SMAG Mobile Antenna Masts AG (1SMA) Earnings Call Transcript & Summary

Hello, and a warm welcome to the H1 2026 Earnings Call of the SMAG Mobile Antenna Masts AG. Before we begin with the presentation, we have prepared an introduction video for you. [Presentation]

Thank you very much for your attention. I am now pleased to welcome SMAG's CEO, Ulrich Feindt, who will guide us through the presentation shortly, after which we will move on to the Q&A session. And with that, I am handing over to you, Mr. Feindt.

Yes. Thank you very much, and a warm welcome also from the Management Board to our investors for the presentation of the first half of 2026, which is almost 2.5 months after our IPO. And I'm glad to also introduce next to me, our COO, Kai Oppermann.

Warm welcome from my side as well.

For all the investors, before we go into the details of the first half of this year and kind of reflect on the story and give you a little bit of light of what's ahead, we would, for all the investors who are not so familiar with the SMAG's story and our unique positioning in the market, give you a short overview about what we do, who we are, and I'm happy to hand over to Kai for this introduction.

Yes. Thank you very much, Ulrich. So if you go to the next page, we see, let's say, basically, our fields of activity. Ladies and gentlemen, we are, let's say, very strongly rooted in several kinds of use cases, starting from the bottom left, in communication, our systems support, let's say, milestone programs such as TaWAN, the German new communication network for the ground forces. But we are also, for instance, let's say, central part of the IBCS implementation in the eastern flank state at the, let's say, eastern border of the NATO. A second, very, let's say, important use case for our company and products is ground-based air defense. As you know, we are, let's say, a key partner for Patriot programs of 5 different countries in Europe and the Middle East. We are also a part of the, let's say, effort, the European effort to integrate different ground-based air defense systems, the program called [ IRIS-T SLM ] together with MBDA. And last but not least, on the top, drone defense. Our systems are being used in, let's say, exploring possibilities to protect critical infrastructure. We supplied this year 2 systems in this use case and looking forward for then rolling them out in the future. On the right-hand side, we have more, let's say, the use cases linked to electronic warfare and radar applications. Starting with radar, we are -- and passive radar applications at the eastern flank as well. We have electronic warfare. Here, we have supplied systems on truck in the Baltic region. We have border control, amongst other, we support in the UAE. And last but not least, let's say, a very promising use cases on physical AI platforms, for instance, integrating, let's say, laser tech, laser effector, counter drone or also integrating drones on our systems to protect them and improve total value. So if we then go to the next page, we would like to show you how we deliver this value to the battlefield. We have 4 product families starting from the left. We have the on truck family. We have then, second, we have, let's say, mast systems that can be mounted on, let's say, armored vehicles, small tanks, but also, let's say, other vehicles. We have container systems and on trailer. To give you a flavor of what these systems can do to our partners from the armies, they are able to support wind speeds from up to 130 kilometers on a height of 40 meters with, let's say, maximum payload of over 500 kilograms and the setup time is under 6 minutes in some systems. So these criteria are key to, let's say, the success of the missions, to data transmission, to safety of our soldiers. Basically to lay the foundation so that communication, surveillance and electronic warfare and other use cases can be successfully basically implemented to basically protect our country and the alliance in the NATO Europe. On the next page, we will basically discuss how our positioning is. Let's say, we are system agnostic. That means that, basically, we can, on the one hand, integrate and do integrate sensors from different manufacturers. On the top of our mast systems, we can integrate, let's say, technology from neo-primes into our, let's say, steering modules of the systems, and we also can integrate different platforms, meaning different vehicles, meaning different trucks. So -- and that really places us like in the middle of this spider web. We are constantly in discussion with the end users, basically the militaries with primes, but also neo-primes and suppliers to basically design the systems from the start, make sure that the sensors are really well integrated onto our mast systems. Make sure that the rolling platforms or, let's say, also the containers fit and, let's say, basically exceed the expectations of the customers. So really then to use a system that guarantees, at all weather conditions, at all times, 100% functionality. And that really places us in the middle of this ecosystem of our industry.

