Earnings call transcript: ATS Corp Q2 2025 sees revenue growth, stock fluctuates

ATS Corp reported its Q2 2025 earnings with notable revenue growth and improved profitability, although the stock experienced significant volatility post-announcement. The company achieved an EPS of $0.34 and revenue of €846 million, reflecting a 6% increase year-over-year. Despite an initial 5.31% rise in stock price to $28.15 following the earnings release, shares have since retreated to $26.83, a 4.69% decline.

Key Takeaways

• Revenue increased by 6%, reaching €846 million.
• EBITDA margin improved to 21%.
• Operational cash flow turned positive at €125 million.
• Stock price surged initially but later declined.
• Strong demand in server infrastructure and AI sectors.

Company Performance

ATS Corp demonstrated robust financial performance in Q2 2025, with a 6% increase in revenue and improved EBITDA margins. The company attributed its success to strong demand in server infrastructure and AI, alongside effective cost-saving measures. These results highlight ATS Corp’s resilience and adaptability in a competitive market.

Financial Highlights

• Revenue: €846 million, up 6% year-over-year.
• EBITDA: €175 million, an increase from €157 million.
• EBITDA Margin: Improved to 21% from 20%.
• Operational Free Cash Flow: Positive at €125 million, compared to a negative €345 million last year.

Market Reaction

Following the earnings release, ATS Corp’s stock initially rose by 5.31% to $28.15 but later declined by 4.69% to $26.83. This fluctuation reflects mixed investor sentiment, balancing strong financial results against broader market volatility.

Outlook & Guidance

ATS Corp projects full-year revenue of approximately €1.7 billion with a 23% EBITDA margin. The company anticipates continued growth in its substrate business and targets positive EBIT by year-end, aligning with its strategic focus on innovation and cost efficiency.

Executive Commentary

CEO Michael Merton emphasized the company’s strategic turnaround, stating, "Stop the bleeding means we need to turn around this company into positive cash flows." He also highlighted ATS Corp’s position as a leading provider in substrates: "We are definitely on the path of being one of the most important providers and suppliers for substrates."

Risks and Challenges

• Potential supply constraints in T-glass materials could impact production.
• Market volatility may affect stock performance.
• Economic uncertainties could influence demand in key sectors.

Q&A

During the earnings call, analysts inquired about potential supply constraints, specifically regarding T-glass materials, and the company’s expansion plans in Kulim. Management addressed these concerns by emphasizing their focus on operational efficiency and technological advancements in substrate manufacturing.

Full transcript - ATS Corp (ATS) Q2 2026:

Operator: Hello, ladies and gentlemen. Thank you for standing by. My name is Ulrike, your operator for today. Welcome, and thank you for joining the AT and S Conference Call on the Results for the First Half Year twenty twenty five-twenty twenty six. Throughout today’s recorded presentation, all participants will be in a listen only mode.

The presentation will be followed by a question and answer session. And now I would like to turn the conference over to Mr. Philippe Gepard.

Philippe Gepard, Conference Moderator, AT&S: Thank you, Enrique. Good morning or afternoon, ladies and gentlemen. Welcome to the AT and S H1 twenty fivetwenty six conference call. With us today are Michal Nerthin, CEO and Silvo Leipner, VP, Corporate Finance. Mr.

Mentine will give an overview of the key developments as well as the market update. Afterwards, Mr. Leipner will comment on the financial figures and our guidance. As Ulrike mentioned, the presentation will be followed by a Q and A session. Now I would like to hand over to Mr.

Martin. The floor is yours.

Michael Merton, CEO, AT&S: Yes, Mr. Gerber. Thank you very much, and a warm welcome from my side. My name is Michael Merton. I’m CEO of AT and S AG.

And as you maybe can hear, my voice is already a little bit used from that day. We had press conferences already early this morning. There’s a lot of interest into our company, what is good and what makes us proud, of course. So let me let me tell you a little bit more about the circumstances and the surroundings before I directly go to the developments. Maybe some of you remember that I mentioned very early after I joined this new responsibility within AT and S that I have three focus points.

This is our customers, this is our investors, and this is our employees. And exactly along these three main responsibilities and main targets for the company, we are actually developing it. So we have some quite good results now for the first half of our fiscal year, and this is not just because of a quite good market environment. It’s with the entire headwind coming from the dollar, but it’s with a lot of support from our customers, our employees, and it’s a lot of trust from the side of our investors. So the first important thing after the history of AT and S with our big balance sheet, with our high numbers on our balance sheet and all the investments we did is to stop the bleeding.

