Montana Aerospace AG ($AERO)

Ladies and gentlemen, welcome to the Montana Aerospace Q1 2026 Conference Call and Live Webcast. I am Sandra, the Chorus Call operator. [Operator Instructions] The conference is being recorded. The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Patrick Maurer, CFO of Montana Aerospace. Please go ahead, sir.

Welcome, everyone, to the Q1 2026 earnings call of Montana Aerospace, a quarter that marks the continuation of our success story and above-market growth. To start and for everyone new in the call, I'd like to reiterate the USP of Montana Aerospace. We are a game changer in the aerospace industry because, one, we have a very integrated value chain, which brings reliability to our customers and mitigates our reliance on the outside world, especially important in these turbulent times. Two, we have high material competence in aluminum, but also steel, titanium; three, the majority of our workforce and assets is located in best-cost countries, both in Europe, but also Asia. And four, we have unique process know-how, partially backed by our own IP and overall, are situated as a key player from an ESG perspective with our integrated business model. Here, you see our long-term visibility of the orders, which has grown in the past from roughly EUR 4 billion in '21 to now more than EUR 7 billion. And it also shows that we are selling our products for all different platforms of the main OEMs as well as other companies like Embraer or Gulfstream and are therefore, set up to have a clear path towards our growth ambitions and towards our revenue growth that we have in the guidance and beyond. In addition, I'd like to highlight that our business model and our setup mitigate negative macroeconomic impacts or any other impact, in fact, that some of you, I know, are concerned about. So if we look at 4 critical areas, or only 4 critical areas for this page, I'd like to show you the protection that we have in these fields and I'd like to highlight that we can, with our business model and our setup, mitigate some of the key questions that come up to many of you in terms of how we are positioned. So one, material pricing, as an example, the aluminum prime material. That is -- we can pass that on to our customers in most of our contracts, either on a monthly basis or then on a PO basis, which, in the end, limits our raw material and our raw material price exposure from an absolute return perspective. Of course, it does have for the current macroeconomic environment where LME pricing increases does have some impact on the working capital and also because we want to secure our supply. But as I said, on the absolute returns that there, we do not have an impact. Second, from the sourcing perspective itself, our integrated casting and recycling setup, especially in our biggest site in Romania, leads to the fact that we are less dependent on external prime materials and especially aluminum prime materials and therefore, enhance our resilience in the supply chain. Three, the energy pricing. So while energy prices and fuel prices are increasing, the majority of our contracts in the meantime, after the COVID experience have an annual inflation protection clause. And on top, the energy we purchased ourselves is protected for the year through -- for the year 2026 and partially '27 through hedging, but also through the fact that we established substantial PV capabilities or capacities over the last couple of years. So all of that protects us from the current increases in the energy pricing that we see. And finally, from the demand side, so from our customer demand side, we are resilient in terms of, first, because we have our buffers in our expectations and guidance towards what we can expect from the OEMs, and we have seen that we are doing the right assumptions in that regard in the meantime, very accurate. And on top, also for the moment, from a customer side, we have not seen cancellations out of the Middle East conflict. So also from the demand perspective, we do not see any headwinds towards our guidance or towards our current setup and results. Let's now move to the financial results of the first quarter 2026. So sales have grown by 4%, driven by the Aerostructure segment to roughly or close to EUR 250 million, EUR 248 million to be exact. And what seems like a slowdown in our growth trajectory is actually a pretty strong performance if you consider that our majority of the sales are in U.S. dollars and the FX rate from Q1 '25 changed from 1.05 roughly to 1.17 in Q1 2026. So around 10% or close to 10% because not all sales are in U.S. dollars are impacted just from a FX perspective. On top, as you will see in a later slide, the Q1 of 2025 was quite strong on our end, but also on the OEM side. And there, in the OEM perspective, we see actually a decrease in this year's deliveries. And that shows that we are actually continuing to gain market share growth. We continue to gain market share and thereby grow our sales. From an EBITDA perspective, we have again increased versus the Q1 2025 and also, again, over proportional, what resulted in a 16.4% group EBITDA margin and more than 18% in Aerostructure, which is already close to, let's say, benchmark performance. Yes, no adjustments were made to the Q1 '26 EBITDA results. On the next page, we see that once we move further down the P&L, the over proportional improvement continues. So you see a plus 11% in the operating results and plus 131% in the final results from continuous operations to have a comparable. That is also driven by a strong improvement in the financial result with 2 main effects. So one is that we deleveraged our balance sheet and therefore, had lower interest costs. And second, also the FX losses, the noncash FX losses that we experienced last year and actually experienced again in Q1 2026 have, however, reduced by roughly half. That also leads then to a strong increase in the earnings per share from EUR 0.17, up from just EUR 0.07 in quarter 1 2025. Here, we get a good overview of Q1 sales and Q1 EBITDA inside of the OEM deliveries. So you can see that we grew in our Q1 2026 deliveries versus 2025 despite the fact that the OEM deliveries actually were reduced by 3.4%. And that is even without considering the FX impact because we are, of course, talking on our side from euro values, while the OEM deliveries are quantitative output basically. Versus the past, we see an impressive growth rate, both in the sales of 40% on average as well as over proportional in the EBITDA of 180% and while there is a certain slowdown, we further -- we see, let's say, our trajectory continue further until we fully utilize our asset base. So there's not -- for sure not the end where we are at the moment. But of course, compared to very low levels in 2023, it's a bit of a slowdown in that regard. We continue to the next page. We see a cash perspective. And from a cash perspective, we have deleveraged our balance sheet further and are now at a very healthy 0.4 net debt-to-EBITDA ratio on a group perspective. That was backed by the cash flow from investing activities, where we received EUR 62 million from the Energy segment carve-out, but also by cash flow from operations, which was positive with EUR 1.4 million, which is, let's say, a plus of roughly EUR 7 million compared to the quarter 1 2024 -- 2025. And despite the fact that our working capital increased because of higher metal prices, as discussed and also because we are starting to protect our supply chain with metal purchases for the rest of 2026. The working capital impact, however, should be just temporarily until the Middle East situation resolves itself and hopefully, pricing comes back to more normal and reasonable levels. Now I will hand over to Vicky Welvaert.

