Earnings call transcript: Exosens Q2 2025 sees strong growth, stock rises 2.7%

Exosens reported robust financial results for the first half of 2025, highlighted by a 20% year-over-year revenue increase. The company’s stock rose by 2.7% following these announcements, adding to its impressive 133% gain over the past year. According to InvestingPro data, the stock is currently trading near its 52-week high of $60.48, though analysis suggests it may be overvalued at current levels. Despite lacking specific earnings forecasts, the company’s performance and future guidance signal optimism.

Key Takeaways

• Revenue for H1 2025 increased by 20% year-over-year.
• Adjusted EBITDA grew by 24%, with a margin expansion of 92 basis points.
• Exosens is set to launch 5G night vision technology in September.
• The company is expanding its production capacity and establishing a new US manufacturing facility.

Company Performance

Exosens demonstrated significant growth in the first half of 2025, with revenue reaching €224.5 million. This represents a 20% increase compared to the same period last year. The company’s strategic focus on expanding its night vision and defense imaging capabilities, as well as its investments in nuclear and industrial control sensing technologies, have contributed to its strong performance. The defense market’s expansion, particularly in NATO countries, has also played a crucial role.

Financial Highlights

• Revenue: €224.5 million, up 20% year-over-year.
• Adjusted EBITDA: €69.5 million, a 24% increase.
• EBITDA Margin: 30.9%, up by 92 basis points.
• Free Cash Flow: €24 million.
• Net Profit: €27.9 million, significantly higher than the €2.9 million recorded last year.

Outlook & Guidance

Exosens projects high teens revenue growth for the full year of 2025, with adjusted EBITDA growth expected in the low 20s. The company maintains a positive outlook with a continued focus on selective mergers and acquisitions, and plans to sustain its leverage ratio around 2x. The upcoming commercial launch of its 5G night vision technology is anticipated to further bolster its market position.

Executive Commentary

Jerome Suriget, CEO, emphasized the company’s innovative approach: "We make use of physical and chemical phenomena that are invisible to the human eye to create sensing data information." CFO Quinn Bois Dominget highlighted growth targets: "We are targeting a high teens revenue growth for the year."

Risks and Challenges

• Supply Chain Disruptions: Potential delays in component sourcing could impact production timelines.
• Market Saturation: Increased competition in the night vision and defense sectors may pressure margins.
• Macroeconomic Pressures: Economic fluctuations could affect defense budgets and industrial investments.

Q&A

During the earnings call, analysts questioned the pace of capacity expansion and its alignment with demand forecasts. Executives assured that capacity increases are planned through 2026-2027, with a focus on maintaining flexibility to meet market needs. The development of 5G night vision technology and potential contracts with the US Department of Defense were also discussed.

Exosens’s strategic initiatives and robust financial performance in the first half of 2025 have positioned the company favorably in the market. With continued innovation and expansion efforts, it appears well-prepared to capitalize on emerging opportunities in its key sectors.

For deeper insights into Exosens’s performance and potential, InvestingPro subscribers can access 15+ additional ProTips, comprehensive valuation metrics, and a detailed Pro Research Report that transforms complex financial data into actionable intelligence. This analysis is part of InvestingPro’s coverage of 1,400+ top stocks, offering institutional-grade insights for informed investment decisions.

Full transcript - Exosens SAS (EXENS) Q2 2025:

Sergei, Conference Coordinator: Good day, and welcome to today’s Exoscience H1 twenty twenty five results conference call. My name is Sergei, and I’ll be your coordinator on today’s event. Throughout today’s recorded presentation, all participants will be in a listen only mode. Later, we will conduct a question and answer session. You may register for questions at any time by pressing star one on your telephone keypad.

And now it is my pleasure to introduce your host for today, mister Laurent Saxi, to begin today’s call.

Laurent Saxi, Head of Investor Relations, Exosense: Thank you. You. Good morning, everyone, and thank you for joining us today. I’m Laurent Saxi, Head of Investor Election at Exos Sans. I’m joined today by Jerome Suriget, CEO and Quinn Bois Dominget, CFO, who will present to you Exos Sans first half twenty twenty five results and our outlook.

This presentation will be followed by a Q and A session, so we can take your question. I will now hand over to Quinn Bois.

Quinn Bois Dominget, CFO, Exosense: Thanks, Laurent. So good morning and good afternoon to all. So our full year 2024 results in our first year following our IPO were very strong. As you recall, we outperformed the guidance provided at the time of the IPO. Now the 2025 has also started with strong momentum.

