Half Year 2026 Seco SpA Earnings Call
Speaker #1: Go to you.
Speaker #2: Good afternoon, everyone. thank you very much for joining us today for the staff results call. As usual, our CFO, Lorenzo Mazzini, will cover the key items of our financial results followed by our CEO, Max Mauri, which we'll share with you a detailed update on our strategy, as well as some trends on our business.
Speaker #2: about our first half 2026 number: please let me highlight that this will be the 6th quarter in a row where we deliver top-line and gross margin numbers ahead of our guidance.
Speaker #2: We delivered a solid first half performance, amid supply challenges. To be specific, we made in the period significant investments into working capital through strategic purchase of memories and PCBs.
Speaker #2: What helped the second managing supply shortages of these components. We will dive in more details in each of these KPIs in a second, but the three key messages, we want to share are pretty clear and are here in the slide.
Speaker #2: The fiscal AI era is here, and the partnership that we announced just announced yesterday with Neura with a new revenue stream, which will start from 2027, is a proof of it.
Speaker #2: The second message is that our exposure to structural growth trends, like energy-grade infrastructure, aerospace, and defense, is grooming, is growing. And the third message is that our new PCBA plants in Italy and China are now fully operational, enhancing capacity and customer proximity.
Speaker #2: I now hand off the mic to Lorenzo for the presentation of our financial results. Please, Lorenzo.
Speaker #3: Thank you, Marco. And good afternoon to all. Let's start having a look at the group's financial highlights in the first half of 2026. The edge computing business recorded a plus of 6% year-on-year growth, despite the difficult situation on the procurement market.
Speaker #3: For memories, in particular. I wanted to stress that despite the shock in prices and lead times, which implied significant renegotiations with customer and supplier, we were able to serve the market, preserving our margin and recording such growth.
Speaker #3: Useful to report that software recurring revenues grew in the first half of 2026 compared to the first half of 2025 by 13%. Growing and increased usage of our CLIA software framework.
Speaker #3: A very positive result comes from gross profit margin. We were able to improve it despite the import of increases recorded at bill of materials cost level.
Speaker #3: We successfully passed part of our cost increases to customer. The group benefit in the period also of a positive. A positive sales mix in margin terms.
Speaker #3: Adjusted EBITDA reported in the period as light reduction, explained by a discretional increase in OPEX. The group increased its indirect personnel headcount by about 20 people, respect to the first half of 2025.
Speaker #3: Primary in R&D, so research and development, to support the strong project pipeline. And logistic, to support the opening of the new plant production plant near Arezzo.
Speaker #3: Useful to point out that part of such logistic expenses will be reabsorbed from the next quarter, on which is expected a better operating leverage driven by the volume expansion we are forecasting.
Speaker #3: Passing to comment, our sales breakdown in the first half of 2026, I want to highlight the good growth of INEA. From a geographical standpoint.
Speaker #3: It was mainly driven by the rebound of German market, which is, in terms of weight, the most relevant for second. Regarding instead the split by vertical, second continues to have a great diversification, with the industrial sector being for sure the most dynamic one.
Speaker #3: Analyzing our first half 2026 profitability performance, the EBITDA margin records a reduction of about 1.5%, driven by other personnel costs. The driver was spending over research and development to support the future growth, and over logistic, for the setup of the new production app near Arezzo.
Speaker #3: Part of such logistic indirect cost will be recovered already from the third quarter, on which we expect to benefit a good operating leverage level.
Speaker #3: Passing to adjusted net financial position, after extraordinary production CAPEX, gross by about 6 million respect to year-end, due to inventory expansion. Strategic stocks of critical memories well were implemented, to put in safety deliveries to customer.
Speaker #3: Moreover, the extension of material lead times drived the necessity of increasing inventory levels. The about 18 million of either inventory was counterbalanced by a solid cash generation, impacted at the end of the semester, the adjusted net financial position by only 6 million.
Speaker #3: I close my remarks underlining that despite this growth in net debt, our leverage position remains close to one times EBITDA, so a level of real excellence.
Speaker #3: I thank you for your kind attention and I pass the floor to Max to continue our flow, our presentation. Thank you very much.
Speaker #2: Thank you, Lorenzo. And good afternoon to everyone. Let me now walk you through what our in my view, the key highlights of this publication.
Speaker #2: The first half was a resilient a solid top line in a very complex supply chain environment. And the momentum is now clearly accelerating. We expect an all-time high, 60 million euro revenue in the third quarter.
