Gabler Group AG (XK4) Earnings Call Transcript & Summary

Ladies and gentlemen, we warmly welcome you to the H1 2026 Earnings Call of the Gabler Group AG. I'm pleased to welcome Gabler CEO, David Schirm; and CSO, Ole Johannsen, who will guide us through the presentation and the results shortly, after which we will move over Q&A session via audio line. [Operator Instructions]. And with that, I'm handing over to you, David.

Thanks, Udith for introducing. Ladies and gentlemen, welcome to our H1 results and the earnings call. Starting this presentation would like some common understanding about Gabler Group. There are probably some new participants that are not 100% aware about who go bays. So I would like to start with a slide about our field of activities where we are in about the ocean. So I guess most of you know and are aware of that the oceans are becoming actually fundamental economic factor. And of course, having all the geopolitical tensions in mind that are currently running, it's a huge economic factor we are facing here. Just to give you some numbers, 90% global God trades are via ISC routes. They have to get surveyed protected. -- roughly USD 16 trillion value of critical minerals on the seafloor, 30% of oil and gas production are offshore. It's according to roughly 32,000 kilometers of pipeline. They also have to get money toward and 99% of international data traffic probably right now as well are via submarine cable. It's according to 1.5 million kilometers worldwide. And the technological field we are in, in order to cover this, we see on the next slide, our equivalent on our part of the technology for submarine systems for subsea coms and data and subsea power. All of these business areas are creating revenue streams plus that we have synergies about these 3 business areas, and they also have revenue streams and common products like underwater monitoring solutions. So all the aspects I just mentioned, it's about finding the right approach to monitor and survey all these kind of assets. And we have comprehensive systems. We are a comprehensive system provider for AUVs and UUVs based on the technology that we have within the group. This is just in a nutshell what the Gabler group is about. On the next slide, we will show you now some figures about the H1 Ole.

Yes. Welcome to the audience. Thank you very much. Here, we see the record backlog provides high revenue visibility. And the order intake above EUR 50 million, it's split and we have published this as well. The European Navy to submarine business and some smaller other orders. And the total order backlog is what we like to present today is EUR 390 million. And this considering as well the revenue we did until end of June. And the order intake is positive and leads to the expect that this still is a high demand, and we are 100% convinced that to fill up the soft order backlog until the end of the year with, let's say, our portfolio. And by that, we show you on the next slide some more figures. David, again, you.

