Seco S.p.A. ($IOT)

Good afternoon, everyone, and thank you very much for joining us today for what should be another exciting earnings call. As usual, our CEO, Max, will share with you a detailed update on our strategy as well as some trends on our business. And before that, Lorenzo, our CFO, will cover the key items of our financial results. But first, let me start with a snapshot of our full year numbers. While some of these figures have already been shared with the market back in February, we want to emphasize that this is now the sixth time in a row where we delivered top line and gross margin numbers ahead of our guidance. We will deep dive in more detail in each of these KPIs in a second, but the headline message is clear. SECO business model delivers strong top-line growth and sector-leading profitability even in what remains a complex environment. This year gone by has been pivotal for our business, and you have seen us active on many fronts, including deepening our technology partnership with some global partners like Qualcomm, Intel, Raspberry Pi, and Axelera, winning significant new business such as the contract for the U.S. military with Boeing, which Max will discuss in more details later on and obviously, a succession of new offerings, both on the hardware and Clea front, making Seco every day more relevant as a key partner in industrial Edge to AI solutions. This slide is a 1-page summary of today's presentation key highlights, so I won't spend much time covering it. But just note that the strong performance on both top-line and gross margin was echoed further down the P&L with an adjusted EBITDA margin above 20% for the year and on our balance sheet as well, with a net-leverage ratio dropping back below 1x. It's also worth mentioning that the momentum we have enjoyed in 2025 created strong foundations for another year of profitable growth in 2026. And while we acknowledge the fact that this is a tough market out there, we have the strategy, the global footprint and the offering to continue capturing market share and delivering value to our stakeholders. So now let me hand over to Lorenzo, who will go through our full-year numbers in more details.

Thank you, Clarence, and good afternoon to all. Firstly, I would say that 2025 was a great financial year for the Group. We were able to combine growth and profitability together with cash generation and decreasing Net Working Capital. This is a significant combined achievement in a single year. Now having a look at the Key Performance Indicator of our 2025 financial. Net Sales grew close to double-digit at constant FX. Sales was about EUR 201 million, offsetting the important depreciation of U.S. dollar registered in 2025. We have an especially great result in Q4 '25 with a plus-16 percentage growth rate quarter-on-quarter. About gross profit margin, we closed the year with a robust 53.6 percentage, a 90-basis-points increase compared to 2024. The trend was driven by a positive sales-mix as well as a good purchasing performance on electronic components. At EBITDA level, we came back in fiscal year 2025 to a level of excellence with more than EUR 40 million in absolute terms and above 20% in relative terms. This important result is driven by operating leverage on a lower OpEx base by EUR 3 million, mainly thanks to a reduction in manufacturing costs. Good results in adjusted net income as well, at 6.6 percentage of Net Sales, driven mainly by operating profitability. Despite the strong increase of Earnings Before Taxes, the Group recorded almost stable income taxes, driven also by the use in SECO S.p.A. of the Italian tax consolidation tool and by the important activation in 2025 of Patent Box over software developments. Commenting the sales breakdown by area, the key geographic areas grew double-digit year-on-year. The only exception is Germany featured by a difficult economics and industrial context, which registered a double-digit decrease. However, please consider that Q4 '25 versus Q4 '24 sales in the German-speaking area recorded a growth again, showing some positive sign for our future prospects. Having a look to the end-market, most of our key vertical experienced a double-digit growth, in particular, industrial and medical. The exception is vending, impacted by the destocking matter primarily on the German market. Passing to the adjusted EBITDA performance in fiscal year 2025, we recorded a 20.3 percentage in profitability, about plus-5 percentage points compared to 2024. The main driver of this result is the operating leverage effect of a significant higher sales on a decreasing OpEx base. OpEx, excluding non-recurring items, decreased about EUR 3 million in fiscal year '25, driven primarily by the reduction in the use of external manufacturers, privileging in-house production. As per non-recurring adjustment, they are almost all represented by stock option actuarial value. Finally, a word on our Net Financial Position. In fiscal year 2025, the Group had almost EUR 9 million of cash generation in a context of significant volume expansion. This result excludes the extraordinary CapEx on the new production sites. In particular, we were able to further decrease Inventory and generate Cash Flow in a growing business context, not easy. On financial side, the Group reached a leverage ratio below 1x EBITDA, closing our deleverage trend after the Garz & Fricke acquisition in 2021. Thank you very much for your attention. I give the floor back to Max to continue with our presentation.

