Jenoptik AG (JEN) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Jenoptik conference call regarding the results of the first quarter of 2026. [Operator Instructions] Let me now turn the floor over to your host, Dr. Prisca Havranek.

Good morning, everyone, and welcome to our Q1 2026 results call. I will lead you through our presentation. And then as always, Andreas, our Head of Investor Relations, and I will be open for your questions. Now let me begin with an overview and some key messages on Page 4 of our slide deck. First of all, I'm very pleased to report that order intake was very strong for our OEM businesses in the first quarter, as we already indicated on our previous call at the end of March. Ramp-up in the semi industry seems to be in full swing now, hence, demand for our semi equipment customers was particularly strong. But also order intake in our biophotonics business unit was substantially up compared to last year. Revenues for the quarter were slightly down year-on-year as we expected and I had indicated on our last call. We are also pleased, I can say, with the evolution of our profitability in terms of EBITDA margin in Q1. Noting, however, as you know, that Q1 does not represent a modest comp if you look at last year. Free cash flow in Q1 was down year-on-year, reflecting higher working capital needs in conjunction with our accelerating order intake. Now taking a broader view at our company and at our strengths. We continue to believe that we have established very strong positions in certain end markets, combining a well-developed technological base with strong long-term customer relationships. And looking forward, we aim to further leverage this powerful foundation by focusing on our growth opportunities. particular areas like AI-driven semi demand, which we are seeing right now, optical communication for data centers, defense applications, SMS expansion in the U.S. and also AR/VR applications. Lastly, we confirm our outlook for 2026. Moving on to Page 5 now. As I just mentioned, we are overall very satisfied with the order intake development seen in the first quarter. And indeed, the total number reached almost EUR 357 million on a group level, and that marks a record for us. Now starting with Semiconductor & Advanced Manufacturing, which you know is by far our biggest business unit. As you know, our lithography business was subject to certain supply chain fluctuations last year. And in Q1 2025, it was particularly weak. So in the first quarter of this year, we have seen a clear acceleration of demand in this field. In addition, customer activity in our inspection business in semi has remained strong as we already saw throughout last year. I would like to note that the order intake of around EUR 180 million also includes one large order that we do not expect to reoccur in the coming quarters. Turning to our biophotonics business. Order intake was also very strong last quarter, being up by almost 66% year-over-year. Importantly, we recognize positive momentum across our different business fields, meaning MedTech, Life Science and Defense. Here, in the Biophotonics SBU, we believe that we have seen that the strong dynamics that we've seen in the first quarter may also have been supported by certain early order effects relating to growing geopolitical uncertainties since the start of the year. We continue to believe that the quarterly volatility of order intake in this business unit will remain high going forward, partly because of a somewhat special order pattern in the defense space as customers there tend to place few but sometimes very sizable orders. Now moving on to our Solutions businesses. Both for Metrology & Production Solutions as well as Smart Mobility Solutions, order intake developed broadly as we were expecting. As a result of all this, our first quarter book-to-bill ratio at group level went up sharply to almost 1.5, and our order backlog grew to EUR 719 million. Please follow me now on Page 6 to cover our revenue development. So as we broadly indicated in our previous calls, revenue was marginally down by 1% year-on-year to around EUR 241 million. Excluding FX effects and here, especially, of course, relating to the euro-USD exchange rate fluctuations, our revenue would have been up by close to 2%. Now if you look at the segment level, Semi business revenue was up by around 7% year-on-year from a low basis, as I've already mentioned, in the same quarter of last year. Main driver was our semi inspection business, but also Digital datacom was supportive, albeit, as you know, on a lower level. Now let's look at BioPhotonics. Here, the comps were very high, driven by a strong dental business last year. Consequently, our revenue was down by around 11%. However, both our Life Science and Defense business fields saw good growth in the quarter. For Metrology & Production Solutions, revenue development primarily reflects the continued difficult market environment in the European automotive industry. Finally, revenue of our Smart Mobility Solutions business was almost up