Okay. Thanks, Kai. Dear investors, reviewing on the first half of our journey of 2026, we have spoken in the IPO process probably oftentimes about the project, TaWAN, but we can say that the first half was nothing less than remarkable for the company. The signing -- the official signing of the Bundeswehr's TaWAN LBO project is a total of -- was a total of EUR 120 million fixed order backlog, and this is a total contract with up to EUR 900 million, including the optional parts of this contract. So this was an outstanding first half year. We completed now, in beginning of July, our IPO. It gives us the opportunity with almost EUR 30 million of funds to invest, and we will explain to you our journey of investments in a couple of slides for the future, to broaden and to use this opportunity of large contracts, a significant order backlog and the best-in-class product to set the right cornerstones for the future. The first half year was also implemented or was driven by a ramp-up of our -- ramp-up execution and ramp-up of our production and our total capabilities. We grew our total output by 20% to slightly more than EUR 20 million, and also our net sales increased by slightly more than 15% to EUR 12.6 million. However, as you can see also in the KPIs on the right-hand side, these ramp-up efforts and also partially the impact of product mix resulted in a temporarily lower profitability with an adjusted EBIT margin of 2.6%. We go a little bit more into detail in the next couple of slides. We stand with the guidance and confirm the guidance, which we have given with EUR 55 million to EUR 60 million on total output and 19% to 21% of adjusted EBIT margin. What is remarkable is, of course, and we guided you through the process of our total order backlog of EUR 1.4 billion by the end of 2025. And of course, this order backlog stayed on the same level, and we can also report slightly increased, but tremendous order backlog of EUR 1.4 billion by the end of half 1 of 2026. So Kai, if you would like to talk a little bit about the investments into -- and the use of proceeds.

Yes. Thank you, Ulrich. Indeed, the company is strategically now well-positioned with the funds of up to EUR 30 million that we have basically been able to receive during our IPO or in the IPO. So basically, we have 3 pillars here that I would like to explain a bit further. Let's say, the first pillar and basically the central pillar is our growth investment that makes up about 2/3 of, let's say, the funds. This has basically 2 aspects. One is the ramp-up and the, let's say, industrialization and enlargement of our facility here in Salzgitter. So as you know probably, we have here at hand 10,000 square meters in production space. We will double that at the end of the year, starting at the end of the year, and then equipping that next year, so that at the end of next year, we'll have then more than double, 20,000 square meters. And in this process, we are already, let's say, under -- let's say, we've made already substantial investments. We have already invested in a welding robot line. We have set up our, let's say, first truck line in the first half of the year. We have basically improved the handling and logistics in our factory, making, let's say, work better for our employees, making it more efficient, invested in that. And then in the, let's say, the major points still to come this year, we are going to invest in a new, basically, paint shop. Paint, as you know, is a very critical application here in our industry. You speak about functionalities such as infrared visibility or decontamination capabilities. So paint shop is one very big item. We also discuss or, let's say, invest in a second facility for our, basically, mast tower assembly. This is a, let's say, huge facility where we can basically unfold the mast completely and do all the, let's say, very detailed checking and installation work on that. And those items together will be, let's say, around EUR 2 million. We will still invest in aluminum welding, also invest in more fixtures in basically handling of, let's say, the assemblies. So this is by far the, let's say, important -- most important pillar. The second aspect of that is international growth, right? So as we reckon, Europe is one Europe, but all the countries have, let's say, different basically priorities. As Ulrich outlined, we see a lot of growth potential also in major programs such as TaWAN or others in European neighboring countries, but we reckon that this will not be possible to serve, let's say, out of Salzgitter-Bad. So we, therefore, prepare for also a footprint internationalization, so that at least part of the value chain can be then also be localized to participate in this market growth. Two other aspects here is working capital investment and strengthen balance sheet. Working capital investment, ladies and gentlemen, basically 2 layers. One is supply security. Let us take the electrical components, rare earth chips. So we are basically stocking now what we need for our contract execution, either at our factory or at our supplier, so that they are physically basically on hand. And secondly, here, we have, let's say, what we call intelligent inventory. There are many, let's say, opportunities, for instance, in service, having the right parts on stock puts you in a position to fulfill the customer requirements very swiftly, and this will generate new business. Last but not least, strengthen balance sheet. For instance, we have to -- you have reckon that we have, let's say, a huge amount of prepayments, that we have a good market position to impose that in the market, but this has to be securitized. And obviously, the cost of that will fall by having a better balance sheet position, and that is in the third layer of our use of proceeds.