And in a very dynamic defense market environment, we remain fully on track to meet our full year 2025 guidance. Let me share with you a few highlights. Revenue first. We are targeting a high teens revenue growth for the year. And in H1 twenty twenty five, we delivered EUR224.5 million of revenue, which is up 20% versus H1 twenty twenty four.

And our organic growth remains also robust at plus 13%. Profitability, we are targeting low 20s EBITDA growth for half year twenty twenty five. Our adjusted EBITDA came in at 69.5%, up 24% year on year. So this represents a 30.9% EBITDA margin, which is a 92 basis points improvement versus H1 of last year. On free cash, we generated nearly EUR24 million during the period with a cash conversion ratio of 76%, slightly above our guidance of 70% to 75%.

Finally, our balance sheet remains solid. So with a leverage ratio of 1.3 times our EBITDA and strong operating cash flow generated from operations, we have the financial flexibilities to support our organic growth for R and D, but also for capacity increase, but also to fund our bolt on M and A operations. I will now hand over to Jerome, who will briefly recap who we are and what we do and the key trends that shape our markets. And after that, I return to provide deeper insights into our financial performance.

Jerome Suriget, CEO, Exosense: Thank you, Benoit. Good morning, everyone. So let me summarize what briefly what we do at Exosent that would give you a brief. At Exosent, we make use of physical and chemical phenomenas that are invisible to human eye to create sensing data information useful to OEMs and end users. We hold leading positions in our initiatives that are part of four value added fast growing verticals, defense, industrial control, licenses, and nuclear.

We are a global player as our customers can be OEMs or armed forces anywhere around the world. We focus on application that can then more than on geographies, and our technology is used globally. We are a technology driven company with 7.7% of our revenue in this in r and d. We have an active portfolio well, a historical portfolio for 230 patents. And we achieved as a just as a reminder, last year revenues of close to 4 well, €394,000,000 active in two segments that are amplification and detection and imaging, both reflecting our high end technology differentiated positions on fast growth markets.

I’m assume for now, most of you know a lot about Exosens already. So I propose that we focus on the current understanding of our markets. And if you need need more information, you’ll be able to find it in the presentation that we will not cover entirely today. So let me perhaps focus on our markets and starting with the markets around amplification. The night market vision benefits from strong underlying trends in different budget.

It was made officially that now NATO countries, while they not all of them had reached a 2% threshold that was a preexisting threshold before the the the conference in June. New target has been set for NATO countries have 2.5% of GDP with additional 1.5 for, let’s say, security related that we retain here. 3.5% defense related investments as part as a percentage of the GDP. This 2.5% should be reached by the mid twenty thirties, and it will fuel the increase will fuel the short, the medium, and the long term growth in defense. In amplification, we provide massive effective and differentiated capacities to our forces.

As a reminder, we are the sole sizable non ITAR provider of image intensifiers, And we have by far the fastest growing capacity in the world as we have demonstrated over the last few years. So next page, see massive demand in the coming in the coming years. With the growing budgets, not everything is set yet. We see already some armed forces considering changing their changing their format, adding new trees or talking about adding new trees. But for the time being already, we see over 1,000,000 devices coming over the next few years with three main areas.

North America where the penetration really today is estimated to be close to 100%, but it’s mainly a replacement rate. It’s a more modern, more advanced equipments, and and more performing devices. Europe where the night vision penetration rate is increasing and going to continue to increase from 30 to 50% as a target to 50 to 70% in some countries. Certain countries like Germany already targeting 100% of the of the troops being equipped. In Middle East and Asia, where the penetration rate is more in the range of 10 to 30%, that is far from being reached as of today.

Furthermore, in NATO countries, we start seeing consideration around reserve forces. So we do not talk anymore about only armed forces and land forces, but really about global forces and reserves are now being considered to a certain level for being part of the defense efforts. So, in the coming years, we consider Exocent is very well positioned to capture an increasing demand in Europe, in Middle East and in Asia. But we we aim at also gaining traction in The US market. First, concerning The US.

It is by far the largest single market in the world. It represents about 45% of the old market. It’s a very dynamic market where efforts of modernizing land forces are concerned and where we understand there is a sort of a form of a constrained production capacity. This is why we have chosen to implement a new factory for several reasons. First, to free up capacity in Europe so that Europe factories serve countries where either free is required, and these countries could be served from these countries where where iTAF three is required will be served from Europe and countries where it is not required could be served from our US factory.

