Technoprobe S.p.A. (TPRO) Earnings Call Transcript & Summary

Good afternoon, everyone. We will begin shortly. Good afternoon, everyone, and welcome to Technoprobe H1 2026 Financial Results Presentation. [Operator Instructions] I now have pleasure handing over to Technoprobe CEO, Stefano Felici. Please go ahead, Stefano, the floor to you.

Good evening, and thank you for joining us and with Stefano Beretta, our CFO, presenting the first half 2026 results and the guidance for the third quarter of this year. As usual, Q&A session will follow at the end of the presentation. Let me start by saying that the first half 2026 represent another milestone for Technoprobe. Our performance demonstrates not only outstanding financial solution but also strength of our positioning in what we believe is one of the most attractive structural growth markets in the semiconductor industry. We delivered record revenues of EUR 464.1 million, growing 42.4% year-over-year and 48.2% sequentially as a result of a by broad-based demand across our key customers and applications, confirming that the long-term AI investment cycle continues to accelerate. As volumes increase, we captured significant operating leverage across the business. Gross profit grew almost 66% year-over-year with gross margin expanding to 53.8%. A while EBITDA increased nearly 94% to more than EUR 206 million, delivering an outstanding margin of 44.4%. And these results demonstrate the scalability of our business model and our ability to convert strong market demand into superior profitability. Looking at the key drivers behind these results, execution was clearly been one of our greatest strength. We achieved record revenues because of the manufacturing capacity improving and at the same time, leveraging our cost structure, allowing profitability to grow significantly faster than revenues. The combination of execution excellence, operating leverage and margin expansion is exactly what we aim to deliver as our business continues to scale. From a market perspective, AI data center remains by far the most important growth engine for Technical. We continue to see exceptional investment across the AI ecosystem with customer increasing spending to support an ever more powerful computing platforms. We believe this is not a short-term phenomenon, but a structural transformation of the semiconductor industry. Within this environment, several trends continue to work strongly in our favor. First, Data center applications remain the primary driver of demand for our advanced technologies. Second, the rapid evolution towards increasingly sophisticated AI models including the emergence of our agent AI is pushing semiconductor complexity to new levels. Finally, every new generation of advanced devices require significantly higher test intensity increasing the value of our solutions and creating additional content opportunities for technical. This structural trends reinforce our confidence in the long-term growth trajectory of our business. Looking ahead, we remain very optimistic about the second half of the year. Deposits demand trends will experience during H1 are continuing Customer engagement remains extremely strong. To support this sustained demand, we are continuing to expand our manufacturing capacity ensuring that we can meet customer requirements while preserving the operational excellence and profitability that have characterized our performance. Overall, we believe these results demonstrate that Technoprobe is executing exceptionally well, benefiting from powerful secular growth drivers and further strengthening its competitive position. Next. So let me now provide some context on the market environment and our expectation for the second half of the year. Overall, the picture remains constructive with the trends and momentum observed in the first half expected to continue into H2. However, the pace of growth remains clearly differentiated across the market. Starting from AI, demand remains exceptionally strong and continues to be the main structural growth engine for the semiconductor industry. Recent industry commentary confirms sustained investment in the AI infrastructure, continued strong demand for leading-edge technologies and increasing requirements for high performance computing, advanced memory and packaging. For Technoprobe this environment is particularly supportive, the development of increasingly powerful accelerators custom processors, HBM solutions and complex [indiscernible] architectures is increasing both device complexity and the test intensity. Each new technology generation requires more sophisticated testing, tighter performance requirements and greater reliability. Reinforcing the strategic importance of advanced forecast solutions [indiscernible] expect strong AI growth to continue throughout the second half with no material change in the underlying momentum, visibility remains solid. Customer engagement is high and the broader AI ecosystem continues to invest aggressively in next-generation computing capacity. Moving to the consumer market. The trend is more moderate. We are seeing slight growth supported by a gradual normalization in smartphones and personal computers, selected product refresh cycles and the progressive introduction of AI [indiscernible] devices. Nevertheless, we are not assuming a broad-based consumer boom. The recovery remains major and differs by customer, application and product category. Our expectation for H2 is, therefore, for continued slight growth, broadly in line with the first half. The market appears healthier and more stable than in previous periods. But the monitor of the opportunity remains significantly below what we are currently seeing in AI and data center applications. Finally, in Automotive and Industrial, the key message is recovery. inventory correction and customer destocking have progressed. Order patterns are gradually improving and an increasing number of applications are beginning to contribute to the up cycle. Within automotive, semiconductor content continues to increase as vehicles become more digital, connected and software defined. However, the near-term recovery is still progressive rather than uniformed and visibility can vary across geographies and customers. As a result, our H2 assumption for automotive and industrial is continued recovery rather than a sharp acceleration. We believe that the direction of travel is positive, but we remain disciplined and do not yet assume a full term to normalized demand across every application. To summarize, we expect the second half to reflect the same market structure seen in H1. Strong and sustained growth in AI, moderate growth in consumer and gradual recovery in automotive and industrial. This mix is favorable for Technoprobe given our strong exposure to the most advanced and test in testing semiconductor applications and support our confidence in the continuation of the positive trends into the second half of the year. Now let me turn to Stefano Beretta, who will give you more colors on our figures.

