spare you offer a large introduction and I've summarized in one slide what is our ambition. Our ambition is to be the European leader in hynix low-volume electronic manufacturing services for advanced markets, which is aerospace, defense, medical and industrial. And what you see on this slide is just where we stand right now. You see over the past 5 years, you see a 24% annual growth from 2020 to 2025. That was full year, including 6% organic growth, 19% M&A growth. Very important for us is that EBITDA has grown faster than sales, 28% on average with the margin increase from 9% to 10.5% in adjusted EBITDA margin. Today, Cicor is the only true pan-European provider of electronic manufacturing services. And we have access, we can address 70% of the European market. Extremely important for us as this provides us the ability to scale the business. And we have grown last year, 40% through the acquisition. This is purely pro forma. So this is not the reported sales number, revenue number. This is pro forma, meaning that we have closed 2024 with CHF 480 million of sales, and we have acquired businesses that in the last 12 months before closing of the transaction done CHF 210 million in revenue. So this 40% growth already indicates that we have behind us a period of transition and transformation period. And this is the theme that we are talking about 4 months now. Then the last 12 months from July '25 to June 2026, in the east were a transformational period for Cicor. In the result, we are now #2 in Europe with aerospace and defense markets, talking about last year, #3 in health care technology. So we are making progress in our ambition to become the European market leader. And in the meantime, we are serving 11 countries with manufacturing footprint, most importantly, 7 countries in EMEA. Going to the next slide, where we can have a snapshot on the first half where it is most important. And I take a question that we received a lot over the past months. Obviously, what's about organic growth. We have commented in Q1 on the effects that have dragged down our revenue, mostly issues in the supply chain. And if I cannot say that these issues are overcome, we have been able to stabilize the situation and to return to organic growth in the second quarter. The almost 20% revenue growth, 19%. Yes, it was for the complete first half on the back of acquisitions with a flat organic development overall in the first half. But were -- Q1 was negative and organic. We already saw above 5% organic growth in Q2. And that's what we have commented over the past few months. We see that increasing momentum from the order book that is building. That is a very satisfying development that we see almost 40% order intake growth with the strongest contribution from aerospace and defense. That is very significant, and it is not a single shop. This is a high book-to-bill rate that is pretty constant in the first half and where the second quarter was the fifth consecutive quarter now above 1. So it is not a short-term element. It is not something that is driven by 1 or 2 or 3 programs only. This is a very broad acceleration of the business that you see in the book-to-bill rate. Now on the EBITDA margin, we will talk about that in detail, it's clearly affected by our integration and productivity measures, where, however, and I'll show you a slide in a minute, the integration program is really on track and largely completed. So if we go on the next slide, we see how our revenue is split. And here, we have a bit more detail that we are now providing with regards to our regions. But let's start on the left with our revenue by industry. The big growth engine was indeed aerospace and defense. With the share growing from 22% to 28% in our business overall, that was growing 19%. So an enormous growth of the aerospace and defense business and that was both through acquisition but also growing very well organically. The Industrial and health care technology markets were also in absolute terms growing but losing in share. Obviously, they were growing significantly slower than aerospace & defense. And organic growth was still a little negative in these 2 as we are coming. In some countries, out of an enormously poor economy. And that leads us to the right, the revenue by region where you see that in the U.K., u.K. is 23% of sales, in a much larger business after 24% last year, continues to be the most important country for us dominated by the aerospace and defense business that we are doing in the U.K. And what you see here is that the U.K. sales development is overall organic Switzerland. Switzerland pretty stable, a pretty good situation. Cicor continues to be firmly rooted in the Swiss market. In Switzerland, you hear a lot of reports from manufacturers out of semiconductor, out of building technology and other markets and Cicor continues to support the backbone of Swiss industry with electronics manufacturing services as the Swiss leader in that market. So a stable and good position, reflecting the totality of Swiss industry, which is recovering and getting much stronger. France, the share has increased. That is purely due to the full integration of Eolane, what used to be Eolane [indiscernible], where we integrated the business from the end of April last year. But we are also seeing growth in that country. Germany. Germany is the weak spot in Cicor. You see a decline in share -- sales share from 20% to 14%. Also in absolute terms, you see significant reduction in sales, which is partially borne by our German entities and partially by exports for example, from Asia into Germany, but also from Switzerland and to Germany. We have taken the appropriate measures so that the profit margins are in line with our expectations, but as you can see on a significantly lower basis. But let me also say Germany is seeing some signs of recovery, as we see over the past few months, the significantly increasing activity from customers and looking for new programs. Rest of EMEA, as Cicor, we are in quite a number of countries. We are very broad-based. We are in Spain, but we also have significant sales to Italy to Sweden to remain now, for example. Asia Pacific, good situation has grown a little bit organically, has grown really on the back, mostly of our strong medical business and the same is true for the Americas. Turning to the next slide. I was commenting on aerospace and defense, and you see that growth. Whereas last year, the first half was held back by the delay of