Seco S.p.A.

Operator: Welcome to Seco's H1 2026 results and business update. Before I hand over to yours today, please be advised there will be an opportunity to ask questions at the end of the presentation. In order to do so, please use the Raise Hand function on your screen, or for those signing in, it is star nine on your keypad. I now have pleasure handing over to Marco Letizia, Seco's Head of Corporate Development and Investor Relations. Please go ahead, Marco. The floor to you. Marco Letizia: Good afternoon, everyone. Thank you very much for joining us today for Seco's first half results call. As usual, our CFO, Lorenzo Mazzini, will cover the key items of our financial results followed by our CEO, Max Mauri, which will share with you a detailed update on our strategy as well as some trends on our business. About our first half 2026 number, please let me highlight that this will be the sixth quarter in a row where we deliver top line and gross margin numbers ahead of our guidance. 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, whatever Seco 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. The physical AI era is here, and the partnership that we just announced yesterday with Neura Robotics, with a new revenue stream, which will start from 2027, is a proof of it. The second message is that our exposure to structural growth trends like energy grade infrastructure, aerospace, and defense is growing. The third message is that our new PCBA plants in Italy and China are now fully operational, enhancing capacity and customer proximity. I now hand off the mic to Lorenzo for the presentation of our financial results. Please, Lorenzo. Lorenzo Mazzini: 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 +6% year-on-year growth, despite the difficult situation on the procurement market 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. Useful to report that software recurring revenues grew in the first half of 2026 compared to the first half of 2025 by 13%, growing an increased usage of our Clea software framework. A very positive result comes from gross profit margin. We were able to improve it despite the important increases recorded at bill of materials cost level. We successfully passed part of our cost increases to customer. The group benefit in the period also of a positive sales mix in margin terms. Adjusted EBITDA reported in the period a slight reduction explained by a discretional increase in OpEx. The group increased its indirect personnel headcount by about 20 people with respect to the first half of 2025, primarily in R&D, so research and development, to support the strong project pipeline and logistic to support the opening of the new production plant near Arezzo. 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. Passing to comment our sales breakdown in the first half of 2026, I want to highlight the good growth of EMEA from a geographical standpoint. It was mainly driven by the rebound of German market, which is in term of weight, the most relevant for Seco. Regarding instead the split by vertical, Seco continues to have a great diversification with the industrial sector being for sure the most dynamic one. Analyzing our first half 2026 profitability performance, the EBITDA margin records a reduction of about 1.5 percentage 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 hub near Arezzo. Part of such logistic indirect cost will be recovered already from the third quarter, on which we expect to benefit a good operating leverage levels. Passing to adjusted net financial position after extraordinary production CapEx grows by about EUR 6 million respect to year-end due to inventory expansion. Strategic stocks of critical memories were implemented to put in safety deliveries to customer. Moreover, the expansion of material lead times drive the necessity of increasing inventory levels. The about EUR 18 million of higher inventory was counterbalanced by a solid cash generation impacting, at the end of the semester, the adjusted net financial position by only EUR 6 million. I close my remarks underlined that despite this growth in net debt, our leverage position remain close to one times EBITDA, so a level of real excellence. I thank you for your kind attention, and I pass the floor to Max to continue our flow, our presentation. Thank you very much. Max Mauri: Thank you, Lorenzo, and good afternoon to everyone. Let me now walk you through what are, in my view, the key highlights of this publication. The first half was a resilient, a solid top line in a very complex supply chain environment. The momentum is now clearly accelerating. We expect an all-time high EUR 60 million revenue in the third quarter. 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 EUR 50 million. This give us a good visibility for the coming quarters and beyond. The gross margin is rebounding, too, back on 56% in the second quarter, up almost4 points or 400 basis points quarter-on-quarter, 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 fundamentals behind these numbers are solid. The Clea 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 wins with different new customers and new logos, and we have internal production capacity now up to EUR 350 million. 