Thank you, Patrick. And good morning or afternoon, everyone. Let me take a moment to address the recent leadership change following the resignation of the CEO of Montana Aerospace. As I know, this is an important topic for many of you. First and foremost, I want to underline that the CEO transition is fully decoupled from the performance of the business, and it is not driven by any change in our strategy, any operational issues, nor does it affect our financial outlook in any way. Put simply, our strategic and operational continuity remains fully intact. Our strategy is unchanged. Our guidance remains unchanged and most importantly, our execution continues fully on track. Operationally, the business is performing as planned and delivering as expected. To ensure continuity during this phase, Patrick and I have taken on interim responsibilities, working closely together and supported by a highly experienced extended leadership team across the group. This is not a situation where we are starting from scratch, quite the opposite. We are building on a strong and well-established organization. It is also important to note that we continue to benefit from Kai Arndt's involvement as an adviser, particularly on key strategic topics, which provide an additional layer of continuity. So if I can summarize the key message in one sentence: this is a transition in leadership and not a change in direction. Let me now move to Slide 11. What gives us confidence in managing this transition is the strength of our organization and leadership team. We have a proven and well-functioning management structure with clear accountability across all functions, regions and divisions. This structure has been built over many years and is designed to deliver consistency in execution. Importantly, there are no changes to our operational setup. Our sites worldwide continue to be managed by the same experienced teams, reporting lines remain unchanged and day-to-day operations continue exactly as before. I would also like to highlight the seniority and experience of our extended leadership team. Many of our senior leaders have been in the aerospace industry for more than 20 and in many cases, even over 30 years. This brings deep operational expertise and long-standing relationships across the industry. Supported by these seasoned leaders with extensive aerospace experience and strong functional expertise, we are also very well positioned in terms of customer access, contract management and strategic alignment with our key OEM partners. At the same time, our divisional leadership teams continue to operate with the same focus and discipline that has characterized their performance in recent years. So overall, we are not relying on individuals. We are relying on a strong and experienced leadership structure. That continuity is critical, and it is a real strength in times like this. It allows us to stay fully focused on what matters most, delivering on our operational targets and executing our strategy. And I would emphasize that our teams on the ground remain highly engaged, focused and committed to delivering results. This transition is being managed from a position of strength, stability and continuity. With that, let me hand back to Patrick.

