Operator: Hello and welcome to the TKH Q3 2026 conference call, hosted by Alexander van der Lof, the CEO, Elling de Lange, CFO, and Harm Voortman, Member of the Executive Board, is also available for questions. For the first part of this call, all participants will be in listen-only mode. Afterwards there will be a question-and-answer session. I would now like to give the word to Mr. van der Lof. Please go ahead.
Alexander van der Lof: Good morning, everyone, and a warm welcome to the Q3 market update call. I believe we were able to deliver a good set of results, with a 20.3% turnover growth and a 61% adjusted EBITDA growth. The strong organic growth was driven by Vision Technologies and Electrification, although also the growth within the fiber optic was very strong. What we see is that we are making further progress in the separation of the Electrification activities. We had early look meetings, started end of Q3, early look meetings with investors, and I believe that is very good to see that we also had quite positive feedback from the early look meetings.
Alexander van der Lof: We announced two interesting acquisitions within the Automation, following the previously announced buy-and-build strategy for Automation. I believe that is very good to see that the further focus we have on Automation and Electrification, that it is really paying off. I move to the next slide, where we have the specific update of these three segments. Vision Technologies performed well, as previously mentioned, with a turnover growth of more than 20%. Good news is especially that both Security Vision and Machine Vision showed a very strong growth. What we see within Security Vision, that especially the mission-critical position that we have with our technologies and the drive for automation within security is supporting us in a good and strong performance. Within Machine Vision, a very good performance in 2D machine vision.
Alexander van der Lof: I would say that all end markets performed quite well, and a strong growth, especially in defense and semiconductors, which are quite new markets in the Machine Vision area. Further in 3D machine vision, an excellent performance, not only in Europe and the US, but also in Asia. Again, a good proof of the high-end technology that we have there, the way we can differentiate with our software proposition. I believe a very good outlook in respect also of the system solution performance, which can give us another opportunity in growth. What we see is in the order book that there was a slightly lower order book at the end of June in Security Vision, whereas Machine Vision continued to have a very strong sequential quarterly growth. I move to Automated Machinery.
Alexander van der Lof: As expected, the turnover decreased, based on the lower order intake in the previous quarters. What is good to mention is that we saw in Q3 a substantial increase in order intake, I have to say, to a relatively low order intake in the H1. The outlook in that respect is that we will not see in the short term, in the coming quarters, already an increased turnover, as we need time to translate the orders with engineering into progress and percentage of completion in respect of the turnover. In Electrification, a substantial growth with 46.5%, both in offshore energy and in onshore energy.
Alexander van der Lof: In onshore energy, we saw that the demand is further growing from the Dutch network operators, and what we also, of course, see here is the very high level of framework agreements that are supporting us in our market share and at our position in the market. In offshore energy, we also saw a strong development of the activities, especially driven by higher production volumes supported by Eemshaven. What we also saw here is a strong contribution from outsourced services and accessories. All in all, this led to a very strong turnover growth. We have to mention that we see in general strong raw material price increases, and that also had an effect, of course, on the turnover in Electrification, and of around 5%.
Alexander van der Lof: Good news is, of course, also that the LTM for Q3 adjusted EBITDA for the Electrification reached EUR 81.5 million, and the turnover reached EUR 666.5 million, with an EBITDA margin of 12.3%. The other business, I already mentioned that performance of especially the fiber optic activities was at an excellent level because of improved price levels and volumes in the fiber optic market. I move to the next slide, so that is the outlook, where we reiterate our outlook communicated at the publication of the H1 2026 results. Barring unforeseen circumstances, we expect organic growth in both turnover and adjusted EBITDA in 2026. The anticipated full-year development includes a lower Q4 2026 adjusted EBITDA compared to Q4 2025, which was at a very high level, record level of EUR 70.5 million.
Alexander van der Lof: That is mainly due to the expected decrease in Automated Machinery results on the back of the lower order book and the strong Q4 2025 comparison base. So far, the presentation, and I would like to hand over now for questions.
Operator: Ladies and gentlemen, we are now ready to take your questions. If you wish to ask a question, please press pound key 5 on your telephone keypad to enter the queue. Our first question is from Ruben Devos from Kepler Cheuvreux. Please go ahead.
Ruben Devos: Yes. Ruben Devos from Kepler Cheuvreux. First one on Q4, you expect EBITDA below the EUR 70.5 million of Q4 last year, whereas the first 9 months, I think it was up almost 50% organically. So, could you help us size that a bit more, the step-down in Q4? Is it rather modest? Should we think about something close to the Q3 level of around EUR 63 million? Is Automated Machinery the only reason here, or are there other moving parts? That is my first question.
