Q2 2026 SCHMID Group NV Earnings Call
Speaker #1: Ladies and gentlemen, we warmly welcome you to the H1 2026 results conference call and webcast of the SCHMID Group. I am pleased to welcome the CFO, Arthur Schütz, and CSO, Roland Retemeyer, who will guide us through the presentation shortly, after which we will move on to the Q&A session.
Speaker #1: Before we begin, I'd like to remind everyone that today's discussion will contain forward-looking statements within the meaning of applicable securities laws. These statements are based on current expectations and assumptions, and are subject to risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements.
Speaker #1: Please refer to our filings with the U.S. Securities and Exchange Commission, including our annual report on Form 20-F, for a discussion of these risks and uncertainties.
Speaker #1: We undertake no obligation to update any forward-looking statements, except as required by law. In addition, today's discussion may include certain non-GAAP financial measures. Reconciliation to the most directly comparable GAAP measures can be found in our earnings materials and filings.
Speaker #1: And with that, I'm handing over to you, Arthur.
Speaker #2: Thank you, Mara, and good morning, good afternoon, everyone. I'd like to start by giving you the headline picture of the first half of 2026.
Speaker #2: In short, this has been six months of significant transformation. If we bear the balance sheet, our cost program has been executed, and we're seeing real momentum in order intake.
Speaker #2: Let me walk through the core numbers that tell the story. €33 million of new net capital was raised through our convertible and SEPA. €31 million of debt was reduced by a debt-to-equity swap announced in May. €4 million of fixed costs were taken out through our sprint program. And €52 million of orders were received in the last eight weeks.
Speaker #2: 2026 remains a transition year, but the foundation is now in place for a strong second half of ’26 and a promising 2027. Let me now walk you through the P&L for the first half.
Speaker #2: First of all, Q1 was a slow start. It tends to be seasonally weak, but it was weaker than expected. We've seen €18.2 million in revenues in Q1, which increased to €27.8 million in revenues in Q2.
Speaker #2: Out of this, equipment revenues were €10.7 million in the first six months last year—which was a very weak half-year—rising to €39.4 million in H1 2026.
Speaker #2: Spare parts and services increased their revenues from €5.9 million to €6.4 million in the year. Our gross profit margin of 21.2% was lower than expected; this is partially due to the lower scale, but also a shift towards China, where we have slightly lower margins. We expect this trend to reverse in the second half, with more German production-based revenues.
Speaker #2: Our G&A expenses increased by more than €3 million because of the sprint restructuring, share-based compensation, and capital structure items. I will talk more about that on the next page.
Speaker #2: Other income and other expenses include about €1.7 million in foreign exchange losses; this was €6.3 million in gains in the first half of '25. The financial results losses reflect the accounting treatment of the XJ Harbor liability, which we converted into shares in January, and to a lesser extent, also the fair value movements of the company's warrants.
Speaker #2: It also includes, for your information, about $875,000 of interest on our debt. Now, let me move to the next page and walk you through how we get to our adjusted dividend.
Speaker #2: So, the adjustments include about €420,000 of sprint restructuring costs. Share-based compensation reflects 2026 and 2027 sea-level rewards for shares and options. And the IFRS these had to be recognized this year.
Speaker #2: Capital structure restructuring costs reflect the fact that we had two 20-F filings this year. This half-year, we are still under the NASDAQ monitoring period, which means higher filing requirements until February 2027.
Speaker #2: We also had some costs that came with the debt-to-equity conversion. Let me now talk about our Sprint program. So, we concluded Sprint 1—we reduced headcount for full-time equivalents by more than 40 in our German overhead functions. Most of those departures will happen in Q3.
Speaker #2: We had, or we will have, restructuring costs of about €700,000, of which, as I mentioned, €400,000 was expensed in the first half. This is mostly for paid leave, again running into Q3 mostly, and then some small severance payments.