So many thanks, Lorenzo. Now let me take some time to share some update on our business activity and recent progress. As you know, we are moving through a fast-challenging environment, so in a very complex market, but we continue to see strong opportunities as demand for Edge AI and smart-embedded solution is at all-time high and still growing significantly. This obviously support a positive outlook for the next quarter, as we remain committed to deliver value to our customers and to strength our long-term business partnership and foundation. It's important also to mention that we reached a record level of client interaction during the Embedded World, which is one of the most important exhibition in our sector. I think this year, we received more than 110 customers and generated over 260 qualified leads that we are working on after the exhibition. These number are more than double compared to the previous year. This is a confirmation of the growing interest around our product and our solution. During the Embedded World, we presented AI-powered HMI, brand-new advanced industrial automation solution, and cutting-edge AI demonstration with some of our key partners like Intel, MediaTek, NXP and Qualcomm. I would say the feedback that we received both quantity and quality of the feedback was really amazing, and I think the market is fully recognized our technology leadership. And I think this is very positive for the continue of this year and also beyond. When we talk about our industries and in this slide, we try to represent to you which are the key vertical and end-to-end solution that we are ready to offer to the market. As you can see, from Industrial Automation to Energy, Medical, and Defense, we provide our clients with a complete set of Edge AI capability. Customers are asking for scalable solution, high-performance vision systems, and intelligent computing for any new generation of machine and robots. And I think our Portfolio is covering this request extremely well. In the recent month, specifically, we saw particular interest in the Aerospace & Defense sectors with a lot of new business opportunity and design-wins that will drive a strong growth starting from the '27. These types of customers are asking for 10 years or more in terms of contract durations. So, it's going to start in 2027, but the duration of this growth will be very long. This come up on top of new vertical that like Robotics, for example, or Autonomous Systems, Drone, all these types of technology are new. And this represent a new vertical where SECO is entering right now, opening a lot of doors for further increase our capability to accelerate in the future our growth-path. I think this is very important, and we are continuing to support customers to innovation, especially launching new hardware as well as new Clea functionality to enable them. And we can see our road map in this slide where -- as you can see both on the HMI, on the modular, and on the Embedded PC, we have a lot of new products that are out right now and will be out very soon. But I think we are building them with a lot of silicon-partner and this is driving us additional demand for product and new customers that are coming asking for modular-vision, for box, board, high-complexity application in Industrial, Health Care and Automation. This pipeline give us a solid foundation for future growth, even in a demanding market environment. It also allows customers to transition more smoothly from Edge Computing to full Edge AI system. And I think one of the most recent win illustrate the value of this capability. In fact, as you know, recently, we announced a significant win with Boeing for a control device that operate on the U.S. Navy environment. This project in cooperation with Boeing confirm our ability to deliver high-end solution in extremely challenging environment. The device meet stringent requirement, operates under harsh environment and offer a simple and safe user interface for remote control. I think this win is very important because demonstrate our hardware and software capability and how we can combine together a very strong, mission-critical product. I think talking about this deal, for example, is a deal where we receive a contract for over 25 years of production. So you can imagine how long is the product life-cycle in the Defense & Aerospace market. So I think, now is the time to talk also more about the software because the software is becoming more relevant, and this is driven by the AI. As you know, AI is transforming basically the Industrial Sector. And any customer is asking or will ask solution to deliver and deploy AI directly on the device. And this is where our software platform Clea is becoming from a nice-to-have, which was since now in a must to have that is now on because with Clea, customers can train models, deploy them, and run them directly on the field device. This complete integration reduce the time-to-market of the customers and creating a lot of value for them. To deploy a model on a device with just 3 click, we have introduced and we presented it actually during the Embedded World on a very