Second is on The US market itself. US is targeting US is launching and having multiyear contract. But also, we also know penetrating The US market could take time and we believe being implement on the ground there in the country will be a change for the longer term in this country. Second, concerning Europe, a few countries like Germany, like Poland, like Finland have plans to increase their armed forces. I mentioned that.

But but also their reserves. Other countries are already entering full multi year programs with large volumes that have not been seen in the the past. It is the case, for example, in Spain, in Italy, in The UK, in Greece. And so we see the the the these large volumes progressively progressively being more frequent. Finally, in The Middle East and in Asia, there are a few large countries that will constitute the bulk of the upcoming volumes.

And here, Exosense enjoys a very strong position, a key position as a supplier of high quality exportable tubes. The group, for example, has a thirty year or close to thirty year old partnership with Bell in India. So now when we when we consider capacity, we are facing a growing demand. And we have had since 2020 a staggered capacity approach with stages of capacity increases that have been decided over time. So between 2020 and 2026, our capacity will have 2024, sorry, our capacity will have nearly doubled, but our output will have more than doubled.

And we did that in several stages. The last stages already announced, consider consists in increasing our capacity by 25% until end twenty twenty six, beginning beginning 2027 in The US and Europe. However, we are facing a growing demand because these announcements were made before the announcements of the GDP increase, before the Europe European, let’s say, consideration about increasing budgets following the Munich conference. So we are we are evaluating our further increase in capacity, and we will make announcements in due time as we consider as we consider necessary. But obviously, in end twenty twenty four, the market was seen stronger at the time of the IPO.

And today, we see we continue to see a a growing trend in in this market. We have demonstrated that we have the ability to to increase our capacity. We have the cash and the financing necessary to do so. We have a staggered staggered approach, and so we will adapt constantly to the to the market and to the demand. And and furthermore, our capacity to ability to increase our capacities also will be increased in the future because we will also be able to do that not only in Europe.

We know two factories in Europe, but also in The US with this new factory we’re setting up. Concerning our DNI segment, indeed, the DNI segment is also enjoying a strong tailwind coming from the defense. On that market, we are talk we have target we are targeting four main applications. Let me start perhaps with the two first ones, drones and anti and counter drones. Drones and anti drone devices have become a pillar of modern warfare following the lessons learned, let’s say, from the return of identity conflict, especially Ukraine and in between Ukraine and Russia.

And we see this segment as a very fast growing subsegment of our business in defense. Our technology is a very good fit for for short and medium range surveillance. Actually, the thermal and the cooled and and cameras are perfectly fit for long range. Shorter range, more invisible in the visible world. That corresponds to medium sized tactical drones, which units or programs counts in the range of a few thousand units, a few tens of thousand units for in case for for for larger programs in perhaps concerning certain countries.

But the the the use of infrared and cooled and and cooled fits perfectly the purpose, and it requires differentiated, well integrated, high performance technology that Exosensis provide. So we have made a significant design in sales to yet undisclosed customers in Europe, And we see this this program programs and these subsegments really continue to pick up. We expect, in fact, a significant part of the increasing budget to fuel this drone and consequently the anti drone warfare in the NATO countries. Our other applications in descent, the the the two remaining ones are really around platforms and missile warning systems. That is these programs come either through modernization of existing programs with optronics technologies of a new generation or for new program, generalization of optronics on on all types of platforms together with large equipment programs.

So the visible low light cameras and thermal cameras are becoming part of any new or recent platform, And the demand of these platforms is expanding rapidly aligned with the budget increases, the reinforcement of the of the troops, the reinforcement of the land forces, and the put in capacity of the armed forces. Key customers design wins adds to the expansion of our business together with expansion within existing and current customers. Rhine metals drivers enhancement systems, for example, as well as handhold missile warning systems in Germany and other NATO countries are fueling and will continue to fuel the growth in the medium to long term. In DNI, our markets are generally supported by strong underlying factor. As a reminder, we estimate that the long the medium term growth for this market in in the high single digits range between seven to 10%.

And specifically in nuclear, we are we have started a sort of a, I don’t know, a super cycle. The word is a little bit of a buzzword, but this is what it is. And supported by the renewal of safety standards into the existing platforms, the existing plans. The increase in electricity demand that is rising everywhere due to the electrification of the of industry, of our societies, of transport. And the emergence of new business models of SMRs, all of that has made nuclear inevitable and totally part of any modern energy mix amongst other things that nuclear is renewed because of these few but strong factors.