Speaker #2: The run rate has been achieved of about €4 million in expense savings in labor costs, and this also reduces our fixed costs and lowers our break-even point.
Speaker #2: Now, we have started moving to the second phase of our sprint program, which is a purchasing cost savings program. More than 50% of our total expenses are for purchasing materials.
Speaker #2: And our target for savings is 5% of those purchasing expenses—at least 5%. As we now see a period of increasing volumes for purchasing, this is a good time to renegotiate terms and conditions.
Speaker #2: We think that most of those 5% minimum savings we can achieve by year-end. However, we also redesigned some high-cost components, and this design-to-cost will take us a bit of time and will be more something for 2027.
Speaker #2: Let me then walk you through cash flow and working capital. We had €29.3 million of operating cash outflow in H1, which was mostly the €26 million of investment in working capital.
Speaker #2: As you can see, we had negative working capital in December of last year, and we are now at about 14% of LTM sales by the end of June.
Speaker #2: Now, medium-term, we think we can reduce this back to something more like 10% or less. We also believe that the absolute amount of working capital is something that we can keep flat or reduce by year-end.
Speaker #2: We spent about €800,000 on capex. We are typically running at €1.5 million of annualized capex. Obviously, in the second half, we will start seeing some of the spending on the Chinese factory, which in total will be for around €11 million, and this is land plus building.
Speaker #2: It's not so much the machinery that we effectively have already. And as I mentioned before, we raised about €33 million through the convertible and the standard equity.
Speaker #2: That leads me to the balance sheet. We did a $30.75 million debt-to-equity swap announced in May. This meant the total debt has been reduced from $53 million to about $23 million, which we believe is a sustainable level, and also means that we actually now have some debt capacity.
Speaker #2: And can fund some of our growth in debt rather than in equity. Additionally, obviously, we have this convertible, the Black Forest convertible, of €2.5 million that matures in March.
Speaker #2: Of the $30 million convertible issued in January, $11 million are remaining. And we have a $20 million convertible that was raised in July.
Speaker #2: As part of the convertible financing, we now have additional debt capacity for China, as long as this is non-recourse to the German subsidiary or to our Topco. So that means, for example, the Chinese factory can be financed on a non-recourse project basis.
Speaker #2: Of debt, we can also raise additional working capital or bank loans up to the €20 million level. The average cost of funding for our Chinese debt and the new debt will be around 2.7%, so very attractive rates.
Speaker #2: Additionally, we still have $21 million of standard equity remaining. We have not drawn on that in the second half of this year and are not intending to draw on this for the rest of the year.
Speaker #2: With that, I now hand over to Roland, who will give an operational update and talk about our order intake situation.
Speaker #1: Thank you, Arthur. Let me give you an operational update. We executed well in the first half of 2026, and we also delivered one of our first Infinity Line H+ for 700 by 700 millimeter panel-level packaging to a U.S.-based customer.
Speaker #1: In addition to that, to grow with our customer, we decided and started to consolidate and expand our Chinese manufacturing campus. We will move the currently leased two locations to one bigger, SCHMID-owned manufacturing campus in Zhongjiang, Guangdong Province, which is the same province as today. With this, we are consolidating our current operation and will double our production capacity in China.
Speaker #1: The total investment is about €11 million, and the new facility is expected to be operational by Q4 2027. Our Malaysian facility is successfully established, up and running, and currently expanding to fulfill the demands of our growing key customer in this region.
Speaker #1: Our order intake is accelerating. In our investor call in May, I stated that Q1 was rather slow due to new factory planning of our fleet chip BGA substrate customer, and that I expected some momentum in the market through fleet chip BGA substrate capacity investments in the second half of 2026.
Speaker #1: We already recognized this momentum in late Q2, and we do see continuing market demand through the rest of 2026 and the full year 2027. Due to these fleet chip BGA substrate and continuing AI server board capacity investments, we already achieved a €52.3 million order intake in Q3.
