Earnings call transcript: Genoptic Q4 2024 revenue misses forecast

Genoptic’s Q4 2024 earnings call revealed a significant revenue miss, reporting $118.3 million against a forecast of $204 million. Despite this, the company saw a 28% year-on-year increase in earnings per share, reflecting strong profitability. The stock reacted with a 2% decline post-announcement, closing at $49. According to InvestingPro analysis, Genoptic maintains a "GREAT" financial health score of 3.01 out of 4, and the stock appears undervalued based on their proprietary Fair Value model.

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Key Takeaways

• Genoptic’s Q4 2024 revenue fell short of expectations by a substantial margin.
• Earnings per share increased by 28% year-on-year, indicating strong profitability.
• Stock price declined 2% after the earnings announcement.
• The company faces ongoing market uncertainties due to geopolitical tensions.
• Semiconductor order intake remains challenging.

Company Performance

Genoptic experienced a mixed performance in Q4 2024, with strong earnings growth but a notable revenue shortfall. The company reported a 5% organic revenue increase for the full year and improved its return on capital employed by 120 basis points to 10.8%. However, the decline in order intake by 6% and a reduced book-to-bill ratio of 0.92 highlight challenges in maintaining growth momentum.

Financial Highlights

• Revenue: $118.3 million (missed forecast of $204 million)
• Earnings per share: Increased by 28% year-on-year
• EBITDA margin: Nearly 20%
• Return on Capital Employed: Improved to 10.8%

Earnings vs. Forecast

Genoptic’s Q4 2024 revenue of $118.3 million was significantly below the forecasted $204 million, marking a substantial miss. This highlights potential challenges in demand or execution, contrasting with the company’s strong earnings growth.

Market Reaction

Following the earnings announcement, Genoptic’s stock price fell by 2%, closing at $49. This movement reflects investor concerns over the revenue miss and broader market uncertainties, despite the company’s strong profitability metrics.

Outlook & Guidance

Looking forward, Genoptic anticipates 2025 to be a transition year, with revenue guidance of +/- 5% compared to 2024. The company expects EBITDA margins between 18-21% and plans to reduce capital expenditures significantly. Challenges in semiconductor order intake are expected to persist in the first half of 2025. Analyst consensus from InvestingPro remains strongly bullish with a 1.45 rating (1.0 being strongest buy), with price targets ranging from $22.24 to $42.11.

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Executive Commentary

CEO Stefan Tregga remarked, "2024 has been, in many ways, another record-making year for us when it comes to sales and profitability." He also noted the company’s efforts in exploring new applications and maintaining technology leadership in photonics.

Risks and Challenges

• Geopolitical tensions could impact market stability and demand.
• Inventory corrections in the semiconductor market may affect order intake.
• Potential tariffs between the US and Canada could influence the ProtoMax business.
• Dependence on top customers, who account for 48% of total revenues, poses concentration risk.

Q&A

During the Q&A session, analysts expressed concerns about the ProtoMax business amid US-Canada trade tensions and sought clarity on the stabilization timeline for the semiconductor market, expected in H2 2025. Continued investments in emerging technologies like silicon photonics were also discussed.

Full transcript - Jensen-Group (JEN) Q4 2024:

Conference Moderator: This conference will be recorded. Good morning, ladies and gentlemen, and a warm welcome to the Genoptic Conference Call regarding the Financial Results 2024. At this time, all participants have been placed on a listen only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to your host, Doctor.

Stefan Tregga.

Stefan Tregga, CEO, Genoptic: Thank you very much and very good morning from our end here in Jena. With me today as always is our CFO, Friska Harven and Klisek, and we’re looking forward to discussing with you 2024 and giving a first sort of glimpse into what we expect for 2025. ’20 ’20 ’4, I’d say, has been characterized again uptick by really quite robust growth in revenue and earnings. We’re fairly proud of the fact that we could grow the business once more, this time single digit sales growth is what we post. And probably even more importantly, we again expanded our profit margins to now an EBITDA of almost 20% of sales or just a tad below the 20% mark.