Yes. Before we come to our guidance, I'd like to reiterate the key pillars to continue our growth story in Montana Aerospace. So obviously, one, it's the structural growth that is in -- is the basis of our industry. We capitalize on strong end market drivers that are different to other industries, such as strong global air travel coming more and more also from the Asian, Middle East and South American and African side. Growing aircraft order backlog. So year after year, we have experienced and seen that despite, let's say, the growth in deliveries, which could be better, but which we see constantly. There is also a growing order backlog, which the OEMs have to manage to fulfill earlier or later. And of course, the ramp-up of OEMs, Boeing doing a good job as well as others. Second, there's our internal strength and growth pillars, vertical integration, the machine capabilities and low-cost asset setup that allows us to be competitive towards our customers and compared to their competition. Our industrialization strength, we are industrializing more than 3,000 parts per year and have built up inventive capacity and strength in that field to be able to respond very quickly to OEMs, but also other interested companies, material competence and others. And finally, as you know, the aerostructure industry is still very and highly fragmented because of the setup of qualifications and basically past history. So also there, there's a huge and tremendous potential to further integrate, let's say, the whole supply chain by both M&A consolidation, but also by taking over packages where we can offer to a customer, let's say, a one-stop shop versus competition who -- where the customer often has to deal with 3, 4, 5 parties and also their supply chain challenges, we can provide reliability as a one roof and one-stop shop company. Especially in the North American market, we see more and more possibilities in that regard with our past acquisitions and our current setup. So yes, overall, these pillars will allow Montana Aerospace to use the growth in the industry and in the market, but also to use our own strength to grow and continue to grow above the market. When we come back to guidance, I'd like to reiterate the figures we gave in the annual earnings call a month ago. So nothing has changed neither with the management decision nor with the continuing discussions in the Middle East, which one day are better than the other and fortunately positive today. We still see, let's say, 2026 sales of more than EUR 1 billion. We also see an EBITDA of more than EUR 185 million, which results in a strong 18% EBITDA group margin and even more so in Aerostructure segment. And on the cash conversion, we have seen some unclarity and confusion what is included and what is not. So we have clarified that in this guidance. So our cash conversion, which we see around 50% for the year and more in the years to follow, comes from a basis of using basically an operating cash flow, including the working capital adjustments, of course, minus our maintenance CapEx that we see in the range of roughly EUR 50 million. And if you look at our CapEx spend in quarter 1 of around EUR 11 million, that's very much in line with where we stand. But then, of course, on top, there could come expansion CapEx, which we diligently consider at the moment, certain projects as well as, of course, M&A transaction, and those are excluded in the cash conversion guidance, just to be clear. And also on the 2027 numbers, we keep a very positive view and momentum. And we don't see any change in the positive outlook that we have for that year and for the year '27 and the years to come. If we, therefore, close the presentation and before we come to our Q&A, I'd like to one more time reiterate our strong growth potential in Montana Aerospace and our results guidance as well as the way we can create value for our shareholders. The main points that stand behind this is our high visibility of sales and orders and our big order backlog for the next years ahead. A very strong margin profile achieved through operational excellence, fixed cost leverage and our low-cost asset base, a strong cash flow profile following a period of growth investments, but now, let's say, more and more paying off and significant internal and external opportunities to create more shareholder value in the future. With that, I thank you for listening, and we can come to the M&A -- the Q&A part.