certain major programs. These programs have kicked in, especially in the U.K. And you see more than 50%, almost 60% growth from '25 to '26. Overall, over the past years, 46% annualized growth of -- 45%, sorry, 45% annualized growth, and this is on the back both of acquisitions and with a strong platform that we have created, we are generating the organic growth. Share of revenue has increased to an all-time high. Now it's 28% in Cicor [indiscernible]. This is in line with our strategy where we want to see aerospace and defense becoming something like 1/3 of overall business. Going to the next slide, please, where I want to comment a bit more on what we are doing with the businesses that we acquired in 2025. Peter will comment on the numbers and what we have done and how that affects us. But what you can see is that we have acquired not only 40% top line on a pro forma basis, but also 12 sites. So this is not only 40% of our top line, it's also 40% more sites. And here, it is extremely important for us that we have implemented, mostly implemented in a very fast manner, a very disciplined execution of the integration varies. And here, I talk about the operational integration that drives the cost synergies and create the platform for future organic growth. In Germany, for example, we have established a cluster between our Zerintia sites, which includes pro factors. We have consolidated the management organization. If you wish, we now manage Zerintia as one virtual factory are creating the synergies that we have but leaving the locations in place. In Alarm, we have focused on operational excellence, new customer and program wins. And I'm very happy that we could announce new program wins such as the win for the French railway sector, a major 5-year program, which is contributing there. We are now doing and we have completed second round efficiency measures. So within the 12 months after acquiring the businesses where most of the restructuring has taken place. Now we have shape and home, the efficiency and the performance of the business and some additional measures. And we have established Morocco as our main hub in North Africa. So we operate in Romania a best-in-class highly automated factory that produce it at competitive cost. And as a proper low-cost alternative, we offer North Africa. That side is now growing very fast and where we integrate not only Eolane, but we integrate also the Moroccan side from Valtronic, which is under the same roof as one of our existing sites. That has allowed us to divest of the Tunisia side because that side was subscale and significantly smaller than what we do in Morocco. And that transaction has been completed a few weeks ago as announced. Now what we did with Mercury Systems was a very attractive scenario where we have carved out the manufacturing operation in Switzerland. Typically, this comes as a comparably low purchase price. On the other hand, the carve-out requests strong measures to integrate the operations into our operation network. We have made enormous progress despite some difficulties in transfer and manufacturing from Switzerland to mostly our Newport U.K. side and some local Swiss manufacturers required to our runoff site. So that puts us in the position that plant, we can close the Geneva side before the end However, and I mentioned the complexities of the cobalt and of transferring aside. And that requests a lot of double effort. So we were hiring a number of employees in new parts, especially and had to keep the employees in Switzerland. So a lot of double expense, which is flowing into our EBITDA. But again, after some difficult start due to the technical complexities, we are now very well on track. And I can report to you having been on site a few weeks ago that the progress is absolutely amazing. But MADES, we are having a fantastic business. We acquired a business that stand-alone is very profitable, extremely well connected Spanish defense industry, growing very fast, and that actually did require capacity expansion. Capacity expansion we have done that already. That is a modest investment, meaning one additional assembly line that we have installed in Malaga to cope with the organic growth. That is very much coming from new customer wins. And Kongsberg, which we announced earlier in the year is one of those customers and additional a lot of cross-selling with our other large aerospace defense customers in Europe. And in Valtronic, what we wanted from Valtronic, we got. We wanted the capacity, the resources, both in Morocco, which I commented already, and the resources and local manufacturing site in the U.S. So we got that. And we have forcefully adapted the cost structures to the present business, which the former owner did not do. And now we have a very strong base to grow our business, both in Morocco, I mentioned earlier, but also the U.S. Turning to the next slide. where I would very briefly want to talk about the divisions, EMS division, absolutely returning to organic growth in Q2. Good growth of the top line, 20%, of course, mostly driven by acquisitions. And the EBITDA margin also below our targets for the reasons already mentioned and widely explained. This is really due to the loss of efficiency during integration of the businesses. Today, EMS is 95% of what we are doing. And on the next slide, let me briefly talk about the AS Division. The AS Division has returned to organic growth. So that is something which is already positive, despite the printed circuit board business, mostly medical being continued to be affected by a soft market environment as sales are shifting into H2. The hybrid substrate business, on the other hand, is an extremely high demand where we are talking mostly about aerospace and defense applications. Now on the downside, and that is a lot of work that we put into that topic was the profitability being impacted by issues related to the ramp-up of capacity in vans we have faced. At the same time, not only the transfer of production from Germany after closing the factory last year. And on top of that, the exponentially growing demand from our aerospace and defense customers. That has resulted in manufacturing issues, which have weighed on profitability significantly in the first few months, but I can report that the actions that we have undertaken have been successful. And over the past couple of months, we have seen significantly improved results. With that, I hand over to Peter, who will talk about the financial fund.