Good afternoon, everyone. As you may read in our press release, revenues recorded in the second quarter market another all-time record for Technoprobe seeding EUR 277 million, above the high end of the outlook range, registering an increase of 64.3% compared to the same period of prior year, with a sequential increase of more than 48% compared to Q1 2026. Gross profit is practically doubled compared to the same period of 2025, up to EUR 158.5 million, representing a 57.2% margin also exceeding the high end of our outlook range. Even more extraordinary is the increase in the EBITDA, which is -- which in just one quarter, reached EUR 437 million, with an increase of 135% compared to the same period of last year, representing an impressive margin of over 49%, well above the upper end guidance during our prior call. Moving to the year-to-date figures already showed by Stefano Felici. Total revenues were just above EUR 464 million with a year-on-year increase of 42.4% the gross profit was EUR 249.6 million, 65.7% higher compared to the same period of '25 and representing a margin of 53.8%. The EBITDA closed at EUR 206.2 million, almost double compared to the same period of '25, representing a margin of 44.4%. On this page, you can see a summary comparison between the financials at the end of the first 6 months, 2025 and 2026. Just to comment that further revenue year-on-year increase was entirely driven by an organic growth of almost EUR 170 million, largely sustained by artificial intelligence volumes as well as a soft recovery in consumer segment, together with a slight recovery in automotive and industrial. Dimension growth has been partially offset by the FX headwind for approximately EUR 3 million. In fact, the revenue expressed at constant currency, constant currency used in '25 would have been approximately EUR 30 million higher than reported revenue, meaning an unfavorable impact of more than 6%. On a gross profit level, the increase in the margin of 760 basis points from 46.2% to 53.8%. As already mentioned in our prior press releases confirm once again, the ability to rapidly increase the production capacity and implement internal efficiency in our production processes, together with the operating leverage across the entire P&L. All of these impacts have been partially offset by the increase in depreciation following the investments in fixed assets made during the latest months to expand our capacity and increase the automation. Gross profit at constant currency would have been approximately EUR 24 million higher by using the half 125 average rate, bringing the margin well above 55%. At the EBITDA level, the effect of the operating leverage is even more evident, also favored by spending discipline in SG&A and the integration of the R&D departments of the various divisions. Showing an increase in the margin, even including a negative ForEx impact for approximately EUR 23 million, which would have brought the margin above 46%. Finally, the net financial position has remained almost stable over the last 6 months, during which the cash generated by the operating activities for approximately EUR 93 million was practically all used to fund the capacity expansion made in the same period. Again, as already anticipated in the previous press release, the group has recently embarked on a path to double its production capacity from 2025 benchmark by the first quarter of 2027 through an ambitious investment and hiring plan. To date, the results exceeded our expectation and we now expect to be able to increase the capacity up to 140% compared to the run rate at the end of 2025. Of course, the complete success will depend on many factors, especially on the ability to quickly adapt to changes in global dynamics and maintaining focus on our technology, on our people and on an ethical governance. The increase in the production capacity combined with the stronger-than-expected volume growth driven by the artificial intelligence leads us to expect the third quarter with another strong sequential growth in both revenue and profitability and supported by a meaningful operating leverage effect. So as I show in the chart, our investment mix is also evolving significantly. Compared to prior estimate, we have fare accelerated the total investment to be deployed by the end of Q1 '27 to approximately EUR 350 million, of which approximately 80% of total investments are now concentrated in Italy where the construction of the new greenfield manufacturing facility in [ Chernus Colon Bardon ] has already begun and planned to be concluded by the end of Q1 2027. That said, third quarter of the year is expected to show another sequential record revenue together with robust growth in gross margin . So revenues to be about EUR 314 million, plus/minus 3%. Gross margin in the range of 61.5% plus/minus 200 basis points and the EBITDA margin in the range of 52% plus/minus 200 basis points. And considering that we are more than halfway through the year and based on the volume and capacity information available to us today, we believe it's appropriate to update the revenue and the EBITDA margin targets for 2026, revised it again upwards as follows. So consolidated revenues in the range between EUR 1,050 million and EUR 1,100 million. The EBITDA margin between 46% and 48%, and this is all I have for the comment. So thanks, everyone, for your attention. Now we can move to the Q&A session.