by 11%. And here, we've seen growth across all regions. On the next page, Page 7, we look at our profit development. So as you can see on the left side of this chart, the group's EBITDA reached around EUR 44 million, up by a little more than 22% compared to last year. This implies an improvement of our EBITDA margin by around 350 bps, which was primarily driven by 3 aspects. Firstly, of course, we didn't have the onetime relocation costs relating to the move into our new fab in Dresden that we had in Q1 2025. Secondly, some improvement in our product mix, especially relating to our semi business. And finally, across all of our business units, an overall lower cost base as a result of our cost reduction program executed last year. On business unit level, based on the aspects mentioned before, our semi business recorded a healthy EBITDA margin of 30.6%. Despite a certain decline in revenues, as I explained earlier, driven by the dental business, our biophotonics business continued to operate on a strong margin level of around almost 22% in this quarter. Both our solutions businesses recorded good progress in terms of profitability, given, on the one hand, tight cost control in regards to MPS and revenue-led operating leverage in the SMS business. The other line, which includes our Corporate Center as well as Prodomax, saw about EUR 6 million negative swing in EBITDA year-over-year, largely relating to certain corporate projects and to a lesser extent, due to lower profits generated by Prodomax. Now looking at key aspects of our P&L. If you follow me please to Page 8. Gross margin was considerably up year-on-year, which was primarily influenced by a general lower cost base as well as the contribution by our semi business, as I've alluded before. If you look at functional expense, I think we have remained fairly disciplined overall with those expenses growing by 2% year-on-year despite the typical low cost inflation impact, of course. Largely driven -- or let's say, our depreciation and amortization was largely flat. The improvement of the EBITDA, therefore, fell through to the EBIT line, driving EBIT margin up to 10.7% in the first quarter. Looking at the bottom line, our earnings per share reached EUR 0.29 versus EUR 0.16 in the first quarter of last year. Now turning to Page 9 and looking at cash flow and balance sheet data. Let me start with operating cash flow. Given the strong order intake, our priorities have shifted towards optimizing our ability to serve our customers. Hence, we have been taking on more working capital compared to the end of last year, resulting in reduced operating cash flow and also reduced free cash flow in this quarter. Adding on to what I just said, you see that our working capital ratio was up at the end of the first quarter, but I would like to note that we consider this as temporarily elevated due to the support of the semi ramp. On the remaining financial parameters, we have not seen any major changes, meaning all our financial situation overall has remained very robust. Finally, please follow me to Page 11 to cover our guidance for 2026. And here, I would like to start with some general remarks first. So with regards to the order intake, of course, we are very pleased that we saw what we saw in the first quarter, right? But in the sense of managing your expectations for the coming quarters, I would like to reiterate that we saw a sizable kind of annual order in semi, meaning it broadly covers a full year demand in that quarter. We also think that some early order effects, as I have mentioned before in biophotonics business has been supportive. So net-net, we do not believe that such an order intake level is generally representative for the coming quarters for the group. Secondly, when it comes to revenue, please bear in mind that particularly in the semi and biophotonics business units, it will be fairly relevant what kind of mix of orders we are going to see in order to judge the revenue conversion. since, as you may know, our factories are currently operating at different utilization rates. Thirdly, we think that macroeconomic and geopolitical uncertainties have clearly more accelerated rather than decelerated since the beginning of the year with applications, for example, in our automotive-related activities, which are being difficult to predict. So overall, we continue to expect our revenue in fiscal year 2026 to be up in the single-digit percentage range versus prior year. And on profitability, we expect our EBITDA margin to be in the range of 19% to 21% on a full year basis, and we expect our CapEx to be slightly down below last year's level. Our main undertaking with regards to capacity expansion is our classical optics site in Jena, where we're expanding our high-precision cleanroom production, which mainly relates to our semi business and which we expect to come online in 2027. And with that, I would like to hand over back to our operator and to start the Q&A session.

[Operator Instructions] So the first question comes from Mr. Lasse Stueben of Berenberg.