innovative solution, which is Clea Studio AI. Just to show to you how it works, this is a no-coding experience where you need to bring basically the model from our Application Hub, which is an App Store, take them and use them into the studio, it enables basically any person also without any specific technology background, to deploy the algorithm to see the workload working. And this is easy. This is fast, this is simple. And this is make it really available to everyone. And this is transforming ideas into practical AI-driven service that run on the device at the edge or in the cloud, based on the customers' choice. It is a key part of our strategy to continue to grow our Software Business. And thanks to Clea Studio AI, we can now simplify AI deployment, accelerate customer time-to-market reducing their initial investments. And I think these 3 pillars are what will drive Clea adoption further. So, with our Ecosystem, customers can now deploy optimize AI models in a minute across any kind of architecture. We provide a comprehensive toolkit, including advanced software containers, simple app, and details deployment guide. This reduce significantly the pre-works and accelerate experimentation in a computer vision and deep-learning models. The SECO Application Hub is a central element of our strategy because, thanks to it, we are creating an ecosystem of third party that, together with SECO, will offer to the customers a very end-to-end solution with a lot of use cases and a lot of verticalization software made application. Now, let me shift from products to operation because it's important also to have a look how we are strengthening our industrial infrastructure. We are very close to complete our building in Arezzo. This is 10 assembly line and production line with the implementation of Siemens OpCenter. We are exchanging traceability, efficiency, and quality. This facility is also designed to met key certification standard across Defense, Transportation, and Medical, and other regulated industries. I think thanks to these investments, we will support internally up to 50% of further growth in our revenue. And it will -- together with the investments that we did in Hamburg with a new anechoic chamber, as well as in Hangzhou in China, where we expanded significantly our production also over there is representing a very solid industrial infrastructure to support our future growth potential. So now, as you know, we are in a world very challenged. A lot of things are happening. Specifically in our sector, we are facing something on the Memory that it never happened before. In fact, we -- driven by big demand of Data Center for AI-application, price of the Memory. The Memory are really booming in the last 6 months. Anyway, we was able to face such a problem with a very good strong [indiscernible] as well as thanks to our capability to basically negotiate with customers, we was able to secure a good compromise for the margin to protect our margin during the course of '26 and '27. Second, we are acquiring a lot of memories -- we are now covering almost 92%, 93% of the entire demand in '26. We are already covering half of the demand also in the '27 because we really think that this market could be a market that affected by allocation soon. And so we are securing our supply-chain and the supply-chain of our customers. I think this is another point where we are creating value for the customers. I think it's important also to mention that, thanks to our job, we will protect our Gross Profit Margin along the entire year. I want to -- also to anticipate that the Q1 as well as the Q4 '25 has been -- will be slightly affected by this impact. But I think progressively, it will be recovered significantly well, and we will see it improving during the course of the -- already the second quarter and the second half of the '26. I'm really happy to see that we started the year very well. In fact, we record an Incoming Backlog, a very strong in February. It was basically a record, all-time record in our history, over EUR 30 million of order in a single month. This has continued also in March. So the trend looks solid. This reflects an increase in customer activity and provide a better visibility for the coming quarter, confirming that the demand for our Edge Solution is accelerating. We remain mindful and market uncertainty, yes, but the order momentum is definitely a positive sign for our top-line performance. With this trend in mind, let me share our outlook for the first quarter of '26. We think we can stay close to EUR 50 million in the first quarter of '26. I think this guidance reflects both optimism and caution. And I think it's important also to have in mind that together with these good results, we see strong customer interest for all the new product. Our pipeline is very, very high. So a lot of opportunity in a lot of different vertical and also the KPI that we are monitoring are showing definitely a very good momentum. I hope this presentation has addressed all the key point, and I want to thank you all for the attention. And now we can open the Q&A section. Thank you very much to all.