[Operator Instructions] The first question today comes from Alberto Gegra.

Congratulation for this another strong set of results. So I have one question on the implied second half. If you can -- if you have anything to flag just to better understand the reason behind the phasing between the third and the fourth quarter since you are having a very strong third quarter than the last 1 slightly down sequentially. The second question on the capacity increase, just to reconciliate the previous messages on -- of around EUR 1.4 billion run rate of manageable sales by the end of first quarter. So an update on this figure considered the updated CapEx also considering DIS and potential Chinese revenue. And the third one, if you can update us on the new markets, what are you seeing in the discussion with your potential customers what drivers do we expect in 2027, in particular, between CPU, ASIC, HBM and silicon photonics.

Thank you, Alberto. So let me start for the H2 trend. So for the moment, we guided Q3, of course is still under examination. So what we showed now is a trend -- an upgraded trend for the year-end, but we still have some lag of information. As you know, the visibility is very short and not yet completed for the Q4. What we can see right now is that a significant mass production and cyclical trend, especially for the GPUs that led if i can grow in the first half of the year would take a kind of pause for the second part, especially for the last part of the year and then to restart in terms of volumes in 2027. So in the second part, especially in the last part of the year, we expect a bit of a slowdown in the softly replaced by CPUs and ASICs, but volumes will be different in that case. So this is something we expected usually in the Q3 as a kind of cyclicality in the past years. Now the cyclicality has been moved a bit further along the year. So we expect that in Q4. About the capacity increase, as I mentioned before, we have increased the investment expected by the end of Q1 '27 from EUR 250 million to EUR 350 million, so EUR 100 million more. And this additional increase that is almost entirely addressed in the equipment and automation not only in Italy, but also in all our facilities, especially in Taiwan, Korea and China as well, will allow us to increase again our capacity from what we mentioned in the prior press release, that was EUR 1.4 billion at a run rate, at least to EUR 1.6 billion run rate at the end of Q1, meaning $1.9 million in terms of run rate. This is the most important upgrade we want to show and we want to disclose. Lastly, for the new market, I can leave the floor to Stefan Felici

Yes. So we -- as far as market segment for next year, we don't expect major changes in the ratio between GPUs, CPUs -- there might be a slight correction in the CPUs, maybe a little bit more superior demand related to AI, but this is still early to say, but we don't expect major difference compared 2026. So for an emerging market that maybe I can comment is, you mentioned silicon photonics. This is can be really considered new segment. And the situation here is that right now, I mean, there are solutions in the market. that are more lab oriented. So it's because the customers are approaching this type of test for the first time and still little bit unclear what will be the final strategy how to test these type of devices in volumes. So this year, I would say that is still is the characterization phase, okay? And there are solutions there that are not for HBM and not for volumes. There are a solution for more for characterization. What we are preparing for is a solution that can address high volume, okay? And we have already developed the core technology for this type of testing and will be up to the final customer to decide when to switch from a characterization phase to a mass production or mean to the test in high volume and testing high volume for these devices. Probably this will happen during 2027. The start of these volumes -- but it's still early to predict exactly how much would be the business. So we -- for sure, we will update you in the next call.

We now have a question from Oliver Wong.

So you mentioned that the next year, you don't expect a significant change in position on different ships. So has there been sort of a delay in the HVM revenues of any sort?

No, there are no different comments compared to prior press releases. So we expect -- we still expect for 2026 to have a very small portion of revenues in the range of EUR 10 million, more or less, more than that by the end of the year. So again, we have been qualified by 1 of the 3 customers and the situation is pretty stable. So we are still in the qualification phase for the other 2 main players of the segment. We do not expect to have additional information by year-end. So we remain stable and consistent.

Sorry, I meant for next year for 2027. Since you said on the change in the composition of types of chips. I guess that means HVM will continue to be a pretty small part of the revenue. So I was wondering if there's any sort of the way compared to what you previously may have expected.