And stop the bleeding means we need to turn around this company into positive cash flows. We need to be able to earn the money we spend, whether it’s for salary, whether it’s for interest or for further investments. And exactly this is what we wanted to achieve for the first half of the year, and we did. And even if it’s not on the top of our presentation, for me myself, this is the most important number that’s a turnaround in our operating free cash flow from a quite negative number minus EUR $345,000,000 into a positive number EUR 125,000,000. This will guide us also in the future.

This is one of the cornerstones of our further development as well. We take care for cash and we take care for cash flow. And this is we take care for the money of our investors. As I said before, with the headwind of the dollar exchange rate, but the tailwind of our customers, we achieved quite a nice growth of our top line from EUR800 million the previous year into EUR846 million this year. And please remember, we have a difference in the dollar exchange rate of roughly 10%.

So it translates into a growth of roughly 15% in dollar. And believe me, we will continue this kind of growth as I promised before. Hand in hand with the improvement of our top line and also against the dollar exchange rate, we were able to increase our EBITDA margin and now we have an EBITDA of 175,000,000 against 157,000,000 in this time frame one year before. This equals the margin of 21%. Yes, our profitability is not one to one related to the dollar exchange rate.

We have some natural hedge because we have costs in the non dollar area. But nevertheless, there’s a lot of effort, and I will show you the numbers later on, coming from our internal performance and cost management to achieve this positive development as well. So in a nutshell, we achieved our first half year guidance for this fiscal year. This is thanks to our efficiency program. And another important number is our EBIT became positive in Q2.

And we will reach breakeven or we already reached breakeven in EBIT for the entire first half of our running fiscal year. When I’m talking about stop the bleeding, this is the second step towards earn the right to grow. So cash flow positivity, first step now or second step now is zero EBIT. Next step, what we want to achieve end of this fiscal year, is a clearly positive EBIT. And the third step then later on will be a positive net result.

This is healing of a company towards earn the right to grow and earning the entire trust back from the investors. We have positive feedbacks from almost all of our customers and positives in two ways, not just from the market environment, but I also told you that we focus on innovation and on a different way of cooperation with our partners, with our customers. And a lot of our customers became our partners. So we offered a kind of partnership towards innovation. We have the first innovation circles headed by our CTO with customers.

And this program also is going on and it is building trust and long term relation with our customers as well. Both of our new sites, Kulim and Hinterberg, are actually in ramp. The ramp as as ramps are, at the end, it’s good and positive, but with all the hurdling around, of course. But it is positive so far. We could certify all products we wanted to certify in the related time frame.

And step by step, we are now going into classical operations, classical products for our customers and generating classical revenue and not just test products we are running there. Overall, the market environment, especially the relation between The United States and China, stay a little bit uncertain, so we do not really know how it will develop. I’m not sure if everybody really expected that president Trump and president Xi Jinping really agreed on the rare earth trade, what is now possible again. So nobody really knows how this will further develop. As we stated before, tariffs are not our main problem so far because our customers are mainly in The United States.

Nevertheless, we are not supplying our goods directly into United States. We are supplying them to assemblers, which take computer chips and our products to fully assemble main boards of computers, supercomputers, and artificial intelligence computing systems. Our full year guidance at the end will translate into an operational growth dollar to dollar of roughly 20%. And this, of course, helps us significantly independent from the pressure on our cost structure. It helps us for operational excellence.

The more product you have to deliver, the more opportunity you have to save cost. So follow me to the next slide. This will be significantly faster. You just see the market development, how we’ve seen it. You see the market development for printed circuit boards, what in dollar was very positive this time, 13 percent plus in dollar, but just 3% plus in euro.

And the market development for the IC substrates was plus 16% in euro plus 6%. If you go to the next slide, what does it mean for us? If you go to the business unit electronic solutions, these are the printed circuit boards. You see at the end, h one to h one, so 2425 against first half year of twenty five-twenty six, we achieved a net growth in euro of plus 1%, will translate a dollar growth of roughly 11%. So also this dollar growth gives us room for operational improvement, so we could fully compensate on the margin side, the dollar exchange rate, so that we actually also stay with 21% of operational margin, what is EBITDA, with a positive outlook for the second half of the year.

For a better understanding, we had a separate small bar for Maybe some of you remember that Ansam was our site in South Korea, what we sold last year. And for better comparability, we set it a little bit aside so that you can compare the real numbers on the ongoing business. The second unit shows you the growth you expected and we promised. This is the growth from our business unit microelectronics electronics, what are the substrates. And here you see the year on year quarterly comparison is already in euro plus 10%, again, what equals plus 20% in dollar.