[Operator Instructions] First question today comes from Marco Vitale.

Marco from Mediobanca. Two questions from my side. The first one is, say, a clarification on the Outlook. We noted that a progressive acceleration in organic growth throughout 2025, and you also mentioned a very strong pipeline and backlog as of February. When we're looking at the Outlook for, say, the first quarter, you are guiding for mid-single-digit revenue growth that implies a sort of deceleration compared to the pace that you recorded in the second part of 2025. So the question is whether is this, say, Quarterly Trend affected by some, say, specific factors? Or what should be the pace for the following quarters, if you see an acceleration or basically, you say want to adopt a more cautious view on your growth Outlook, also mindful of the fact that Consensus is currently projecting a 15% growth for 2026. The second question is on profitability. We noted that in Q4, there's been, say, a couple of items in terms of OpEx and Gross Profit Margin that, say, translated to lower profitability compared to Q3. And previously, you were mentioning also some noise due to, say, Gross Profit Margin for what concern the cost of Memory, and so on and so forth. So, the question is whether you see room for improving margins in 2026 in a context of growing volumes? Last question is on Working Capital and probably on Cash Generation that was very strong and better-than-expected. What have been the drivers for such, say, efficiency in terms of especially Inventories? And do you expect this, say, Working Capital-on-sales incidence to be sustainable also for the coming quarters, or do you expect some volatility due to also the Supply Chain issues?

Thank you, Marco. So, let's start from the first question about the Revenue Growth. I think looking back in the '25, we posted in the first quarter -- quarter-on-quarter growth, proxy to zero last year in the first quarter, to arrive finally on a 16% growth in Q4 '25. So, I think this year, the trend will be similar. Luckily, we are starting with, as you said, something in between 5%, 6% of growth already in quarter-on-quarter, Q1. But based on the orders and on the pipeline, we see it progressively growing during the rest of the year. So we will have -- we are expecting to have a very good year in terms of growth. So that's the first question. So, second question is regarding profitability. I think in Q4, we discounted already a decrease on Gross Profit Margin driven by Memory. Memory costs are increasing. We do not have a magic wand, so we cannot simultaneously increase the price to the customers. We did it, but with a couple of quarters of delay. So therefore, we will see the impact on the margin continue, as I anticipated, in Q1, but will be fully neutralized starting from Q2 -- second quarter of this year. On the Free Cash Flow, yes, it was really good, I think, driven by 2 factors. One is decrease in Inventories. And second is we did a very good job on receivable. And that was basically Working Capital optimization, which is structural in our Business Model in a normal environment. So I would expect to see some impact about it from the Inventory, not actually too much, because we are well-balancing the extra Inventories that we are doing on Memory covered by pre-payment from customers. So, it will affect our Free Cash Flow, but not too much.

The next question today comes from Bharath Nagaraj.

I have a couple of questions. On the new Arezzo facility coming online in Q2, I think. Can you help us quantify the expected cost benefits that you could potentially see during the course of the year? Should we think about that at a Gross Profit level or further down? And then secondly, on Clea, 2026 was the year where several customers who were on trial previously were expected to go into mass production. Is that still on track? And what level of growth in Clea should we considering in 2026, and how much will be recurring?