But I’d say it’s almost 20% of sales and we’re really, really proud of that. On the other hand, of course, we have to report declining order intake. Order intake declined also by mid single digit, and that’s predominantly in our, in the former, I have to say, in the former NPC segment, basically driven by the turmoil in the automotive markets. And we’ll get to that in more detail later in the presentation. Generally, I think it’s fair to say that the market environment really has been or has become much more difficult in recent months.

Geopolitical tensions are raising and the discussions around tariffs that we see in certain parts of the world really doesn’t help us and help, I believe, the whole economy and certainly not us as an export oriented organization. And we have to deal with that going forward. I think we’re a strong business that can deal with that, but it does have consequences, of course, for all of us. Internally, I think it’s great to report that our further development of our municipal setup is shaping up. We have now set up the business such that our business units really do reflect the four markets we serve, the semiconductor manufacturing, healthcare and life sciences, metrology and production solutions and our smart mobility solutions, our traffic business.

Those are basically the four markets in broad terms that we do serve and we have aligned our organization along that. For today, we are for the last time presenting figures and numbers in the old setup of APS, SMS and MPC. We do have the presentation included a realignment to help you understand our business in the new segments going forward. And of course, next earnings call then when we do our Q1 earnings call, we will report in our new segments. Let me before I turn the floor over to Prisca and hand the mic over, let me just reiterate that we believe our long term growth perspectives remain intact really.

We have all the ingredients for continued growth despite the fact that for 2025, we’re a bit more cautious and we come to the outlook for this year later in the presentation. We’re a bit more cautious, maybe a bit on sort of the careful side here because there’s so much uncertainty that it is really difficult to judge how the next weeks and months will unfold, let alone have a very clear picture of 2025 at this point already. That is why we are, later in the presentation, are sharing with you a fairly broad guidance and that again is due to this uncertainty this year.

: By and large though, and in

Stefan Tregga, CEO, Genoptic: the long run, we all are very convinced that the growth perspectives and the business model of Enoptic is absolutely intact. We remain to be a growth engine, and we’re very committed to demonstrate that in the mid term term. With that, let me turn the mic over to you, Kriska.

Friska Harven, CFO, Genoptic: Thank you, Stefan, and good morning to all of you on the call. I would like to now cover our performance for the fiscal year ’20 ’20 ’4 in greater detail as always starting with order intake and order backlog on Page six. So overall, in 2024, we have seen quite some volatility on order intake. Following very positive dynamics in the second quarter, we saw a greater level of overall market uncertainty, as Stefan has just mentioned, impacting order activity in the third but also in the fourth quarter. As a consequence, full year order intake came in at $1,030,000,000 down by some 6% year over year and with the main divisional trends being as follows: Demand from the family equipment end market has been largely stable on a full year basis, but was down year over year in Q4, broadly as we expected.

Demand trends in our Life Science and Medical business remained essentially unchanged compared to Q3, meaning substitute activity in our laser based applications has continued. In fact, as Stefan mentioned before, our overall order intake drag in the development in 2024 came from our MPC, impacted by certain structural issues in both the German and the North American automotive industry as well as the recent discussions about import tariffs in The U. S. As a result, our book to bill ratio on group level has reduced to 0.92 sorry, to 0.92. As a consequence, our order backlog has reduced by about 10% year over year, and we anticipate to convert approximately 80% of this backlog into revenue in this year 2025.

Now moving to Page seven for revenue and EBITDA. Now turning, first overall, I think the execution in 2024 continued to be strong, as Stefan said before, considering notable growth in both revenues and earnings. Looking at the left graph, you can see that top line development remained robust and in line with the guidance we provided at the beginning of last year. Revenue was up by around 5% without any effects from portfolio changes in 2024, so this growth was purely organic. The main growth drivers in this period were once again our Advanced Photonic Solutions division as well as our MPC segment.

