Ion Beam Applications SA (IBAB) Earnings Call Transcript & Summary

[indiscernible] First half of 2026. I am Thomas Pevenage from Investor Relations. As usual, you will find this presentation on the Investor Relations page on our website. The question-and-answer session will follow the formal presentation. Today's speaker Olivier Legrain, our Chief Executive Officer; [indiscernible], our Deputy Chief Executive Officer; and Catherine Vandenborre, our Chief Ventures and Corporate Officer. Here is the agenda for today's presentation. We will start with the highlights for the period, followed by the business review where we will discuss the strategic progress and the financials of each business unit. Finally, you will cover our financial performance in more detail and give you an update on our guidance and outlook before opening the Q&A session.

Thank you, Tamara. Good afternoon, everybody. Let me start by sharing our key messages for today. 2026 confirmed that IBA is on track with its improved profitability trajectory, progressing on the execution of our strategy. We delivered a solid first half performance with growing revenue exceeding EUR 320 million and a substantial improvement in profitability reflected by an adjusted EBIT of EUR 17.6 million and a positive net result of EUR 9.3 million. Commercial momentum was strong with equipment order intake up 64% versus same period last year, keeping our backlog stable at EUR 1.6 billion despite sustained conversion, combined with our expanding installed base and service activities, this reinforces our long-term growth engine. To support further this growth, our leadership team and Board have been strengthened. Finally, we reiterate our '26 guidance of an adjusted EBIT of at least EUR 52 million, and we remain on track with the '24 to '28 outlook. Let us now have a closer look at the commercial dynamics behind these figures. On the equipment side, order intake reached EUR 176 million, thanks to IBA clinical, which more than doubled, driven by sustained adoption momentum in proton therapy with 5 rooms sold over the period. In IBA technology [indiscernible] systems also reflecting a slower start in Industrial Solutions, offset by a solid radiopharma demand. This kept our total backlog stable at EUR 1.6 billion of [indiscernible] up from services. The 2-year holding equipment book-to-bill stood at 0.9%, down from 1 at year-end given the sustained convection into revenue as we progress into the different projects. On the financial side, the story is one of continued growth and improved profitability. Revenue increased to EUR 324 million, thanks to well-executed backlog conversion across segments. Adjusted EBIT amounted to EUR 17.6 million, a profitability improvement of EUR 7 million year-on-year. The adjusted EBIT margin increased to 5.4%, thanks to a gross margin improvement. We moved from 29.5% in H1 '25 to 33.7% in H1 '26 driven by a better equipment profitability mix and execution improvement in proton therapy. Importantly, the net result turned positive at EUR 9.3 million. Net debt stood at EUR 81 million at the end of June, up EUR 23 million versus year-end, mainly reflecting working capital movement and timing effects. Our net leverage ratio closed at 1.14x adjusted EBITDA and the group retains ample access to its committed credit lines. Before moving into the business review, let me briefly comment on the evolution of our leadership and governance. As IBA grows in scale and extend its activities, we have strengthened both the leadership team and above to support execution of our strategy. Henry has now assumed strategic and operational responsibility across the group including clinical, while Catherine leader our strategic partnerships and innovations. For my part, I'm increasingly focused on the strategic steering of the group and was appointed by Chairman of the Board. Lastly, we have also welcomed Joy Hansen and Dr. Stephen Han to the Board, bringing extremely valuable expertise in sterilization, oncology, regulatory affairs and radiopharmaceuticals. Let us now move to the business review. I will hand over to Henry, who will take you through both IBA Clinical and IBA Technologies.