Great. I mean, Kai is speaking about specifically or spoken specifically about already the ongoing projects of our production expansion. And obviously, with our order backlog at a tremendous high, EUR 1.4 billion, this is one of the key elements what will drive our future growth and also profitability increases, but it's also a main point of discussion with our customers. And as you can see here, our order backlog stays at these tremendous levels. And what is though still a highlight to mention in comparison also to the points that we discussed, between the first half of this year, we were able to increase our fixed order backlog from EUR 140 million by 30% up to EUR 180 million (sic) [ EUR 182 million ]. Our frame order backlog remains at EUR 1.1 billion. And you can see with a soft order backlog at slightly more than EUR 120 million, that we are managing the shift from right to left to give our production and our execution security for the next couple of years. It is extremely important to mention that, of course, as we are operating in mission-critical situations, all our programs are predominantly driven by NATO states and large lighthouse projects such as TaWAN that we mentioned, but it's also Eastern European IBCS projects. The internationalization strategy, we spoke about this earlier. Kai mentioned it, and we highlighted kind of our drive now to use the best-in-class products to gain additional business. Here, it is one part that we would like to mention, that we are now already with large Western European prime customers participating in RFQs, and we have made good steps going forward. Of course, we cannot disclose anything, and it might be for future announcements. But our activities with hiring our international sales director from France really show the fruit of this work, and now it's up to us to perform and excel in this. Looking towards the development of the half 1 in comparison to last year's first half, here in the chart, you can see how our total output increased in comparison to half 1 2025. It is, though, like you can see, revenue was increasing by 15%, total output grew more. According to our local GAAP, the difference between total output and revenue is the change in finished and unfinished products. And this is sort of our ramp-up and what we will benefit from in the next couple of months when we put this -- bring this to revenue. As explained in the ramp-up execution phase, we explained, here, you can see the Q2 comparison this year to last year. But what I would like to highlight is we expected during the process that Q2 will be almost a repetition of Q1. And this is based on the topics that in Q1 we delivered both prototypes for the TaWAN project. And in Q2, we used the time to build up our assembly line, build up our production lines, and were able to get the first industrial customer approval by the end of Q2, so by the end of June. And this marks this ramp-up journey. On the right-hand side, we explained we had last year and in the business, always a very favorable part of aftermarket service sales. We expected this, of course, with the strong new orders, with our order backlog being full on -- with big products, that we will decline slightly in percentage. But as you have probably read, just yesterday, we signed a very nice contract with one of our customers for a European defense program for the service team with EUR 6 million. And also, this shows in mission-critical situations that our customers rely on the capabilities of us to refurbish and enhance our products that are already in the market. Okay. We have also, of course, developed in profitability. Here, you can see the comparison of the first half year of 2026 compared with our first half of 2025, and also the comparison of the 2 quarters. So intrinsically, between the years, our profitability dropped compared to last year because mainly of 3 reasons. The one is, of course, the absolute strengthening and increase of cost due to the scaling and to the ramp-up of our factory, but also factory and the entire organization. As you have reckoned in our guidance, the EUR 20 million was purely also driven for ramping up and getting our production into the series production mode. The second reason is an unfavorable product mix within the year-over-year comparison. This reflects mainly towards a customer that we had in Q1 of 2025. However, it's very important to mention that with these products, we have secured already one additional contract with this customer, where execution will start to the end of -- in Q4 of this year. And we're about to sign further contracts with this customer. So this very positive business will also come back to our P&L statement. And like I mentioned beforehand, we grew in output, and the growth in output was driven by growth in net sales, but also primarily by the increase and the super increase of our work in process. Here, we realize profitability once we ship the goods to our customer, and we run through the acceptance tests with our customers and end customers. Whilst EBIT and EBITDA remained below previous year, also after reversing the nonrecurring items, and we had minus EUR 1 million EBITDA. This is compared to the EUR 2 million of last year. And here you can see that our CapEx initiatives with investing into our factory for the ongoing opportunities, we had EUR 1 million, which was more than EUR 0.5 million more than last year. However, the changes in net working capital and the very positive impacts from down payments of our customers changed the -- impacted significantly the cash conversion, that our free cash flow at the end of the period was plus EUR 0.6 million compared to a minus EUR 1.5 million last year. And this shows again that in this mode of the contracts that we win and when we deliver the contracts, high profitability, that our cash conversion is on an extremely high level, even whilst we start investing more into the future than we have done in the last years. So ladies and gentlemen, coming to the part of what do we expect from the remainder of the year, we have confirmed the guidance for this year. We are extremely positive on having put the right development initiatives for '27 and beyond. As mentioned, this year, we still have kind of the extra efforts to take due to ramp-up, but also one legacy project that we still have in our books, and this will be shaken off in the first quarter of next year. So we are therefore very positive on the underlying case of SMAG. We have put a lot of energy into the organization and into the production ramp-up. We are looking at a business that has a very high order visibility. We are able to increase our fixed order backlog by more than 30% in the beginning of this year, and we expect more order intake and more contracts to be signed in the near to mid-future. And the execution is, of course, one of the main and top priorities ongoing for the business. And we are confident that we will strive on the road to further convert the frame to fixed order book and do everything here to, not only satisfy our investors, but also -- and, of course, our customers, like the customers for the TaWAN project, but also our other customers that are driving projects on key European NATO defense programs. With that, having mentioned, also kind of final slide on our activities in terms of our interaction with the investors. We are -- we have ramped up with NuWays in our coverage. Kai will join tomorrow, NuWays European Midcap Conference in Paris. I will join and I will present SMAG on October 8 on mwb research Defense & Security Conference. We are on main stage on 25th of November on the German Equity Forum. And then already now looking at into next year, the -- by May 2027, the Cantor Investor Conference. In May, we'll publish our annual report, and we'll have the Annual General Meeting in June 2027. And of course, we have -- we will -- to the end of this month, the month of October, then publish Q3 numbers. Okay. That was the presentation from the Management Board of SMAG for the half 1. And we will now jump to the Q&A session.