Moving on to profitability. On the right side of the slide, as you can see, our EBITDA was up a little ahead of our revenue growth, thus we realized further improvement in our margins. Stefan just mentioned it before. Again, it’s important in line with our expectations set out at the beginning of the year. As you know, we were anticipating some onetime costs relating to the move to our factory in Dresden of approximately 50 basis points.

We’ve actually recognized about half of that in Q4 ’twenty four, and we expect the other half to occur in Q1 twenty twenty five. From a divisional perspective, the main contributor in absolute terms was the APS division, but also the non controlling portfolio companies posted notable higher earnings. Moving on to Page eight. From a regional perspective, we saw strong growth in Germany in fiscal year twenty twenty four and in our largest region, Europe, both up by around 175%, respectively. In Europe, including Germany, the APS segment was the main growth driver.

In The Americas, we saw a positive development in the APS division as well as MPC, whereas the go to market transition of our SMS business still had a negative impact on top line. Most importantly, business with our top seven customers continued to develop positively. These customers now account for approximately 48% of our total growth revenues, and we regard this as a development of the proof of our successful strategy of growing the share of wallet with our top customers. Now moving on to Page nine. Here, I would like to give you a little bit more color on the drivers behind the evolution of our margin.

In 2024, we saw gross margin approximately 150 bps, 140 bps down year over year, which from a line item perspective was primarily influenced by depreciation and provision releases in the prior year. On the functional cost side, we continue to be very disciplined on spending. And despite some general labor cost inflation impact and our continued investments into R and D, our functional costs were growing at a lower rate in revenue. Our other operating results improved year over year primarily as we have recognized an impairment charge in the prior year relating to Hommel in a magnitude of €12,700,000 as we know we reported last year. In addition, we recognized lower FX losses in this year compared to the same period of last year.

Now moving on to the EBIT line. You see a marked increase in both in absolute terms as well as margin wise. Further down the line, our financial result was at minus million compared to minus million in the prior year, primarily due to net negative impact from exchange rates. Finally, our earnings per share reached up by almost 28% year on year, and our ROCE improved notably 120 basis points to 10.8%. So overall, as mentioned before, strong execution in 2024 with a very solid set of revenue and earnings.

Now turning to Page 10, looking at cash flow and balance sheet data. Starting with cash flow. As you can see, operating cash flow pretax was approximately at prior year levels, influenced by somewhat higher working capital and some moves regarding tax balances and others. Overall, our net working capital intensity remains unchanged year over year. Moving on to CapEx.

We have continued to invest into our capacities as communicated before with our new semi fab in Dresden being our most important project. As indicated in our last call, we were expecting some catch up of our cash CapEx in the second half, and this is what you see now here at year end. So overall, investing cash flow now up year on year in line with our expectation. Please note that the prior year cash CapEx figure included some inflows relating to the sale of real estate assets of the non photonic portfolio companies. Finally, our net debt position has somewhat improved despite our investment program.

Our leverage was at 1.8x compared to 2x a year earlier. So overall, we believe our financial position and balance sheet remains very strong. And with this, let me turn back to Stefan to cover our divisions and our outlook.

Stefan Tregga, CEO, Genoptic: Yes. Thank you, Prisca. And if you’d follow me to Page number 12, we’ll start with the Advanced Photonic Solutions division. Admittedly, a bit of a mixed bag of our businesses. And again, that is why we are going to report our business in the new structure going forward, providing more clarity.

For now though, for 2024, it is still the Advanced Photonics Solutions business. And as Prisca already alluded to, in particular, the semicon order intake has been seen a somewhat downward trend in particular in the second half and in Q4. Year over year, order intake is flat for the entire integrated across the entire division. And semi has been good year over year, but the downward trend that we saw, the decline that we saw in H2 and in particular in Q4 is worth mentioning. Because that basically caused us to push out our strategic targets to 2026 at the end of last year.