Thank you Olivier, in the first half of 2026, IBA clinical combined strong commercial momentum, continued technological innovation and further operational improvements. On innovation [indiscernible] obtained investigational device exemption approval from the FDA in June, opening the way for our first in-human prime at the University of Pennsylvania. We also launched Adapt Insight XR, an emerging upgrade for the Cortez platform available for both installed and future systems. And in China, all 3 IBA sponsor studies met their primary endpoints and are progressing towards an IBA submission. We also continue to improve operational efficiency across our growing installed base. This same availability remained close to 97% despite increasing workload reflecting the benefits of standardization, AI-enabled trouble shooting and our investment in [indiscernible] in those inventory market conditions remain challenging, particularly in the U.S., weighing on the revenue and profitability. Nevertheless, order intake remains supported by recent portfolio launches such as [indiscernible] and continued momentum in proton therapy quality assurance. Our global footprint in proton therapy will now expand towards 93 sites after completion of all installations, an 11% increase year-on-year. At the end of June, IBA had 47 operational sites, well distributed across regions with strong visibility on future expansions as 46 additional systems are in production and installation, 11 installations were running simultaneously at period end or highest level to date. In Spain, 2 systems are currently under installation and 2 additional projects are expected to start installation later in 2026. In China, we progressed further on major [indiscernible] projects with installation activities now completed, both in Chengdu and in Shenzen. The proton therapy adoption showed strong momentum in the first half with 16 homes sold globally compared to 2 in the same period last year, together with our partner, CGN in China, [indiscernible] 50% market share in this expanding market. More specifically, the 5 rooms sold by IBA, including 2 national first projects, 1 in Brazil and 1 in Portugal as well as 2 home projects with Duke University Health System, one of the leading academic health care system in the [ Europe ]. We continue to have the largest installed base in the market. This provides significant operational leverage and support of efforts to further promote proton therapy in collaboration with our clinical partners. Increasing clinical evidence continues to be a key long-term growth driver for proton therapy. The pipeline is growing with 35 major Phase III trials now covering more than 10,000 patients across a broad range of indications. In parallel, we signed a sponsored research agreement within the [indiscernible] Texas and the health economics of proton therapy to strengthen the evidence base that supports reimbursement discussions and patients access. Despite the continued conversion into our new IBA clinical backlog was stable at EUR 47 billion. This was supported by the strong product that have the order intake with a 2-year equipment book-to-bill ratio of 1.2. Service represented more than EUR 800 million of this total, not yet including the service contract related to the Spanish [indiscernible] project and 2 to 3 systems sold to [indiscernible] Let me now focus on proton therapy continued profitability turnaround, adjusted EBIT reach EUR 12.3 million in growth compared with a loss of EUR 2 million in the first half last year. This reflects sustained revenue growth, improved execution and the increased scale of our installed base, while we continue to invest in key product innovation such as flash and dynamic [indiscernible] Commercial momentum was equally encouraging with equipment order intake increasing to EUR 112 million. Turning now to Dosimetry, the first half remained challenging with an adjusted EBITDA of minus EUR 0.5 million. This reflects existent pressure in conventional radiotherapy and medical imaging, particularly in the U.S. which weighted on the top line, with net sales down 11% combined with a slower backlog conversion. Encouragingly, order intake increased to 36 million supported by recent portfolio launches and continued momentum in proton therapy QA, the revenue generation from these orders is, however, more backloaded therefore, does not immediately offset the current revenue pressure. In parallel, the cost reduction measures announced earlier this year started to be implemented and are expected to progressively support profitability during the second half. Let me now comment IBA Technologies. I will start with the strategic progress over the period covering industrial first and then Radiopharma solution. Industrial Solutions continue to progress around its road map, advancing accelerator-based realization and advanced irradiation solutions, order intake had a slow start as