And this is even more if you have the first half of last year compared to the first half of this fiscal year, what is a plus of 19%. So you can imagine, as I promised, this is the ramp we are actually seeing with increase, of course, of profitability, what will further go on significantly in the second half of this year. But my personal congratulations to our organization, to the people working here for achieving at the end 29% in dollar growth. That means growth in products and for this ramp. And as I said, this is something what will continue especially in profitability in the next half of this fiscal year.

So an important point for the long term sustainability of our business, you can see on page six. We are always discussing and you are asking about our customers, customer diversification, who is our customer, etcetera. And we have two major trends, what we achieved now, to have a better, broadness and sustainability on our customer base. So for the PCBs, it’s important to go away from being a supplier like others, a commodity supplier. And you can see that actually with the contracts we already made, this is not daydreaming, we are talking about projects and contracts which are already in house and already negotiated with our partners and our customers.

We grow the number of key customers with revenue share of more than EUR30 million per year in the PCB area. So it’s very clear that we’re becoming one of the key players also in that area. So why? Because also the classical PCBs are getting more complex. This is one thing.

The second thing is that for power supplies and for high power electronics, our PCB technology as well as some patents as well as some of our core competencies in embedding are high value for our customers now. And we see that this market is developing quite nicely and we would see market growth in the PCB area as well as you see this growth in the number of key customers in that area as well. So that’s an excellent sign for the upcoming time, for the upcoming two, three years for the foreseeable future. For IC substrates, the customer diversification has a different has a kind of a different background. So your questions have been understandable.

Well, you have to rely on just a few customers. What will happen if one of these customers will fail? Good question. The answer the the answer now is we diversified. We are actually becoming one of the key players in IC substrates and the most advanced ones which are existing on the market.

And as I told you previously for the customer development for PCBs, we are increasing the number of our key customers in the IC substrate area as well. So we are not any longer dependent on one, two, three customers. For the next fiscal year, we have contracts with 15 plus key customers, giving us the revenue, giving us the growth and of course giving us their trust. The markets are still the same, as you know, you see it on the left side, so I can skip this. On page eight, what is so important for us to come back to profitability, you remember stop the bleeding and the right to grow is our cost saving program.

We actually overachieved our first planning status for our internal AURORA cost saving program. We wanted to achieve EUR 130,000,000 in direct cost savings relevant in both cash flow as well as in profitability for this fiscal year, But we achieved in the planning of this year, second half of this year and the first planning for the next fiscal year, we achieved additional savings of roughly 20,000,000. So we ended up with total savings for this fiscal year of EUR 150,000,000 plus. And we have a quite good outlook on our project status that we actually can state this will happen for sure. Why do we have such a good overlook?

The reason is we plan all these projects roughly 200 corporate wide in so called measure cards. So we evaluate the cost impact directly together with our controlling and we follow-up each of these projects also while financial controlling over the entire project lifetime until the money is delivered to the bottom line. You see the ramp of our cost improvement on the right side. And what I already mentioned before, we will continue this program into the next fiscal year with a three digit cost saving on top for 2627, so that we definitely will continue to counterfeit dollar exchange rate 0.1. But we also want to be a benchmark not just in technology and innovation, but we also have to be cost competitive and a benchmark in cost as well for our customers.

Before you are asking the question, let me say a few words to the rumors within the supply chain, the risk of so called T glass shortage. What is T glass? You see it here in a picture. An IC substrate substrate consists on a core, and on both sides you have 40 and up to 80 layers, very thin ones, on a fiberglass material what will be filled with a kind of a resin, will harden later on, and all of these layers will have intermediate structures from copper, from conducting material. There will be 100 thousands of holes in each of these layers for interconnects, And, of course, there will be room in these structures for the power supply or processor of up to one kilowatt with thousand apps of electrical power.

So all these layers basically consist on glass fiber, woven glass fiber, extremely fine. And this is T glass. And this T glass mat will be filled with resin and further handled. So with the extreme growth and demand and the layer adds, so the further enhancement in the layer counts for IC substrates. There’s a question actually in the room if there will be enough of this material to support the growth of the entire industry.

So it’s not about having a shortage against today, it’s the question if the industry, the supply industry could follow the growth. That’s the key question. We had a meeting with management of one of our top suppliers here in Austria last week. I personally had this meeting, and I think we are in a good way. We have excellent relations to our suppliers.

We are evaluating second sources. Actually, we are testing already. We are testing together with our customers alternatives, so for getting more material. Again, it’s not about a shortage against the revenue level today. It’s a question of how strong the industry can grow further on.