Thanks a lot, Alexander. Good morning, ladies and gentlemen. Let me now leave you through some of the financial highlights. As usual, please let me start with the long-term view. Since the start of our growth strategy in 2021, we have delivered significant growth and profitability improvements. 2025 and 2026 profitability is diluted by the 2025 acquisitions and ongoing integration. Remember, these transactions came with very low purchase considerations and lower margins. As Alexander mentioned, our integration efficiency program is largely implemented and it will deliver around CHF 10 million annualized savings going forward. Let's dive deeper into the key figures of the first half 2026. Book-to-bill is strong and at 1.2 for half year and has been above 1 in 5 quarters. Cicor achieved a new high in terms of absolute revenue with reported growth of 19%, reaching CHF 334 million of revenue. Core driver was M&A in the first half with plus 22.8% offset by negative FX of minus 3.8%. On organic growth, Cicor's also building up momentum in terms of organic growth with plus 5.3% in Q2 after a decline of 6% in Q1. EBITDA margin is impacted by the integration program. The margin dilution of the newly acquired companies will be decreasing moving forward. Free cash flow has been negative in the first half 2026 after 2 extremely strong years. Key reason is net working capital that increased ahead of -- with the growth accelerating and supply chain remaining fragile Important, this is the bridge between reported and adjusted EBITDA numbers. As you can see, all of the 2026 adjustments are linked to the announced integration efficiency program. This includes the divestiture of the Tunisian facility and the consolidation of the 2 manufacturing sites in Berrechid Morocco. It also includes the final closure of the on site in Germany as well as the move of the toolmaking for plastic injection modeling from single to Indonesia. We have also used the opportunity to streamline [indiscernible] structures and taking target workforce reductions. So now, looking more at the progression versus last year on adjusted and reported basis. The light blue is adjusted reference in 2025. The white is adjusted in 2026, providing a comparable base. Dark blue off of perspective for reported numbers in 2026. Order intake up close to 40%, revenue growth, 19% with organic momentum picking up in Q2. EBITDA reduced and absolutely mainly due to the AS results. EBITDA margin diluted as we were integrating the 2025 transaction and executed various relocation capacity ramp-up programs. EBIT reduced to the mentioned lower EBITDA profitability, while DA was stable as a percentage. Net profit reduced lower versus EBIT as we had less onetime experts while maintaining a stable tax rate. And free cash flow, as mentioned, negative after the last 2 very strong years as organic momentum has been picking up and supply chain situation is fragile. Some perspective on the divisions as well. I mean, let's start with EMS. EMS is now 95% of the group revenue. So really the vast majority of our business. EBITDA margin diluted by the 2025 acquisitions, integration costs plus softness in the German market. The integration efficiency program plus the ramping up of specific revenue programs or customer programs in A&D and Medical will drive the EMS margin improvements moving forward. On AS, it's only 5% of our group revenue. We have 2 technologies with different symptoms really benefit from increased demand but has invested into capacity ramp-up in our site in France. The PCB business was impacted by shifts in customer demand. This has led overall to an absolute EBITDA reduction of CHF 1 million and an EBITDA margin erosion. Let's now look on a group level at our adjusted income statement. You can see that material expenses remain broadly unchanged, but the EBITDA margin dilution effect is coming from the explained effects in operating expenses. And if you go into the nonadjusted income statement, you see it's really around the people cost. Depreciation amortization rate levels remain stable. And you see at the bottom, we had again a onetime FX hit of CHF 1 million for strengthening, but the effect is lower versus last year where we had CHF 2.5 million. Tax rate stable and relatively unchanged. This chart shows a more detailed revenue bridge. You can see the major impact of CHF 64 million of the new acquired businesses and the number of months impacted impact for each transaction. Just to illustrate, for example, we closed the Mercury transaction beginning June 2025. So the first 12 months of revenue count into inorganic. Then June 2026 starts to when after the 13th month, then starts to count into genic. It shows that moving forward only the remaining months of Valtronic and MADES will deliver M&A growth in the second half so the percentage impact of the inorganic will go down. Another point to mention is the negative FX impact of Swiss franc close to CHF 11 million as the Swiss franc, especially at the beginning of 2025 strengthened significantly versus pound euro and U.S. dollar. So that is, in average, 3.8% negative for the first half. Same bridge for EBITDA, where you also see not only the bridge from adjusted last year to adjusted this year, but also reported. Acquisitions contributed about CHF 1.6 million EBITDA. FX had a negative effect of CHF 1.2 million and the base organic negative CHF 1.5 million. The CHF 3.3 million adjustment on EBITDA all linked to the onetime effects of the integration efficiency program. On the consolidated balance sheet. First, the equity ratio improved to 29.3% due to the delivered net profit as well as the more efficient treasury operations. You see later on that we have used excess cash to reduce our financial liabilities. Financial leverage is at 1.3 so we remain at a very low leverage and have significant headroom to continue further value-accretive acquisitions. Cash flow statement. Sorry, you jumped on chart. Yes, current cash flow statement. Let's now look at free cash flow, a very important measure for us. I want to highlight especially the negative impact of working capital. You see the minus CHF 22.1 million. I will explain on the specific more. And that has been the driver, obviously, for the negative free cash flow of CHF 11.5 million. One other point, we have used at the bottom, you see this CHF 29.7 million. It's around CHF 30 million cash to reduce our financial liabilities. Clearly, on the net working capital, you heard of priority in the second half is to convert the working capital buildup into cash as expected sales ramp up materialize and to deliver a clear improvement in free cash flow conversion. Now I mentioned operating net working capital. Here you see the overall progress. You can see that over the last years, the operation excellence program has brought down net working capital as a percentage of revenue significantly. Now at year-end 2025, we reached a new low with 22.3%, so the current levels are back at 24.3% are up versus the year-end 2025 results, and this is exactly driving the net working capital hurt. If you look into the details of the alternative performance measures, you will see that this is driven by increases in inventory and trade receivables. But -- and this is obviously driven by the accelerating business momentum and the TT transaction write-off end of last year, and the integration programs were CHF 3.3 million beginning EBITDA beginning of this year, significantly suppressed short term. The adjusted ROIC is down mainly to the reduction in EBIT, while invested capital, including the new acquired companies has increased proportionally to its business size. The integration program and returning to historical EBITDA margin levels will drive ROIC and ROIC recovery. Key figures per share, no major changes. You will see that our number of outstanding shares remain stable at CHF 4.4 million. That is the right number to use if you look at earnings per share measures. And obviously, the vast majority of men to convert bond is by now converted into optional conversion period. Let's now dive into net profit and earnings per share. For 2026, we are at half year at similar levels of earnings per share was CHF 2.76 per share versus CHF 2.95 last year. As to our EBITDA guidance, we expect a stronger EBITDA in the second half compared to 2025, and that is obviously impacting then the total fiscal year earnings per share. Now one important chart here is I really want to provide some more perspective on the fiscal year guidance and the sequential step-up in terms of revenue EBITDA from half 1 2026 to half 2 '26. On the left, you see the reported numbers, as explained over the course of this presentation. On the right, you see what mathematically to achieve our fiscal year guidance you will require in the second half. You see a significant step-up. The key drivers. Let me start first are obviously the 2025 acquisitions that are on the revenue side, really improving sequentially. A large portion of this is driven by A&D program. On top, we will see the ongoing savings of our integration program that you see then obviously, as the revenue goes up, plus the integration program, the 2025 acquisitions are delivering significantly sequential EBITDA improvement. The second one is, and we mentioned this one always in our guidance, we are faced towards second half in terms of the programs and the revenue ramping up. We have a very clear line of sight on A&D and medical programs where they're ramping up in the second half. This is really the second biggest building block because it obviously converts a significant adjusted EBITDA. Two smaller impacts, but are worthwhile to mention is we have largely completed all our transfers and capacity ramp-up programs. So we see the negative effect that we had the first half obviously disappearing and going down and obviously improving into a sequential improvement. And obviously, some of the supply chain lead time -- long lead times that have led to an impact in the first half are coming then in the second half. So really, overall, we have clear line of sight on the step-up, and hence, we have reconfirmed our guidance. With this, I hand over to Alexander for some more final business perspective on the outlook. Alexander, you're muted.