Alexander van der Lof: Good morning, Ruben. The announcement made in the press release very much concentrates on the issues coming out of the Automated Machinery, where indeed the order intake has been low in the last couple of quarters. As a result, we have seen in the more recent period a lower level of activity, and that is also going to continue in Q4. So, that is the main reason for this kind of comment on the, call it the cap or the top end of the Q4 expectation. I am not going to give a particular bandwidth in the end. I think some of the other areas which we highlighted are in good swing, have good order books to cover, so in Q4. So, it is more on this side, the Automated Machinery, where the prior periods are having this impact in Q4.
Alexander van der Lof: I would like to leave it like that.
Ruben Devos: Okay. Okay, so maybe following up on machinery, I mean, the order intake will not show yet in the revenue in the coming quarters because of the engineering lag you are referring to. That reads that basically you expect sales to stay under pressure, not only for Q4, but maybe also the early parts of next year. How are you managing the cost base through that period? I mean, I think you said in August you would not cut to the bone, but is a mid-teens, let us say, return on sales still achievable at these volumes?
Alexander van der Lof: Well, I think indeed to cut to the bone is not wise, and I think that is also current situation. We have, of course, a market position which is very strong, and we fully believe that markets are going to recover. First, maybe a little bit of a positive sign there was Q3. So we have to make sure that the competencies stay intact and that we are able to perform going forward as well. It does not mean that we are not there for looking at OPEX. We definitely have taken quite some steps. Headcount is reduced, and all kinds of other steps are being taken to mitigate the effects. But it does not mean that, let us say, everything can be compensated in this way. As you might have seen also in H1, our return on sales has been kept up pretty well.
Alexander van der Lof: We expect that to be slightly lower in H2, but it does not mean that things fall off the cliff.
Ruben Devos: Okay. How much of your engineering capacity here is sort of flexible or subcontracted?
Alexander van der Lof: I would say it's close to a third, more or less.
Ruben Devos: Okay. All right, great. Just one more on Electrification, just on price versus volume. Obviously another step up from the second quarter now in Q3. You said that part of it reflects passing on higher raw material prices. A rough split between volume and price would be helpful. Maybe on the volume side, how much came from offshore at Eemshaven versus maybe onshore from the Dutch grid operators? Thank you.
Alexander van der Lof: I believe a very good question, Ruben, but we cannot exactly specify and differentiate between offshore and onshore. Both were performing quite well in organic growth. Related to the volume and the turnover growth, I mentioned around 5% is price increase.
Ruben Devos: Okay. All right. Okay. Great. Thank you.
Alexander van der Lof: Or 6.5%. Yeah.
Ruben Devos: Okay. Thank you.
Operator: Our next question is from Tijs Hollestelle from ING. Please go ahead.
Tijs Hollestelle: Yeah. Thank you, operator. Good morning, gentlemen. I have a question about the order backlog in the Electrification business. At the end of June, it was EUR 508 million. Could you share the level at the end of September?
Elling de Lange: Yeah. I mean, if you look at the order backlog, we are close to EUR 450 million at the end of Q3. Also, the delta came out of the offshore segment.
Tijs Hollestelle: Yeah. That already includes the offshore wind projects won earlier this year. What are the names? Zeevonk and Gennaker?
Elling de Lange: Correct.
Tijs Hollestelle: Yeah. I am looking at the, let's say, also the June data, where you also give, let's say, for the overall order book and breakdown over when you expect to execute part of the order book. I only see about EUR 100 million for next year. I assume that most of the order backlog of the Electrification concerns offshore wind. Are you not concerned that you, let's say, do not win a sufficient amount of new contracts for utilization rate in 2027?
Alexander van der Lof: What we can say is that we have the order book today to have a good utilization in 2027. I believe we are also making good progress with a few new opportunities that it looks like we are able to close in Q4. However, we do not need these additional projects for 2027 utilization, so they would contribute more in 2028. Of course, with the sales funnel, you know we previously have informed the market that we are working in more than 50 tenders with a total of 15,000 kilometer of cable. That gives us a good overview of how the order book will further develop. I believe the focus for us is mainly on 2028 to get the order book filled at the levels that we have in our business plan.
Alexander van der Lof: But, yeah, we can be, let's say, realistic in the fact of the high market share that we have, that we will have a good order book in 2028, as it looks at this point of time.