We do expect that to carry over in particular into H1 twenty twenty five before we see expect to see ramp up in order intake in H2 twenty twenty five. So the decline in order intake in the semi part of our Advanced Solutions business that we have seen at the end of last year, we expect to also see the beginning of this year. And in particular, in Q1, we expect a combination of certain inventory corrections and potential onetime effects, which are going to, as far as we can tell thus far, are going to continue pressure on orders, in particular on the semi front. Overall, in 2024, again, Auto Intake for the Advanced Photonics Solutions has been flat. Nevertheless, revenues have been growing once again by 5.6% to now million for the whole of the division.

And as a result of that, profitability is again up to an EBITDA level of now 100 and almost €92,000,000 and that does indicate strong business in our core APS division. If we turn the page over to the Page 13, the next page, Smart Mobility Solutions. Here, we have seen a noise grow in auto intake, in particular driven, of course, by our investments into the sales force in North America. We’ve discussed that throughout the last year in greater detail. We have changed our setup in North America in terms of how we go to market in particular in The U.

S. And we see one interest going to be out here coming up. We do see first successes in auto intake in North America, in particular at the end of last year. And that carries over into this year, 2025. We foresee for smart mobility solutions a nice development in 2025 as much as we can tell thus far, particular with, as I said earlier, the investments into the sales force in North America starting to pay off in terms of auto intake.

And second factor we talked about throughout the whole of last year, an inflated R and D invest in this division, which is going to come to an end throughout the course of this year. And that will release some additional margins. You can see on the page that EBITDA margins have been suppressed. We have seen a slowdown in margin or decline in margins. We anticipate an expansion EBITDA margins again to more normal levels in 2025 for our smart mobility division.

Let me, with that said, go to MPC. MPC, as you know, will be dissolved or has been dissolved by the end of last year. Hommel, together with TriOptics and our automation business, laser processing, is now forming part of our new MPS segment, which we are going to report starting now. What you can see in the MPC companies is combination of Hamel and ProtoMax. ProtoMax, in particular, has been in quite a lot of ups and downs lately.

ProtoMax has developed from a sales and in particular EBITDA perspective very nicely in 2024. PACCAR is very or Protomax is very profitable. Hommel also has been posting better than better profit levels than in the past, which results to an EBITDA margin of 17.5% for the whole of the MPC companies versus 14.1% last year. Auto intake, on the other hand, has seen a sharp decline. And that is particularly due to our business in Canada.

ProtoMax is suffering from the geopolitical tensions, in particular, from the tensions between United States Of America and Canada lately. The whole debate about tariffs really doesn’t help a lot in terms of business development for, in particular, the automotive industry. There’s so much uncertainty in that Detroit, Toronto area at the moment that auto intake is very challenging for Protomax, has been at the end of last year and continues to be this year. Nevertheless, if you look back into 2024, despite the fact of a sharp decline in order intake, revenues have been growing 4% for the combination of Hammel and ProtoMax. And as I pointed out earlier, EBITDA has seen a significant improvement in 2024 despite, as I said earlier, the sharp decline in order intake.

And I’ll point that out once again because I’m fully anticipating questions around Protomax in the Q and A session. Again, the whole debate about tariffs between The United States and Canada doesn’t really help in the business and in any particular process here. Nevertheless, let’s we’ll quickly go to Page 16. And here, we do show you our new reporting structure. I think you should be all aware of that by now.

Going forward, we are going to report our business in the four divisions aligned with the four markets we are catering to. We’re going to report in semiconductor and advanced manufacturing, in biophotonics, in metrology and production solutions and in smart mobility solutions. Mirroring the markets we serve in terms of semiconductor, in terms of health care and life sciences, in terms of metrology and traffic and mobility solutions. We do believe that creates a better customer focus internally. So from a managerial perspective, quite frankly, that’s helpful for us.

It’s sort of the leadership of the company here. We have a bit even more sort of focus within the organization. And we do hope and believe that for you, our investors, also creates more clarity and is helpful to better understand in OpTic going forward. On Page 17, we have just prepared for you once again how that setup comes together, but I think that’s fairly clear by now. So APS, the former Advanced Photonics Solutions, basically gets split in the three divisions along our markets or business units along our markets, semiconductor, biophotonics and metrology and production solutions.