[Operator Instructions] Our first question comes from George Mcwhirter from Berenberg.

I've got 2, please. Firstly, on the guidance on cash flow. In terms of what you expect for net cash at the end of this year, if I take the 50% cash conversion and also assume the majority of the asset proceeds this year, is it fair to assume that you end up with a net cash position in the higher double-digit euro million range?

Yes. So let me answer that. Yes, we see -- we clearly see a net cash position in the higher double-digit range. Of course, it depends on any strategic CapEx or M&A decisions that we make. But without those, clearly, yes.

That's great. The second one was on the reason for the raise of the cash conversion target for next year. Is it mainly due to improved profitability? Or is there anything else to think about in terms of working capital or CapEx?

No, I think -- I mean, we are confident with the figures. And since we have experienced a lot of discussions with investors and analysts over the last couple of weeks, we were just -- we wanted to give more clarity and more guidance in that regard. And it's basically just to make public the discussions we had with -- yes, all of you.

The next question comes from Josh Sullivan from JonesTrading.

Just wanted to zero in on the market share gains you highlighted in the prepared remarks. Where are you being most successful taking share or what product line specifically?

Yes. I mean, for sure, in the areas where we have vertical integration as well as with the Vietnam low-cost setup. So in Vietnam, we have qualified, let's say, the second OEM in the meantime. So a lot of possibilities are coming from that side, but also from many other fields. So definitely there, we see a good momentum from just being extremely competitive in that regard, but as well as the integration model. So in our Romanian side, but also in the U.S. setup, especially with the acquisition of ASCO in the past where we have machining and surface treatment capabilities and also the extrusion side, -- we see more and more that the OEMs value this setup and that more and more packages are coming to us for discussion. And yes, basically, with our setup and the fast speed of industrialization possibilities that OEMs often need when they see some problems arising, we have this momentum of market share gain and getting additional packages without losing others.

And if I take that, and I appreciate your '27 guidance takes a discount to the OEM's airframe production forecast, which is prudent. However, if we think of the market share gains you're making here as well as the eventual restocking needs across the industry, how can we frame Montana's growth rate just relative to what the actual airframes that do come out of the OEMs over the next 2 years?

Well, I mean, that -- we have, of course, a certain market share growth also expected in those figures, but with very conservative build rates, as I said. But to compare and to say what is coming from exactly which direction for that is a bit too early at this point in time. I mean, if we gain, let's say, more packages than is currently on the horizon or that are already signed and can industrialize them faster, then, of course, the guidance could -- or we could outperform the guidance clearly. And of course, also then if the OEMs perform better than they do, then that would change the respective numbers and the relative, let's say, growth on both of these pillars.

And then just one last one on M&A. Given the leadership transition here, and I understand that you're trying to keep some continuity across the company, but what is your perspective on the current M&A environment, looking at either large assets or small assets? Just want to hear your thoughts.

Yes. I mean I would say we have a reasonable size as a target from a company perspective. So somewhere in the range of companies with EUR 100 million to EUR 300 million in sales in that range. So that's the target range that we look at. And to go out of that doesn't make much sense from, let's say, not overtaking ourselves and on the other side, not purchasing very small assets unless they are extremely strategic. So that's the target range. And I think the change in management has not a major impact on the M&A pipeline nor whether we, let's say, pursue one of them. It's mostly based on whether they make strategic sense for us, whether we see a benefit to further strengthen the partnership with the OEMs and therefore, provide value for both sides with such an acquisition. And on top, let's say, we are evaluating for every M&A path, also internal investments that could fulfill a similar purpose.

[Operator Instructions] The next question comes from Olfa Taamallah from ODDO BHF.