the market continues to digest the overcapacity created by the post-COVID investment cycle. Nevertheless, the commercial pipeline remains active with encouraging signs of conversion of EtO and gamma volumes into [indiscernible]. On execution, 2 important milestones were reached the start of operations of our large-scale [indiscernible] installation and the acceptance of the world's largest ebeam installation. We also launched [indiscernible], which extends its portfolio into the lower capacity segment. In new applications, polymer development is progressing with the first installation at customer site expected to start by the end and on PFAS, we continued testing on ID concentrated mattresses. Turning now to RadioPharma Solutions. Commercial traction remain solid, supported by deeper penetration in core markets and expansion into high-potential geographies. This was illustrated by 4 cycle [indiscernible] contract, with fringe in India to expand their [indiscernible] radiopharmaceutical production more general, thanks to the strong demand for [indiscernible] installed base has grown by an amazing 75% since 2016. RPS also continued to extend its position along the radiopharmaceutical value chain following the [indiscernible] acquisition interfaces between oxytane and [indiscernible] enterprises are now aligned and available to our customers. [indiscernible] on integrating offering from isotope production through [indiscernible] We are now accelerating the next phase of [indiscernible] including portfolio optimization scale. Finally, IPS launch Cyclone IQ for industry healthcare asset into 11 production, which I will discuss on the next slide. Let me maybe say a few words about how [indiscernible]. This launch extends or established on platform into lower capacity segment, designed for customers that do not need the larger system it provides a reliable alternative to demand addition. The product addresses both medical device sterilization and full radiation applications targeting either existing gamma operators, new entrants or manufacturers considering in-house realization. [indiscernible] market interest since launch confirms the attractiveness of this segment, notably in Asia and Latin America. Before going further, I'd like to spend a few minutes on what we mean by overcapacity in the sterilization market. This chart is based on our internal estimate and is shown for illustration purposes only. As presented at our Capital Markets Day, the underlying demand for accelerator-based sterilization is broadly steady and predictable, growing at 6% to 8% per year, driven by GDP growth and rising medical care needs and standards. But the COVID period created an unusual demand spike even that conventional EtO and gamma capacity could not be expanded quickly enough to absorb customer tone into them of technology. That led customers to invest ahead of the underlying trends because the system order today takes around 3 years to reach a market, their capacity is still being absorbed is explained slower how the intake we currently expect. Our view remains that this reflects a temporary imbalance between capacity and demand, other than the structural change in market fundamentals. A more balanced situation is expected around 2028 to 2029 as utilization catches up with installed capacity driving normalization of [indiscernible] Turning to RadioPharma Solutions. We launched Cyclone IQ an MMI and met in June, a [indiscernible] dedicated to industrial scale statin to 11 production. As you can see on this slide, it complements the cycle on portfolio that we have built over time, expanding to diagnostic application to therapeutic, alpha and the [indiscernible] production. A statins 1 of the 2 [indiscernible] we selected a strategic place alongside [indiscernible] 225. With IQ, we are reinforcing our commitment to accelerate the bench-to-bedside adoption of statin 211 labor drugs. The IBA Technologies backlog decreased over the period, reflecting sustained conversion into revenues, while in the scale order intake are not yet picked up this year. As discussed earlier, this reflects the expected temporary overcapacity in sterilization market, which was not fully compensated by the great commercial momentum in RadioPharma, the 2-year equipment book-to-bill ratio, therefore, closed at 0.7. Finally, looking at the financial results. Net sales increased to EUR 127 million, representing close to 40% of the total book sales, thanks to well executed equipment backlog conversion and growing installed base supporting services. Adjusted EBIT contribution is compared to last year, driven by less favorable product mix during the period, continuous R&D investment in radiochemistry and radioligand therapies within RPS as well as in PFAS and [ Polina ] projects within Industri. Nevertheless, EBIT margin landed at 6.5%. I now hand over to Catherine for the corporate section and the group financial review.