Tijs Hollestelle: Okay. That's very helpful. So 2027, that's not a problem. Then just for my understanding, the specialty cable, also part of the Electrification, that is not really an order book business. That is short cycle between order and delivery, so that's not part of the reported order backlog. I guess in onshore cable, I think you shared earlier in one of your PowerPoint presentations, you have a massive framework agreement there, over EUR 1 billion. So also, that is not really included in the printed order backlog of the Electrification business. Is that correct?
Alexander van der Lof: Yeah, that is correct. Especially the framework agreements give a very good overview of where the market is developing, which direction. There, the order book is relatively low because of the framework agreements. We have a very strict procedure, formula, how we translate framework agreements into orders, and that has a relatively short period where you translate into orders.
Elling de Lange: Maybe just an addition, Tijs. The order backlog on specialty parts, I would not neglect that in relation to the revenue stream it has, because clients are locked in for long periods of time, and the order books are pretty substantial.
Tijs Hollestelle: Yeah. Yeah, and I also recall your remarks that the high-voltage onshore cables might also be produced in your subsea cable capacity. Is that also correct? And how much of the EUR 1.4 billion framework agreements, how much roughly, let's say, is related to that?
Alexander van der Lof: Yeah, I believe that's a little bit too detailed information. The main focus for high voltage will be our plant in Lochem. At the same time, Eemshaven is supporting onshore with production of insulated cores, but that is mainly for medium voltage. So we have decided to have focused plants, and again, Lochem is then high voltage.
Tijs Hollestelle: Okay. Thank you very much.
Operator: Our next question is from Martijn den Drijver from ABN AMRO. Please go ahead.
Martijn Den Drijver: Thank you, operator. Good morning, gentlemen. I would like to come back to Electrification, and very helpfully indicated what the raw material price effect was, that 5%, but you also mentioned the impact of accessories and services. Can you perhaps provide a similar number for the impact of those revenue levels in Q3?
Alexander van der Lof: No, unfortunately not at this point of time, also in respect of the separation process that we are working on.
Martijn Den Drijver: Okay. Will that effect also be visible in Q4, or is the Q3 more of a one-off?
Alexander van der Lof: No, it is not a one-off in Q3. That will continue at a similar pace in Q4 as compared to Q3.
Martijn Den Drijver: Understood. Then, I remember in the last call, you were quite confident that you would be able to produce on an annualized rate of 600 kilometers per year, so 50 kilometers per month. Did the offshore achieve that level in Q3?
Alexander van der Lof: Of course, Q3 is also a period of holidays. What you see is that Q3 is a weaker quarter because you have less productive hours. We still were, let's say, quite close to the 50 km.
Martijn Den Drijver: Understood. With regards to onshore, you have capacity at various locations. Can you give us a sense as to where utilization levels are in the overall capacity that you have for onshore on the energy side?
Alexander van der Lof: Yeah, very good question, Martijn, but we cannot disclose that at the moment.
Martijn Den Drijver: Oh, that's too bad.
Alexander van der Lof: Yes.
Martijn Den Drijver: Okay. You have mentioned strong optical fiber. Obviously, the other segments, the 24.8% growth was very strong. A similar type of question, because you have moved capacity to Poland, you now have very strong demand. How should we view utilization there? Are you nearing full capacity? Are you still have quite a reasonably long runway? How should we think about fiber optic going forward in that sense?
Elling de Lange: Well, I mean, if you look at the Digitalization part, of course, it contains various activities in there, of which the largest segment belongs to the telecom part and the fiber optics. What we have seen is that, of course, there has been globally quite a shift of, let's say, telecom portfolio going into AI-driven investments like data centers and all kinds of other things.
Elling de Lange: From that point of view, it is like a small reset in the industry now where capacity is being deployed. It also means for us that, let's say, the revenue mix is slightly different than what we have seen in the past. So it is not just, let's say, fiber optics being cabled. There is also fiber optic sales as such. So that leads to a kind of different response to what the utilization rates are. I would say on the overall chain, so the fiber and cable part, especially in the fiber part, we are almost, let's say, fully booked, I would say. We have seen that increase has come out of allocation to specific product mix items and final customers, where the growth in the end has taken shape.
Martijn Den Drijver: Okay, understood. Just one clarification, that is my final question. If I look at value, in H1, it was 50.2. That was slightly down from the previous year when it was 50.7. This quarter, it is 48.8 versus 50.2. So the decline is slightly steeper, whereas your high value-add Vision Technologies did extremely well. Can you perhaps elaborate on that decline in value-add? Is that just Automated Machinery, or is there some other effect in that added value development?