Speaker #2: What is a 25% progressions year-on-year. Order intake is at a record level as well. Up 55% year-on-year, and in absolute terms, around 50 million.
Speaker #2: This give us a good visibility for the coming quarters and beyond. And the gross margin is. Rebounding too. Back on 50, 6% in the second quarter, up almost 4 points or 400 basis points quarter on quarter.
Speaker #2: Addressing any concern on our ability to source key components and pass through the price impact to our client. I think what is important is the fundamental behind this numbers are solid.
Speaker #2: The clear recurrent revenue is up 13% year-on-year, and our book to bill is 1.4 times. We have also secured more than 50 new design win with different new customers and new logo, and we have internal production capacity now up to 350 million euro.
Speaker #2: In short, the business is healthy and is gaining traction. Most importantly, this performance was achieved in a particular complex supply chain environment. During the first to face components allocation constraints and significant extended lead time from the key silicon the growing AI demand for data center infrastructure.
Speaker #2: In this context, we proactively secured strategic inventory of critical components as I really think the 18 million that we increased in revenue are really good and like a gold right now to be able to fulfill and beef the customer demand.
Speaker #2: This give even greater value to the results delivered and work done position as well to continue executing our growth strategy in the period ahead and gaining a competitive advantage.
Speaker #2: So we discussed about physical AI already in the past, but now is tangible is just started. And I really think that this end market will be a strong new end market for our company.
Speaker #2: I think physical AI means when a machine started to perceive and interact with the reality. And this is exactly where the sake offering and our technology is really competitive and I think we are one of the best company as per our position in the world to really succeed in this new vertical.
Speaker #2: I think all our new product are AI powered by design. They used next generation chip and they have dedicated AI computing building. This open new market for SECO, robotics, drone aerospace defense, and many other will come.
Speaker #2: I think this will accelerate our growth path into 2027 and beyond. We believe SECO is really unique positioned by combining our hardware, together with our clear platform, to fulfill the markets demand.
Speaker #2: Our strategy is simple. We build a one scalable portfolio across different kind of silicon vendors and different kind of technology to really intercept growing end markets.
Speaker #2: Looking better this strategy, we are splitted across many vertical, but the most important one are for sure industrial automation, aerospace and defense, robots and drone, energy, medical, and smart device in general.
Speaker #2: In every one of these we offer hardware within AI building and more importantly we are offering also our clear platform on top to an end-to-end unique solution.
Speaker #2: In terms of partner, Intel Qualcomm NXP and others, I think it's important to partnership are starting to pay off. I think thanks to that partnership we can serve many customers with different kind of needs.
Speaker #2: Using the same strong platform. And this is how we can reduce the risk, increasing the ROI on our R&D investments and scaling our growth capacity.
Speaker #2: So let me give you a concrete example. The autonomous factory. So this is the vision under which we will see smart camera AI powered screens robots and mobile vehicles all work together.
Speaker #2: This is a real ecosystem and is where SECO is present in every part of it. The market is going definitely in better direction. This is one of the key of our future strategy and I think that is really important to mention 70% of our customers tell us they want a technology partner.
Speaker #2: Not just a supplier. Why? Because the level of innovation required is pretty high. And the growth number along this such of vertical is pretty high.
Speaker #2: Robotic investments are expected to roughly double every year through the 2030. I think this is a very huge opportunity and we are build to perfectly capture it.
Speaker #2: So why we are so confident? I think because we are offering something unique. So SECO is now covering the entire value chain that is critical for a client.
Speaker #2: From the powerful edge AI hardware to a dedicated software framework to deploy AI directly on the device at the edge and a unique marketplace of AI algorithms.
Speaker #2: Together this is a full stack from hardwares to intelligence. To value added services that customers can really build along our technology. I think the it's important also to underline that thanks to the strong partnership at the technology partnership that we build over the last five years with the main silicon vendors this kind of ecosystem is becoming even powerful.
Speaker #2: Talking about a developer community here is a good example how we want to grow. And how I think the partnership that we are building are really playing like an ecosystem.
Speaker #2: For example, the work that we did with Arduino and Qualcomm Arduino by the way is one of the largest developer community in the world.
Speaker #2: And I think having this such of community behind is very good for prototyping. But when they are ready to scale from prototyping to industrialization from samples to mass production this is where SECO come in and this is where our product and the fact that we design our product pin to pin compatible both on the hardware and software side meaning that the immigration is smooth there is no need of writing any single line of code this is where the value for the customers is huge.
Speaker #2: Accelerating they start to market reducing their investments. So let me now show you another example on a new edge AI mission critical controller that we are building together with Intel.