I was wondering, would you be able to share how large that order was in Q1 in semicon and advanced manufacturing? The second question would be, in the past, I think you always gave kind of what proportion of the backlog you expect to convert into revenues in a given year. Are you willing to share that number with us again this time? And then the final question would be around, and you mentioned product mix in semiconductor being favorable to margins in the first quarter. So I'm wondering, given what you're seeing in the orders, should we anticipate the mix in semi to change and sort of what that implies for margins going forward?

Lasse, I will start with the first question, which was related to the large order that I've mentioned. And obviously, it's hard to give you very specific details here on the call. But what I can tell you is that it's a low double-digit million amount that we are talking here. And I think the main message being that we do not see this recurring in the upcoming quarters. I think that's clearly the message we wanted to send with this. As for the backlog question, I don't have the number at hand here. And as I mentioned also in my remarks regarding the outlook, it very much depends on the, let's say, the output that we're able to get in our factories given also different utilization levels. I think what I can say here is, I'd like to reiterate, our backlog has increased. We have a strong backlog, which gives us a good foundation, obviously, for the remaining 3 quarters. But at this point, I'm not able to give you a good estimate of how much we're going to convert into revenue. As you know, our revenue guidance is confirmed at the single-digit percentage range versus last year. I hope that helps a little bit. And on your last question regarding product mix, I believe this was regarding product mix in semi. We have seen a strong inspection business in Q1, yes. I've already alluded to the demand trend in lithography, but we have not yet seen the, let's say, the impact of that in Q1. But bear in mind, if we look at mix, you also have to keep in mind that the previous year lithography was also affected by the move into the Dresden fab. And this is not only the onetime cost that I've mentioned, but of course, also the loading level was different in Q1, given both the business momentum, but also the effects of the move. I hope that helps a little bit.

Your next question comes from Malte Schaumann from Warburg?

Can you hear me?

Yes.

Okay. Good. So for the current -- maybe not in the first quarter, but do you see customers or a change in the customers' order pattern for the instance, customers beginning to beginning to place orders earlier than expected due to potential capacity constraints, which are in discussion already reserving slots for '27. Anything you recognize in that sense?

Thank you, Malte, for your question. Let me give you a general answer. I think you've seen that we have seen a very record order intake across the company and particularly in semi, but we've also mentioned that in our biophotonics business. We believe that we have seen a certain early order impact and we think that may be coming from, for example, geopolitical worries that could also affect some of the supply chains for our customers. So I think we see some effects of that. With regards to the semi market, I think it's really hard to tell at this point, but I would believe that the ramp-up dynamics that we've seen also in previous cycles would also be valid in this cycle. So in that sense, I would say, cautiously, yes, that some of the orders, let's say, that we see in Q1 may also be of semi ramp being at full speed. And there are some, let's say, some effects of that, that customers tend to place their orders even earlier in a steep ramp-up phase rather than, let's say, in a stable or ramping down period.

Okay. Understood. And then touching on AR/VR. I mean, that has been a topic which never really took off during the past couple of years and now you mentioned it specifically in your comments and quarterly reports. So what are you seeing in this area? And what are the potential implications? Do you already benefit from increasing orders? Is that sustainable? Or do you expect further potential ramp-up then going into the year?

Yes. So I think maybe a little bit of a longer order there. I think maybe reiterating what we have seen over, let's say, also what we discussed in our Q4 call in March. I think we see a stronger noise, stronger momentum, also stronger customer inquiries for augmented reality versus virtual reality. yes. So I mean, there's a couple of major OEMs launching devices in the AR space over the last couple of quarters and months. So we see augmented reality actually more dynamics as compared to VR dynamics. Having said that, yes, we see more interest, more conversation. We also mentioned that at the industry conference at Photonics West, I believe, at the end of January, there was definitely more dynamics discussed. But from an order input point of view for us, it's early days. And while we are very well positioned, I would say, particularly in the waveguide testing space, we've only seen, let's say, modest order intake as compared to the previous years. And we have not seen or not also anticipating any major VR orders coming in, in the near future. So I would say it's a bit of a balanced picture, but the good news is, is that various players are launching AR devices that I think are, in some ways, also accepted well by the market, although it's early times to tell about that.

