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

Introduction & Market Context

hGears AG (XETRA:ETR:HGEA) released its first half 2025 results on August 13, showing improved profitability despite continued challenges in key segments. The precision components manufacturer, currently trading at €1.81, reported solid performance in a difficult market environment, with particular strength in its e-Tools division offsetting weakness in the e-Bike segment.

The company’s stock has faced significant pressure over the past year, trading near its 52-week low of €1.34, reflecting investor concerns about the challenging market conditions and the company’s cautious full-year outlook.

Quarterly Performance Highlights

hGears reported total revenue of €49.3 million for the first half of 2025, representing a slight decline from €50.2 million in the same period last year. However, segment performance varied significantly, highlighting the company’s diverse market exposure.

The quarterly sales development shows a stabilization pattern emerging after several challenging quarters throughout 2023 and 2024. Q2 2025 revenue came in at €24.3 million, slightly below Q1’s €24.9 million, but showing signs of stabilization.

As shown in the following chart of quarterly sales development across business segments:

The e-Tools segment has been the standout performer, growing 19.4% year-over-year to €18.0 million in 1H 2025. This recovery has been gradual but consistent, with Q2 2025 showing €9.2 million in revenue, up from €8.7 million in Q1 2025.

Meanwhile, the [e]-Mobility segment experienced a slight 3.0% decline to €23.8 million, which management attributed to ongoing challenges in the automotive industry. The e-Bike segment continues to face the most significant headwinds, with revenue dropping 28.6% to €7.5 million due to persistent inventory destocking issues.

Detailed Financial Analysis

Despite the revenue challenges, hGears demonstrated improved profitability in the first half of 2025. The company’s adjusted EBITDA doubled to €1.1 million (2.2% margin) compared to €0.5 million (1.1% margin) in 1H 2024. This improvement came despite a slight decline in adjusted gross profit to €22.6 million (45.6% margin) from €23.5 million (46.7% margin) in the prior year period.

The following chart illustrates the company’s financial performance across key metrics:

Management attributed the profitability improvement to production brought forward, streamlined structures, and cost measures implemented throughout the organization. These efforts have helped offset the negative impact of lower volumes, particularly in the e-Bike segment.

Free cash flow remained negative at -€2.3 million for 1H 2025, slightly worse than the -€1.7 million reported in 1H 2024. Capital expenditure increased to €1.3 million from €0.1 million in the prior year period, reflecting selective investments despite the challenging environment.

The company’s working capital position improved to €8.6 million from €9.8 million in 1H 2024, demonstrating management’s focus on cash preservation and operational efficiency.

hGears maintained a stable balance sheet with available liquidity of €14.4 million as of June 30, 2025, consisting of €9.4 million in cash and cash equivalents and €5.0 million in unused credit lines. This represents a decrease from the €17.1 million in available liquidity reported at the end of 2024, primarily due to the negative free cash flow in the first half of the year.

The following chart shows the company’s net debt and liquidity position:

Forward-Looking Statements

Despite the improved profitability in the first half, hGears maintained its cautious outlook for the full year 2025. The company reconfirmed its guidance for:

• Revenue: €80-90 million
• Adjusted EBITDA: -€4 million to -€1 million
• Free Cash Flow: -€6 million to -€2 million

This guidance suggests that management expects more challenging conditions in the second half of the year, potentially reversing some of the profitability gains achieved in the first half. The full-year EBITDA guidance implies a significant deterioration from the €1.1 million reported in 1H 2025.

In the Q1 2025 earnings call, CEO Sven Arendt had expressed cautious optimism about future recovery, stating, "We do expect a significant recovery because we feel that this year’s drop in demand is primarily driven by the sell-off of inventory." However, he also cautioned that "one swallow doesn’t make a summer," highlighting the need for sustained improvement.

The company continues to focus on cash preservation and cost optimization measures to navigate the challenging market environment, with CFO Daniel Biszak emphasizing that "cash is king" during uncertain times.

While hGears has shown resilience in the first half of 2025, particularly in its e-Tools segment, the ongoing challenges in the e-Bike segment and cautious full-year guidance suggest that a complete recovery may not materialize until 2026, as indicated in previous communications with investors.

Full presentation:

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