In nuclear, we enjoy a strong position on on all type of reactors, especially large reactors, but also SMRs we announced, and we have made had some way in 2024. But also research reactors. We have a unique radiation technology, and we continue to develop and to invest into new developments, new products, especially on high temperature detectors for SMRs with with new technologies of SMRs imaging. This what is now today’s study feasibility qualification studies will be followed in a few years by production, and we see that starting by the end of the decade for for some projects. Industrial control enjoys a certain market recovery, but prospects remain strong until the medium term.

As we speak, the rise of artificial intelligence applied to production issuing growth requiring more data, more information. And we see we’re starting the end to the destocking in some industrial markets like sorting as well as a result to certain level in CapEx investments that should translate into renewed interest for optronics controlling control systems. This market is tampered for the time being still with the current reshaping of The US scientific market. But overall, we see the trend in industrial markets as being more positive moving forward, and we remain we we see that remaining high single digit growth for the next few years. Last, on our life science vertical, we see still some softness with sustainable drivers for the medium term.

But when the uncertainties around The US research, we we have results. It’s more about uncertainty rather than absolute levels. So Exosense maintains the huge strategic differentiation ensuring that we remain at the leading edge of the technology, the most adapted provider of detectors to our customers’ instruments. And in the short term, the Chinese market remains soft to to to medium oriented. The US inflation relation act slightly impacted pharmaceuticals.

And some of our customers actually saving the opportunity of this market status to invest into new generations of instruments that will probably come to the market in the few years.

Paul Valentin, Analyst, Stifel: We see them kicking in, let’s

Jerome Suriget, CEO, Exosense: say, in two years, and the interest for exhaustive progress is massive. So thanks to our unique technological edge and our strategic choices, we see this market as continuing to show the growth of. So overall, the perspective for for growth for the group on the business remains strong. And perhaps it’s time to to go a bit more into details on how we did how we did during h one. And I think Quinn Boy will he will lead us through that.

Quinn Bois Dominget, CFO, Exosense: Thanks, Joe. So now let’s look how these market trends have translated in our financial performance for the first half of full year 2025. As I mentioned in the beginning, we continue to deliver strong growth, but we also improved our margin. Revenue is up 20%, adding EUR 38,000,000 of revenue overall, EUR 24,000,000 from amplification and it’s driving by very solid defense investments and our backlog is strong at the moment and give us a very good visibility for the months ahead. And we also combine this with excellent executions with our factories running at full capacity and very high yield.

20,000,000 of additional revenue is coming from Detection and Imaging, mainly thanks to our acquisition. Santronic that we closed on 07/31/2024, Elrtec that we closed on 09/01/2024, and more recently, Nuxent that we closed in March 2025. Our adjusted gross margin has also grown by 22%, reaching 49.6% of sales, but up 89 basis points compared to last year. This adds about $20,000,000 in gross margin, of which $16,000,000 from amplification and $4,500,000 from DNI. Now let’s dive into the details by segment in the next slide.

First, amplification. The revenue grew by almost 18%, and it’s driven by three main factors. The first is sustained market demand, as Jerome mentioned. Second is increased capacity, thanks to additional CapEx that we consistently invested since 2022. And third, by our sustained high yield.

On the demand side, our growth is largely due to increased volumes of night vision goggles for land forces. And these night vision goggles are powered by our image intensifier tubes. The war in Ukraine and the high density combat operations have made all armies realize that night night missions night missions are critical and give a real competitive advantage to the armies that are properly equipped. Now thanks to the industrial investment that we have made since 2022, we’ve been able to gradually increase our production capacity. And at the same time, our industrial yields have remained very high with limited scrap and rework as our interim workforces is now fully trained and fully effective.

So it’s, it shows how, our industrial excellence is delivered at Exosense, while we are able to grow capacity while maintaining a very high quality of our products with low return rates from our customers and a very low scrap at the same time. We are also seeing steady demand for higher performance products, and this translates into a better product mix for us. All of this leads to an improvement in our gross margin in Amplification of two seventy six basis points improvement year over year. And the gross margin stands now at almost 50%, more precisely 49.8%, which is a record high for us. Second, on the detection and imaging, we also grew by 23%, 23.6%, and driven by three factors, two positives and one more adverse one.

The first is, as I mentioned earlier, the external acquisitions that fuel our growth. Second is the negative impact from reduced U. S. Scientific research spending, as you mentioned earlier. And third is the increased market demand for defense imaging and detection application.