And this is actually ongoing, well, with with quite a good good progress. I think we will have a better view even next week in Kulim in Malaysia. I will be present there as well. We have our supplier conference. So more than EUR 500,000,000 in supply value will be present there, and we will further discuss how to overcome this demand for the future, how there are different chances, different plants which can further produce, Are there different glass tiles which can be used?

And so on. So just for you to understand what is going on there and what is the problem or not the problem, but it’s a problem for growth. Okay. So hopefully, I could give you some information on the market overview and an overview on how our company actually develops. And I will hand over to mister Leipner, my dear colleague from finance, giving you a little bit of closer look to our financials and the results in detail.

Thank you for attention.

Silvo Leipner, VP Corporate Finance, AT&S: Also, welcome from my side. I will lead you to the next slide and starting with group results. On the right side, you can see that the half year revenue growth from 800,000,000 to €846,000,000 that is roughly a plus of 6%, driven by positive mix volume effects and that compensated, as mister Merton mentioned, the the unborn revenues that we have made last year also included in the revenues as also the headwinds from pricing and FX. If we calculate FX also even, then we have an increase even of 11 percentage, and you can see the margin is still from growing from 20 to 21 percentage. And if we go to the left side to the quarters, you see the quarter two growth a little bit more at 12% to the Q1 quarter, and we have a little bit better margins that results from benefits from customer agreements that was affected in the second quarter.

And even if you compare Q2 twenty four-twenty five to Q2 twenty five-twenty six, you see a slightly minus of one percentage. But if you include also here the FX, you have also On the next slide, as always shown by us, the cash and cash equivalents, you see we have a financial structure in some with unused creditor lines of EUR $811,000,000. In the year before, it was EUR $741,000,000. If we include the EUR 100,000,000 of deposits, then we have even EUR $840,000,000 in the last year, so even on a maintained level.

If you see the maturity on the left side, we have to repay this year €25,000,000 €26,000,000 €245,000,000 and in the next year €485,000,000 on debt. So with this money we can do this, it’s roughly in some 730,000,000. The financing costs are also predefined with 3.25%. They are lower as we have lower set ups and also lower interest rates. On on the next slide, the development on on working capital.

As as you know, in the quarter two, three, and four, twenty twenty four, twenty five, we have lower factoring in our working capital as we reorganized our our factoring program. And you can see then in q one twenty five, twenty six, we were on a normal level again. In the q two twenty five, twenty six. We have now 14 plus six percentage on on worker capital ratio. The inventory and the payables are more or less on the same level.

Also, the receivables are only short term effect on the other receivables. Normal receivables are even on the same level. So in the end, we are there between 1040%. On on the next slide, you see the cash flow. The cash flow from operating activities is 209,000,000.

We write it on the right side, including also the factoring, what I mentioned in the working capital. So a little

Philippe Gepard, Conference Moderator, AT&S: bit

Silvo Leipner, VP Corporate Finance, AT&S: positive than last year. So the cash flow from investing activities is minus two. There we see a lower CapEx than in the last year. The CapEx was 84. Last year, we have 254.

And also the special thing with the deposit is included in the investing activities. Cash flow from financing activities is lower than last year. In the end, we prolongate in of the debt to 135,000,000. Last year, it was 337,000,000. And if you look at the operating activities, two zero nine cash flow minus the CapEx annualized operating free cash flow that is very positive with €125,000,000 and as mentioned even from Mr.

Maertin last year, $345,000,000. On the next slide, the balance sheet, you can see the total assets are more or less on on the same level, minus 1%. There’s a little bit more depreciation and FX effect included. The equity is decreasing mainly impacted by FX effects from 1,000,000,000 to 877,000,000. And the equity ratio with this is also lower from 23.3 percentage to 19.2.

And the net debt is more or less on the same level we have last or in March, we have 1,400,000,000.0, and we are now also roughly at 1,400,000.0. The net debt EBITDA ratio is also very fine with 2.2. On the next slide, the guidance for for this year, 05/26, we expect approximately €1,700,000,000 revenue with an EBITDA margin of approximately 23%. We calculated all this with an oil U. S.

Dollar FX rate of 1.17 and we expect a net CapEx of $250,000,000. And also, as mentioned, we maintained positive EBIT and operating free cash flow. On the next slide, you see the guidance for twenty six-twenty seven that we confirm. The revenue will stay between 2,100,000 and 2,400,000.0. As you know, when we calculated this revenue, have an S.

Dollar FX rate of 1.07. Actually, it is 1.15, 1.16. So we have a difference of 10 percentage. And as you know, of our revenue roughly 75% are in US dollars, so we expect it on a lower level in the revenues. The rest is more or less as in the past, no no changes.

