R. STAHL AG (RSL2) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. My name is Holger Angrick, and I'm very excited to welcome you to the R. STAHL Earnings Call for the First Quarter of the Fiscal Year 2026. The results will be presented by the CEO, Dr. Claus Bischoff; and the Chief Commercial Officer, Tobias Popp. [Operator Instructions] We will record this earnings call, and you will find a recording later today on the R. STAHL web page in the IR section and also on our research hub. We are covering R. STAHL and I will supply a link to our comprehensive research in the chat box in a few moments. Thanks so much for joining this call, and I will now hand it over to Claus and Tobias. Gentlemen, it's all yours.

Good morning, ladies and gentlemen, also from our side. We warmly welcome you to our Q1 earnings call. My colleague, Tobias Popp.

Good morning.

And myself will guide you through the financial figures. And in the end of the call, we will give you an update about our future program, NEXUS. Let's start with the overview and the financials of Q1 2026. We are reporting a stable and solid quarter, which is really a good news, taking in consideration the geopolitical and macroeconomic challenges out there. Order intake came as planned on a level of EUR 77.2 million. Of course, this is below the all-time high of Q1 2025 but it's significantly above Q4 2025. Sales remained stable at EUR 73.4 million, which is quite exactly the level we had last year. Notable is that Asia Pacific region was very strong due to onetime projects. Due to hard work on cost optimization, we increased EBITDA pre by EUR 3 million, and we are now at a level of EUR 6.7 million. In parallel, net profit roses to breakeven. And, let's say, challenging news of today's call is that still free cash flow remained negative on the level of last year. This is mainly by expected after effect in our working capital. I come to this later. If we are looking on the income statement, as mentioned, we are better in profitability due to cost reductions. I really like to highlight here that our material ratio is now below 33%, which is, in my perspective, benchmark in the branch. And the team did here within the NEXUS program, a really good job to bring this on that level, and we continue. So having this said, cost of materials now down to EUR 25 million, and we also could decline our personnel costs significantly by roughly 10%. Mainly this decrease is driven by cost-cutting programs initiated in 2025 but also we see now upcoming effects of the future program NEXUS, especially in other personnel costs. On the other operating expenses, we are still high. This is something we have really to work on. Main reason is here that we still have a significant level of temporary workers that need to be addressed in the upcoming quarters. With the mentioned cost improvements, we are now in a positive EBIT, roughly around EUR 1.8 million. The financial result is a bit worse compared to last year due to a higher credit realization. At the end, EBITDA is at breakeven. We suffered a bit on the taxes because we had a significant project business in high-tax areas, which leads then also to a net profit at breakeven. Overall, as I mentioned, good news EBITDA pre is coming up significantly, and we are now above 9% in margins. As we mentioned already last call, the target for us midterm is to come above the 10%. Free cash flow, here, we see from the improved net profit that we could stabilize the amortization on the same level and also the other income so that the cash flow itself is now on a significant good level, EUR 4.6 million compared to EUR 1.6 million last year. This is up of 3%. Then we have the big hit in the working capital. We have here roughly EUR 7 million. Main reason for this is expected spillovers from 2025 because in 2025, we planned a much higher 2026 salary level. We did a good job on bringing down costs but we could not terminate all the orders we had out to our suppliers. And this is now the spillover we have to work on. Two key measures are in place. At the beginning of this year, we have now a corporate value stream responsible, which is carrying for plants, logistics and purchasing out of one hand. And the second is we are now have implemented a forecasting system that ensures that our working capital is aligned to the need of sales. Due to these key measures, we expect significantly down in the working capital in the upcoming quarter 2 and quarter 3. Cash flow from investing activities, we reduced. But with the hit I mentioned already on the working capital, we still see then the negative cash flow on the same level of last year. To compensate then this negative cash flow, we had to work with debt so that net debt is increased now by EUR 5 million, so that we are now roughly around EUR 40 million in net debt.

Sales remained stable. Asia Pacific, very strong. Generally spoken, we are still faced with a rather conservative investment behavior across all our industries and across the countries, the regions. mainly caused by exogenous factors like geopolitical uncertainty, conflicts and internal factors like market and cost positioning. On the internal ones, we are working with our NEXUS program proactively. In detail, Germany dropped quarter-by-quarter by 13.6%. The Central region dropped by 10.2%, Americas by 14.5%, Asia Pacific, on the other hand, had a significant positive peak due to the earlier mentioned project realizations, which was booked earlier in 2025. So overall, in consequence, the gross regional weighted sales remained stable at 73.4% (sic) [ EUR 73.4 million ], which is nearly the same level as we had in Q1 2025.