Speaker #1: And our total is now at $96.6 million in order intake year to date. These high-end equipment orders also balance the loading of our German and Chinese manufacturing locations, as Arthur has previously explained.
Speaker #1: We published and raised our order intake guidance for 2026 in July this year, to €125 to €150 million, and based on what I currently see and the information I have, I do expect us to land in the upper area of that guidance.
Speaker #1: With this, I'm handing back to Arthur.
Speaker #2: Thank you, Roland. So, looking at our new guidance, the revenue guidance remains unchanged for the full year. We expect at least €100 million in revenues. If we're looking at the adjusted EBITDA margin, obviously this used to be more than 12% guidance for the full year.
Speaker #2: We're now expecting 6% to 9% adjusted EBITDA margins for the full year. And then, for order intake, as Roland just mentioned, within the €125 million to €150 million range, we now expect to be at the upper half of that range.
Speaker #2: With that, we conclude our presentation, and I hand back over to Mara to organize the Q&A session.
Speaker #3: Yes, thank you very much. So, ladies and gentlemen, we now come to the Q&A session. It's your turn. If you would like to ask your questions in person via the audio line, please click on the raise hand button.
Speaker #3: And if you're dialing in by phone, please press the star key and 9 to raise your hand, and star key and 6 to unmute yourself. Additionally, you're also welcome to ask your questions in our chat box.
Speaker #3: And we will read them out loud for you. But we will start today with our audio line, and I have a raised hand from Sebastian Naji from William Blair.
Speaker #3: I just sent you the allowance to unmute yourselves. You may do so. Sebastian, are you there? Can you hear us?
Speaker #4: Hello, can you guys hear me now?
Speaker #3: Yes, perfectly. Hello.
Speaker #4: Great. Well, congrats on the solid results here and the continued build of the pipeline. I just wanted to ask maybe first about the order guidance for this year.
Speaker #4: So, you've talked about kind of the upper half of this $125 to $150 million range. You already have nearly $97 million through mid-August. So maybe if you could just expand a little bit on what gives you some of the confidence that you can get that remaining portion as we move through the rest of the year, and how much of that is tied to identified projects already in negotiation versus just broader pipeline?
Speaker #1: Thank you for your question, Sebastian. I think mostly I know that most of the projects—the order intake projected for the rest of the year—is already in negotiation.
Speaker #1: So, that's projects already in negotiation.
Speaker #4: Great. Okay.
Speaker #2: And then maybe to clarify, so obviously most of the orders are in. There are a few small remaining, but we know exactly which machine we're going to manufacture in Germany and China.
Speaker #2: Most of the orders that we received recently, or in the next few months, really go into 2027.
Speaker #4: Got it. Okay, that's helpful. And then just on the financing, following this $20 million convertible, do you believe your balance sheet, in combination with some of the customer prepayments that are tied to these orders, is sufficient to fund your growth outlook here, or could you need additional financing down the line?
Speaker #4: Just maybe, what are your thoughts there?
Speaker #2: Yeah, so we're pretty well financed at the moment, and yes, we will get customer payments. For the next six months, I don't see any issue raising new equity, at least.
Speaker #2: As I said, we now have the ability—and find it very attractive—to raise debt in China. So, for example, working capital requirements that we may have in China, where some of the payment terms, especially on the receivable side, are pretty long, we can finance with debt in China.
Speaker #2: And also indirectly, effectively finance the German business. So we don't see any finance requirements, other than some of the debt, in the next six months.
Speaker #4: Okay, good, great. And maybe just on the topic of the China capacity that you guys are buying. I guess, what kind of revenue level can this enlarged footprint support?
Speaker #4: And does moving from rented to owned capacity improve your unit economics at all?
Speaker #2: So basically, at the moment, we have two facilities, both rented, which are a few kilometers apart. There's an inherent inefficiency, as we have to ship stuff between the two facilities.
