Jenoptik AG ($JEN)

Good morning, ladies and gentlemen, and welcome to the Jenoptik conference call regarding the financial results of 2025. [Operator Instructions] Let me now turn the floor over to your host, Dr. Prisca Havranek.

Thank you very much. Good morning, everyone, and welcome to our fiscal year 2025 results call. Today, I'm here with Andreas Theisen, our Head of Investor Relations. I will lead you through the presentation. And then as always, Andreas and I will be open for your questions. As you know, our preliminary headline 2025 results have already been published mid of February. So today, we will cover the full set of audited financial figures, including key business unit results as well as our outlook for the year 2026. Now let me start with an overview on Page 5 -- 4 of our slide deck. From a management perspective, 2025 was a very busy year. First of all, let me briefly comment on our progress on executing our strategic goals. Number one, we implemented a new organizational structure, making our company somewhat leaner, increased accountability within our businesses and with our new reporting structure, also increased transparency for our investors. Secondly, we brought our biggest single investment, I mean, our new micro-optics fab in Dresden online, and we are now in a position to further grow this business going forward. Thirdly, again, in our semi business, we delivered on our strategy to grow share of wallet in our inspection business. So overall, I think we made substantial progress in making Jenoptik stronger yet again and in delivering on our strategic agenda. Now looking at business development. From a market perspective, in particular, semi lithography was somewhat difficult in 2025. We focused on what we can control and thus, our focus throughout the year was on executing and accelerating our efficiency program. This has paid off in terms of margin protection and cash generation. As we enter 2026, we have seen signals of a rebound, in particular, in the semi market and overall, a more positive trading environment across most of our verticals. In 2026, we will keep our near-term focus on addressing and further developing our growth opportunities, particularly in areas like AI-driven semi demand, optical communication for data centers, defense application, SMS expansion in the U.S. and also AR/VR. As a consequence, we expect to return to profitable growth this year, and I will cover the details of our guidance here at the end of my presentation. Lastly, I'm very excited that our management team will be complete soon again with Dominic Dorfner joining us as our new CEO, as you have seen from yesterday's release. Now turning to Page 5. Looking at order intake in detail on group level, we reported a decline of approximately 3% year-on-year. However, the dynamics have been fairly divergent between our 4 strategic business units. So starting with Semiconductor and Advanced Manufacturing. As you know, development has been impacted by certain supply chain fluctuations in our lithography business as well as an order cancellation in Q1, as we highlighted on our previous call. While we saw a stabilization of demand in the lithography business in the second half of 2025, order intake for the full year was down by around 11% year-on-year. Customer activity in our inspection business was strong throughout the year with us executing on our strategic road map of increasing our share of wallet. Turning to our Biophotonics business. Order intake was very strong last year, being up by around 19%. We saw positive momentum, in particular for our defense product offering, but also a positive development in our life science applications. In MedTech, we have seen lower momentum in the second half post the launch of a new generation product in our dentistry business. I would like to remind you here that quarterly volatilities of order intake in this business has become more pronounced given our customers' order behavior in the defense business. Here, customers tend to place few, but partly very sizable orders, sometimes for multiyear deliveries. Overall, given the nature of this industry, we do expect fluctuations between single quarters to remain high also going forward. Now moving on to our Solutions businesses. In Metrology & Production Solutions, orders are slightly down year-on-year on an ongoing weakness in the automotive market, whereas Smart Mobility Solutions recorded robust mid-single-digit order intake growth last year. Our book-to-bill ratio was slightly below 1 or at 0.95 to be precise. Our order backlog reduced compared to prior year-end to around EUR 591 million. Overall, we anticipate turning more than 80% of this backlog into revenue in 2026. Please follow me now to Page 6. The revenue in 2025 declined by approximately 6% year-on-year to around EUR 1.05 billion. This reflects generally weaker order intake trends at the beginning of the year, especially in the semi space, as I mentioned before, it also includes a 1 percentage point negative impact from euro-USD exchange rate fluctuations. With regards to our semi business, revenue was down 12% year-on-year. This was a result of what we already discussed several times in earlier calls, meaning softer demand in the lithography business, which, as you know, makes up for a big chunk of our volume. On the contrary, revenue with our customers in the semi inspection arena developed very well last year. Now looking at Biophotonics. Here, revenue was up by 10%, driven by a strong performance primarily of our defense as well as our MedTech businesses. For Metrology and Production Solutions, revenue development reflects what I've mentioned before on order intake. So an unchanged difficult market environment in the -- particularly European automotive industry was primarily weighing down on our revenue performance. Now finally, revenue of our Smart Mobility Solutions business was up by almost 9% in 2025, particularly as our efforts in the important U.S. market are gaining traction following our strategic decision to enter the smart mobility market in the U.S. with our own sales and our own service force. Please follow me on to Page 7, where we look at our regional revenue distribution. First of all, I would like to note that given the size of our key account businesses, and I'm talking about our semi and our Biophotonics businesses here, the meaning of regional performance is somewhat limited. Year-over-year decline in revenues in Europe, including Germany, was very much triggered by issues we had in our semi business or to be more precise, our lithography business. In the Americas, we saw a positive development driven by Biophotonics and of course, the now well-advanced go-to-market transition of Smart Mobility Solutions in the U.S. Looking at revenue share we realized with our top 7 customers. Unsurprisingly, this has dropped from 48% to now 43% in 2025, reflecting the somewhat special situation in lithography. Looking forward, of course, we expect that the share of