Elling de Lange: I mean, if you look at the overall mix, then of course, with the lower share of Automated Machinery in the total, you see a little bit of effect there. The other side is that the Electrification part has, with the high growth rates, it is as shown, has taken a bigger share in the whole. Of course, with the Electrification portfolio also comes, to some part at least, the sourced services, accessories, et cetera, which go into these projects. As the share grows, it also means that, therefore, the overall added value is reduced on the back of actually the growth of Electrification.
Martijn Den Drijver: Understood. That makes sense.
Elling de Lange: It is all a mix effect.
Martijn Den Drijver: And then just one follow-up on that. If you look at the added value of Electrification per se, and that of Vision Technologies per se, did they go up?
Elling de Lange: Vision did very well on the back of strong markets, increased order intake, et cetera. You might be able to improve your pricing proposition as well, and that is actually what we have been doing in quite a lot of areas. So from that point of view, pricing development is good. In the Electrification part, of course, there is a little bit of mix between the various segments where we can, let us say, have more pricing power than in others. But again, here comes in the sourced portfolio, which we then, let us say, include in our overall revenue stream in some of the projects, especially in the offshore part, which then puts a little bit of a different added value percentage on the whole. But in general, I would say across the board, fairly positive in terms of pricing power.
Martijn Den Drijver: Understood. Those were my questions. Thank you.
Operator: Just a reminder, you can press pound key 5 on your telephone keypad at any time to enter the queue. The next question is from Maarten Verbeek from The IDEA!. Please go ahead.
Maarten Verbeek: Good morning. It is Maarten Verbeek of The IDEA!. Firstly, on Electrification, particularly on the execution of the Inch Cape project, could you inform us the status about this project? Has it been completed? Secondly, since these outsourced services and accessories contribute quite a bit to your revenue, could you more or less indicate how much of the growth they are responsible for?
Elling de Lange: Yeah, first referring to the Inch Cape project, it is not yet completed. Very good progress is being made, and that project will continue in 2027. So, it will also not be finished in 2027. Again, yeah, the service business share, we are not disclosing at the moment.
Maarten Verbeek: Okay. Secondly, Vision had excellent performance in order, strong growth. But in the market, there was also an issue with the image sensors. The supplier has some issues. One supplier of these has some issues. Has pressured your growth, or do you expect that this will pressure your growth in the near future?
Elling de Lange: I mean, at an early stage in 2026, we took steps already to mitigate these effects as much as we could. So we secured most of our demands at an early stage. Of course, some of these things go at a higher ticket than in the past, but we were able to pass this on very well. I mentioned earlier that we also did well on our, let us say, added value in that segment. So from that point of view, it did not hamper too much. Of course, it is not that by the end of the year all these issues are completely resolved in the entire industry. But I think we are having quite some steps taken, as said, for 2026 at an early stage in the year, and therefore mitigated most of the plans, and we are doing a lot of stuff towards 2027 as well.
Elling de Lange: From that point of view, I am not saying that we will not have any effect, any negative effect because of that, but I think a lot of things we have taken care of. We are in this business for quite a long time, and we know that these things can happen, and we have our programs in place to assist us with going through this phase in a more smooth way than maybe we did in the past.
Maarten Verbeek: Are there any other components in the market where there is a shortage which could harm your revenue going forward?
Elling de Lange: Well, I mean, there are always some specifics in terms of very detailed portfolio elements, but I think that in itself is something which we have seen in the last couple of years and in many occasions. I would not so much say that we are going to be blocked in our growth sheerly by having not the right supply chain matching our demands. Of course, there will be issues which we have to work with and deal with, and that is what we are doing.
Maarten Verbeek: Thanks.
Operator: The next question is from Ruben Devos from Kepler Cheuvreux. Please go ahead.
Ruben Devos: Yeah. Hi, I just had a remaining question also on Vision Technologies. I mean, 21% organic growth this quarter, so another step up from around 12% in the H1. You talked about Security Vision with larger projects, though the order book is somewhat below June in Security Vision, right? Machine Vision keeps going. It would be helpful if you maybe could split the 21% organic growth between the two. If we sort of have fewer larger projects in security, in security backlog, right? Should we expect Vision Technologies growth to slow in Q4 and into next year? Thank you.
Elling de Lange: Well, I mean, before we start to change our reporting structure with all the percentages at the lowest detail possible, that is what we would like to shy away from. The comments we provided at the quarterly update, that is basically where they are. Both are doing well. As I said, I mean, the H1 has shown already a very strong growth, especially in the Machine Vision part. If you look at the entire market, I think there is a good underlying appetite for the technologies which we provide. The trends which are, let us say, making our clients to invest in our portfolio are definitely there to stay. From that point of view, I think, yeah, we are fully, let us say, in that sweet spot.