And then on the other business area, probably that refers to Prodomax. The order intake has picked up a bit in the first quarter. Is that a onetime thing? Or do you see more sustainable recovery in the market that customers are now be able to order at higher levels again?

Yes. Thank you for your question, Malte. I would say it's too early to call this a trend. You know that we've had basically 4 consecutive difficult quarters in 2025 in Prodomax, including as well a cancellation that we pointed out in Q4. Now what I see in Prodomax in Q1 is encouraging. It's a good first step in the right direction. And I would also say that some of the RFP requests are potentially going up a little bit, but I wouldn't call this a trend at this point. It's too early. And I would say the general muted investment environment for the U.S. OEMs remains the same as well as the geopolitical tension or I would say, the certain reluctancy to go across the border to Canada for your supplier. So those 2 things, I don't really see a major change in the trend. But I think it's encouraging that we have seen an uptick in demand in order intake in Q1 for the first time quite honestly, in a couple of quarters. So overall, let's say, slightly optimistic on Prodomax.

Okay. Sounds good. Last question on the gross margin. I mean, probably there were some mix effects, especially coming from the semiconductor business. Lithography probably becoming a bit stronger in the next couple of quarters. So what do you think -- what should we think about gross margin progression throughout the year? Was that more than 35%? I think it was the highest gross margins in quite a number of quarters. So what should we expect for the upcoming quarters?

Yes. Thank you for your question. So I think when you compare year-over-year, obviously, Q1, as you know, the semi business, I've just mentioned it before, was very much affected by also the move to Dresden. So the micro-optics business was not firing on all cylinders operationally. And then we have demand-driven trends there. So it's not really a good -- a fair comp to look at last year's quarter 1. Now having said that, I would say we have seen a good gross margin in Q1. And I would expect -- I'm not guiding you explicitly on gross margin, I can't do that. But I would expect the normal fluctuations that we've also seen in, let's say, the good semi quarters last year to continue also into the next quarters here. So ballpark number, I think we have an okay gross margin right now.

At the moment, there seems to be no further questions. So I might repeat once. [Operator Instructions] The next question comes from Maissa Keskes from ODDO.

Given the very strong order momentum and the recent guidance raised from one of your key customers, could you provide a bit more color on the full year '26 growth expectation? Should we interpret the current single-digit growth guidance more towards the upper side rather than toward the low end?

Maissa, thank you for your question. Let me try to help you along with that. Now obviously, maybe, first of all, we have not changed our outlook, and we are expecting a single-digit growth, and that is valid both for the group and also for our semi SBU. So I would say all the ranges are in play as of today. We are, I would say, encouraged but what we have seen in the demand picture in the Q1. Now I think, as I've also said in my remarks, the focus now, as is also true in typical semi ramp-up phases is on execution. Operational execution across all of our sites yes. And our team is fully focused on that. And that will also, let's say, be a determinant on where we land within our total revenue for the semi business. So meaning where in the range that I recognize is a wide range at this point, we will land is, to a large extent, next to, of course, the mix of orders that we are getting, also relevant how we will be able to convert those orders into revenues. And that obviously, in a perfect world, you would have a balanced utilization across all our sites. Clearly, we have different technologies here at play. We have different customer products. So this is not the case. And that will determine a little bit the phasing on the one hand, on the other hand, also the total outcome where we land in the guidance.

The next question comes from [ Louis Hilary ]. Okay. It seems that we have no more questions. So there are no further questions in the queue.

Okay. Well, then thank you very much. Maybe summarizing very quickly, we had a very good start to the year, dynamic demand in our OEM businesses. And even though this very high momentum is unlikely to continue at this pace, it provides us with a very strong foundation for the successful fiscal year 2026. And with that, I would like to thank you for attending our call, and we are looking forward to seeing a lot of you on the road during the next few weeks. Thank you very much.