our top customers to grow again. Now on Page 8, I would like to cover our profit performance by business. As you can see on the left hand of this chart, the group's EBITDA reached almost EUR 193 million, down by around 13% compared to last year. Our absolute EBITDA improved sequentially every quarter last year, and margins in the second half improved to the above 20% level. However, the full year, our EBITDA margin contracted by 150 basis points year-on-year, including an about 1 percentage point impact from our cost reduction program. On business unit level now, influenced by lower utilization and changes in the product mix, EBITDA in our semi business unit dropped by almost 18% year-on-year. Importantly, we were able to retain a strong margin level of around 26% on a full year basis and even around 29% when looking just at Q3 and Q4 together. So I believe this clearly shows the resilience we have in this business. In our Biophotonics business, the strong top line growth drove better utilization of our capacities in combination with positive product mix effects. EBITDA margin substantially improved to more than 20% last year. Looking forward, though, broadly keeping the strong margin level is what we're aiming at. And let me reiterate that semi type margins are not realistically in the cards from today's perspective. When looking at our Metrology and Production Solutions business, lower overall revenues impacted profitability on the basis of lower fixed cost absorption. But for sure, our cost reduction program will also help us to get our fixed cost base lower going forward. Finally, Smart Mobility, we saw good margin progression of more than 200 bps to 13.6% based on strong top line development and the associated leverage of functional costs. Now turning to Page 9, looking at key aspects of our P&L. I think we've said several times already, strict cost management was a key priority to us in 2025, considering the lower revenue levels that we alluded to before. Overall, we have reduced our headcount measured by FTE by almost 5% compared to the prior year. So now looking at the main developments of our P&L in detail. Gross margin was down by 130 bps year-on-year, which was primarily influenced by lower fixed cost absorption and product mix effects. On a business unit level, our semi business saw the biggest impact here. On the functional expense side, I think we remain very disciplined as those expenses declined by 1% year-on-year despite some general labor cost inflation impact as well as the already mentioned cost reduction expenses. Moving on to the EBIT line. You see a more pronounced decrease in both absolute terms and of course, margin compared to EBITDA since depreciation and amortizations were as expected, slightly up year-on-year. Further down the line, as you may recall from our Q2 call, we have recognized an income of a little above EUR 3 million resulting from a settlement agreement regarding the sale of VINCORION, our previous mechanical defense activities. Bottom line, our earnings per share reached EUR 1.26 versus EUR 1.62 in 2024. And as you have may read in our communication this morning, the Executive Board and the Supervisory Board proposed a dividend of EUR 0.40 for fiscal 2025 compared to EUR 0.38 for the year before. Finally, on ROCE, not unexpected given our earnings development last year, ROCE was at 8.4%, quite below our ambition level. We continue to see ROCE as a core metric in steering our company and remain committed to getting back to more satisfactory levels. Now turning to Page 10 and looking at cash flow and balance sheet data. Here, let me say that we are very pleased with the development, particularly considering the difficult trading environment for some of our businesses. So despite decline in earnings, as you can see, our operating cash flow pretax improved considerably, mainly on lower inflows into our working capital. And with additional support from the normalization of our CapEx, free cash flow was up by nearly EUR 50 million, enabling significant debt and leverage reduction. Finally, please follow me to Page 12 to cover our guidance for 2026. When looking into 2026, I think it's clear there's still high market uncertainties persisting driven by both macroeconomic, but also geopolitical developments that are generally difficult to predict. With regards to the semiconductor equipment industry, the by far biggest end market for Jenoptik, recent news flow has been positive, given, amongst others, announcement of massive data center investments and the associated need for computing capacity. Based on these trends and as well customer order activity, we expect positive momentum for our business in this space. Overall, for the Jenoptik Group, we expect revenue in 2026 to be up in the single-digit percentage range versus prior year. On profitability, we expect our EBITDA margin to be in the range of 19% to 21% in fiscal 2026. We do expect our CapEx to be slightly below last year's level. With that level, we are delivering what we promised and we will be trending towards our maintenance CapEx level. Now before I close my presentation, and we go into the Q&A, let me give you some extra color in sense of model assumptions, which some of you may find helpful. On revenue, we estimate a similar FX headwind of approximately 1 percentage point as we saw in 2025. Regarding profits, for sure, we may have some benefits from our cost-saving program and the emission of the associated onetime expenses from the restructuring as we are moving into '26, but general cost inflation, expected FX headwinds should also be borne in mind. On the contrary, rising energy prices may not influence the equation significantly, at least as far as we know from today's perspective. On our financial results, we are in the process of refinancing some of our German debenture bonds and overall expect our financial results to be broadly in line with previous year. And very importantly, from a phasing perspective, we do expect revenue in the first quarter of 2026 to be below last year's first quarter, given our current order book structure and capacity availability. So in summary, as we move into 2026, we see an improved demand picture as of now, supporting positive expectations, especially in our semi and defense businesses. Therefore, operational execution is our main focus at the moment. Moreover, we believe we have ample growth opportunities ahead of us, which we aim to realize. And those include, as I've mentioned in the very beginning, firstly, digital data communication with our high-performance microlenses used in transceiver. Secondly, defense, where we have established -- we have an established product offering and a strong international customer base; and lastly, further leveraging our infrastructure investment in the U.S. market for our SMS business. So as I see it, we have everything in our hands to be successful in 2026. And with that, I would like to thank you and hand back to our moderator to start the Q&A session.