Got it. Thank you. So for 2027, in terms of magnitude is still to be defined. So as you know, the definition and the adoption of the technology is still to become what is more suitable for the production of Technoprobe that use a vertical MEMS product rather than can deliver product. So the adoption of this technology is what drives the volumes and the potential campaign signing to Technoprobe. For 2027 we don't have a particular visibility on that. It doesn't depend on us. What it counts very much for us is to have a technology ready for the moment when it will be necessary and we are very committed on that, and we know that our product will be successful for the customer. One of them is already adopting in terms of let me say, prototype prototypization and it works. So we are very confident it will be successful in 2027. But again, it's still too early to define which will be the volume for next year.

Yes. And I want to add on this, Stefan, mentioned about our approach, which is better approach. And this is -- we're leveraging basically our technologies used for logic. And this is important to say because the vertical, we think that also the HPM and will evolve and can be customized for it to perform better in the future. And so this will give the better moly will give more flexibility visit to the HTM signer design. The other very important things for us is that we want to base I mean this technology on our best core technology that can also produce the same level of profitability that we have also with logic. And is typically in the -- also in the past, the memory market was not the best one as far as profitability but again, because of a different architecture. So our main point is to address this market with a better performance with a different technology that can produce the same result of the technology used for our logic. And as Stefan doesn't depend on us when the adoption will happen. So we're already going in the right direction. So there is -- we see interest in this technology. But -- is it still early to say when exactly will be adopted in mass production.

So the next question comes from Alexander Duval

Congratulations on the strong results. I had a couple of questions. Firstly, you have raised your CapEx investment this year. I wondered if you could give us some thoughts on the level of investment you might do beyond 1Q '27. Clearly, there's an uplift you're talking about in your cumulative spend up to that point, but it would be very helpful to get a sense given the extremely robust AI market? And second of all, just to double-click on that question about differentiation within memory. I wondered if you could elaborate a bit more on the extent to which technological differentiation that you offer will allow you to surmount some of the sticky relationships one would think that competitors would have in the memory space

Thank you, Alexander. Let me take the first point about the investments. You read is very correct. I mean, EUR 350 million to be spent in 15 months. So starting from January '26 to March '27 is very, very challenging. And we are literally committed to deploy all these investments. Right now, at the end of June 2026, we spent approximately EUR 90 million. So we have EUR 250 million more or less left to be spent in the next 9 months. Very challenging because most of these investment relates to machineries and equipment, depending on the ability of our suppliers to deliver what we have ordered to them. So it could be the case that if not completed by March, something can be delayed for 1 month or 2 months. But overall, the commitment is to spend this big amount for this capacity increase. And this is exactly to deploy the run rate capacity at EUR 1.6 million. That is already more than double or largely more than double compared to 1 year ago. But overall, do not forget the fact that the expansion plan was launched in the fourth quarter 2025 is being implemented through to parallel work streams. So not only purchase of equipment. So each of the 2 work streams has a different execution time line. So the first one is the most important for the moment in the short term has been quickly deliver and that is quickly delivered great results so involving greater execution complexity and focused on optimizing the existing manufacturing processes, including redesign, production workflow reducing machine processing time, increasing the number of daily shifts, reconfiguring selected factory layouts and all to accommodate additional automation equipment. So the resulting capacity today is expected to progress steadily month by month through the end of 2026. So we don't -- we will not have a big bang at the end of Q1 and this is what is completely visible right now in our numbers. So we are growing consistently quarter by quarter and month by month. The second work stream is, of course, the new 4,000 square meter manufacturing facility, which is already underway and expected to be completed by the end of Q1 '27. This is -- this project has a longer implementation time line carries lower execution risks. But at the greenfield facility can be designed and configured in line with the group's specific operational requirements and the contribution to the productivity and capacity will only materialize once the facility becomes operational.