[Operator Instructions] And we already do have the first raised hand, [ Mr. Finn Kemper ].

Perfect. Can you hear me now?

We can hear you.

Perfect. Couple of questions from my end. First one is, you mentioned current inspection and acceptance bottlenecks that lasted also into Q3. So just if deliveries should be delayed as a result, should we expect these volumes to shift into 2027? Or is there a risk that they could be pushed out even further? Maybe another question is, could you outline the concrete measures that you're taking to remove these bottlenecks? And what time line you currently expect for the inspection and acceptance process to be fully normalized? And then maybe in the end, if I recall correctly, around EUR 100 million was moved from the soft backlog into the framework backlog. Maybe you could provide some context on what drove that reclassification.

Yes. [ Finn ], thanks for your questions. I would start with the first question, your contractual question and on the measures, what we do kind of to accelerate and smoothen the process with the acceptance, as we have mentioned that also on the slide to Kai. First and foremost, we have delivery. So we're delivering on contracts. So what in the -- with the eventuality of an acceptance that will not take place in 2026, these deliveries are then pushed and postponed to 2027. Means that this is kind of the -- this would be then just a matter of project phasing and whatever is kind of taken away from '26 would be added to '27.

Okay. Perhaps you said, basically the process of certification and acceptance. Let's say, we have successfully passed the acceptance process for, let's say, one part of the TaWAN project. And what is basically to be accepted is once you have, basically, passed the first acceptance, the process has to be very well defined. The documentation has been accepted. And then basically, the process is speeding up, right? So knowing that -- I mean, it's no industry secret, knowing that the German quality acceptance organization is also, basically, required to, let's say, speed up processes ramp up. This is very, let's say, important factor. We have on site here a team of dedicated personnel from this organization. We have seen the speeding up for basically the small TaWAN system, and we successfully started the certification for also the large system so that we expect this to be ended soon and then also seeing the same effect and speeding that up. So our associates, they work hard, let's say, basically to make this acceptance as smoothly as possible. And this should be normalized as you demand. It normalized basically then at the end, let's say, end November, mid-November, it should be normalized, and then we will be, let's say, on full steam from then on. I think you had a third aspect, the reclassification of order backlog.