[Operator Instructions] And we have the first question. So the first comes from Craig Abbott from Kepler Cheuvreux.

Good morning, Prisca and everyone. And thank you Prisca for also giving us some of the additional modeling indications. I'll just ask a couple of questions first and then get back in the queue. In the -- looking at your EBITDA margin in your semi activities in Q4 was indeed quite high, I think, around 30%. And I just wanted to -- this could be an indication of a new level of profitability we can expect going forward. Appreciating there will always be some quarterly fluctuations. But if that nevertheless is like kind of directionally a run rate? And can this be scaled further? That would be my first question, please.

Of course. Thank you, Craig. And I would like to caution a bit here. Yes. You are right. We were actually quite pleased with the 29.8% margin that we saw in Q4 '25, right? Main driver was better product mix and also lower costs from our reduction program. And also, of course, to be fair, we also have some onetime effects from release of bonus provisions that impact obviously the whole company, but also this business. So to your question on to moving forward, if this is an indication of a new profitability level, we expect good margins to be realized. But we have to also think that we -- next to the sector cost inflation, you know, we have a labor cost agreement of about 3% hitting us as of April '26. We also have to put in additional resources to accommodate the ramp-up and then our accelerating demand that we -- that as I've mentioned that we anticipate at least based on what we see today. So overall, that would not lead me to believe that we will come to a different margin environment for this business in 2026.

I'll ask two more now and then I'll get back in the queue. The secondly, in semi, you mentioned twice, and you've talked about this before about increasing your share of wallet in the inspection space. I just wondered if there's any more light you could provide here and kind of helping us put that in some kind of dimension. And yes, if you could remind us kind of the sales split in your semi activities between lithography end markets and the inspection activities.