So the financial performance is of expectations. As Ole mentioned, net sales over EUR 27 million in the first half year. As you probably remember, we expected over EUR 24 million work in progress, EUR 4.4 million, gross profit margin of EUR 21.4 million. That's according to 67.4%. And -- the own work capitalized considered in the profit and loss statement, EUR 0.7 million and an adjusted EBIT of EUR 6.8 million. That's according to an EBIT adjusted EBIT margin of 21% and the net cash end of this first half year of EUR 33 million. To give you some deeper information about these figures, first of all, it's about the own work capitalized. So what we have capitalized is the vision mask in our electronic mass system. This is something that we also have on our R&D road map and the strategic road map -- these products are actually exactly what we need in entering the U.S. market. As you know, that's also one of our strategic approaches because it fits perfectly with the same interfaces like Kasumi in that case into American boats. And that actually shows the progress we make on this project in Q1 2027, we will be able to deliver and offer actually on the market this kind of mask system. The adjusted EBIT, the margin of 21.3 points seems to be a bit lower than expected probably, but what is really important to understand is that this EBIT is based on roughly 40% on the turnover, but covering 50% on the personnel costs according to German GAAP because we're not following the Cox alignment. So that means we have close to 60% only with half of the personnel cost for the second half year. And so we are more than confident to keep our guidance as mentioned beginning this year. The net cash is lower than in the quarter -- first quarter, it will come from EUR 38 million to EUR 33 million. This is just due to the fact that we heavily increased the sales from in Q2, and that leads actually to a higher receivable level of EUR 17 million. So that means, actually, it's only operational effects we see here and also totally on track for for our aspects. We are following by fulfilling the guidance. With regards to the strategic fields on the next slide, looking to the business performance. And as from a explained, the fixed order backlog, Uly and also covering and showing our great position in the market -- you might be aware of the big projects ahead of us. Of course, this is not even mentioned and not even considered. The achievement of the planned key financial targets for H1 great end. Also mentioned in Q1, balance sheet strengthened by full repayment of interest liability, so the shareholder loan actually towards Posse. The growth initiatives separated into organic growth and inorganic growth. So what we did is the new production site for the submarine system is signed and ready to move in and beginning of '28, the next acquisition for the company planned for end of 2026, also advanced on the -- not only the short list we have, also in progress on pretty deep discussions in due diligence. We are following -- our North America, U.S.A., Canada, we separated, but in total North America geographically. We're also in progress, so that we can deliver our own U.S. entity and also the Canada entity to start or even accelerate the business in North America. Further key strategic hires. So we also improved actually and extend our management board with really some strategic persons as well. But this is something we're going to disclose when they're going to start working for us, but it will improve our market entry globally and for specific technologies we already have in place. On the side of the innovations, you were probably following our successful sea trial of the Topete, launchable USB, we still stick to our first deliveries in Q4, beginning Q4, three of the systems will be delivered to a Navy in Europe. Our diver homing and Ole will give you some deeper insights on the next slide there, we receive or will receive the first orders in pretty near term and short term. And finally, mentioned with regards to the capitalized R&D, the vision mast market already. I mentioned that in Q1 2027. So all in all, if we look to the financial performance, the same if we look to the strategic priorities from our side, we are totally on track and everything that we expected and wanted to achieve so far are totally aligned to our expectations. On the next slide, deep dive to the diver homing.

Yes. So seen in the video on the right side, the market and the drivers have not possibility to communicate and fight back the summary on a very reliable way. And this is what we present to the market. And as David mentioned, we of near-term orders. And we have here a unique device based on the patent, which allows the divers to communicate, to position themselves and to have an unawarded communication network without going to the surface for GPS, and this is, as I said, unique in the market. So you can directly navigate, you can stay connected below the surface and you have integrated diverse as well for AUVs, both or other vehicles and other assets, you can as well have this, let's say, device connected to. And we see not only combat divers as a market as well, we have the special forces as an entry market, and we can expansion or let's say, increase and the scalability in the expansion markets for other security and law enforcement divers. And of course, we see this as well as a platform expansion because this is not a special single tool. It is based on our core capability in one of our business area, which is the subsea consent data. And we here with increased the revenue stream by having this device invented and we will present it in Paris at the Euronaval in November, but this will be as well as part of another slide later on. So next slide is on yours.

Right. So considering the current financial and performance that we were able to deliver so far, seeing our on track being strategic activities, putting all this together as also mentioned, we stick to our guidance 2026 and net sales from EUR 69 million to EUR 71 million. an adjusted EBIT of EUR 17 million to EUR 19 million and an adjusted EBIT margin between 23.5% and 26.8%. Also, midterm targets in terms of the net sales, gross margins, ETC. The net sales, our clear target midterm organically over EUR 100 million. This still our goal, and we are confident in achieving it. The gross margin between 70% and 75%, personnel expenses below 30% and other operating expenses below 13%, CapEx, lower 3% and D&A, roughly 2%. So this is what we are still keeping as our target to fulfill. Looking on an outlook, we just mentioned the Euronaval Ole maybe just give some.

Yes, of course right virtually or physically in the Q3 and Q4 this year. So countervitual road show is on short notice the next. And we are present in Munich at the Val Investment Conference -- the euro level is the biggest event in trade show in Europe worldwide [indiscernible] from markets. published even to do there and as well are open for any meetings. Of course, therefore, contact our team member, Nahata and the other events shown here in this table, purchaseable and, of course, already planned some highlights in Q1 and Q2 next year.