Thank you, Henris. And let's start with an update of our new ventures beginning with PanTera, which continues to make strong progress. The company obtained recognition as a CGMP producer of actinium 225, following by its largest client. This is important because it supports the use of PanTera supply for clinical trials. PanTera regulatory documentation is already being referenced in clinical trial applications across the U.S. and Europe, demonstrating early adoption of its supply platform and facilitating the integration of its isotopes into multiple development profiles. In parallel, PanTera announced in May this year, an expansion of its collaboration with Terrapower [indiscernible] supported by the [indiscernible] . TPI will provide additional raw material while ERI will host and operate a new production line expected to be fully operational by end of 2027, together with a 30% increase in weekly output at the existing facility in [indiscernible] these initiatives will triple PanTera's total actinium-225 capacity while distributing production across 2 Belgian sites to strengthen supply resilience. The company also continues to be a strong commercial traction with more than 25 active customers across the value chain with several master supply agreements. From the financial standpoint, PanTera generated in the first half of this year, EUR 13.7 million of revenue and EUR 6.7 million of EBITDA. The fourth and final tranche of the service is now expected in the second half of '26, which will further dilute IBA on our chip to 31% and generate an expected revaluation gain of EUR 5.5 million. Zooming in on the demand behind these figures, the actinium-225 line continued to expand with more than 40 active clinical trials currently ongoing for several indications, including prostate and urindocren canceled. Three of these have now reach Phase III with first results expected as from 2028. Obviously, the outcome of this higher bit drive of future demand for actinium 225, depending on what they show in terms of efficacy toxicity profile and the range of tumors that can be [indiscernible] For PanTera, this is precisely why reliable regulatory rate supply matters as these programs progress. Let's now have a look at the other ventures starting with [ MIQ ] factor. Following the equipment contract executed with IBA, development of the demo machine is progressing a key milestone as it will enable the system for semiconductor applications. The project is also supported by favorable market trends in cynical carbide power devices, particularly for electric vehicles and AI data center applications. Second, Energy received positive feedback from the proton therapy community following its presentation at Pitocin June, in Parallel, it secured a EUR 8 million loan from its first customer [indiscernible] as part of short refinancing efforts, while technical development remains ongoing. Finally, [indiscernible] discussions with [indiscernible] are progressing regarding the joint development of production infrastructure in Europe and the U.S. and a [indiscernible] has applied for the part related to the construction of the first site in North. Let's now close the business review section and move to the financials in more detail, starting with the improvement in profitability. The step-up in gross margin was the main driver of the profitability improvement, increasing from 29.5% to 33.7% year-on-year, combined with top line growth, this resulted in additional EUR 18.9 million in gross margin. Operating expenses increased in nominal terms, while remaining at 28.7% of sales. This reflects a less investment to support IBA's growth, including key R&D projects, which we haven't capitalized and the enforcement of communication in this functions with GE as well as a recognition of EUR 2 million of bad debts following a prudent application of our risk policy. This semester was also marked by a one-off EUR 1.5 billion related to the resolution of 2 specific business claims in IBA clinical. Below adjusted lower financial expenses in PanTera has positive contribution with the equipment, further supported improvements, which I will detail on the next slide. Starting with PanTera's positive contribution to IBA Group earnings. The equated result amounted to EUR 2.1 million based on IBA's 35.8% ownership. Other operating expenses were mainly impacted by the ESP implementation project that went live in April and by Dosimetry [indiscernible]. This was partially offset by lower financing expenses, which narrowed to EUR 2.6 million as the adverse foreign exchange loss reduced to EUR 1 million from EUR 4 million last year, and the impact of hyperinflation in Argentina, also [indiscernible] Tax was slightly lower than last year, mainly due to the absence of footholding taxes and impact of dividend recorded in the first semester of 2025. If we turn to the cash evolution, you will note that we generated EUR 18 million of positive operating cash flows before working capital over H1, in line with the profitability of our activities. However, the reversal of the working capital cycle continued to impact our cash position. And I will come back to the working capital dynamics and prospects in more details over the next slide. Investing cash flow mainly reflects capital expenditure and the price of adjustment paid on [indiscernible] acquisition based on the actual December 25 cash and working capital positions. New borrowings reflect the [indiscernible] on the remaining tranche of our [indiscernible] bringing the total to EUR 50 million to the EUR 50 million acquisition term loan. The payments are related to movements in revolving credit facilities and leasing reimbursements. The movement in treasury shares include our 400,000 shares buyback program over H1, partially compensated by exercises of stock options or in all our group cash position decreased to EUR 44 million. Before detailing the working capital evolution, let me briefly explain the accounting impact linked to the TFI regulation. The move to set for [indiscernible] changes the timing of all certain balance sheet items are recognized in project execution. This updated approach does not impact the underlying economics of our project as project profitability and cash generation remained unchanged. Two effects on working capital are worth highlighting. First, equipment [indiscernible] in stock for longer and it's transferred leader in the product life cycle, which mechanically increases reported inventories. Second, the [indiscernible] project accruals recognized earlier which increases [indiscernible] payables and project execution. Overall, those that temporary differences and the Board approval reconcile as projects progress towards shipments. Turning now to working capital with this new approach in mind. Overall, the working capital requirement as over the last 3 years, shaft delivered from a strongly negative position to a slightly positive one at EUR 6 million, resulting in a negative impact on our financial position. The main drivers for this trend are our contract assets and liabilities, contracting [indiscernible] price and advanced billing that increased by EUR 52 million on a net basis. They continue to be impacted mostly by 2 elements. First, a few large contracts with unusually back-ended payment terms most notably our proton therapy projects in Spain. Those loans accounted for a EUR 19 million impact on H1 and accumulated EUR 54 million over time. Second, the currently slow order intake in industrial, which used to be a meaningful positive contributor to the working capital cycle. Then on a like-for-like basis, excluding the impact from the updated ERP-driven group. Inventories have decreased by EUR 18 million, driven by backlog execution. Payables have increased by EUR 23 million again, on a comparable basis, and note that the ESP migration, this retirees -- sorry, it's not processing of payments, but also customer invoicing during the April-June transition period. Now in terms of prospects, as previously indicated, we expect the working capital situation to normalize as invoicing cash collection catch up with project execution and order intake pointing to an improvement of our cash and net financial position for '27. So we confirm these positive trends. You can [indiscernible] still expect volatility in the meantime, given the sensitivity of our operating model to a relatively limited number of large milestone collections. H2 '27 remains for [indiscernible] for market improvement and stabilization as 6 out of the 10 Spanish proton therapy projects will have been delivered by then. We remind that each delivery to EUR 10 million payment followed by EUR 8 million payment after final acceptance. In view of the first half performance and the momentum across businesses, we reiterate our '26 guidance of at least EUR 32 million supporting our long-term profitability trajectory. Lastly, as you know, IFRS 18 will become applicable as from '27, introducing changing your to the presentation of certain financial performance measures. We will provide further details on future financial petition. And I will now over -- I will now hand over to Oliver for his concluding remarks.