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 half, the electronic market continued to face components allocation constraints and significant extended lead time from the key silicon vendor, driven especially by the growing AI demand for data center infrastructure. In this context, we proactively secured a strategic inventory of critical components, as I really think the EUR 18 million that we increased in revenue are really good and are like a gold right now to be able to fulfill and meef the customer demand. This gives even greater value to the results delivered and work done position us well to continue executing our growth strategy in the period ahead and gaining a competitive advantage. We discussed about physical AI already in the past, but now it's tangible, it's just started and I really think that this end market will be a strong, new end market for our company. I think physical AI means when a machine starts to perceive and interact with the reality. And this is exactly where the Seco offering and our technology is really competitive, and I think we are one of the best companies as per our positioning in the world to really succeed in this new vertical. I think all our new products are AI-powered by design. They use next generation chip, and they have dedicated AI computing built-in This opens new markets for Seco: robotics, drone, aerospace defense, and many others will come. I think this will accelerate our growth path into 2027 and beyond. We believe Seco is really uniquely positioned by combining our hardware together with our Clea platform to fulfill the market's demand. 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. Looking better this strategy, we are split across many verticals, but the most important ones are for sure industrial automation, aerospace & defense, robots & drone, energy, medical, and smart devices in general. In every one of these, we offer hardware with AI built-in, and more importantly, we are offering also our Clea platform on top to an end-to-end unique solution. In terms of partners, Intel, Qualcomm, NXP, and others, I think it's important to mention that our strategic partnerships are starting to pay off. I think thanks to that partnership, we can serve many customers with different kind of needs 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. Let me give you a concrete example, the autonomous factory. This is the vision under which we will see a smart camera, AI-powered screens, robots, and mobile vehicles all work together. This is a real ecosystem, and is where Seco is present in every part of it. The market is going definitely in that direction. This is one of the key of our future strategy, and I think that it's really important to mention 70% of our customers tell us they want a technology partner, not just a supplier. Why? Because the level of innovation required is pretty high, and the growth number along this vertical is pretty high. Robotic investments are expected to roughly double every year through 2030. I think this is a very huge opportunity, and we are built to perfectly capture it. Why we are so confident? I think because we are offering something unique. Seco is now covering the entire value chain that is critical for a client. 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. Together, this is a full stack from hardware to intelligence to value-added services that customers can really build along our technology. I think it's important also to underline that thanks to the strong partnership, the technology partnership that we built over the last five years with the main silicon vendors, this kind of ecosystem is becoming even powerful. 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. 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. 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 migration is smooth. There is no need of writing any single line of code. This is where the value for the customers is huge. Accelerating their time to market, reducing their investments. Let me now show you another example on a new edge AI mission critical controller that we are building together with Intel. This is a rugged device. It's fanless, it's run on battery, and works in the field. It uses the latest Intel Panther Lake technology, and it has on-device AI for situational awareness. This opened the door to high-value defense application and very big, large customers. This example, I think, represents the entire Seco strength and competitiveness that start from the design, integrating rugged system, advanced electronic design, as well as HMI display. Now we arrive at the major announcement we made last Friday. I think Seco has signed a stronger strategic partnership with Neura Robotics, a European leader in cognitive and humanoid robotics. Seco will deliver custom Qualcomm-based solution. Our product will be inside all the five Neura robot types, humanoids, personal assistants, robot arms, mobile manipulators, and quadrupeds. In the humanoid alone, five Seco modules 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 Robotics, is really having the Neuraverse platform that is basically replicate the functionality of a neurologic human-centric infrastructure into the robot, while 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. I will give you more colors on the number in a while. We are also planning to deploy this robot inside our own facilities. I think Neura is one of the best robotic company in the world. Definitely number one in Europe, but really fighting to be a worldwide leader. I think we are really proud to be a core technology partner for them and to help them to scale in a huge mass production expected for the forthcoming years. 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. We have now two basically new plant up and running, giving us a total full capacity to reach up to EUR 350 million in revenue. Okay, now it's time to have a look to the number. I think our incoming backlog is clearly improving, up 55% year-on-year in a July year-to-date basis. Our book-to-bill ratio has been constantly above one, which is now 1.4, to be precise, already for many months. This is not a one-time spike. This is a healthy, consistent trend that will continue over the course of the forthcoming quarters. Our guidance for the third quarter. We confirm a revenue of about EUR 60 million, +25% year-on-year. 