Moving to the strategy. Tobias and myself being in charge now for 4 months, did an amazing job to focus on shaping the strategy of R. STAHL. I was very happy getting with him a partner that has more than 30 years of experience in the company that could be linked with my experience, roughly 30 years in global industries so that we together can shape the future. And we were driven by our passion and our personal commitment to bring the company on the next level. We involved internal experts as well as excellences from outside, pushing the company forward and going for global excellence and future readiness for R. STAHL. Outcome of this work is the future program NEXUS. We shared already and introduced in our earnings call 2025. Nexus will guide our way from today being an expert for components becoming a solution provider for harsh environmental and explosion protection in 2030. Key element here is that a solution provider, we will then have the chance to multiple cash our valuable competence by selling standard products, by adding to our standard products automatization, combining them to solutions and facilitating then over the life cycle of the usage of our products by services. This multi-caching will allow us to reach a sales level of EUR 500 million in 2030. NEXUS is much more than a program. Nexus is our way into the future and to secure this way, it is a 3-stage execution. That means each of the 3 stages we will now share with you is self-consistent in terms of action fields and business contribution. We can ensure that we only go to the next step before we are solid on the stage before. So the following stage always then builds on the previous. The stage #1, you see here on the screen is foundation and stabilization. The key task of this stage is to ensure that the company comes to a level that we are profitable even on a conservative sales level that we see in those days. Over and above, we will prepare the company for the following transformation by making the structures ready for transformation, by developing capabilities and by setting the stage on the processes. The second stage will be the transformation and building. This is most dedicated to establish and facilitate our new market positioning as solution provider, multiple cashing our competencies. The heart of this market position will be a consequent focused portfolio on megatrends. Megatrends are customer needs that globally drive the market growth in our plan. Two examples, we see increasing needs for safety and regulations. And we see that in the harsh environmental, we see the push for fully automated operation becomes more and more critical. And these are significant chances we will address with our portfolio. Being a midsized company, it's important for us that we have a structure that allows us to work efficiently with such a broad portfolio on a global perspective. Therefore, we will need a decentralized organization with a clear responsibility local to local. To be then effective in working, we need a digital operating model. The digital operating model will allow us to scale the excellences and the synergies globally on one hand side. And on the other side, we will enable our regions to act local and local so that we are really addressing the local customer needs so that we can gain global market share in the regions. Already in the past, the company was working intensively on enjoying international and global market chances. If we point out here internationalization, it will mean much more. We go now to hunt and bring in global excellences, leaders, experts into the company, taking over really global responsibility so that we participate on global excellences for R. STAHL being a Waldenburg company. The technical and excellence is key of all what I mentioned. And here, we work significantly on combining our high-quality standard products with digitalization and adding then a new excellence area we call product realization. Here, the key element is, on one hand side, technology itself and products are important for market success. But what we underestimated in the past, it's also a must that we bring the products on time, on quality, on specification to our customers globally. And to address this, we established the global value stream organization. I point it out in details later. Having now these 2 stages in place, the third one will be then the growth and scaling. That means all key elements we have then prepared. We can then scale by a footprint extension and by further market penetration, more and more bringing our value stream to a fully automated operation. Latest, at that point, we have also the excellence to address inorganic growth. Of course, if there is a chance on our way before, we will negotiate. I'm more than happy that we really kickstarted this program already in Q1. The teams did an amazing job to already receive key milestones and key achievements. Tobias and myself are happy to share today in the call already some highlights. First of all, we achieved final financial stabilization, which gives us the freedom to act smoothly in the credit agreements. Key elements that we realized is now a working capital management. We consequently realized quick savings also in other personnel cost spendings, and we terminated our membership in Arbeitgeberverband Sudwestmetall to be more flexible in our cost adjustments, negotiating with the workers' council here on site. Last but not least, we adjusted the guidance for 2026, taking consideration the challenges that are out there. Having this stabilization elements in place, we could then free up our mind to work on our program NEXUS that will be a solid base for our company transformation with the key elements I shared in the slide before and with a transformation concept where we work forward on practice that we means the key element of our concept we will introduce on daily work. And we will ensure that overall, this is a transformation from us to us. That means we, together with the leadership team and all employees of R. STAHL take the responsibility to make NEXUS happen. First and very important implementation status of NEXUS was the establishment of [indiscernible] with our social partners. And in this business, we tied in objective external institutes that negotiated and valued with us the key needs of transformation and the key action field of transformation that we got here alignment and also together with the Supervisory Board is a very important cornerstone that we achieved because this is the aligned base now for further negotiation with the workers' council and the social partners to further establish NEXUS and to realize the cost savings. The key of our future success is that we significantly improve and bring into a future manner the way how we work, our competencies and capabilities and our leadership. And leadership means also most prominent, fast and solid decision-making. Therefore, Tobias and myself established already in the structure now 2 boards. The first one is a governance board. This is exactly the board where we handle the transformation by us, for us, as I mentioned, together with the employees of the company. And the second board is a business execution. Here, we ensure that we get fast and market-relevant decisions to further improve our excellence and our speed to market. With the key elements in terms of board, we have then the chance to further dig in and to work out what is a streamlined corporated structure for the company. And this structure will streamline our hierarchies and our functional setting. We will significantly reduce our hierarchies, and we will ensure that the salary level is rightsized and adjusted to the work and the responsibility of each employee. With having this concept now fully developed, we see a cost down potential by EUR 5 million in this year compared to plan and EUR 20 million by end of 2027, then continuously per year. We need here to clearly lay out that these potentials are confirmed by experts. So they are optimized there, but in subject to the negotiation with our social partners. And I'm more than happy that we are now through the phase of workers' council elections. And I'm more than happy that we will see in close period of time, strong partners to be available on the social partners that we can negotiate and shape the future of the company together. Let me point out the value stream again. I mentioned that already but in my opinion, this is a very important cornerstone for the excellence of the company. With Stefan Lang, Senior Vice President now for Value stream, we could hire beginning of this year, a very experienced expert who is now optimizing the operation of plants globally, logistics and purchasing out of one hand with one leadership team. So from the R&D side and from the sales side, we have one single person and one single organization of contact to make product realization successfully and efficient. This team already created a forecasting team, a forecasting tool that now ensures that the value stream with each element is aligned to the market needs. And therefore, we get a much stricter, more flexible handling of our working capital. This value stream organization will be a key element to bring down our working capital and to improve our cash reliability.