And from the former MPC segment, the Hammel piece goes also into the metrology and production solutions and smart mobility basically stays as it is. Protomax gets reported separately under the group functions. Now what do we expect for 2025? Well, as I said at the beginning of the call, currently, 2025 is really a challenge in terms of predictability. There’s a lot of uncertainty in the marketplace.

And of course, that makes it somewhat challenging to come up with a precise guidance at this point. We have always said that we see 2025 as a transition year basically, and we stick to that. We do believe that revenues will be roughly along the line of 2024. So we see sort of a transition of 2024 into 2025, if that makes sense, within a corridor of plusminus 5%. That’s sort of the precision that we can give at this point.

And we’ll certainly come back to you with better clarity as soon as we have more clarity. Of course, with such a fairly broad corridor on the sales line, a fairly broad corridor also on the margin line is sort of linked to that. We do believe that depending on our sales volumes, we will see EBITDA margins between 1821% essentially, as I said earlier, in line with 2024% depending on where we end in terms of volumes. Capital expenditures, I think, should be significantly lower than in 2024. We have spent a lot last year, and we see that declining to a more sort of normal or normalizing to a more normal level in 2025.

And yes, that’s, I guess, what we expect when it comes to CapEx. And with that said, we’ll park here and look forward to any questions. A lot of questions you probably do have. Thank you very much. Before we break for questions, please do have a look into the appendix where you find detailed information about our new segments and how the business would be reported basically as if they would be in the new segment.

I will look into that. Hopefully, that helps you to build your models going forward.

Conference Moderator: Thank you very much. So dear ladies and gentlemen, we are looking forward to your questions. So the first question is from Craig Abbott of Kepler Cheuvreux. So over to you,

Stefan Tregga, CEO, Genoptic: Craig.

Craig Abbott, Analyst, Kepler Cheuvreux: Yes. Hi, good morning. Thanks for taking my question. Actually, I’m just going to kick off with a quick technical one. Looking at the quarterly figures you gave us for the new divisional structure, thank you for that, first of all.

Secondly, though the EBITDA margin in Q4 in semi and advanced manufacturing was considerably lower than the other quarters. I realized business was already telling off a little bit. And I realized you probably had a couple of million related to the move costs, which you said have been split between Q4 and last year Q1 to ship. But still, it looks like a pretty hefty decline. I just wonder, were there any special factors involved in that?

Or because normally, we wouldn’t see that kind of seasonal factor, I don’t recall, in Q4 or maybe there is. That would be really my main question there. Thank you.

Stefan Tregga, CEO, Genoptic: Yes, you pointed out the factors already, Greg. I think you’re pretty much spot on. Q4 had been impacted by slower business overall from a sort of, yes, at this point and also by the first part of the costs to move into the new factory. There is always also a mix impact if you sort of try to dissect it between the classical uptake and the microstructured optics and so on and so forth. But by and large, it is due to business sort of tailing off in Q4 and the one time effects.

And just to sort of answer that potential question right upfront, that’s certainly also an effect that we expect for Q1 in 2024.

Craig Abbott, Analyst, Kepler Cheuvreux: Yes. I was going to be my follow-up. It sounds like we should expect sort of kind of like that in the both start with Q1 and then move from there. Yes, just two more follow ups from my side and then I’ll turn it I’ll get back in the queue. Just talking about to make sure I understood that correctly, it sounded like in the semi business that you expect like the you said culmination, I think, so like the worst of the inventory adjustments on the side of your customers, therefore impacting your order inflow most significantly in Q1.

And that from there, we should see new order patterning sort of starting to merge hopefully over the following quarters as your customers also hopefully start to see their end markets picking up. Did I understand that timing sequence correctly?

Stefan Tregga, CEO, Genoptic: Yes. Q2 is a bit sort of early to sort of say in particular, but in principle, exactly, as you pointed out. Whether it’s Q2 or Q3, we’ll have to see, but the inflation point, but in principle, exactly as you pointed out.