Yes. Thank you very much for your question, Craig. So as you know, we talk a lot about lithography, and I'm sure there will be some questions going forward. But our second large pillar in this business is our inspection business, you know, where we, again, also sell optical components, optical systems into the key players there. And we have indicated on several occasions that we actually have seen nice growth development throughout the year '25, both in order intake, but also in revenue. And with that, of course, that business has been growing versus the lithography business that has not been growing in 2025. Strategically, we think that's important, not only to build up, I would say, a second large pillar outside of the lithography business, which, of course, volume-wise is still the bigger one, but also because we believe we have ample share gains that we actually can get in our -- in the share of wallet of our customers. And this is linking back to our Capital Markets Day in 2023, where I think we talked about that. And now it's basically to give you a data point also that we are delivering on that strategic goal.

And my third and last question for now. Please, on the EBITDA margin progression, if you could help us bridge that through. You gave us some indications in your comments a moment ago, but just trying to gauge like how much of that is like the efficiency measures feed through coming through now plus the follow the cost there last year. And secondly, mix effects from perhaps an over-proportional growth in your semi activities and whatever else may be factors worth pointing out, thank you.

Yes. Thank you, Craig. I mean you've seen the segment guidances that we are giving on this. Maybe where I can put a little bit more flavor, as I already alluded to in the comments. So of course, there's a one-off effect overall for the company from the restructuring expenses that we had in 2025 of high single-digit millions, which, of course, on a recurring basis, we will not have that, and we'll get some incremental impact from this restructuring project. We also have a project where we are working on introducing material expenses. That's also part of the activities we have kicked off last year. So that, I would say, is a tailwind. The headwind is, of course, the normal labor cost inflation. We have -- I think I mentioned that in the comments, labor cost agreement in Germany, and this is the biggest cost factor, obviously, for us that starts in April and is above 3%. So we have to, of course, factor this into the equation. And then we have to see overall what the geopolitical situation will bring. At the moment, we do not expect a major increase in costs from the current geopolitical situation, and maybe I can comment some more on that afterwards. But we will, of course, also have a slight increase in energy costs. But keep in mind that we are not an energy-intensive business. Our energy costs are fairly small compared to a lot of other industries. So if you take the net-net there, that gives you sort of the view on the sector cost inflation. And then on top of that, you mentioned our semi business. As you know, the mix matters in our company. So the demand acceleration, the early signs of which we are seeing today will, of course, have some influence on how the year plays out. And the semi profitability, of course, is a big mix factor within our total company profitability mix. I hope that sort of gives you a little bit of flavor on those questions.

Yes, indeed. Very helpful. Thank you very much.

The next question comes from Maissa Keskes from ODDO BHF.

Regarding Prodomax, the order intake is very low in '25 and the backlog is almost done. So how do you see the business development in '26 and beyond? And should we expect additional costs that could put some pressure on margins? And what are the concrete measures that are you implementing to mitigate this?

Yes. Thank you, Maissa, for the question. On Prodomax, we have seen in Q4 in 2025, an order cancellation at that business in the mid-single-digit value. So that, of course, is, I would say, not great news. That is unfortunate. It's not something that we will see going forward in our view. But of course, it's also a testimony to what I'm going to say next, which is that the demand situation for Prodomax in the overall North American/U.S. OEM space is still quite volatile and quite subdued. And that, of course, has an impact on Prodomax top line and the demand picture overall, as I've just mentioned also for 2025 order intake. Now what are we doing about this? Now Prodomax is an asset-light business that has actually -- it's based out of Canada. So it has a certain flexibility in its cost base that we have and the management there together with us have already, I would say, put to use in 2025. And of course, that's what we have to closely monitor again in 2026, depending on the demand situation. What I think is important, but I think you're fully right, a very low demand and also depressed revenue level will also hit profitability there. And there will be some structurally remaining costs that we cannot -- that are fixed basically, yes. But I think what is important to note is Prodomax is a business that has a very good market position, I would say, in this North American OEM space. So when -- it's more a question of when the demand will return rather than if the demand will return. So we believe this is temporary in nature. And while it's hard to be specific on when do we think the demand will return, we are absolutely convinced given the market position that it will return given time.

The next question comes from Olivier Calvet from UBS.

Prisca, Andreas, my first question would be on the sequential development in margin. Do you expect a similar development as 2025? You touched on the Q1 growth rate being a bit subdued, let's say. Yes, maybe start there perhaps.