Thank you, Claus. Talking about portfolio excellence. We talked earlier about that an independent service company will be a major building block on our NEXUS way forward. And the concept for that company is written in Q1. So we are good to go there. The partner -- we have as well established a partnership to develop the first smart data kit. I was mentioning earlier that we are approaching to extend our network in order to shortcut the one or the other learning curve. And then we have the involvement of defining. So we are heavily involved to define a new automation architecture. While we are product-wise independent, that fits perfectly good in our way forward. So in quarter 4, you can expect the first innovation corners. So talking about further internationalization. So the first international leaders are brought in our top management, that is the make or break in order to go more international and to bring as well an outside in view in our management. Then we have corporate R&D activities in between the plants in order to really internationalize more on the R&D side. And then we brought as well the first key responsibilities abroad. In that case, the commodity purchasing takes part in India. We have as well founded a new service center in Tunisia that will speed up our IT activities there, and that will first -- will be the first steps to utilize our global excellence. The digital operating model is a really essential key on our way forward, and we did a lot of work in quarter 1. So for instance, we optimize our end-to-end digitalization. We had the first IE/AI applications defined and piloted, and we improved systematically our master data because the master data will be essential for all what we do around digitalization. We will, of course, follow up on the digital twin journey. This is a really good approach way forward. We presented at this time several spin-offs of it. So all in all, we are getting much more digital in line with our future business model. As you can see, we already had a lot of things on the plate and happened in quarter 1. And here's a quick preview what's coming next. That means that will be the major points we are working on quarter 2 and show you later on the results on those. First of all, the execution of the negotiations with the worker council will take place. The election we heard are up and running, so negotiations to resume quickly. Target is to agree and to improve finance stability and performance, which helps our company framework-wise. So make or break is that to improve our financial stability. Talking about Sales Excellence 3.0, this is the next level of sales operation, which is mandatory in order to get more international. This has a lot to do with efficiency using AI, for instance, using more digital data connections outside in and inside out. This is as well the establishment of a so-called market management, which will connect the outside world to the inside world in order to bring the market more in the company. And we will, of course, approach additional hunting areas in untapped areas close by. And we will penetrate the much deeper the market as we did before, showing our new things coming out of our first technologies. All in all, it will help us definitely to achieve our growth targets. So the ACR strategy update as a third outlook, this has a lot to do with the refinement of our ACR strategy. This is all about finding the right priorities and going for those, defining key action fields for growth markets and establish as well a strong internal link to those markets because we need to fulfill the promises we make at the front end in our internal supplies. This is the key in order to get more out of the market. So focus, focus, focus is the next wave for ACR.