As I mentioned earlier, a big part of our DNI growth is coming from our acquisitions closed in 2024 or H1 of this year. On a like for like basis, H1 growth is actually down by 2.5%, mainly due to the decline in The U. S. Scientific research investment. This caused a drop in Q1, which still affects Q2 by the way, but to a lesser extent.

If we exclude The U. S. Scientific research cameras, our underlying growth would have been in the low single digit in H1 twenty twenty four, which is more or less what we had in 2024. In Q2, we have seen a recovery in DNI with a 7% like for like growth. We have experienced a growing demand for imaging and protection systems in defense applications.

For example, camera and drones, long range surveillance cameras that detect massive drone attacks, and missile warning systems on aircraft or on tanks. We have also benefited from positive pricing and product mix, which has helped us partially offset the negative volume impact. All in all, our DNI gross margin came in at 48.7%, which is roughly flat compared to full year 2024, which was at 48.6%. However, this is almost a three points decrease compared to half year 2024, which was at 51%, which was very high. This drop is mainly due to the dilutive effect of our acquisitions, which are on average about 10 points below our group’s margin.

The EBITDA margin is around 20%. Next page, EBITDA and EBIT. So we delivered best in class EBITDA margin of 30.9% and EBIT margin of 26.1%. That reflects our strong position in a market that demands high technology and very good industrial expertise. While we drive both growth and margin expansion, we also kept control over our fixed costs and as we benefit from scale effects.

This has led us to improve our EBITA margin by 92 points and our EBIT margin by 142 basis points. And both EBITA and EBIT margins have reached record high level for us. Naticka, we delivered a net profit of 27,900,000.0, which is a significant improvement versus last year, which was at CHF 2,900,000.0. And three points I would like to highlight here. 2024 included one off impact due to our IPO.

We had close to €4,000,000 of operational costs operational IPO consulting fees that were booked in other income and expenses, as you can see in the note one. We also booked EUR 13,000,000 of one off costs related to the financing refinancing of our debt. This is close to EUR 17,000,000 of one off costs related to the IPO. We also restructured our debt following the IPO and have significantly reduced our financial cost. The third impact is our income tax, which has significantly increased compared to last year as we increase our profitability.

Now on R and D, next page. So we are an industrial tech company. And at the core of the model is our strong commitment to R and D, which is a key lever for innovation and to sustain our future growth. Over the period, we have continued to prioritize our R and D investment, and we maintain a very solid 7.1% of sales for R and D, which is consistent with our guidance of 78%. And this ratio is also very comparable to last year’s 7.9%.

So in absolute terms, this is gross R and D spend of $17,000,000 which is up $2,300,000 versus last year. So it’s an increase of R and D spend by $1,600,000 of which EUR $05,000,000 is due to our scope effects, primarily linked to acquisitions. As you know, technology is critical to our M and A strategy and the integration of this M and A has also a direct impact on R and D spending. And the remaining 1,100,000.0 increase reflects our continued investment in R and D strategic initiatives. And among the other, there is the five gs project for night vision that is almost complete and for which we will commercially launch in September.

We also continue to leverage external funding mechanism for our R and D spend. Over the period, it represented 3,500,000.0 of subsidies and grants received either from tax credits or from customers. And this is an increase of 0.7 versus last year. And this is fully in line with our strategy to co develop solutions with our customers as it helps us derisk innovation and also secure repeat business with our customers and strengthen long term partnership. Our second pillar of our industrial tech model lies in industrial excellence.

As a process manufacturer, we transform raw materials into high-tech components. And in order to maintain best in class industrial assets, and this is critical for us to keep good yields and operational efficiency. On CapEx, two points I would like to highlight. First, we made strong investment in 2023 to meet rising demand, and we ramped up production throughout 2024. While we expected a normalization of our CapEx, the sustained strength in the defense environment has led us to maintain high level of CapEx.

And as you can see, our growth CapEx has increased from 7,200,000 to 9,700,000. This reflects our commitment to scale. Let me give you a few examples. At our Bree facility, construction is underway for a new building that is designed to house additional equipment, and this is a key enabler for our future capacity expansion. And in parallel, we have also made targeted investment in critical tooling and machines that will directly increase our output and operational efficiency.

Second point I would like to highlight, our strategic investment plan of $2,020,000,000 dollars that we announced in January. This plan is progressing fully on track. Technical engineering studies are underway, and assets are currently being built. We expect the initial commissioning to begin during 2026 with the full capacity coming by mid twenty twenty seven. And this timeline will allow us a smooth and scalable capacity increase.