Exactly. Yes, from the soft backlog to frame, if I recall correctly.

Exactly. So I -- if you recall the page, total -- I'm flipping back to it. I hope you can all see it. The EUR 1.4 billion remained the same. Of course, fixed order backlog increased by primarily the one contract that we won to the end of half 1 and decreased as a matter by revenue. Frame order backlog, it's driven mainly by the large programs, frame order part of TaWAN, and then the other Polish business that we're working on, which is kind of the continuation business. And from our classification also the -- whilst it becomes more and more precise and we are jumping into the final negotiation or the negotiation rounds, also our project with MBDA has moved from soft order backlog to frame. And then new opportunities that we are kind of -- where we explain that we are in a very solid position of single source have increased to soft order backlog, whilst we take a very deliberate and rather conservative approach on the size of these projects.

Meanwhile, we had also received some questions in the chat box. One of them you already touched on a little bit, which is, can we expect the rate of frame backlog conversion to fixed backlog to speed up? Or will it continue to be lumpy one-off moves?

Yes, that's an excellent question. The answer to that is that mostly we work on very large programs. So kind of the -- it is -- we are in a project business. So our business is that we participate in larger contracts. We have won yesterday a project of EUR 6 million. This is rather on the small hand size of our businesses. And we're currently working, as mentioned, on one program we believe that we will -- that we are rather close to getting commitment from us and our customer of approximately EUR 70 million, 7-0. And then looking at the change of the years, there's the program signing with our -- potentially our customer on the [ AeroNous ] with EUR 150 million to EUR 200 million potentially. And by the mid of next year, round about September, we expect that the optional volumes of TaWAN will be signed. That is major lumpy one-offs, probably as per the question. But still, we see the acceleration of -- and the clear milestones here of when our business shifts from frame to fixed. And on the go, we expect also, of course, smaller programs to be signed.

The next question is, the management guidance has a caveat that requires key suppliers to deliver on time/budget. How can you manage, mitigate these risks?

I guess that's a very typical one of any business that is in our ramp-up situation. I mean, we are -- we have given the guidance of also growth for the future, where we said business will accelerate with probably 40% growth rates. This is then, of course, the huge opportunity, but the topics of ramp-up that we mentioned, suppliers and the acceptance of our customers, but also the German Bundeswehr authority are key drivers. And I guess, Kai, if you want to say a couple of words towards the key supplier risks and how we mitigate.

Yes. Basically -- thanks, Ulrich. Let's say, the basis for our business is, I mean, our large contracts in the order book, they are based on precursor models. So we have basically for the truck system, we have a precursor model at the eastern flank, NATO's eastern flank. And for the small, let's say, the mast on tank, that is the small TaWAN, we have supplied already 70-plus units to Switzerland. So it has to be understood that this is not something that is, let's say, like completely new or so. It's proven design. And obviously, this also relates to supply sources. However, we have designed by purpose our products that there is no, let's say, like special material, think of special steel or so, that you cannot basically easily source in a constrained situation or highly engineered products. So these are, let's say, the foundation of our basically supply chain. So yes, we have basically on plan our supplier development what is basically the first, let's say, the first action here. We have already, let's say, increased our supplier development team to 4 people, and they are constantly with the suppliers and making sure that this is delivered on time and in quality. And obviously, our strategy includes second source. Basically, we started that already, let's say, last year. And the second sourcing process where you have more than one source for a certain good will be finalized in the coming months. And last but not least, as a, let's say, third item or measure, we have here, basically, well ahead stock-keeping to make sure that, let's say, goods are in the right quality in the -- let's say, in the warehouse, so that this cannot impact our, basically, our production system.