Speaker #2: This is a rugged device. It's a fanless. It's run on battery and works in the field. It use the latest Intel Panther Lake technology and it has on device AI for situational awareness.
Speaker #2: This opened the door to high value defense application and very big large customers. This example I think represents the entire SECO strengthness and competitiveness that start from the design integrating rugged system advanced electronic design as well as HMI display.
Speaker #2: So now we arrive at the major announcement we made last Friday. I think SECO has signed a strong strategic partnership with Neural Robotics. A European leader in cognitive and the humanoid robotics.
Speaker #2: SECO will deliver custom work on based solution our product will be inside all the five Neural Robot types humanoids personal assistants robot arms mobile manipulators and quadrupeds.
Speaker #2: In the humanoid alone five SECO models are on board. So our content grow with the complexity of the robot. We are covering from the brain to the smart limbs of the robot where basically Neura which is a unique technology from Neura is really having the Neura verse platform that is basically replicate the functionality of a neurologic human centric infrastructure into the robot.
Speaker #2: Well our computing is interact with the AI platform and make it happens in a daily basis. Life. I think it's important to mention that mass production is planned for the first quarter 2027 already.
Speaker #2: I will give you more colors on the number in a while. We are also planning to deploy this robot inside our own facilities. And I think Neura is one of the best robotic company in the world.
Speaker #2: Definitely number one in Europe. But really fighting to be a leader a worldwide leader. And I think we are really proud to have to be a core technology partner for them and to help them to scale in a huge mass production expected for the forecoming years.
Speaker #2: I think it's important also to give you an update on our operation and our production capacity. As you know we have increased our footprint and production capacity in Europe as well as in China.
Speaker #2: We have now two basically new plant up and running giving us a total full capacity to reach up to 350 million euro in revenue.
Speaker #2: I think now is okay. Now is time to have a look to the number. I think our incoming backlog is clear improving. Up 55% year on year.
Speaker #2: We know a July year to date basis. And our book to bill ratio has been constantly above one which is now 1.4 to be precise already for many months.
Speaker #2: This is not a one time spike. This is an healthy consistent trend that will continue over the course of the forecoming quarters. Now our guidance for the third quarter we confirm our revenue of about 60 million euro plus 25% year on year.
Speaker #2: This will be the highest quarterly revenue in the SECO history. I'm really proud about this. Looking ahead I can anticipate that visibility on organic growth keeps improving.
Speaker #2: This growth is broad based is come from many different end market and new logos. By looking at the order intake and boot to build KPI and factoring the Neura partnership I think I feel confident in stating that the markets estimate for the 2027 are a bit behind schedule.
Speaker #2: So before we will share a complete view on the 2027 later this year as I hint on what is coming just let me add that the Neura agreement will count for not less than additional 25 million revenue already in 2027.
Speaker #2: So I think you should take it into account when you make estimation on close here and thank you again for your attention. We are now happy to take your question.
Speaker #2: Thank you very much.
Speaker #1: Thank you to the speakers today. We now have an opportunity for questions. As a reminder if you would like to ask a question please use the raise hand function on your screen or for those dialing in it's turn nine on your keypad.
Speaker #1: Once your name is announced please remember to unmute your line and say your company name before asking your question. The first question today comes from Marco Vitale.
Speaker #1: Please Marco go ahead.
Speaker #3: Afternoon thank you for taking my question is Marco from Mediobanca. Just one from my side you spent in your final remarks you mentioned that you have a very strong pipeline and the visibility is growing over the organic growth trajectory.
Speaker #3: The question is how confident do you feel that the 60 million revenues per quarter could be the new run rate over the coming quarters and whether this will support say operating leverage to bring the EBITDA margin consistently above 20% level of the next quarters.
Speaker #3: Thank you.
Speaker #2: I think having a 60 million in revenue in mind is clearly that we will come out with an EBITDA above 20% because the operating leveraging which is actually pretty strong considering 75% more or less of our OPEX has fixed OPEX.
Speaker #2: So therefore our operating leverage is significant. Especially when we go over 50 million. I think looking ahead as I said the market consensus was basically expecting SECO to be in the range of 245 million in 2027.
Speaker #2: Now I have been at least 25 million in revenue coming from the Neura partnership. So therefore I think the magnitude by quarter will be even higher of 60 million each.
Speaker #2: We will see how proportionally the growth will be deployed into the 2027. I would say I would like to be more specific on it later during the year but generally speaking I think the expectation that we are having for as a mix in between our strong demand and strong pipe order intake book to build together with the new big partnership with Neura are now facing a target at least of 270 million for the 2027.
