hGears 1H 2025 slides: profitability improves despite ongoing e-Bike challenges

hGears AG reported mixed first-half 2025 results, with adjusted EBITDA doubling to €1.1 million on €49.3 million revenue, primarily driven by strong e-Tools segment growth (+19.4%) and internal cost efficiencies. However, the e-Bike segment continued to face significant headwinds, declining 28.6%, and free cash flow remained negative at -€2.3 million. Despite the H1 profitability improvement, management maintained a cautious full-year outlook, projecting negative adjusted EBITDA of -€4 million to -€1 million, implying a significant H2 deterioration and suggesting a full recovery is unlikely before 2026 due to persistent market challenges.

Analysis

hGears AG presented a mixed financial picture for the first half of 2025, characterized by improved profitability driven by internal efficiencies despite a slight revenue decline and persistent segmental weakness. Total revenue edged down to €49.3 million, but adjusted EBITDA doubled to €1.1 million, expanding the margin to 2.2% from 1.1% in the prior-year period. This performance was underpinned by a stark divergence in segment results: the e-Tools division posted robust 19.4% year-over-year growth to €18.0 million, effectively counteracting a severe 28.6% contraction in the e-Bike segment, which continues to suffer from industry-wide inventory destocking. However, the positive EBITDA figure is overshadowed by a deteriorating free cash flow of -€2.3 million and the company's reaffirmed cautious full-year guidance. Management projects an adjusted EBITDA between -€4 million and -€1 million for the full year, which implies a significant operational and financial downturn in the second half, reversing the gains from H1 and suggesting a full recovery is not expected until 2026.

Key Decisions for Investors

• Investors should heavily discount the positive H1 2025 adjusted EBITDA, as the company's own full-year guidance implies a significant loss of -€2.1 million to -€5.1 million in the second half.
• Monitor the performance of the e-Bike segment for signs of bottoming out from inventory destocking, as a turnaround in this unit is critical to the overall recovery thesis.
• Given the stock is trading near its 52-week low, the risk-reward profile is skewed; a cautious stance is warranted until there is tangible evidence of a market recovery or an improvement in the company's negative free cash flow trend.