Yes. Thank you. Thank you very much, Peter. Very, very helpful. And what you can see everybody is really the amount of transformation that have taken place in Cicor over the 12 months. I am extremely pleased how my team has performed it shows the strength of our decentral organization because the size of the program and the number of actions could not have been controlled by one headquarter. It is the strength of our teams around the world, but especially in France, in the U.K. and Germany and Switzerland that have been driving all these changes. Now as Peter has shown in his last slide, it is all about converting the scale that we now have into earnings because our ambition is not only to be the European lead of now we are very much complete with everything we wanted to do. It is more than 80% completion that we have, very important, again, the divestiture of the Tunisia side, which, as we communicated earlier, has led to a lower 6-digit loss. However, avoidance significant restructuring charge, while we were not only preserving the jobs for the employees, which have now found a new home, but also allowing us to do that without any restructuring. Now looking forward, Peter has shown it all. And it is a return to positive organic growth in Q2. It is something that we expect to continue. Peter has also said it, we have a clear line of sight pretty much all the orders are in the books for the second half. And that allows us to look at sequential growth. So second half of the first half between 10% and 25%. That is a very wide margin from 10% to 25% growth. We also see, as you were seeing in one of the earlier charts from Peter, that this will be mostly organic. Now why is this margin so wide? It is because the supply chains are for critical components, especially in the aerospace and defense market continues to be very tense. We have other and general supply chain in circuit boards that have to be manufactured in Europe in an environment where capacities are constrained. So a wide gap, and it is all about execution and the ability of our supply chain teams to secure the material required. And that leads to the expected revenue, CHF 700 million to CHF 750 million and adjusted EBITDA of CHF 70 million to CHF 80 million. We can tell you today that we feel comfortable in confirming that guidance full year. Of course, it assumes now talking about stable geopolitical situation is maybe not the right work, but assuming gave geopolitical situation that is not further deteriorating over what we see today. And of course, we have always the overall economic situation and the -- for special Swiss franc as a disclaimer here. So with that, thank you very much. Thanks for your interest, and let's open...