Yes. I'll take your second question. I hope not to be too much technical to answer to your question, but feel free to ask again more question if you need but to answer the simplest way to answer your question is to check also and start from the beginning what happened and tell you what happened with the logic devices. Because if we go back 15, 20 years ago, all the logic devices were tested. Most of them were tested with cantilever tops, not [ Beka ] took about logic now, not members, but then I'll and make the point why I'm saying this. But focusing on the logic, they were tested with the cantilever. Cantilever means crops coming from the site and they cannot cross each other. So basically, with that type of geometry, you can contact just a line of tests, okay? Typically in the periphery of the devices. This was a very standard for -- there are still some devices with just pad on the periphery of the devices. And continued approach can, of course, contact this line of pets. This was logic became a very big technical constraint for the performance of the chip. So because the designers needed more pets to be dropped in the area, and they needed to -- maybe to put some power supplies in the middle of the bus or ground in the middle of the is to get more beta power integrity signal integrity to get a better performance. So what happened is that for the logic chips, the designers start to put pets covering the whole area of the chip. That's everywhere. So that was really the reason the technical reason why cantilever technologies couldn't at that point couldn't be suitable anymore for the application. So because if you are past everywhere in the -- also in the middle of the device everywhere, the only way to contact those pads is in Berka,and that was really the -- what the -- why the best technology basically was the win in technology at that point. So from Cantilever, everybody switched to the ethical and basically, 99% of the logic market and any logic ship is tested with vertical technology because of this reason. It's more the flexibility for the Zynex to cover and to put all the parts wherever they want is. Okay. So now coming back to memory. Memory -- typically, the memory ships, the memory devices were simpler idealogic devices. And until now, the pet I mean the to be contact for testing are still in line, like can be 2 lines of pets. I mean, very similar to the configuration that I just described for logic. This allow -- as far as geometry or cut still allowed to reach these pets using micro continue approach. So from our side, you can contact a line of pet. Again, our vision, but is not -- is also supported by customers. is that it would be much more beneficial now to have [indiscernible] everywhere because now we are in the -- we are going in the direction where also the HBM is not any more a very simple memory chip but is a very high-performance chip. And everybody want to push over the limit the performance of these devices. And this can be really the reason why at certain point, the designer will prefer to change the layout and put parts everywhere and the point vertical will be the only solution. So I don't know, I hope this can explain the differentiation here of the technologies. I don't know if you have a [indiscernible] your question.

The next question now comes from the phone number ending in 893.

Sorry about that technical difficulty. It's George here from Deutsche Bank. Congrats on the great quarter. I have a few questions. Just firstly, on the new guide for this year. I think maybe you touched on this earlier, but just to double click. If I take your implied Q4 guide even at the top end of the sales range you're growing maybe 3% sequentially in Q4, but your implied margin in Q4 at the high end of the margin guide for the full year. I think the Q4 margin is around 49%, which is down from Q3 despite the implied higher sales. So just wondering how to think about the drivers here for the margin specifically, maybe it's visibility, maybe it's a degree of caution, but any commentary there would be helpful. And then I have a follow-up.

For the question. So basically, if you see the profitability guideline or trend, we show it, this is a full year profitability that is not in a decrease compared to Q3 because you should remember that Q1 was a much lower profitability on and then you have to accumulate all the profit of the year. So we expect for the moment to have a Q4 in a range between second quarter and third quarter revenue we don't know yet, which will be the guideline for that order backlogs we will see in Q4, but we expect that in a range between Q3 and Q2 2026. So if the range will be that, we will have a similar profitability equal to the same quarters that we have just passed. There could be some small dilution in the second part of the year, but not significant. In general, the current mix of customer we expect in the second part of the year will be more addressed with higher agency fees or distribution fee that could impact a bit on the profitability. There will be some probably additional labor award for our colleagues, depending on the results that will be achieved. There will be some R&D and SG&A extra charge related to the Chinese factory ramp-up, especially. So as you know, we are building a new factory in China to serve the domestic market and this is ongoing. And the vast majority of the expenses for the ramp-up are expected in the second part of the year. So Q3 and Q4. We talk about EUR 3 million i4 million ramp-up cost in the second part of the year. So all these elements combined together can give you a very small dilution on the profitability but the profitability overall across the year will be consistent with the second quarter, with the level of revenue in the second quarter and consistently Q3 with the level of revenues of Q3.

Brilliant. Just secondly, wondering if you have any update on the custom ASIC market share or any sort of engagement with customers. And with these new markets like ASIC, HBM, silicon photonics, becoming more material, I guess, in '27 maybe '28 how should we think about the potential for margin dilution or margin gains from these new products versus maybe what you're doing today in the AI GPU, I assume is driving the margin today?

Let me answer from the financial standpoint, and then I'll leave the floor to Stefano. From a financial standpoint and profitability, we do not expect to have any dilution on this product. unless maybe for the initial ramp-up of the industrialization. As Stefano mentioned before, for example, silicon photonics is still on a lab phase. So the cost is higher and the profitability is lower, but we talk about very little volumes. Other mass volumes, we do not expect any dilution on profitability in any of our products.