Okay. So about the new Factory, we will see a clear benefit in terms of cost, not actually on the Gross Profit Margin, but below the gross profit margin at the OpEx level. We introduced in this factory a lot of robotization and automatization. So meaning that we can make more product with less person. This is the end of the story. Therefore, you will see in the second half of the year benefits in terms of incidence on the OpEx side. About Clea, I can confirm it. I can confirm that we are close to sign a significant -- a very significant multi-year agreement with Large Customers. It will drive a lot of recurring revenue. Apart from that, we have several customers where we are closing discussion entering into the Production Phase. We will see it progressively during the year, and I will be more precise, of course, at the mid of the year, while we will guide to the market with an Official Guidance, as always. Generally speaking, what I can tell you to you now is the adoption of Clea is going well. Discussions with customers are increasing based, as I told you before, especially on the AI-effect. So many customers are really interested now in deploy AI at the Edge, using this new technology to bring something new on their customer table. And therefore, we are facing a lot of inquiry and a lot of customers' interaction about these topics. It happened also during the Embedded World, where we collect a lot of demand around the Clea framework in general and Clea Studio AI specifically. So I think definitely during the '26, we will see this business growing for sure, at a different and much higher-growth rate compared with the Edge Computing one.

If I may do a quick follow-up. In terms of the new capacity that's coming online in Q2, how should we think about the utilization of that -- for this year? Is there -- is it going to be slightly at the lower-end compared to what where you normally are at? Or do you think that you have enough Demand Visibility for this year to be at like 70%, 80% that you normally are?

I think this new production capacity has been done not to cover the needs of the '26, but to cover the needs of the Company at least by the '28, '29. So therefore, we will be able to have a Production Capacity Utilization in the range of 60%, 65% -- so well below our average, which is now in the range of 80%, 85%, giving us a lot of room of improvements in terms of velocity and capability to capture the demand that, as I said before, still strong. And therefore, we did a good investment in my mind because we clearly anticipate well a strong trend that is coming this year and make ourselves ready in advance was a very good move in my mind. Thank you very much for your question.

The next question comes from Aleksandra Arsova.

Just a couple of follow-up questions. The first one is maybe on -- generally on the sentiment. You mentioned before that the very good Order Intake you had in February is also continuing into March. And so, I assume despite all the macro and geopolitical situation that is ongoing. So what do you think is the reason behind this very strong Order Intake also in March? Your clients believe that these macro and geopolitical situation is only temporary? Or maybe just a little bit of color of why do you see still this very strong sentiment on your clients' end? And the second one, again, you mentioned Order Intake more than EUR 30 million in February, but just can you give you an idea of the Total Backlog at the end of February or maybe March, just to track the evolution over time over the coming quarters?

Well, so let me cover the last one first, and maybe we can go on this slide, Clarence, thank you very much. So we are not communicating the Total Backlog, but just to give you the sense is also the Book-to-Bill. I think the Book-to-Bill is very well above 1 in, let me say, a record-high on the last 3 years. I think that could give you a clear indication about the trend. Referring back to your first question. I think what is happening is geopolitical tension in some way, opening a very good windows for SECO, which is a West-based company. This is important for a lot of customers here in Europe, as well as in the U.S. against our -- as you know, our main competition is based on Asia. And due to the tension and the geopolitical crisis around the world, I think many customers are becoming and considering more and more important to be West based partner to be a Taiwanese or Chinese one. So that is giving us definitely with customers that we was not able to serve before. So new customer as well as the demand is still strong from the existing customer because we are now facing a technology-transition in between, let me say, the old Embedded Technology and the new Edge AI solution, meaning that a lot of customers really need to have additional computational power at the Edge, meaning into their device. And therefore, they need to order new device instead to stay with the older one that cannot support this such of elaboration of models directly on the device. I think so the combination of those 2 driver is really making the market good for SECO, even if I cannot avoid to mention that this such of crisis into Mid East as well as Europe, Ukraine war is really something that is make our life challenge together with the Memory, it's a tough year, but we are navigating into it extremely well. Customers continue to push for New Product and for having a New Solution, which is good for our business, and let's continue it. Thank you very much.

Currently, we don't have any question in queue. So we will wait just a few moments to give everyone the opportunity to ask a question. As there are no questions in the queue, I will now hand back to the speakers for any final comments before bringing this Presentation to a close. Please go ahead.

Well, thank you very much to all for your attention. We will be around at the STAR Conference as well as with a European Roadshow in the next couple of weeks together with Clarence, so speak soon, see you soon.