Thank you, Catherine, thank you, Henri. During the first half of the year, we continue to execute with discipline, converting backlog, capturing new commercial opportunities and advancing our strategic priorities to further strengthen the group's positioning. A few highlights turned out. Proton therapy confirmed its return to sustainable profitability, building on a strong 2025 and positive market dynamics. Technology reimport, its competitive position through the launch of new products in strategic market segments and applications as innovation remains at the core of [indiscernible] We're also particularly pleased with the progress of PanTera one of the most promising assets within our venture portfolio. As a leader in the rapidly emerging therapeutic market, PanTera is expanding access to innovative cancer treatments while creating significant long-term value potential fully aligned with IBS mission. At the same time, we stay focused on navigating a challenging market environment in Dosimetry and managing the current pace of our working capital cycle. Overall, these results we report our conviction in strength and resilience of IBA's business model, the diversity of our equipment and services portfolio, our leadership in attractive growth market and the strategic optionalities provided by new applications and ventures position us well for the end of the year ahead.

Thank you, Olivier. Before moving to Q&A, let me remind you of the key upcoming dates in our financial calendar. Let me also remind you that this presentation contains forward-looking statements. These statements are based on IBA's current assumptions and beliefs and are subject to risks and uncertainties as described in this disclaimer. We will now move to the Q&A session. [Operator Instructions] Thank you very much for listening to our results presentation. We will now open the Q&A session. And I see a few hands already raised. So we will let you David start by asking your questions.

Maybe on the -- coming back on the margin evolution for Porton therapy and technologies. Yes, if you can explain a little bit more [indiscernible] evolution for H1? And what's, let's say, the reiteration of the 2026 guidance implies basically and let's say direct follow-up to that. So how structural is the improvement that we've seen in PT, so that we've seen structural [indiscernible] so the current profit margin, should it be seen as a floor going forward moving to 2028? And a bit same question, but let's say, for the lower profitability in technologies. So given your comments on the overcapacity issues in industrial, so you expect it to, let's say, rebasing a bit of the profitability there? And then the question on the net debt evolution. So I think, Catherine, you provided us with some guidance. If you can clarify a bit what you expect for H2? And then for 2027 and if you can please repeat by when you expect to have the 6 Spanish contract, let's say, delivered and installed. Was it in 2027? And so should we kind of expect like this inflow of 6x let's say, roughly EUR 18 million coming in. So yes, if you can give us some color on the net debt evolution.