I may have 2 questions. First, I would like to follow up on the market share question. Wondering if you could specify how the scale within the revenues, I mean, in terms of organic revenues and maybe on which programs you have been successful so far and whether it is temporary or not? Maybe if also you can give us an idea about potential market gains in coming years. And the second question is related to the potential launch of share buyback. What may trigger such a decision? And when should we expect the move?

Yes. So on the first question of market share, we see momentum across all platforms basically. Of course, there are in tendency quite a lot of possibilities on the short-haul planes because the delivery targets for Airbus and Boeing on A220, A320, 737, yes, they are very ambitious. So they need reliable partners, and therefore, there are a lot of good possibilities for us with our integrated setup to, let's say, to win packages there. But the same is true for the wide-body planes. So basically across all platforms. From the share buyback perspective, yes, I mean, we see with the recent changes, macroeconomic environment, but also, let's say, some miss or some confusion, I would say, in the spin-off of the Energy segment, the management changes that compared to the underlying basics of Montana Aerospace, the stock market price is on the lower end. And therefore, that could prove attractive also for our Board of Directors to initiate such program. And from a time perspective, I mean, I would see that not too long out in the next weeks.

The next question comes from Christian Bader from Zürcher Kantonalbank.

A couple of questions from me. So the first one being in terms of the revenues in the first quarter, can you please comment whether you gained or whether your business grew with all customers, at least in constant currency terms or have you delivered a bit less to one of the big OEMs or one of the other smaller customers?

Yes. I mean, in general, let's say, there is, of course, more growth from the one OEM side than the other for the moment. As you have also seen, I think, by their delivery rates, but that doesn't translate one-to-one to our deliveries. So that's not related. Last year, however, there was a strong momentum in Q1, especially on one of the short-haul platforms. So there, we have experienced last year very strong sales, which are then more constant rather than strong growth compared to the other platforms. But I would say across a variety of platforms, also wins on additional smaller companies or smaller OEMs, different fields, yes.

Okay. And did you grow the satellite business?

In Q1 -- we did, yes.

Okay. All right. And my next question is relating to FX hedging. From my memory, you have been hedging your U.S. dollar exposure in the past. So I was wondering, did you do that also in the first quarter and which impact did it have on your results?

Yes. So we also did that in the first quarter of 2026. Sales are, of course, unhedged. So the hedge benefit comes in between EBITDA and financial results. So let's say, the full impact you see in the net result. But basically, sales are unhedged and therefore, on the sales side, you see the impact of a change in the FX.

Okay. But did you benefit from hedging in terms of -- for your first quarter results?

Yes. I mean so as we have discussed in our guidance and in, let's say, in the detailed ad hoc, we have an FX rate of 1.18, 1.19 assumed for our guidance. We have hedged below that. But of course, it's not -- so in terms of -- compared to the guidance, we have benefited in Q1, yes. Compared to the spot rate, there were a lot of ups and downs. So it was -- the average FX rate was 1.17. So in that regard, it was quite neutral for Q1.

Okay. All right. And then my last question relates to the tax rate, which has been extremely low in the first quarter. Can you maybe provide some guidance what to expect for the full year, please?

I mean for the full year, we continue our guidance in that regard. But yes, for Q1, to be honest, yes, that's, of course, also some reflections that refer to the prior year, some -- especially on the North American side, you typically have final tax results. Yes, but there's -- I think there's something especially in the tax rate for Q1.

All right. So you can't give us any guidance for what we should model for the full year in terms of tax rate?

I mean for the full year, we again see a low double-digit euro rate for taxes. Yes. So I think that's the guidance we can give there.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Patrick Maurer for any closing remarks.

Yes. So thank you, everyone, for listening into the Q1 earnings call. One more time to reiterate, we believe the company is structurally and organizationally very well set up to deliver on our guidance and potentially above that. And we look forward to talking to you on a personal note or then again in the half year earnings call. Thank you very much.

Thank you.

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