So the important message we wanted to share with you is we kick started now NEXUS, our way into the future. And the first results are already there. And also, it's clear that a lot of challenges are still in front of us. This is not a home run. This will be hard work but also clear stating to all our stakeholders but even more important to our employees. NEXUS with the milestones, with the key action fields has all for us ready so that we together can shape the future. It will be hard work, sure. But Tobias and myself are absolutely convinced even if we see the harsh world outside with geopolitics, macroeconomic effects. With NEXUS, we have our future in our hands, and we can make it happen by hard working together and working together more efficient and more successfully than others. Tobias and I started today to share also in this call step-by-step the results that are coming up. And also, we gave you an outlook what we are working on now in Q2. We will continue this way and also bring you with us that you share our journey in the future and can enjoy quarter-by-quarter the outcome that we generate and our proceedings on the way forward of R. STAHL into the future. Also, we like to invite you for our annual meeting, which will take place 16th of June, and Tobias and myself will have a chance to share more details with you about the program and about the proceedings. To frame up today's call, let's have an outlook on our guidance for 2026. With the hard work and the clear direction of our future program NEXUS. We, as R. STAHL confirm our guidance for the fiscal year 2026 as shared in the earnings call 2025, even if the geopolitics since then get worse. And that means in detail, we still go for sales between EUR 285 million to EUR 300 million. EBITDA pre, we saw already that we are good in our way. So we confirm targets between EUR 22 million and EUR 27 million. Free cash flow, this is a key area that we need to work on, especially with our value stream organization, but we confirm here that end of the year, we see a balanced cash flow -- free cash flow. Equity ratio, we go for a slight decrease. And again, we confirm this, taking consideration the risks we see in geopolitics and general economic development. So we are at the end now of our presentation. And Tobias and myself, we are now open for your questions.

Thanks so much, Claus and Tobias, not only for your way of looking back on the just past but also on your detailed look into the future. We do have a few questions already. In case anybody else would like to pose any additional questions, feel free to use our chat box and enter them. Let me begin with the first couple of questions that are looking back, starting with the top line, there was one question regarding your growth that you've seen in Asia. At some point, you mentioned that they were onetime projects in Asia. Can you be more specific? And do you expect more projects in Asia to come in this growth rate to continue going forward?

So the project we've been referring to was mainly that UPS job, what we presented last year that was booked in '25 and executed mainly in '26, early '26, as shown. And this is generally a good indication on the change we will have in Asia. So we've been there really mainly opportunistic in order to learn the market, in order to get a kind of idea on the landscape and on the heat map. And now we do that tactic, strategic and step-by-step in order to get more business out of those markets.

On the other hand, America was doing -- or the Americas were doing a little more on the soft side. What are you doing to turn this around and to maybe increase momentum there again?

Yes. You're right. We see that U.S., also saying North America is softening. And the challenge is here geopolitics. So we have still a value chain that is coming from Europe, we're importing to America, and then we're just finishing our goods that is the current status. And with the new organization, I mentioned the value stream organization, we are working on optimizing this value stream. That means bringing more value adding local to local. And by doing so, we are then not longer have the challenge of this taxes that are there, and we are much faster in the execution to customer, which is a significant competition aspect in U.S.

Let's move further down in the P&L for the first quarter. Looking at your profitability, EBITDA before special items improved quite significantly from 5% to 9.2% in the first quarter. Main driver here were lower material expenses and personnel reductions. How much of this improvement would you rate as structural rather than temporary?

What we see so far is structural, but it's, as I mentioned, an outcome of the cost-cutting program 2025. So it's structural on the personnel level, what was not addressed in 2025 is really, let's say, also working on the organization itself. So to make a move forward to leaner organization and to streamline the hierarchies. And this is something we address now within NEXUS, and this is something, as I mentioned, where we see huge potential to increase efficiency. But taking in consideration that this is a major step, this will also need intensive negotiations with our social partners.

Thank you. Let's continue with the EBITDA. The EBITDA before special items and the reported EBITDA, the difference between those 2 was rather small in the first quarter at only EUR 0.3 million. Should we assume that special items will remain limited over the coming quarters? Or should we expect higher restructuring on the NEXUS related costs in the fiscal year?

This most likely depends how we can work on our personnel cost structure. moving forward and especially how fast we can move forward in the negotiation with our social partners. This is the key element there.