Craig Abbott, Analyst, Kepler Cheuvreux: Also, I may just add one quick one on that before I move to my last question. I mean, is there is that your main customers, is there sort of I mean, when I look at consensus forecast for their business over the next couple of years, nothing has really dramatically changed again other than the original tone down in fall of last year. So their call up plan, which they’re indicating you to you for ’twenty six, ’twenty seven, whatever, has not fundamentally changed. Is that correct?

Stefan Tregga, CEO, Genoptic: ’twenty six, ’twenty seven, you’re saying the Yes, yes, longer term. Longer term. Yes, yes,

Friska Harven, CFO, Genoptic: yes. Correct.

Craig Abbott, Analyst, Kepler Cheuvreux: Okay. Thank you. My last question is just I know you’ve told us in the past conference call you don’t want to give us like precise answers on this, but obviously you were very clear about how Coromax’s current operations obviously are feeling the impact of the geopolitical situation and so forth. So just conceptually, could we interpret that to suggest, look, this is probably not maybe the appropriate time to try to push ahead with the sale of Potomax or anything that you can shed light on there?

Stefan Tregga, CEO, Genoptic: I’ll use my words very carefully here. The situation between The United States and Canada doesn’t make it any easier at the moment. And it makes it harder to be precise and harder to predict what’s going to happen in the next few weeks and months. Nobody can even tell me what’s going to happen on April, whether or not we do get tariffs. And therefore, at this very moment, really do understand that the only thing I can say is the uncertainty is really very high and that the sort of we don’t know if I think it’s a real answer.

It’s hard as it’s stupid as it sounds. But whatever I tell you can be completely the opposite by an hour from now. So I really don’t know.

Conference Moderator: Thank you very much also from my side. So we are moving on to the next question. The next question is from Olivier Calvi of UBS. Over to you, Olivier. Olivier.

Olivier Calvi, Analyst, UBS: Yes. Good morning, Stephane and Puskar. Hope you can hear me. Thanks a lot for the new segment structure. I had a few questions.

So first to come back on the new segments, maybe starting out with, I guess, the acronym is Sam. So just to double check, it was mostly covered by Craig, but is there any seasonality to call out in that business besides the sort of order pattern that we see this year? Second one also on biophotonic. So I can see a strong margin in H2 and especially in Q4. What’s the right way to think about this piece in terms of margins?

And then on MPS, very low EBITDA margin in Q1 last year. Was there anything to call out there? That would be the first bit and maybe I’ll take the next one.

Stefan Tregga, CEO, Genoptic: Olivier, thank you for your questions. On semi con, yes, there’s always seasonality. That is the case. You’re right there. It’s a typical semi pattern, not as pronounced as it used to be in the past, but still structurally there is seasonality.

On the other businesses, I wouldn’t read too much into quarterly figures here. I mean, in particular in the Bio business where we also have modules and components, large contracts often, it really is, you have, sometimes you have a quarter with higher order intake and higher revenues and sometimes you have a lower quarter. So again, I would not read too much into the seasonality of the other businesses quarter over quarter. Yes, full stop, I think that’s what I can say. I’m not aware of any specifics.

I’m looking to Christa here, but No.

Friska Harven, CFO, Genoptic: Maybe following up on your question on the margin on Bio. In the first half, we had, let’s say, weaker margins because of the mix of project phasing and also some quality issues that have been resolved. And I would say to the opposite, we had very strong margin in the second half of the year. But as Stefan said, don’t read too much into a quarter by quarter margin development. Maybe we also have to say that with the new disclosure, we will have some volatility in some of those segments as they are driven by projects and mix effects.

Olivier Calvi, Analyst, UBS: Fair enough. And in metrology and product solutions, was there anything to call out in the first quarter last year? I know quarterly Q o Q changes, but still.