Speaker #3: Very clear. Thank you Max.
Speaker #1: Thank you Marco for your question. The next question now comes from Adrian Gerold. Please Adrian the floor to you.
Speaker #3: Hi. Can you hear me?
Speaker #2: Yeah.
Speaker #3: Excellent. Well thank you very much for the presentation. Really interesting. And happy to see that you have new partnerships. My question regards whose partnerships.
Speaker #3: From the previous meetings we had my understanding was that your new big partner was Raspberry Pi with the Arduino board. In this presentation seeing as it's used mainly for prototyping I'm wondering if something didn't go quite as you hoped with this partnership and how it works with Qualcomm.
Speaker #3: I'm very happy to see that you're doing pin to pin compatibility but I was wondering about this particular partnership.
Speaker #2: Right. So first of all I'm sorry. Maybe you are making some confusion. Because Raspberry Pi and Arduino are both SECO partnership but are two different player.
Speaker #2: Actually competitors. Between them. All of them are referring to the developer market. Difference in between is with Raspberry Pi we build a Pi vision which is entering now in into the mass production phase which is definitely good because it's adding new revenue.
Speaker #2: Out of this partnership with Raspberry. The Arduino pin to pin compatible IQ8 design that we did based on Qualcomm chipset it's a completely a brand new product means meaning that we are receiving a lot of demand out of it from basically all the region.
Speaker #2: Keep in mind that we will be mass production with IQ8 later in 2027 starting by the end of first half. So therefore to see the results of the partnership we did with Arduino joining the program works with Arduino Arduino is a Qualcomm owned company.
Speaker #2: We will attend second half 2027. Just to complete the picture is normal in our sector that we when you make a partnership you will see results after more or less two years from the beginning of the partnership because this is typically the time to market that you need to wait until to grab some fruits.
Speaker #2: I think also looking into the past what we announced the big partnership we did a few years ago. With Qualcomm it's definitely now starting in having the first big payoff but I can tell you it's just the beginning more to come.
Speaker #2: Thank you very much for your question.
Speaker #3: Excellent. Thank you very much for your answer. It was very clear. Thank you.
Speaker #1: Thank you Adrian. We will now move on to the next question. The next question comes from Alexandra Arsova. Please Alexandra go ahead.
Speaker #4: Hi. Good afternoon. Thank you for taking my questions. A couple of follow ups. The first one maybe again on the collaboration with Neura. So on top of your expectation on revenues for the next year just I thought to have maybe some additional R&D or CAPEX in order to develop this new partnership.
Speaker #4: You are already ready with the existing capacity innovation you carried out recently. And then the second one is maybe some follow on Germany. You mentioned presentation that Germany showed a little bit of recovery.
Speaker #4: Just maybe some more follow on what is the and what kind of growth effects over the coming quarters.
Speaker #2: Right. So first of all about Neura I think we are well covered in terms of growth CAPEX. Already to for the entire 2027 at least.
Speaker #2: We are now working on the 27 budget under which we are evaluating eventually growth CAPEX to sustain not the 27 but the 28 and for coming demand not only from Neura but from all the new logo which are not so few.
Speaker #2: That we are now analyzing and we will come out with a clear plan later this year. I don't remember exactly your the Germany. So the Germany I think is going well and this is also a structural basically change meaning that a good portion of the increasing into our order intake is coming from there.
Speaker #2: As well as looking the pipeline we are expecting to see Germany growing a different growth path in the 27. Definitely better than in the near past.
Speaker #4: Very good.
Speaker #1: Thank you. Just a small follow up again on CAPEX. So currently I assume like 20 25 million per year of years is something that is consistent we should say yes you are sharing right now.
Speaker #2: That's correct. As a basis.
Speaker #1: Very helpful. Thank you.
Speaker #2: Thank you very much.
Speaker #1: Thank you Alexandra. We will now take the next question from Bharat Nagar J. Please Bharat go ahead.
Speaker #3: Thank you. Congrats on the results and continuing momentum. Just a couple of questions from me please. On the NRE revenue in clear being lower this year versus last year does that mean that there are lesser customers currently trialing clear?
Speaker #3: How should we think about the pipeline of the potential recurring contracts that you could win from customers still trialing clear? That's the first question.
Speaker #3: The second one if I if I may ask that as well. Given investments in the inventory this year at the start of this year how should we think about operating cash conversion from your EBITDA for the full year?
Speaker #3: Thank you.