Okay. I will start with your last question on the Spanish contract, it's a very straight 1 question. So we expect this year in 2026 still to ship 2 machines then 2 other machines in 2027. And there, the 4 remaining machine in 2028. And I like to mention it's time that there is a shipment, there is a nonpayment of EUR 10 million. Then on the question regarding the margin and the guidance that we gave for 2026. First, in terms of improvement of the margin, it's, let's say, mainly driven by more favorable equipment mix in proton therapy, it's linked to the fact that the legacy contracts are slightly decreasing the total portfolio that we have. And we like you have seen with order intake. We have a new contract in the portfolio in total. We have also improved the project execution, and we see our services and especially the services in proton therapy but not only contributing also to the improvement in gross margin that we have mentioned. In total, for the guidance that we gave for 2026, we didn't revisit the guidance, so we confirm at least EUR 32 million. So that's the first answer to your question. It's at least it's a kind of low the guidance. At this stage, we believe that its not appropriate to be more precise than that. And if there are a number of elements to be rather positive, namely the improvement the turnaround that we have seen in proton therapy, especially at the level of the margin. The very good commercial momentum we have in [indiscernible] at the same time, we see that those inventory is a little bit lagging behind and that the order intake in Industrial Solutions especially has been a little bit lower than initially expected. For the second half of the year, we expect to have, let's say, more balanced H2 versus H1 than we had in 2025. And what does it mean? It means that especially on Industrial Solutions, so part of technologies, we expect the order intake to be better than what we had in the first half of the year. Of course, you know that all the projects and especially the project that we have in proton therapy. [indiscernible] negotiated over a very long period of time, and we might have some on the precise bonds during which we finally closed the contract with the customers. Does it answer your question on the margin and guidance, and then I'm left with a question on net debt. But as we put...

Yes. Maybe very quickly on the margin evolution. So because you discussed overcapacity, should we think now that because of this overcapacity, there is significant pricing pressure in industrial, which will like last for a couple of years before it improves?

No. But maybe I will let.

So that first, you know that for us, it's becoming a bit of a region, 40%, 30%, 10%. You know that in our plan, PT was supposed to catch up and technologies was already at that level. The first semester is rather on the low side in terms of overall margin contribution because we had a new [indiscernible] unfavorable product mix. So you should not take the first semester of '26 as the benchmark for the [indiscernible] going forward. We stick to -- what we see is the overall margin plan for technology, and there is no reason to deviate. The capacity question for me, does not put pressure necessarily on pricing because you know that in our technology, we have clear leaders. But that means simply that the single unit events in terms of others, there are probably a few opportunities this year to convert than what it was 2 or 3 years ago or what it will be in 2 or 3 years. But that does not change our pricing dynamic nor of margin dynamics.

And then on net debt, so what we expect is, let's say, relative stability over 2026, and then start of improvements, but let's say, light improvements in the beginning of 2027 with a marked improvement in the second half of 2027. So that's how we see the evolution of the net debt over the next months.

Thank you, David. So we move then to Frank Klassen from Degroof Petercam for the next set of questions.

All right. First off, my question is on the Dosimetry, you've implemented some cost savings there. Could you help us remind how could you quantify these cost savings? And what do you expect for the second half? Do you expect to return to profitability there? That's my first question. And then also the second question on the cost line. So looking at your operational expenditures, they moved up quite a bit, 17% to from EUR 29 million to EUR 93 million, driven, for instance, by the R&D. Is this EUR 93 million. Is this a sort of new run rate also for the second half -- or were there some temporary effects, which inflated the cost line?

I'll take the first one. So the effect of Dosimetry, you understood that it's market linked. I can further comment to go directly to your question, we said 1.6%. It's mostly people-related restructuring savings, they will start to kick in, in the second semester in terms of full impact, and we expect a return to profitability of Dosimetry in those instances.

That's clear. And the cost line?