Free cash. Our performance was once again a strong performance. We generated $24,000,000 of free cash, which is in line with the level that we achieved in the 2024. So as we increase our EBITDA, this positive impact was offset by higher working capital needs, which was expected given the 20% growth in our activity. A large part of this working capital is due to inventory buildup for H2 deliveries in response to our sustained demand.

Importantly, we control our CapEx carefully even as we scale operations. And as a result, we achieved a cash conversion ratio of 76%, improving from the 74% of last year and exceeding our guidance of between 7075%. Finally, leverage ratio. At the 2024, our leverage ratio stood at 1.2 times our EBITDA. And even after the closing of the Nonsant acquisition in March 2025, we’ve managed to maintain it at a conservative level of 1.3 times our EBITDA.

So we saw the cash generation from operations, the refinancing at the time of the IPO with undrawn RCF of CHF one hundred million. We are very strong we are in a very strong position to fund our organic growth ambitions, but also our bolt on M and A strategy. This concludes my first review of first half results. And I will now hand over to Jerome, who will briefly discuss our outlook for twenty twenty four twenty twenty five, sorry, and the twenty four-twenty six period.

Jerome Suriget, CEO, Exosense: Thank you, Benoit. So let me perhaps just remind you what we expect for 2025 and 2026. For 2025, we expect a continuing strong performance with revenue growth in the high teens and adjusted EBITDA growth in the low 20s compared to 2024. This implies a mild improvement in our adjusted EBITDA margin year over year on the full year basis. Until 2026, we expect 2426 adjusted EBITDA CAGR to be in the high teens.

On investments, with additional investment capacity, additional investment of €20,000,000 announced, we expect the cash conversion to be between 7075% over 2426 period. And on the M and A, we continue we will continue our selective M and A strategy while maintaining a leverage ratio of about two. So as a conclusion, our h one results show a strong performance. We are very pleased with this performance that showed sustained revenue, sustained profit growth driven by different tailwinds. But looking ahead, we expect these positive trends to continue throughout the remainder of 2025.

And we consider today, we remain fully on track to deliver our financial guidance for the year with this performance and the upcoming perspectives. This concludes our presentation. And so I think we will now be happy to take any questions you might have concerning this this publication.

Sergei, Conference Coordinator: Thank you, sir. As a reminder, to ask a question, please signal by pressing star one. If you find that your question has already been answered, you may remove yourself from the queue by pressing star two. And our first question is from Alexander Petterc from Bernstein. Please go ahead.

Alexander Petterc, Analyst, Bernstein: The first one would be on amplification on I would like to understand to what extent you’re now becoming very capacity constrained in this business. So if you could give us an idea as to how far out you are currently booked, I suppose it’s into well into 2026. If you could give us an idea of what is the capacity by end twenty five. Is it midway between 190 k and hundred forty that you have for end twenty four and ’26? The second question would be on your intention to grow DNI through m and a.

Would you not consider to put this on pause a little bit and direct all of your efforts into increasing capacity in amplification where you have the biggest constraints at the moment? And just finally, just a housekeeping one for Quinboy on tax for the year. What will be the P and L tax rate and the cash tax rate? Thank you very much.

Jerome Suriget, CEO, Exosense: Okay. Let me perhaps first answer on capacity. So our capacity is growing as we speak under several factors. Firstly, we have a have a continue we work continuously on improvements of our processes that we use our So as we speak, the capacity is increasing. On top of that, yes, we we had investments and we have machines and parts that we have to train.

Let me perhaps illustrate the the fact that the 20,000,000 additional investment for capacity increase of 25% is shared between US and Europe. Europe capacity increase will come a little bit earlier because the the the the the let’s say, the infrastructure is is more or It’s already in place, in fact. So we consider that the capacity for the European part will be hitting earlier than than The US part as soon as 2026. And meanwhile, until that, yes, we have this continuous improvement and and on capacity that should also be translated into, into our production output at constantly yield, which we always work on, but we we have to be careful about yields so that that that can evolve over time. Then reaching ’20 beginning of 2027, The US capacity will fully kick in.

And meanwhile, we have the ability, as I mentioned, to decide for the capacity increases that would heat simultaneously Europe and US from there on. Okay? So I hope that is that translates your your your question. But we expect we do not expect, let’s say, a one off capacity increase by 2027, but something more regular, especially start well, it’s already starting in fact, but it it will add on and accumulate over the course of 2025 and ’23 and and mainly 2026. Concerning CapEx, capacity increase is mainly driven by operations in our by by operations.