Elling de Lange: That has shown indeed at least the same growth rates as we highlighted that the H1 of the year, also in the Q3, with an increased order book in that segment. Yeah, it is, I would say, a very attractive segment to be in. We have very good niche market positions there, which are also going to give us, let us say, hopefully a strong base going forward.
Ruben Devos: Okay. Just then maybe two small follow-ups on that. Just in terms of the end market shift, is there I mean, you reference defense, right? I think in H1 was consumer electronics, batteries. I guess semi is still good, but yeah, is defense becoming a more meaningful part of 2D machine vision? Just the Machine Vision order book, is that liquidated than usual? Those two.
Elling de Lange: I think the Machine Vision. Let's say if you look at the end markets which you mentioned, indeed some of the bigger ones like consumer electronics and battery, these are strong markets, especially for 2D. Then the upcoming segment is indeed defense. Semiconductor, as you highlighted, is strong and good. Defense is an area where, of course, the, call it qualification cycles with our clients is, to some extent, fairly lengthy. But we have not started this quarter. We have started quite some time ago. So, we are getting there the order books, and that's indeed an important growth element. It's not the largest segment as such, but it's definitely on the way to get its fair share within the 2D revenue stream.
Elling de Lange: Your point whether that is leading to a kind of lengthier order book, I would say that that's not yet the case in the sense that it's coming so dominating within Q3 already that it leads to a major disruption in the lengthening of our order book. That's not the case. But of course, in the defense industry, it's very much about being specced in for certain solutions, and the spec-in is basically kind of warranting your future potential. Whether that's in order book or not, but the speccing in is essential. I think that's also a very important KPI to monitor and to follow.
Ruben Devos: Okay. Again, just a final question, still within Automated Machinery. With these two bolt-on M&As you did, the Weld Seam Inspection business and WolkAbout, could you give an idea of their combined revenue? Is it sort of the deal size we should expect from here? Or are you looking at larger opportunities in, let's say, Vision Technologies and robotics?
Elling de Lange: Yeah, I mean, if you look at the deal size here, I mean, they are combined less than EUR 10 million in revenue. But the key thing, they are strategically important building blocks in the strategy going forward. It's not, let's say, the kind of range if you look at our buy-and-build strategy, which we highlighted at least in some occasions going forward for Automated Machinery, that the average size is in that bracket, because then we have to do quite a number of acquisitions. So, I think the average going forward is going to be of a larger size than these ones, but they are essential to getting the right building blocks in place also for the future elements we want to add on to what we currently have.
Ruben Devos: All right. Thanks a lot.
Operator: Our next question is from Trion Reid from Berenberg. Please go ahead.
Trion Reid: Thanks. I am here from Berenberg. I just had two questions on Electrification. The first one was just to really get a kind of status update about Eemshaven. It is obviously running much better because we see your revenue improving strongly. But what about the profitability? Do you feel like you have ironed out all of the problems that we had in the past, or is there still efficiency to gain? The second question was just on the onshore energy also, obviously demand very strong. I wonder if you have any sense of any of this demand being restocking, and how much is kind of restocking compared to underlying demand? Thanks.
Alexander van der Lof: Yeah, related to the offshore activities, Eemshaven, I believe there is still efficiency improvements potential. We made really good progress in first-time right, which is the learning curve you have to go through, and there is a substantial reduction of first-time right issues. So again, on a very good track. But I believe efficiency improvements and productivity improvements will continue in the coming year. But we are getting close to, let us say, the business plan that we are focusing on. To the, what is it, restocking, that is not, let us say, a strong driver for, let us say, the growth that we have. I believe the stocks have been reduced last year to really a minimum, as also the demand accelerated really fast.
Alexander van der Lof: We see that the network companies try to have some more availability in their stocks, but that is not having a major impact on our turnover.
Trion Reid: That is great. Thanks. Really clear. Thank you.
Operator: Just a reminder, you can press pound key five on telephone keypad to enter the queue to ask a question.
Alexander van der Lof: Okay. As there are no further questions, I like to wrap up that we have a very strong foundation to very strong activities, Automation and Electrification, however, as also Digitalization is showing a good performance. We are looking forward to further positive development of the activities of the TKH Group. I like to thank everyone, and especially the analysts for asking good questions. I also like to thank everyone who attended the call for being in the call. I like to give warm regards from the executive board and hope to see you all in the coming time.