Maybe a word to the equity ratio as this is assuming a new repayment of a hybrid. The first call of the hybrid, as you know, is in October, and the repayment is in January 27. We are actually in validation how to proceed, so this is open and not no decision yet. And back to Filip to the Q and A.

Philippe Gepard, Conference Moderator, AT&S: Thank you, Mr. Merthy and thank you, Mr. Leitner. We will now start the Q and A. In order to give everyone the opportunity to raise questions, we would like to ask you to limit yourself to two questions.

Once we are through, if there are still questions and still time, we will start another round. Now I would like to hand over to Ricci to handle the session.

Operator: Thank you. So ladies and gentlemen, at this time, we will begin the Q and A session. If you are using speaker equipment today, please lift the handset before making your selections. So as a reminder, if you would like to raise a question at this point, please press 3 and the star key. The first question at this point comes from Daniel Leon, Astecorp.

Daniel Leon, Analyst, Astecorp: Congrats to the good development. I would like to ask you how you expect seasonality in the second half year, especially given, on the one hand, the strong iPhone demand that we are seeing and which is also being guided now for the December? And also reflecting, of course, on your ramp, how would you expect this to play out the third and fourth quarter in terms of maybe revenue and also profitability?

Michael Merton, CEO, AT&S: Okay. Thank you for your question. You know that we don’t answer question with respect to our customers, but generally to the cell phone market. The cell phone market has a strong peak in the Christmas business. So the production of these smartphones will take place mostly in the first half, second quarter, a little bit third quarter year of or regular time year.

And so delivery of the components are low in the second half of the year. So what equals our second half of fiscal year? So we expect a little bit lower business in smartphone support, but of course, a strong further development in our substrate business, what goes hand in hand with additional profitability. So for the next fiscal year, we see some additions in our classical so called PCB business as well. Power electronics is becoming more and more important for many, many reasons.

So we can have one on one on this one while this is happening. So we see more and more interest on power electronics and embedding, and this will support the classical PCB business from next year on as well.

Daniel Leon, Analyst, Astecorp: Okay. Clear. Thanks. And then maybe you showed us more or less the applications that you target in both of your segments. Could you somehow provide a split to this as well or the importance?

Or maybe as you line them up, are they ranked in the importance based on revenue?

Michael Merton, CEO, AT&S: Yes. So far, we do not have a a a revenue split, but it’s a good point. I think we can prepare such revenue split for the next time or for one on one meeting. What is important maybe in actual environment, automotive is not our most important business. So what you’re actually hearing from the automotive industry, especially in Germany, the ship shortage, etcetera, this has almost no effect on us.

So we are supplying the automotive industry a little bit out of China and out of India. But we have no downside actually coming, for example, from German European automotive industry here so far. Digital infrastructure definitely is one of our biggest market segments principally, but it’s something it’s a good idea to prepare the market shares here for for the next time. Sorry not having this in in

Daniel Leon, Analyst, Astecorp: Yeah. Would would be also interesting where the growth comes from for the for the clients that you diversify going forward.

Michael Merton, CEO, AT&S: Yeah. Okay. Here we have a strong demand, believe it or not, from servers, server infrastructure, as well as from artificial intelligence. But it’s not just the 100% artificial intelligence, it’s also the big server and mainframe infrastructure as well.

Daniel Leon, Analyst, Astecorp: Okay. Clear. Thanks.

Operator: The next question comes from George Brown, DB. Please go ahead. Your line is open.

George Brown, Analyst, DB: Yes. Hi, guys. Thanks for taking my questions. I have two, if I may. Just firstly, I see in your reports that you are now in close contact with further key players in the chip industry, notably in AI.

I’m just wondering if you provide some details here on who that may be potentially and what the timeline is here. And then secondly, just on the constraints that the industry is facing with T glass, I guess, how confident are you that you can qualify it and ramp at alternative suppliers within a suitable time frame? I guess, how easy is it for these supplies to replicate what the key glass is basically today? Thanks, guys.

Michael Merton, CEO, AT&S: So let me start with the T glass. There are already different or the supply the structure of the supply chain is there are manufacturers of the original glass as a material, and then you have manufacturers using that raw glass material to produce this woven material we are using for the course of our substrates. So why PGlass? What is so special here? It has a very high content on special minerals, especially aluminum oxide.

By the way, what is sapphire? That’s a trivial name. And we use it in the course because of the strength of this material. So the bending and the withstanding of bending coming from from all the layers on both sides is the lowest with the so called T glass. And therefore, for this extreme flatness what can be reached, this material is so important.