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. This growth is broad based, it's come from many different end market and new logos. By looking at the order intake and book-to-bill KPI and factoring the Neura partnership I feel confident in stating that the markets estimate for the 2027 are a bit behind schedule. 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 EUR 25 million revenue already in 2027. I think you should take it into account when you make estimation on Seco now on. Let me close here and thank you again for your attention. We are now happy to take your questions. Thank you very much. Operator: 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 star nine on your keypad. 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. Please, Marco, go ahead. Marco Vitale: Afternoon. Thank you for taking my question. It's Marco from Mediobanca. Just one from my side. In your final remarks, you mentioned that you have very strong pipeline and the visibility is growing over the organic growth trajectory. The question is, how confident do you feel that the EUR 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 over the next quarters? Thank you. Max Mauri: I think having EUR 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 as fixed OpEx. Therefore, our operating leverage is significant, especially when we go over EUR 50 million. I think looking ahead, as I said, the market consensus was basically expecting Seco to be in the range of EUR 245 million in 2027. Now, I am adding at least EUR 25 million in revenue coming from the Neura partnership. Therefore, I think the magnitude by quarter will be even higher of EUR 60 million each. 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. 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-bill together with the new bigger partnership with Neura, are now facing a target at least of EUR 270 million for the 2027. Marco Vitale: Very clear. Thank you, Max. Operator: Thank you, Marco, for your question. The next question now comes from Adrien Giraud. Please, Adrien, the floor to you. Adrien Giraud: Hi. Can you hear me? Max Mauri: Yeah. Adrien Giraud: Excellent. Well, thank you very much for the presentation. Really interesting, and happy to see that you have new partnerships. My question regards those partnerships. 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 is used mainly for prototyping, I am wondering if something did not go quite as you hoped with this partnership and how it works with Qualcomm. I am very happy to see that you are doing pin-to-pin compatibility, but I was wondering about this particular partnership. Max Mauri: Right. First of all, I am sorry, maybe you are making some confusion because Raspberry Pi and Arduino are both Seco partnership but are two different player, 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 into the mass production phase, which is definitely good because it is adding new revenue out of this partnership with Raspberry. The Arduino pin-to-pin compatible SOM-SMARC-Dragonwing-IQ8 design that we did based on Qualcomm chipset, it is a completely a brand-new product, meaning that we are receiving a lot of demand out of it from basically all the region. Keep in mind that we will be mass production with the SOM-SMARC-Dragonwing-IQ8 later in 2027, starting by the end of the first half. Therefore, to see the results of the partnership we did with Arduino, joining the program Works with Arduino is a Qualcomm-owned company. We will attend second half 2027. Just to complete the picture, it is normal in our sector that 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. I think, also looking into the past, what we announced, the big partnership we did a few years ago with Qualcomm, is definitely now starting in having the first big payoff. But I can tell you it is just the beginning. More to come. Thank you very much for your question. Adrien Giraud: Excellent. Thank you very much for your answer. It was very clear. Thank you. Operator: Thank you, Adrien. We will now move on to the next question. The next question comes from Aleksandra Arsova. Please, Aleksandra, go ahead. Aleksandra Arsova: Hi. Good afternoon. Thank you for taking my questions. A couple of follow-ups. The first one, maybe again on the collaboration with Neura. On top of your expectation on revenues for the next year, are you expected to have maybe some additional R&D or CapEx in order to develop this new partnership, or you are already raised with the existing capacity and innovation you carried out recently? The second one, maybe some color on Germany. You mentioned during your presentation that Germany showed a little bit of recovery. Maybe some more color on what is the growth rate you are seeing in Germany and what kind of growth you are expecting over the coming quarters. Thank you. Max Mauri: Right. First of all, about Neura, I think we are well covered in terms of growth CapEx already for the entire 2027, at least. We are now working on the 2027 budget, under which we are evaluating eventually growth CapEx to sustain not the 2027, but the 2028 and forthcoming demand, not only from Neura, but from all the new logo, which are not so few, that we are now analyzing, and we will come out with a clear plan later this year. I do not remember exactly your The Germany. 