And another question that kind of addresses the same issue. If the gap between pre-special items and post special items remains rather small, one person was wondering if it makes sense to disrupt the special items, EBITDA, the EBITDA pre. But I guess that's something that you can consider going forward. I have one more question. And before I get to this to everybody who's attending this call, if you have questions, please feel more than welcome to enter them into the chat. We do have some more time to address additional questions. The last question that I presently have is you aim to increase your international footprint and technical expertise. what end markets technologies are you targeting specifically? And regarding your -- and you've already talked a little bit about the sales offensive in Europe, Central Europe and Asia, but maybe you can elaborate a little bit more in depth going forward.

Tobias and myself aligned in our work on Nexus that we need to be focused in our internationalization. We are still a small company. There are huge potential on the market and our side, no doubt. But to be successful in terms of effectiveness and efficiency, we aligned together that we really need focus. And there, we said the most promising region from market perspective but also from our today's position is Asia. And therefore, also, we announced already that we now continue to build a new plant in India, which will be the hub for Asia. And we're then now sitting with the team and Tobias will give you more details with the team to work on a next-level Asia strategy that we will bring up in one of the next calls. But what I said will not mean that the rest of the world, we take out of our scope. We will especially also work in North America to, let's say, increase our local to local footprint and also to come here to a very focused growth strategy. But relating to the questions about priority, international Asia first, and second step will be you U.S. by [indiscernible] approach, and Tobias will give more details.

Yes. So basically, we mentioned that earlier, it's about how we position ourselves on the markets. And there, we're talking roughly, and this is not black and white, 2 verticals. The one is more the infrastructure related. And there, we will present ourselves as a one-stop shop. That means you can get everything around explosion -- electrical explosion protection, including services, as we mentioned before. And the other pillar, the other vertical is then more the process-related one where we can highly differentiate, where we have our solution competence in the back and stuff like that. And those positions, we will place on the hotspots we are approaching in Asia.

Thank you so much. I do have one more question, which is focusing on NEXUS and the focus on efficiency and operational performance. If you were an investor, which concrete KPIs would you track over the next 2 or 4 quarters to assess whether Nexus is working, especially regarding working capital, free cash flow and order conversion?

I would recommend we need to follow up on the working capital so that we see here the improvement that we announced here, especially in the area of bringing, let's say, our stocks down. So with the measures we have in place, we need to be much better in those. This would be number one. And secondly, we, of course, need to see that the improvements we saw so far in EBITDA pre continues to go all the way up. So we know that the improvements we see in the moment are to a significant part driven by the measures already decided 2025. Now we need to show that with the NEXUS, EBITDA pre is also fueled by Nexus. So questions, recommendation to investor, I would have a focus on 2 EBITDA pre and working capital.

Thank you so much. I see that somebody is still typing. There might be an additional question coming up. I'll just bear with you for one second and see if we're going to answer that. In Q1, the book-to-bill ratio was slightly above 1 order intake, EUR 77 million; sales, EUR 73 million. How confident are you that this positive momentum can be sustained through 2026? And where do you see the full year ratio setting?

So talking about the order intake, we are confident looking at the pipeline. So this is robust. Of course, on the short term, that is in relation to the uncertainty in the geopolitics and in the markets. But from that point of view, the second quarter, I'm positive there. And the sales is always running behind so far at the end of the day, the same conclusion there.

Thank you. I think this was the last question. At least I don't see any additional ones. Wait a second, dramatic entrance. There is one more question, which reads, do you also expect special opportunities in the Middle East in the reconstruction of oil and LNG infrastructure?

Yes, we do. There is -- will be some MRO business coming up shortly. This is always the flip side of such crisis, nobody wants, but we will definitely have there some MRO business we can address approach and convert into orders.

Great. I think we're done with the questions. Only thing left for me to say -- next to the final remarks is thanks a lot to you, Claus and Tobias for the deep insights that you've shared with us. Thanks to everybody who joined this call and asked very interesting questions. You will find a recording of this call, as previously mentioned later today on the IR page of R. STAHL and also on Research Hub. We will also send you a brief questionnaire, which we would love for you to fill out so that we can give feedback on this call. To the company, if you have any additional questions, please feel free to reach out to the IR department of R. STAHL or also to our analysts. And before we end this call, I do have to show a few more slides that are in the appendix of this presentation. So in case you look at it later, you can find additional insights. And please pay close attention to the disclaimer on Page 31. Thank you so much to everybody who joined, and have a great day. Thank you.

Great day. Thank you for your attention.

Thank you very much. Bye-bye.