The qualification is already going on. So we already, since many months, are working on further qualifications together with customers. It’s not just a question of the supply chain, it’s also the question of the end users. So the qualification is not something what we just have to do backwards in the supply chain, but it has to be done on defined products together with our customers. This is actually ongoing.

We have already some alternatives, but we have to discuss each of the alternatives separately with each of the customers of our customers. And this is also ongoing. And again, we are not talking about a shortage in terms of the market going down. We are talking about limitations of growth. Actually, nobody really can tell you how the order side is developing.

Because of these rumors of so called shortages, everybody tries to reserve as many materials as possible. And it’s what we call in Germany I don’t know the English expression, but we in German call hamsterkoeisen. So therefore, we are in direct contact to the top executive management of the biggest suppliers here. Yeah? To get rid of these, well, waves coming from from maybe over buying of this material or over ordering of this material.

So we are looking quite positive to that future and into our contacts within supply chain and what we know from our customers, which are already also part here of this discussion and discussing directly with raw material producers as well as with the so called cloth producers. Unfortunately, we can’t give you the names. We are definitely not allowed. We are asking all the time, but we are not allowed, besides certain exceptions, to talk about our customers. But we you know that AMD, for example, is our partner one of our important partners in Kulim in Malaysia.

And when I’m talking about key customers, it’s the same range of top customers like, for example, AMD. We are not talking about second class industry customers. And if you see the number, it’s more or less everything who is playing in that market. It’s more or less everybody. Sorry.

Everything. It’s more or less everybody playing in that market. So take the name, and you most probably are right.

George Brown, Analyst, DB: Okay, brilliant. Thank you.

Operator: Okay, thank you. Ladies and gentlemen, as a reminder, And there is a follow-up question at the moment coming from Daniel Leon, Asset Group. Your line is open.

Daniel Leon, Analyst, Astecorp: Yes. Yes. Thanks. When following EBITDAN, who published results last week, they gave a really favorable strong outlook for IC substrates in the coming years. They mentioned a CAGR of 33% for this in the coming two years.

Maybe too early, but is there any any thoughts when when when reading or hearing such such statements, guidance from from your close peers on how you would see the development shaping for ATNS?

Michael Merton, CEO, AT&S: You know, I I I showed you that we already had a growth of in dollar, and I didn’t it’s reporting in dollar, I think, or in yen. What is it? Yen. Yen. Think the related growth was in dollar, wasn’t it?

So we already see a growth of 29% in dollar last year to this year in our substrate business. But coming from our past and coming from that, let me call it over investment in the past, I’m a little bit hesitant for giving this kind of extremely strong growth promises. We will go through phases of healthy growth, value growth, so profitability enhancement hand in hand with growth. And we will not do this kind of an overinvestment again, wasting the money of our investors. So we will be reactive enough for fast responses because we already have large parts of the infrastructure which is necessary, but we will not have this kind of pre investment before it is happening.

So and therefore, I don’t want to promise things which can’t be promised, you know. This kind of growth is definitely not certain for the future. There are so many aspects what what what can happen. Maybe that’s possible. But then we will discuss it a little bit closer in time when we really see it happen.

But overpromising is is something what I never did in my past and what I will not do for AT and S. You’re on a very good path. You’re on the path back to profitability. We are definitely on the path of being one of the most important providers and suppliers for substrates and of one of the most maybe the most innovative one. This is the promise I can give to you, and this is a promise I also give to our customers.

And this is what we can fulfill. So if there is an opportunity, we will catch it. And if there’s an opportunity in that size, we will also catch it. Can I promise this kind of growth? Nope.

And I will and and don’t do so.

Daniel Leon, Analyst, Astecorp: Okay. Thanks. Maybe also related maybe to kind of the outlook this time on on the technological front. You mentioned the betting. Eby then also mentioned the betting, but also for IC substrates starting some in 2017, 2018.

How would you see this opportunity to shape and add to profitability going forward? And especially also differentiation because this this steps out again from commoditization towards really high end.

Michael Merton, CEO, AT&S: Absolutely. This is what we’re already doing, by the way. We are already embedding components into substrate. This becoming more and more important, and it’s also one step what brings you closer to the customer because the value of the active and passive components we are embedding could be huge. It could be hundreds of dollars for each substrate on the top.

And so we have this kind of risk sharing, value sharing, etcetera for these components as well. And besides substrates, where we are continuing our efforts for embedding, Embedding becomes more and more important for power electronics as well. And this is our second focus point where we have, I don’t wanna say, really unique, but really one of the front end opportunities. And actually, there are not so many companies being able to do what we do in power electronics. And this definitely is a second growth path, what is a little bit more in our terminology focused on the the the more classical side of printed circuit boards and not that much for for IC substrates.