Yes. Taking over, that's actually what we like to show you, and we're even more excited right now to get questions from your side.

[Operator Instructions] We have the first hand up from Meritor's group [indiscernible].

I just had a very long messages in Germany with instructions before I could access even even the microphone. Congrats on your half year, by the way. I think everything seems to be on track, and the pipeline looks very exciting. So a couple of questions from my side. The sales breakdown for H1 was very much geared toward the submarine system. David, we discussed this in the past. And I just wanted to know when we did Q1, you were talking about a bit of a rebalancing in the second half. Are we still on that trajectory? You even mentioned, if I'm not mistaken, sales breakdown more like 78%, 12% and 8% for H2. Now in light of the your perspective on which business are going to be growing in the second half. How should we see this now for the full year?

Yes. Thanks for your question. If I understand your question right there, several questions. But what I understood is the sales breakdown, how I guess it will look like for the entire year. So not about the products but itself, right. So from the perspective of the revenue mix and totally right, so the majority of the first half year is from Gabler from Submarine Systems and that is due to the fact that we have, of course, a lot of projects running, but there are also projects with a shorter lead time and like spare parts. And submarine -- sorry, subsea power and subsecond data, they are only project driven. So that means we are more back-end loaded for the year and those 2 entities than we are in this revenue mix like we have it right now for GABA. So that means we expect for this year the same level as we have yet last year, -- and we still stick to the midterm targets in achieving an even higher growth rate within these 2 business areas. Is that covering your questions?

Yes, it does. And I have a couple of more, if I may. The one thing that surprised me a little bit and maybe you can explain it -- it's more of a financial question is the tax rate in the first half and how should look for the rest of the year. I think you had over 60% in the first half. What should we model now for the full year is really my question?

Yes. So Jim, the entire year, you should model the standard tax rate in Germany, so roughly the 30% plus/minus. There we have the special effect if we have like a minus -- it's pretty simple if you have like just the assumption, if you have EUR 10 million and you need to pay EUR 5 million of tax. And then there is in 1 of the entities also minus. So you reduce your entire EBIT to, for example, EUR 8 million. But you still have the EUR 5 million of tax you have to pay from the one entity. So that's a matter of the view on the consolidation. So assuming that all of the entities are highly profitable by the end of the year, that is something that will be vanished in that view. But of course, until it would looks a bit strange, and it's not the tax level we normally have in Germany.

Okay. And then I have 2 really very easy to answer 1 so far is the top you want to answer that the torpedo product, what sense should we expect? That's number one. And number two, very exciting the acquisition. Can you say anything about the size of that acquisition at this point?

Yes. So on the TTL, I would say for -- so we have a target. The target I can actually tell you because this is, of course, first of all, only a target. So we're targeting 10 units a year, of course, with a ramp-up, but this is actually covered by the interest in the talks we have with different international European, but also global navies they are highly interested in that in that product. And this is what we have for the first phase in getting to the market. That was the first question. Second question, I made the mistake. I didn't write it down this time. Sorry, Maristela again.

Rest you're talking about an acquisition, which sounds imminent and I wanted to understand if you could share anything about the size or the margins and the sector, of course.

For -- the -- yes, I would say, some more current running, yes, due diligences. What I can tell you, of course, is any details so far, but it fits to the strategy that we talk about minor selected acquisitions. So we're not talking about I don't know, compared like tracking and [indiscernible] group so that we're going to go for a much bigger one. Now at this stage, it's more to fulfilling technologies. And we have, for each of the business areas, we have so to say, advanced talks and as said, also process of M&A there. Target is to have one, as we mentioned here as well by the end of the year to have one acquisition announced, signed and closed so that we can integrate them in the following year then. It is -- and maybe because you asked this, you can be sure that we're talking about profitable companies, smaller companies that are pretty, pretty advanced in the field of technologies they are serving.

And I will hold the room another moment for some more questions coming in from Ramon.