We have the financial means to both finance our capacity increase, which is our r and d, which is our priority. We self refinance in priority our organic growth. And also at the same time, our bolt on strategy. In terms of internal resources, the CapEx investments are driven by operations in an established organization and do not and may are mainly in amplification while we still consider detection imaging is a priority for any potential m and a. So we consider that these topics can be run-in parallel without impacting each other.

The group has the capacity to run these two strategic access simultaneously. And I would add even if

Quinn Bois Dominget, CFO, Exosense: we wanted to, I mean, increasing capacity is is not possible. It it doesn’t mean that if you invest 20,000,000 in organic growth for industrial CapEx, you would accelerate investment because there are some physical limits to it. Now on your last question on the tax rate, P and L tax rate and cash tax rate. Cash tax rate is around 20% depending on the jurisdiction where we pay our taxes. As you know, in France, we don’t pay taxes and we still have deferred tax losses.

But our industrial footprint has also changed with increasing DNI that is mostly outside of France. In terms of p and l tax rate, we are normalizing around 25%, more or less, depending on the jurisdiction where we pay our taxes as well.

Alexander Petterc, Analyst, Bernstein: That’s very clear. Thank you very much.

Sergei, Conference Coordinator: Now our next question is from Aurelien Sivignon from ODDO BHF. Please go ahead.

Aurelien Sivignon, Analyst, ODDO BHF: Hi, good morning. Thanks for taking my question. Just a follow-up on production capacity increase. Could we start seeing an impact from Q4? I mean, will it be possible to exceed quarterly revenue of 1,000,082 million dollars in amplification as early as Q4?

Or is that still a bit too early? And then on initial results, so it was sharply done year on year in H1, but it increased versus H2 at ’25, I believe. So could you maybe provide some context or color around the evaluation? Thank you.

Jerome Suriget, CEO, Exosense: Okay. So we expect h two to be not smaller than h one despite the intra half seasonality that we always see during the summer period. So that means that the answer to your question is yes. We expect in fact, the the threshold you mentioned is not a threshold in fact, and will be we expect it to be, I don’t know how to say it, but we we expect ourselves to be higher than this value over the the last part of h two.

Sergei, Conference Coordinator: Thank you. And it appears

Jerome Suriget, CEO, Exosense: There was another question?

Sergei, Conference Coordinator: There it appears there are currently no further questions at this time, sir. With this, I’d like to hand the call back over to you for any additional or closing remarks. Oh, pardon. We have a pop up question from Paul Valentin from Stifel. Please go ahead.

Your line is open. Hello,

Jerome Suriget, CEO, Exosense: everyone. Do you hear me well?

Quinn Bois Dominget, CFO, Exosense: Yes. Yes.

Paul Valentin, Analyst, Stifel: Perfect. So thank you for taking my questions. So congratulations on these good results. My first question is about detection and imaging, specifically, is life science and trial control and class segment. I was wondering how much visibility do you have with your customers in this sector?

I mean, how long does it take to clear your order book with them on average? And then maybe your your answer first, and then I will ask my second answer question.

Quinn Bois Dominget, CFO, Exosense: So DNI is a short cycle business. So the typical lead time between the time we book an order and we deliver is two to three months, very short. At the same time, with our design in approach, we know that when we are design in, the customer will buy from us as long as they will sell their own products because we’re design in. So we share forecast with our customers, but without necessarily PO or frame agreement or sub firm contract, if you wish.

Jerome Suriget, CEO, Exosense: Yeah. And so as as a consequence, when we sell we sell our products to our customers based on the fact that themselves, they sell it onto the end to the end customers. And because the short the cycle is short, we we follow this trend. However, the repeatability is ensured on the very long term for the life of the application, ten years, fifteen years, only based on the design team that we manage in the first phases. This is why I mentioned earlier in the market section that when we see we see some customers seizing the opportunity of the current market status to actually invest into new generations of machines, that mean that it’s a time when we we are getting design in, and then we know we will have repeated revenues for the wrong period of time.

Quinn Bois Dominget, CFO, Exosense: And this will apply, by the way, also for defense application in DNI, the same model.

Jerome Suriget, CEO, Exosense: Yes.

Paul Valentin, Analyst, Stifel: Yes. Thank you. Very clear. My second question is about the amplification segment. Organic growth was only 8% in q two, which marked a slight slowdown, most likely temporary.

Is it is it due to a waiting from customers preferring to wait for the next generation of tubes to be released in September, or is it related to temporary capacity constraints and bottlenecks on which we are working on to keep the growth at the year rate?