But embedding is key for both sides and will definitely be a driver. And we do it already for substrates. We have this capability.

Daniel Leon, Analyst, Astecorp: Okay. Great. Great. And the last one, is fair to assume to have a breakeven to slightly positive free cash flow in the second half as well, just for the second half?

Michael Merton, CEO, AT&S: Please again, what’s the cash flow in the second half? Sorry. Positive

Daniel Leon, Analyst, Astecorp: free cash flow for the second half of this year, just for the second half of this year?

Michael Merton, CEO, AT&S: Yes, of course. Yes, of course. Yes, of course. So what is new I’m not sure if you remember what I said in one of the calls before. EBIT, so an earning KPI, what is relatively close to the net profitability of the company and can be influenced by the organization itself as well as operational free cash flow are the top key KPIs now inside the company for all the internal leaders.

And we take care that cash flow is still one of the leading measures and we will have positive cash flows throughout the entire year. Yes, definitely. We do not burn cash anymore.

Daniel Leon, Analyst, Astecorp: Sounds great. Thanks a lot.

Operator: The next question comes from Brigitte Schuster, RBI. Please go ahead.

Brigitte Schuster, Analyst, RBI: It rather relates to the financials. And if I look at your slide where you show the maturity profile and financial position, one could recognize that your cash and cash equivalent position increased. At the same time, your unused credit lines decreased. Is there a specific pattern behind or a specific reason for drawing credit lines and having it deposited at cash? Or is is there any any reason behind?

Thank you.

Silvo Leipner, VP Corporate Finance, AT&S: In the end, it is a switch, and there’s not really a reason behind. We we have some unused credit lines that was in an agreement and that it goes to a to a normal debt, and that is for future set. So no no plan to reduce or something like this.

Brigitte Schuster, Analyst, RBI: Okay. Thank you.

Operator: There is a follow-up question now coming from George Brown, DB. Please go ahead.

George Brown, Analyst, DB: Yeah. Thanks, guys. So we’re we’re seeing more headlines on on substrate shortages or or at least constraints, you know, happening in the future, you know, obviously, alongside improving demand. In that context, I’m just wondering whether, you know, new customers or or even current customers are looking more actively at the second plant that you’ve been cooling. Obviously, AMD today is ramping the first plant, but the second plant today is just a shell, I believe.

And, yeah, it may take one to two years to ramp into production fully. So, yeah, any any color on on the second plant in Kulin would be helpful. Thanks, guys.

Michael Merton, CEO, AT&S: That’s a little bit too early. Does it really need two years to ramp it? Maybe not. So we did the first or we we we spent the first course on it just recently. We also can take it into use or convert it into a usable production site also step by step.

So that’s what the infrastructure allows, and we just can fill it with certain kinds of equipment and machines. This is something what we are actually thinking about for possible contracts, possible growth end of the next fiscal year, over next fiscal year. So if you see this coming and there’s a commitment, we maybe have to start here somewhere in the next fiscal year. But, actually, we are ramping. Actually, we are leveraging on equipment what is already existing.

So we had equipment in China, what was under underutilized, what we brought to Kulim for full utilization. So there is a second line in Kulim already in the build up status close to qualification together with our customers. So we have a full line now additionally in Kulim, mostly containing machines we already had. So until we really have to leverage on the second building, this this takes some time. And so the good message is we have already in the in the spendings we did so far, the capacity of an additional line in Kulin.

And we have time and also time to discuss it with our customers for new technologies mainly utilizing and embedding is one, by the way. What is what is more and more important to be implemented in the next building in Kulin, but it’s nothing what we have to decide now. It’s something what we actually start discussing now.

George Brown, Analyst, DB: Brilliant. Thanks so much.

Operator: Now there’s another question coming from Johannes Wies, Apus Capital. Please go ahead.

Philippe Gepard, Conference Moderator, AT&S: Yes. Good afternoon. A more general question. The topic class of strut. How much is scissor second, maybe question to another technology.

How much is this a chance for you?

Daniel Leon, Analyst, Astecorp: Because it’s chip on vapor on on PCB.

Michael Merton, CEO, AT&S: You extremely quiet. It’s very hard to understand you. The first question was about GLEB substrate. And the second, to take a terminology what could be understood by everyone, is a kind of a marriage between classical PCB and substrates for the future.

Philippe Gepard, Conference Moderator, AT&S: Exactly. Yeah. What is this customer’s TSMC, for example, not TSMC. Yeah.