Speaker #2: Right. I think on the first point we changed completely the business model this is something that I already mentioned to you all but I would like also to repeat this one because I think it's an important point.
Speaker #2: What we did was basically lowering actually proxy to zero the NRE fee that we are charging to the customer to adopt clear and to move our offering much much faster.
Speaker #2: Much of view into recurrent revenue. We will announce something specific later this year on clear which I cannot anticipate of course today so I hope that what I told right now it's quite enough to explain how the recovery revenue part is growing and the NRE are decreasing.
Speaker #2: I would expect this trend to continue and because ultimately our goal is to increase and produce a good stream of recovery revenue which is all basically 100% of EBITDA conversion as well as all into our cash generation.
Speaker #2: On the second points about EBITDA conversion I pass the floor for a while to Lorenzo our CFO which could be more specific on it.
Speaker #5: Thank you Max and good afternoon. Well for this year as you have seen we are investing a lot in the inventory to secure our capacity to deliver to the customer.
Speaker #5: So we was pretty good in cash generation of about 12 million respect to the increase inventory so I expect to get this same path in the second part of the year so in the second half maintaining this proportion.
Speaker #5: Even if the biggest investment in the inventory has already been done so we do not expect other significant investment in the inventory. Thank you.
Speaker #3: Okay. Okay. May I just ask one more follow up please. Just in terms of the modeling for gross margin given where you are right now the price increases and the visibility that you have in the audit book are you more comfortable guiding to a higher gross margin for the second half of the year?
Speaker #3: I know the market is already expecting that but just thought I'll ask you and in terms of the audit book can you remind us as to how quickly that typically converts into revenue?
Speaker #3: Thank you.
Speaker #2: Right. I think on the order backlog side we typically have between 60 days and 6 months so 2 months and 6 months of conversion into revenue.
Speaker #2: I will say that due to the environment in the supply chain I think nowadays it's better counting 6 months between order book to revenue.
Speaker #2: Looking ahead in terms of gross profit margin I think what we achieved in the first half is very good. I think we hope to keep it also for the second half.
Speaker #2: It's really difficult for us to give you a color a specific color because there are too many things that are moving and so it's really difficult also for us to anticipate something specifically but we think we can hold what we get what we got already the first half which actually was pretty good in terms of business model from my point of view.
Speaker #2: So thank you very much for the follow up Barak.
Speaker #3: Thank you. Thanks for the answers.
Speaker #1: Thank you. So currently we do not have any questions. Q so we'll wait just a few moments to give everyone the opportunity to ask a question.
Speaker #1: Thank you. We will still wait a few moments to give everyone the opportunity to ask a question.
Speaker #2: I think let me now thank you. Sorry.
Speaker #1: Sorry to interrupt. I see that we have a question from Arianna Terrazzi. I will take her question. Please Arianna go ahead. Arianna I see that you're on mute.
Speaker #1: Yes. Thank you.
Speaker #4: Apologies. Thank you for the presentation Max. I have a couple questions mainly clarifications. First on the partnership revenues the new robotics partnership I assume that in 2027 revenues would be generated mostly you said from the first quarter.
Speaker #4: I assume a gradual ramp up throughout the next year. If you can confirm this. And second a clarification on personnel costs. If you can help us in a few minute normalized level of personnel costs over the next few quarters and years.
Speaker #4: Thank you.
Speaker #2: All right. I think on EURA side what I said that I can repeat to you easily is we are expecting as a total for the 27 year not less than 25 million additional new revenue.
Speaker #2: So therefore we are expecting it progressively into the quarters. So starting from the first quarter but gradually increasing. Quarter by quarter because EURA is really thinking to increase significantly as we go the demand progressively also into the 28, 29.
Speaker #2: We signed a very long term partnership agreement. So therefore we will have results well over the 2030 will be. On the personal cost I think this is a very specific questions.
Speaker #2: I think Lorenzo and Marco will be glad to follow up to you on a different. A different call specific one because it's too so specific that maybe we needed to make some deep calculation in it.
Speaker #2: Roughly speaking we are talking about something less just less of 1 million but I would prefer my team to double check it carefully before giving you a number.
Speaker #1: Thank you. I see that Arianna does not have a follow up question so we will wait just a few moments to give everyone the opportunity to ask a question.
Speaker #1: As there are no further questions I will now give the word back to the speakers for any final comments before bringing this presentation to a close.
Speaker #1: Thank you.
Speaker #2: Well thank you very much again. We will be around on the street in the next few weeks if there are any further question or clarification our investor relation team is always available.