Speaker #2: The new facility is not quite double as big, but with the increased efficiency, we think that the real capacity—the effective capacity, let's say—is double.
Speaker #2: And, roughly speaking, we can do about €50 million of revenue in the old two factories. And in the new factory, we can do about €100 million of revenue.
Speaker #2: So, it's a significant increase. We think that, as long as we can increase the current, let's say, run rate—and we're effectively running at $50 million in China, certainly in the second half and the first half of next year—it's all pretty much booked out.
Speaker #2: As long as we can increase that by something like 20%, the unit economics are starting to look better than the current plant.
Speaker #2: So, obviously, with the current rented facilities, we always have a risk of rent increases, while with the owned facility, we basically know for the next 50 years what we're going to pay for this facility.
Speaker #4: Got it. Okay. And maybe just last question, just more on the product side. And specifically just on Glass Core substrates, I guess, what technical or customer milestones should investors be watching for to know that the market is moving from proof of concept and qualification into a volume capacity cycle?
Speaker #4: And what exactly are some of the bottlenecks? Is it TGV formation, metallization? Is it yield? Is it just simply end customer qualification? Just any thoughts on that?
Speaker #1: Well, the technical bottleneck is for sure the metallization of the TGVs. This is something we also have a very strong solution for. But then, of course, the customer-end qualification is another thing you want to watch for.
Speaker #4: Okay, fair enough. Thank you. That's all I had.
Speaker #3: Thank you very much, also from my side. We have another raised hand by David Williams from NETAM. I just sent you an allowance to unmute yourself.
Speaker #5: And can you hear me?
Speaker #3: Yeah, we can hear you. Hello.
Speaker #5: Thanks. Again, thanks for letting me ask a question here. I guess maybe firstly, just on the demand trends—you talked about the acceleration over the last eight weeks.
Speaker #5: What do you attribute the new demand to, relative to the first half? Just given the strength we're seeing across the markets generally, and more broad-based, what do you attribute the recent demand to?
Speaker #1: Well, we have seen in the first quarter—we have recognized, or let's put it that way, in the last quarter of 2025, we recognized a shortage in IC substrates.
Speaker #1: This is what I mentioned with flip GPGA substrates. And in the first quarter of 2026, the big substrate manufacturers were making plans to stop the incremental investments and made plans for staged investment through new factories.
Speaker #1: And this took some time in Q1, and they made it on the way in Q2. And this is what we currently recognize: these new factories are being built and are being equipped with new equipment.
Speaker #1: And this is what we started to recognize in late Q2 and already in Q3.
Speaker #5: Great, thanks so much. And then, as you think about your capacity and what you're doing in China—but more broadly, how do you think about capacity and the ability to meet the demand you have in front of you?
Speaker #5: And maybe, what are the constraints to outperforming the guidance range?
Speaker #2: Yeah, so it's quite a different situation in Germany than in China. In China, we do have a building capacity restraint that we're solving in Q4 next year.
Speaker #2: We have been hiring, I think in March and April, we hired more than 100 people, which is not without challenges, but that's kind of done in China.
Speaker #2: In Germany, we have a lot of space. I don't see any capacity issues there. Obviously, labor is always the bigger capacity constraint. By the way, there's no machinery or so; you find very little machinery in manufacturing here.
Speaker #2: So that's never a constraint. Labor would be the main constraint in Germany. And what we are targeting to do for probably next year, when we anticipate having some capacity issues on the labor side, is to hire contract workers to supplement our workforce here in Germany.
Speaker #2: That's the main constraint I would see. And obviously, training them—and in time—is sort of the main challenge.
Speaker #5: Okay, thanks so much for your time. I appreciate it. Best of luck in the second half.
Speaker #2: Thank you.
Speaker #1: Thank you.
Speaker #3: Thank you so much. We have another raised hand by Mrs. Catherine Thompson from Edison Group. I just sent you an invite to unmute yourself.