Yes. Thank you, Olivier. Yes, you are right. I have mentioned, I would like to reiterate that given the current demand pattern and also our internal capacities, we expect Q1 revenues to be below Q1 revenues of '25. That is correct. And obviously, given our full year guidance, then there will be an acceleration of demand -- or of revenue in that sense for the coming quarters. And of course, the margin picture will also -- because your question was on the sequential margin development, that will also follow, obviously, both the revenue development, but also the mix development is important. So I would say I would expect overall a back-end loaded development for the year, given also the start into the first quarter revenue-wise, as I've mentioned. I cannot give you specifics on margins on particular quarters. But I would say, in general, a bit also what we've seen also in '25, I would expect a stronger H2 compared to H1 at this point.

And just on your comments on capacity availability, could you maybe just give us a bit more color there? And I guess also within the semis business, could you touch on the lead time or sort of order to revenue conversion cycle in lithography and inspection perhaps?

Yes, of course, happy to take that question. So maybe let's start on a little bit of a higher level, right? We have businesses that have longer lead times, and now I'm referring to the semi space that you've been asking about, and that would be the classical optical components manufacturing. So whenever we do classical optics components, lenses, lens systems and subsystems, that has longer lead times. It's more lengthy manufacturing processes and also sometimes in the supply chain, there is longer lead times. If we then look at the micro-optics business, so mainly our sensor business there. So what we have basically invested into Dresden for, that typically is a faster manufacturing process with shorter throughput times, shorter cycles. And so those are the two different dynamics, I would say, in the semi business. And that is valid, I would say, both for inspection and for lithography where applicable. I would say, broadly speaking, you could probably imagine that the classical optical business is more than double of the -- maybe the lead times or the throughput times in the micro-optics business. Now as to capacities, let's say, we have -- as you know, we have invested into Dresden, and we have ample capacity there given the investment there also for, of course, going forward. So we can definitely accommodate substantial future growth for this business in this site. Now in the classical optics, as we have several manufacturing sites, you may have seen that we announced an investment into our Jena manufacturing site in Germany in fall last year. So we have also added there, I would say, moderately capacity in the sense of machines and also, to a certain extent, clean room facility. But we have had a good loading, I would say, overall, in particular, in our German sites in '25, also given the growth dynamics of the inspection business. So of course, we -- while we are -- we will be adding resources to accommodate a potential acceleration, we have to, of course, also make sure that we have -- our loading is not always completely balanced across all sites. I think that's the reality of a manufacturing organization. So in that sense, we have to be putting full operational execution into doing that. And that, of course, will also be determined next to the demand picture on how the year plays out. Hence, being at the beginning of the year, we have to cater for some volatility here.

Maybe just a final one on capital allocation. Good to see a higher dividend. But are there any changes that we've seen some moves on the Supervisory Board? Anything we should think of in terms of share buyback or anything like that?

So there was a lot of questions in one. I'll try to address at least what I can say. Now maybe, first of all, I'm very happy that our Supervisory Board is now complete. And I think you will understand that I will not sort of -- cannot comment on the composition or the Supervisory Board as such other than saying that I think we have an excellent Supervisory Board that helps the management team together shape the future of the company. As to capital allocation, which, of course, we were very clear at the Capital Markets Day '23 on what our capital allocation policy is. And let me remind you, and I think we've just talked about growth and capacities. Number one, capital allocation priority is supporting organic growth. Having said that, the major investment in Dresden is behind us, hence, also my comment on trending towards maintenance level from a CapEx point of view. But there will always be growth CapEx, obviously, given a little bit also the shape of the demand picture. And then second, obviously, returning to shareholders. You've mentioned the modestly increased dividend that we have. And this is our primary instrument at the moment that we use at Jenoptik. And then last but not least, of course, while I don't want you to read anything into that, but just reiterating what we said at the Capital Markets Day '23, of course, there could also be M&A activity, but we don't have an appetite at the moment to have a focus on M&A.

The next question comes from Martin Jungfleisch from BNP Paribas.

I have 3, please. I'll go one by one. The first one is on just the start of the year. You mentioned that you have seen a solid start, particularly in the OEM business. Could you just quantify this a bit? So what does this mean on the order side? Would you potentially see a level of the Q3, like EUR 300 million? Or is it more like the Q4 of EUR 220 million? If you could provide some color on that, please?