[Operator Instructions] The first question comes from Chiara Di Giammaria from Berenberg.

Can you maybe elaborate more on the shift in the AS demand into H2? So why is this the case? And does it mean that you see an improvement in health care? And then also on the A&D business, you mentioned double-digit organic growth for H1. So the question is what changed compared to Q1 here. So considering that supply chain issues persist?

Yes, Chiara. Thank you for your questions. The PCB business is very much linked to the hearing aid industry where about half of our business is going into hearing aids. The hearing aid industry depending on 5 major players in the world that are having almost the entirety of the business. And here, individual customers have started slow into the year as they have been slow in the second half of last year have been started slow into the year, but have announced to us an acceleration of business. So that is what we see and that is why we are stating we have this shift into second half. In Aerospace & Defense, we had very specific issues with certain customized components were subsuppliers of us we're not able to deliver the quantity in time that we needed. At the same time, I would have to say it was the quarter -- the first quarter when the PCB manufacturers or the manufacturer of the [ depreserve ] boards, we're realizing capacity constraints, and we're not delivering on time. So we really saw that lead times for printed service bots that has always been in the range of something like 8 weeks have turned to something which is more like 20 weeks. So these are the 2 main effects that we saw.

The next question comes from [indiscernible].

So could you please provide more color on the nature of the supply chain constraints? Are the bottlenecks mainly related to PCB shortage memory component as highlighted by your peers or you are facing constraints in other areas?

Yes. These are indeed the areas that we have. It is -- this is on memory chips, but we are not a very memory intense business. Our products have much less memory than, for example, service. So this is an effect that we have. Now the -- in Europe, it is where printed circuit boards need to be manufactured locally, mostly in the country of where the product is utilized because the product IP is visible on these printed circuit boards. And after decades of the industry moving to Asia, each country only has a few PCB manufacturers left who can do this. So that is the one very big issue. And talking about more general, the printed circuit boards for medical and industrial, the AI servers are using incredibly complex printed circuit boards, which are using enormous manufacturing capacity. So the global -- even the global printed circuit board industry is in a situation of shortage and delays. And this is for these 2 different regions. So reasons, European industry impacted by the defense demand and the Asian one by the demand from AI.