Speaker #3: You may do so now. Yes, perfect. Hello.
Speaker #6: Great, thank you. I saw in July that Intel made an announcement about a partnership with Lend Technology, talking about Glass Core substrates. I just wondered, what kind of conversations have you been having with your customers over the last few months on Glass Core substrates?
Speaker #1: Well, glass is solving a lot of topics over composite materials. A lot of players in the Intel supply chain, in the NVIDIA supply chain, AMD supply chain—you name them—are putting an eye on glass core substrates as they're better in terms of flatness, smoothness, and in terms of diverse constants like dielectric constants and signal integrity.
Speaker #1: So we are engaged with most of the major supply chain players, and we are supporting them with our technology and equipment to make glass core substrates real.
Speaker #6: Okay, thank you. And I think the question for Artur—I just wanted to understand a little bit more detail on building the new Chinese manufacturing facility.
Speaker #6: So I think you said the cost of that will be €11 million. Are you able to just give me a sense of over what timeframe you expect to send that money?
Speaker #2: Yeah, so effectively, we're now finalizing plans with the architects. We actually haven't purchased the land yet, although that's all agreed and signed up. But I think in about a month or two, we would expect to start construction.
Speaker #2: And effectively, it's a typical construction loan that ramps up with the building. From all I know, it's roughly in equal amounts, I would say, from September or October this year for about 12 months.
Speaker #6: Great. Okay, that's helpful. Thank you very much.
Speaker #3: Thank you very much, Mrs. Thompson. We have another raised hand by Mr. Andrew McGrath from Linden Advisors. I just sent you an invite to unmute yourself.
Speaker #4: Thank you. Good morning or afternoon. I hope you can hear me okay. Yeah, question. I think it's come up a few times, but as you see architectural shifts and panel-level packaging emerge, where do you see that opportunity specifically for you, and any product shifts?
Speaker #4: Or is it kind of your customer deployment of TLP and some of these other elements changing your products and kind of gross margin mix, or is it less specifically driven to that?
Speaker #1: Well, panel-level packaging is an important piece of our domain. Our domain is panels, as SCHMID is producing panel-level equipment. We see different kinds of flavors of panel-level packaging.
Speaker #1: Initially, if you use spec, some players entered panel-level packaging for cost reasons, to save costs on a larger substrate. Nowadays, we recognize panel-level packaging is used for performance reasons, like glass core substrate, such as the 310 by 310, which we currently see in Taiwan, and larger kinds of panels for getting the performance of a larger package.
Speaker #1: So currently, it's done for the package size and not so much for cost reasons. This is what we see in the market and what we support in the market.
Speaker #4: I guess, on the back again, the kind of order intake—how does the gross margin of that product mix compare to the first half and to historical?
Speaker #1: Well, this is a different segment of customers. This is semiconductor customers, who are typically used to paying higher prices for the products. They also expect higher service levels, and they are used to paying for this.
Speaker #1: So, this will affect our gross margin—in a positive way.
Speaker #4: Got it, thanks. And then last one for me, just on working capital and kind of cash balances, recognizing kind of Sprint 1 and 2 and some of the other liability offsets.
Speaker #4: It sounded like you expect working capital to stay flat, if not be a cash benefit. Any added color you can provide on the cash management component?
Speaker #2: Yeah. I mean, maybe if you look at the working capital items, the cash advances haven't increased as much as you would have thought. We do require guarantees in Europe, something that we at the moment cannot get.
Speaker #2: I think this will change over the next nine months—maybe four, maybe the spring. So there are—
Speaker #1: I actually have contracts in Europe where we don't get any cash advances, which is obviously not great for the working capital. That's one thing that hurts working capital at the moment a little bit.
Speaker #1: I would say . Other than that , in general , what you see is that that China , both the receivables are late , but also the payments are late So the whole working capital gets gets expanded .