Michael Merton, CEO, AT&S: Yeah. Exactly. So glass substrates, it’s not just under evaluation. We already developed processes here. Mhmm.

So we can if we want. We we we are able actually to produce substrates with these kind of cores if we want and if there is a demand. So the the key point in glass substrate is, as it mostly is, it’s cost. Okay. And so so the production cost is is definitely higher than for the classical ones.

You need different kind of laser drilling. You need different processes for metallization, for filling up the wire holes, etcetera. So this is at the end more costly and it’s not really finally decided in the industry whether the industry wants to go down that route or continues with the improvement of course and maybe based on this t glass and more advanced core substrate materials. So this is open. Good point is our r and d as well as our technology already developed related processes.

And for us, there is no gap if there is really a demand, so we can do it if it is needed. Great. So the other kind of substrates well, one answer to it is, maybe you know that we are one of the very few companies worldwide which own both of the technologies. So we are leading once on the PCB side and we are leading on the other side on on substrates. So marrying both of this together, let me say, a cheaper and more integrated access towards advanced packaging for the future is something what we are actively driving, where we are actively looking at.

If this really will be the technology route for the future for the high end systems, is not clear so far. We we know that there is one, the biggest company, NVIDIA is is pushing for it. But I think there will be other alternatives in the future as well. So we are working on three d solutions on front and back end contacting. So there’s a lot of things going on also in our direct development context to our core customers.

And there are other alternatives under evaluation as well. So for us, it’s important to be in the driver seat of each of these opportunities. So if something will have the breakthrough in industry that we can be one of the first ones being ready to deliver an already approved process with the customer. If this combination will be the breakthrough, I’m I’m not really sure. Maybe I once mentioned the problem of of power supply.

So the the modern processors used in AI systems running on o point seven, o point eight volts using electric current of up to thousand amps and more, so power consumption of a kilowatt and more. And I think we have to work on reducing this kind of power consumption, and you need ways to feed this power through what whatever you call it, substrates or advanced PCBs in the future. And you need some intelligent electronics to bring down the the the current and maybe to have higher voltages so that the overall losses are lower and so on. So there’s a lot of things actually on the technology side under development. And maybe if some of you want, we once can have a technology investors day and invite you here in to Lehomme together with our CTO to give you a little bit more insight on what kind of strings actually are under discussion for the future.

And there is not just one way, but be sure we are in the driver’s seat also for this topic. So sorry for that long answer.

Philippe Gepard, Conference Moderator, AT&S: No. That was a great answer.

Michael Merton, CEO, AT&S: Thanks a It’s a story.

Daniel Leon, Analyst, Astecorp: I I got it. Thanks a lot.

Philippe Gepard, Conference Moderator, AT&S: Okay. So looking at the time, we have we have one quick question from Daniel left.

Operator: Okay. Mr. Leon, your line is open.

Daniel Leon, Analyst, Astecorp: Oh, thank thank you for letting me on again. There’s one left, actually. We’ve talked a lot about substrates for a good reason, but there’s now also, like, an outlook and tendencies to to see lighter trickling down to medium range and also basic cars starting in China. Do you see yourself benefiting from this trend given your regional setup? Or would you need to wait until this trend becomes more prominent in especially in Europe?

Michael Merton, CEO, AT&S: So you’re asking about LiDAR system. Yeah? So the laser LiDAR system, what is typically phase shifting laser. Okay. Maybe you know that I’m a little bit familiar with this technology coming from a former company.

This is not a big driver for our business. What is a bigger driver is power electronics principally. So electrical vehicle or electrification by principle is and will drive our business with solid state power electronics being embedded into circuit boards. And for China, our driver is more that we decided to definitely step into the China for China business or local for local business. We clarified the boundary conditions on the legal state and the level process landscape for this just recently.

And during my last visit in Chongqing, we officially started that approach and communicated it to politics and to companies, the existing and potential customers as well. So this in in the entire broadness of of applications, this definitely will have an impact for us on the long range. And this will be an additional business and is counterfying, of course, The US China, well, trade war, how how however you want to call it. This hurdling around between this big this big industry nations. And local for local principally is something what is important for us and what we implemented.

LiDAR itself, it’s not a big thing for us. Power electronics is

Daniel Leon, Analyst, Astecorp: Okay. Understood. Clear. Thanks a lot.

Philippe Gepard, Conference Moderator, AT&S: Okay. Thank you. So with this, we will conclude today’s conference call. Thank you for your participation and questions. If you have any further questions, please feel free to contact our IR team, Johannes Mapne and me anytime.

Thanks again, and goodbye.

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