Yes. Thank you, Martin, for your question. And I think you will understand, obviously, I cannot really give you a quarter guidance on that. We've seen, as you said, significant improvement in demand, in particular, our OEM businesses. I have mentioned particularly semi there and also, I would say, the Defense business and some parts of our Life Science businesses. So we actually see good momentum there. But also, of course, our -- as I've said, particularly in the Biophotonics business, including the Defense business, there's high amount of order volatility. So we have to keep in mind that these businesses are driven by ups and downs in order volumes. Yes, but overall, we've seen in the beginning of the year, a significant improvement in demand in OEM, meaning Semiconductor and Biophotonics/Defense.

Okay. So the order -- the book-to-bill should be probably significantly above 1, I suppose.

Yes, I don't know, I cannot give you, as you will understand, some guidance on that. I think you have to do the math yourself there.

And then -- yes. And secondly, maybe on the semi business. Can you disclose what the segment guidance implies for the litho and the inspection business? Like would you expect higher growth from litho this year versus inspection and some other areas? And maybe if you have also baked in some positive effects from some restocking at your largest customers given their growth ambitions for 2026 and beyond?

Yes. I am afraid I won't be able to give you much detail on the specifics of those businesses. As you know, we work with a very concentrated customer base. And then therefore, it's -- we're a little bit limited on what we can say there, as you understand. I mean what I can tell you is that as we have said before, we believe the effects from the supply chain correction in lithography are behind us. As we've continuously said, we think this was most pronounced in the first -- in the beginning of '25. So we believe that this is behind us now. And as Craig has also before -- sorry, asked was around that we are happy with the growth momentum we see in inspection and also our strategic move there. So overall, I think if you put those two together, you sort of get the impact for the wider segment.

And maybe just one last question is on the photonics product. I think you've highlighted a few times. Can you just talk a bit about the photonics for the micro-optics business and the Probe Card business a bit more? So what kind of size in revenues was that last year? And what are your expected growth rates for this year? I mean there's a lot of companies in the laser transceiver business that are seeing the revenues doubling this year. So just checking with you if you're seeing like a similar trend here? And also, how does this tie with the capacity? Do you have enough capacity to cater for that demand?

Martin, it's Andreas here. Maybe on the UFO Probe Card for everyone. So this is for -- this is a testing set of kit for photonic integrated circuits, so special submarket of the semi market. I think we alluded to that before, and we have an interesting product, as I said, for testing those chips. The scale of the business is relatively small at the moment. So we are talking about a single-digit million euro number. We see growth here. But I think we can also say that we are not having the only solution for this for testing those chips. And therefore, we do not really see this to become a tangible or a major driver for our P&L going forward. So it will be growing, but not in a tangible sense.

And maybe to add on that, on your question on the micro-optics, basically the micro lenses, yes, the micro lens -- difficult word, arrays that we supply into transceivers basically or optical data communication. Now as I've also mentioned in my remarks, we have seen -- and we talked about that in '25, right? We've seen a big interest, big demand for the existing product portfolio, I would say, we have of our business there. It's modest in size, but we expect, given the -- all the massive investments into data centers, AI driven, we expect actually some nice growth there, obviously, on a smaller basis as we speak. But we believe -- we closely monitor this market, and we believe that it's an interesting growth opportunity for us incrementally.

Okay. And the capacities are sufficient for growth, I suppose?

We are in the business of sort of adding capacities wherever we need them, right? And so in that sense, I would say it's too early to tell how that will really develop. And therefore, for now, we are fine capacity and this -- we'll closely monitor that.

[Operator Instructions] And we have one more question from Lasse Stueben from Berenberg.

Sorry to come back on the Q1 again. I was just a bit surprised because Q1 '25 wasn't a super strong quarter. So can you give more color on sort of between the businesses, what's kind of happening? Is this largely down to the lumpiness in Defense or simply just the phasing of the demand in semi? And then the second question I would have is just on the Q4 margin in Metrology, that was very high. And it seems like in the segment outlook, you're sort of guiding for an improvement in the margin there for '26. So maybe some more color on what that could potentially kind of look like? Should we be looking for a double-digit EBITDA margin for Metrology in '26 or something else?