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, as well as looking the pipeline. We are expecting to see Germany growing a different growth path in the 2027, definitely better than in the near past. Aleksandra Arsova: Okay, thank you. Just a small follow-up, again, on CapEx. Currently, I assume EUR 20 million-EUR 25 million per year of run rate CapEx over the next few years is something that is consistent with the stage you are sharing right now? Max Mauri: That is correct as a basis. Aleksandra Arsova: Very helpful. Thank you. Max Mauri: Thank you very much. Operator: Thank you, Aleksandra. We will now take the next question from Bharath Nagaraj. Please, Bharath, go ahead. Bharath Nagaraj: Thank you. Congrats on the results and the continuing momentum. Just a couple of questions from me, please. On the NRE revenue in Clea being lower this year versus last year, does that mean that there are lesser customers currently trialing Clea? How should we think about the pipeline of the potential recurring contracts that you could win from customers still trialing Clea? That's the first question. Max Mauri: Right. Bharath Nagaraj: The second one, 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? Thank you. Max Mauri: 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. What we did was basically lowering, actually proxy to zero, the NRE fee that we are charging to the customer to adopt Clea, and to move our offering much faster, much easier from a client point of view into recurring revenue. We will announce something specific later this year on Clea, which I cannot anticipate, of course, today. I hope that what I told right now, it's quite enough to explain how the recurring revenue part is growing and the NRE are decreasing. I would expect this trend to continue, and because ultimately our goal is to increase and produce a good stream of recurring revenue, which is all basically 100% of EBITDA conversion as well as all into our cash generation. On the second point about EBITDA conversion, I pass the floor for a while to Lorenzo, our CFO, which could be more specific on it. Lorenzo Mazzini: 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. So we was pretty good in cash generation of about EUR 12 million respect to the increased inventory. So I expect to get this same path in the second part of the year. So in the second half, maintaining this proportion, 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. Bharath Nagaraj: 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 order book, are you more comfortable guiding to a higher gross margin for the second half of the year? I know the market is already expecting that, but just thought I will ask you. In terms of the order book, can you remind us as to how quickly that typically converts into revenue? Thank you. Max Mauri: Right. I think on the order backlog side, we typically have between 60 days and six months, so two months and six months of conversion into revenue. I will say that due to the environment in the supply chain, I think nowadays it is better counting six months between order book to revenue. 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. It is really difficult for us to give you a specific color because there are too many things that are moving, and so it is really difficult also for us to anticipate something specifically. But we think we can hold what we got already in the first half, which actually was pretty good in terms of business model from my point of view. Thank you very much for the follow-up, Bharath. Bharath Nagaraj: Thank you. Thanks for the answers. Thanks. Operator: Thank you. Currently we do not have any questions queued, so we will wait just a few moments to give everyone the opportunity to ask a question. Thank you. We will still wait a few moments to give everyone the opportunity to ask a question. Max Mauri: I think, let me know. Thanks for- Operator: I see. Max Mauri: Sorry? Operator: Sorry to interrupt. I see that we have a question from Arianna Terazzi. I will take her question. Please, Arianna, go ahead. Arianna, I see that you are on mute. Arianna Terazzi: Can you hear me now? Operator: Yes. Thank you. Arianna Terazzi: Apologies. Thank you for the presentation, Max. I have a couple of questions, mainly clarifications. First, on the partnership revenues, the Neura Robotics partnerships, I assume that in 2027, revenues will be generating mostly, you said from the first quarter, but I assume a gradual ramp-up throughout next year. If you can confirm this. Second, a clarification on personnel costs, if you can help us in assuming the normalized level of personnel costs over the next few quarters and years. Thank you. Max Mauri: All right. I think on Neura's side, what I said that I can repeat to you easily is we are expecting, as a total for the 2027 year, not less than EUR 25 million additional in new revenue. Therefore, we are expecting it progressively into the quarters. Starting from the first quarter, but gradually increasing quarter-by-quarter because Neura is really thinking to increase significantly as we go, the demand progressively also into the 2028-2029. We signed a very long-term partnership agreement, therefore, we will have results well over the 2030 with them. On the- Lorenzo Mazzini: Personnel Max Mauri: personnel cost, I think this is a very specific question. I think Lorenzo and Marco will be glad to follow up to you in a different call, a specific one, because it is so specific that maybe we needed to make some deep calculation in it. Roughly speaking, we are talking about something less, just less of EUR 1 million, but I would prefer my team to double-check it carefully before giving you a number. Operator: 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 questions. 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. Thank you. Max Mauri: Oh, 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. Thank you again for joining us. Operator: This presentation will now come to a close. Thank you.