Okay. And would it be fair to assume that the low end of your full year guidance is already protected from the current supply chain constraints while achieving, let's say, the half depends on the improvement in the component availability? Or do the ongoing supply chain poses a risk across the entire guidance?

Now this is what we are -- so the way we are communicating is that we are confident in achieving our guidance where, yes, the delta between the low end and the higher end is mostly due to execution risks, which are on the supply chain. If we are communicating that the whole guidance is contingent on also the supply chain situation. It's -- this implies that if we experience or a collapsing of certain supply chains. For example, companies like OpenAI, NVIDIA buying up all the capacity in the world for PCB and nothing left for anybody else. That is the less likely scenario, but that is the disclaimer that we are putting in that. We have a certain view on supply chain that at the low end of the guidance, it will not be very good, but if it will become terrible and much worse than it is today, then obviously, there is risk.

[Operator Instructions] The next question comes from Marti Queral from UBS.

The first one would be on the nondefense segment, so medical and industrial. I mean I know that you mentioned that organic growth was still negative in H1 for all segments. Could you give us a feeling here of how much was it? Was it low single digit, mid-single digit?

Yes, thank you very much for your question, Marti. First of all, we have seen, and we mentioned that double-digit organic growth in the Aerospace & Defense segment. However, aerospace & defense is still less than 30% or 28% in H1. So the reduction of the other segments was significantly lower. We have seen mostly a reduction of following customer demands to reduce prices to a level that we don't like because consumer business for us is opportunistic only. So we have some losses there, which is nonstrategic business. In the Industrial and Medical, we are in an almost equal situation. So if you are talking about negative organic growth, we can say this is a low single-digit number only in the first half. So that is a clear sign that the business is preparing to come back. We see, as I mentioned earlier, we see increased activity from customers in these areas now and I should say, even in Germany.

Okay. That's helpful. And then my second question would be on the free cash flow. I mean, I know that H1 was impacted by the net working capital build especially in inventories. But in H2, I think you expect also to grow. So my question is, do you expect also net working capital to be a track for the free cash flow in H2? Or how do you see here?

Maybe I take the question. Marti, thanks a lot for the question. We don't give a clear guidance on free cash flow for the year, but we say that on a sustainable basis, free cash flow to EBITDA conversion is 50%. And I think what we also see is, obviously, as growth momentum is building up, Well, let's put it this way, the negative free cash flow that we saw in the first half, the AR inventory will translate into free cash flow into the second half. But then it depends on the continued growth momentum also going into 2027, what the final result will be for the year. So obviously, a very strong growth momentum going into 2027 is also a nice thing from the business standpoint, but it has free cash flow implications. But we are not guiding specifically on the quarter on the half year on the free cash flow delivery because, again, it would also imply that we're giving some level of guidance on the growth momentum for next year that we do in due course, obviously.

Okay. And then maybe just a follow-up here on the free cash flow. like the increase in inventories, I would expect that this is maybe also related to the fact that you are probably prebuying some components because there are some shortages. So you want to make sure that you have that these components in advance. Is this a fair statement? Or is it also your customers, the ones that are taking the hit also in their balance sheet?

Look, you would see exactly -- if you see on our alternative performance measures, you see obviously the significant step-up in inventories you see that prepayment from customers are pretty stable versus end of last year or slightly going down. Effectively, you're right. The higher inventory levels are driven by -- to one extent, we try to protect, obviously, components ahead of the growth. And so it's driven by the supply chain but also by the growth that we expect for the second half. So those are the 2 drivers for the higher inventory. Accounts receivables, the increase is obviously driven by the higher organic growth and the higher revenue we had in the first half and especially in Q2, but then obviously, we are collecting as we are going into Q3. And trade payables is relatively usually, it's increase as we have seen in the previous it's only partially offsetting the increases in inventory and trade receivables. That's how you should think about it. And you see that, look, effectively versus end of last year with -- we had 22.3%. We're now at 24.3%. So with 200 basis points hurt or 22% increase, that is effectively the hurt that we're seeing in our free cash flow.