Speaker #1: The more business we do in China . But it's , it's , it's actually not that dissimilar from , from Europe . And then of course , some of these items are lumpy You know , we sometimes have some lumpy contracts .
Speaker #1: And there, it really can depend on the exact timing. But obviously, in general, we do get the cash advances before we order.
Speaker #1: And pay for the parts , which is important . Maybe the other point to to make is because of the issues that we had end of last year , some of the payment terms were pretty harsh that we had to give to our suppliers , i.e. we had to pay in advance for some of the parts .
Speaker #1: That's , that's mostly resolved , but also only recently . And that will also help the working capital to get to a more normal level , I would say .
Speaker #1: So it's a little bit higher than what I would have expected in a normalized situation.
Speaker #2: Got it. Thank you very much.
Speaker #3: Thank you so much. We have one more raised hand by Mr. [Name]. You may unmute yourself now.
Speaker #4: Okay. Can you hear me? Okay.
Speaker #3: Yes , hello
Speaker #4: Okay . So I wonder if you can talk a little bit . I mean , I guess you hinted at it , the , the margins on the backlog or just a approximately like give us a sense .
Speaker #4: And the is this more of like a mix or a volume ramping up story to , to get the margins , you know , by 28 or 29 , you know , longer term up closer to where some , some other guys in the industry are
Speaker #1: Yeah. I mean, obviously we do have a certain amount of fixed costs, R&D, and actually our listing costs are not insignificant.
Speaker #1: And that's a fixed cost block , which at the current revenue level is pretty significant So that's definitely a huge scale benefit , as I also hinted at , we some of the newer products and depending on the customer , we have a big margin differences in terms of contribution margin So I think we will see both clearly the order intake that we're seeing now mostly flows into 27 .
Speaker #1: And if you look at the order backlog , 89 million , that's that's pretty much a record . So that will be big scale benefits .
Speaker #1: But also the new product , the more we can sell the new products , the higher will be the contribution margin . So it's hard to say .
Speaker #1: What's more important, but it's both going to be quite critical for improving margins.
Speaker #4: And then, just one longer-term question also: can you give us any sense about how your capacity is scaled? Do you have enough scale?
Speaker #4: You know , after the China factory is done to get to , say , 500 million of of orders or like , can you give us any sense of where you would need to really ramp up your capacity or where you could get to today , just based on I'm not asking for a forecast , but just based on the capacity you have today .
Speaker #4: Thank you
Speaker #1: Yeah. So, as I mentioned, we have lots of space here, and we're in the middle of the Black Forest. So the one thing that's good is you really have a lot of space.
Speaker #1: Also , we used to have the solar operations , etc. we still have that space effectively , so to speak . So space is not a constraint .
Speaker #1: Machinery is not a constraint . It is people . And there's no sort of capacity limit as such . Whereas with say this is it is as much as we can grow , but there will be a sort of the challenge operationally , if we grow , continue to grow very fast , ready to train and hire .
Speaker #1: And again , maybe use contract workers fast enough to , to make sure that we can deliver on , on the quality that we , we need to deliver .
Speaker #1: I would say that is the most challenging , but it's not I don't see we have discussed . Third , a third site .
Speaker #1: You know, I don't think that that's anywhere imminent because, again, we can grow pretty fast, pretty far here on the German side.
Speaker #4: Okay. Great. Thank you very much.
Speaker #3: Thank you so much, Mr. Kiss. We have not received any raised hands, nor do we have any questions in our chat box.
Speaker #3: Therefore, I would say we have come to the end of today's earnings call. Thank you very much for your participation and your interest in SCHMID Group N.V.
Speaker #3: . If you have any further questions at a later time , please feel free to contact Investor Relations . A big thank you also to you , Arthur and Roland , for your presentation and the time you took to answer all those questions .
Speaker #3: I wish you all a successful day. Thank you, and bye-bye.
Speaker #1: Thank you very much, everybody.