Yes. Of course, Lasse, thank you very much. I'll take the Q4 Metrology question first, and then I will try to give a bit more flavor on Q1. Now I mean, if you look at the margin in Q4 Metrology and you look at the revenues, right, it was a super strong given basically comparing the other quarters, Q4 in Metrology. And this is the main effect that you see there. Now from a CFO point of view, I would prefer, obviously, a somewhat more flat or not as volatile revenue development, right? But there's nothing -- the main driver in that margin is the top line. And I've said -- I've mentioned AR/VR growth potentials in -- when I talked about '25. So I think that's an interesting thing to take a look at, not saying that we are planning at all for an inception or anything there. But we've seen some nice commentary and movements also in a trade fair in January in Photonics West regarding that. But then on the other side, as you know, in the metrological business, it's also, as I've mentioned, the automotive business, where we do not really see an improved demand picture right now. So I would say we have to see how this overall plays out into the next year. But that's the explanation on the Q4 on the floor levels. And I -- We have a segment guidance on -- specifically on MPS, which is revenue higher than -- sorry, profitability higher than -- growth higher than revenue. But we have to see how the year plays out. And then on your question on Q1, obviously, we're not guiding for quarters. So I'm somewhat limited on what I can see there. But what I can tell you is keep in mind that, I mean, while semi is the biggest business, there's also sizable other businesses in the Biophotonics space, depending on the Metrology business as we go there. And when we say that we anticipate lower revenues than in the previous year, obviously, it's related to all of those businesses. Do not just focus on the semi business here.

And we have one more question from Craig Abbott from Kepler Cheuvreux.

Yes. I actually just wanted to follow up on part of what you were just discussing in terms of the Metrology protection business. Indeed, I was pleasantly surprised actually by the positive tone of the outlook for this year. I was going to ask you to what extent that is due to pickup finally in the AR/VR applications? Or is it other applications more than traditional applications for TRIOPTICS? Because I assume also given the margin progression in Q4, that the big driver there is the TRIOPTICS business. Is that correct?

Thank you for your question, Craig. So I'll try to give you a bit more flavor here. So yes, you're right. We have guided for mid-single-digit growth in '26, right, for MPS. And as we take a part this plan, if you're right, TRIOPTICS is one of them. And of course, how the smartphone business, which still is a sizable chunk of our TRIOPTICS business plays out, we have to see. So that is one assumption around that. AR/VR, we have seen, I would say, nice small movements and also a lot of press, obviously, if you look at what Meta is doing and so on. But if you then look at the volumes, I think one of the Ray-Ban is 15,000 volumes or something. So you have to say that I don't think we are at the commercialization of that yet. And when and if there will be an inflection point, we have to see. So we have factored some assumptions into that, but for sure, not a complete takeoff of the AR/VR business. But then on the other side, we have factored in that the automotive demand remains depressed, but we have not factored in an incrementally reduced demand. So those are a little bit our assumptions into that segment that has a wide variety of end markets and dynamics there. So that drives our thinking for 2026. But it's early days, so we have to see how those things play out then in detail.

So at the moment, there are no further questions. Oh, we have one more question, sorry, from Malte Schaumann from Warburg Research.

I have a question on the Smart Mobility business. You expect quite significant growth in 2026. Order intake has been kind of book-to-bill close to 1. So maybe a comment on how the project pipeline might look like and if you would expect -- I mean, this implies that maybe some larger projects are in the pipeline that might realize during the first half of the year. So maybe additional color here would be appreciated.

Yes, of course, Malte. So keep in mind that when we have TSP revenues, our order intake is actually not that relevant, where we have recurring revenues that -- it's really where the hardware sales that the order intake is revenue important, right? Where we have solutions businesses, it's less of an importance. So just as a sort of structural comment on that. And then obviously, we expect a growth trajectory from a continued expansion in the U.S. That's something that we've invested in that we would like to see continue there. And then you also -- on your question on order intake, this business is also somewhat volatile for order intake because sometimes there are projects or orders. Think of our business in the Middle East that we take opportunistically that can increase and decrease certain -- or give some volatility in the quarterly order intake. So that's the thinking around growth in SMS.

So now there are no further questions. [Operator Instructions] But I think there will be no more questions. So then I can give the word back to you.

Thank you very much. And I would like to close the call with a clear message. Despite market uncertainties, we believe that we are well positioned to return to profitable growth in 2026 by focusing on both exploiting our growth opportunities in our key end markets as well as focusing on operational execution. Thank you for attending our call, and we look forward to seeing many of you on the road over the next weeks. Thank you very much.