Quinn Bois Dominget, CFO, Exosense: This is more of the base effect of the of the amplification business. As you know, 2024, we increased our output throughout the quarter. So Q1 went lower, Q2 we increased and so on and so forth. So that’s the reason why we have the base effect that has impacted us in Q2 this year. But at the same time, Q3 last year was also very low.

It was we saw close to high teens high teens decline versus Q2 of Q3 twenty twenty four versus Q2 twenty twenty four. And this year, we we have a plan so to to manage the summer closure as well.

Paul Valentin, Analyst, Stifel: Okay. Thank you. And my last question is about new capacity increases being considered for 2027 and and beyond. I guess that you I imagine you you are keen to increase capacity to meet demand while being at the same time careful to not not to increase it too sharply in the short term to ensure that in the long term, capacity is always used at a good utilization rate. So my question is under this decision making process.

Do you prioritize growth even if it means taking probably possibly the risk of creating overcapacity in the long term, or do you prefer to guarantee a high level of margins like today in the long term by increasing capacity very gradually even if it could mean taking the risk of losing a small amount of market share, not totally following the the demand increase in the short term. You see my point?

Jerome Suriget, CEO, Exosense: Yes. Actually, the capacity increase is a is a complex phenomena because when in in the in the when we manufacture tubes, in fact, we have over 460 different steps. So when we say capacity increase is more adding here and there certain machines, but with the different stages, we do not add exactly the same ones. Having said that, there there is one constraint in the capacity increase that is coming from the ability for our suppliers to provide the specific machines that are proprietary. And this is what is facing the capacity, not a choice not a choice between the between the between two different strategic directions.

We we have the capacity to at these suppliers to to to to run the capacity as we wish, but this is a main constraint. It takes eighteen months basically to install eighteen to twenty four months to install the capacity. This is why, anyway, we have to take our decisions early in order to see the results between the next eighteen to twenty four months.

Paul Valentin, Analyst, Stifel: Okay.

Sergei, Conference Coordinator: Thank you. And we have a follow-up question from Alexander Peter from Bernstein. Please go ahead.

Alexander Petterc, Analyst, Bernstein: Yes, sir. Thanks. I just have two two follow ups. One is on on five g. Do you have any update to provide on on that?

Do you have anything to share in terms of technical specifications, figure of merit increase versus 40 plus? And the second question is you say in the slides that you’re now eligible for USDOD contracts, thanks to your new US based plans. Do you intend to start shipping the US DOD as soon as that plant is on stream, or will you first address ITA compliant markets outside of The US? I’d just like to understand to what extent you need to pass jump to any hoops to be able to start delivering to the DOD, get the products validated, or is that already done? Thanks.

Jerome Suriget, CEO, Exosense: Okay. So concerning the five g, the development is ongoing. We are now we have now reached a qualification phase. It’s going well, and we still plan to launch commercially this product. After the summer, we are on track and fully on track to deliver that.

I think I don’t think we have officially disclosed any performance data sheets, but we are, let’s say, on track to our plan, and we will see the opportunity of national an international gathering of customers to launch it commercially September mid September. Sorry. It’s mid September. So we are on track on that. Concerning the DOD capacity, well, there are two things in making business with the DOD.

First, you have to be allowed compliant and allowed, and this is our case because since years, we have been producing delivering devices to the DOD, not night vision devices, but electronic amplification devices to the DOD. And that is done through a special status for our affiliate, which is an FSA. So we have we have this to the this compliance is proven. The other part is we need to gain business and so that we have we can ship to the DOD. But it’s fully understood that the first shipments to the DOD should they occur earlier than when the the factory will be ready and be able to ship would occur from Europe.

It’s fully accepted and fully understood. So we are starting we started and we are starting the continuous start the development, the business development in The US, which is in a way can be served from Europe for the time being until we are fully fully installed and in capacity in The US, which we still plan for 2027.

Alexander Petterc, Analyst, Bernstein: That’s great. Thank you very much.

Sergei, Conference Coordinator: Thank you. And now it appears there are currently no further questions. With this, I’d like to hand the call back over to Laurent Saxi for closing remarks.

Laurent Saxi, Head of Investor Relations, Exosense: Thank you. Thank you again for joining this call today. We remain at your disposal should you have any further questions. We wish you a very good day as well as a great summer holiday. Thank you.

Sergei, Conference Coordinator: Thank you. This concludes today’s conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.

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