Friska Harven, CFO, Genoptic: Maybe on overall stage, as Stefan has also, as we said in our last calls, as you know, we’ve also done some CASK cost reduction measures there because we had underutilization in the, on the back of, let’s say, the lag or the delay of the ARVR orders that we had been expecting.

Stefan Tregga, CEO, Genoptic: And so we have taken some cost up measures within the year.

Friska Harven, CFO, Genoptic: And And we have taken some cost out measures within the year, and you will also see impacts of that, of course, in individual quarters in the margin.

Olivier Calvi, Analyst, UBS: Okay. Okay. That’s helpful.

Martin Yungklaas, Analyst, BNP Paribas: Then the second question was just

Olivier Calvi, Analyst, UBS: on the EBITDA margin guide. So just to clarify, I believe you’ve said that the guidance includes some ramp up headwinds from present in Q1 at least. But how much room is there to reduce the functional cost ratio further this year to offset the possible lack of operating leverage? Is it fair to say it could be around 50 basis points, which is to me the difference between the 2024 EBITDA margin and the midpoint of your 2025 guidance?

Friska Harven, CFO, Genoptic: Yes. Let’s maybe cover that one. I think you may have seen we have already in 2024 been quite cautious on adding headcount. We basically ended the year with flat headcount compared to the end of twenty twenty three, although we grow by 5%. So we have been, throughout the year, to anticipate that the challenges been very restrictive in hiring.

We continue to do that. We have a very, let’s say, top level process involved in order to for hiring right now, And we will continue to do that. Other than that, we will, of course, manage our costs as much as we can. But we also recognize that a lot of our costs are fixed and therefore, not very flexible. We do not have a lot of temp in Germany, in particular, that we can flex.

So we are somewhat constrained there. But cost measurement is a key focus area for 2025.

Olivier Calvi, Analyst, UBS: Okay, great. And then just two left. So one on tariffs. You mentioned in SMS, you’ve invested in the sales force. Could you clarify whether your expectation of single digit growth in that segment and significantly faster EBITDA is assuming no tariffs?

And maybe if you could talk a little bit about the risk in SMS specifically?

Stefan Tregga, CEO, Genoptic: We have not dialed into our models for SMS huge tariff impacts at this point. We do do our business in North America with a U. S. Entity. We have business base in The U.

S. Here. Of course, if there are sort of tariffs on the hardware that we ship from Europe to North America that might have an impact, too early to say because nobody really knows. A lot of our business in North America is what we call THP though, so traffic service provisions where we install traffic cameras and speed cameras and the like and then have a lot of service revenue. And again, that is North American revenue anyways.

It’s carried out to North America from a U. S.-based entity. That is for The United States Of America. What that means from Canada, we have to see at the moment. That’s still open because we currently serve Canada also from an entity from The United States.

So we have to see how Canada develops. But overall, I’d say for SMS, as far as we can have thus far, and again, I’ll place my words very carefully because we really don’t know. But from what we can tell thus far, the impact of potential tariffs, I don’t think will be that big. And there’s a lot of ifs and buts in my answer here.

Olivier Calvi, Analyst, UBS: Okay. And then just a very small one, just to confirm, given your added disclosures on defense business, I think your predecessors sold a defense business in 2014. But I just wanted to ask if you had a sense of any remaining defense exposure in the portfolio and the magnitude of that, please? And perhaps in that new segment portfolio that you give us?

Stefan Tregga, CEO, Genoptic: Yes, we do. We do have remaining defense activities more on the optics side. Let me remind everyone that the Koryan has not been an optics business. We have sold Vinkorion predominantly for strategic reasons, I. E, we wanted to focus this business more on optics and photonics and Vinkorion had been a pure electromechanics business, power generators and the like.

In our Upting Photonics business, we have defense activities. They’re currently below 3% of total group sales.

Conference Moderator: So moving on to the next question. The next question is from Martin Yungklaas of BNP Paribas. Martin, over to you.

Martin Yungklaas, Analyst, BNP Paribas: Yes. Hi, good morning, everyone. I have two questions, please. The first one is a bit of a follow on your guidance. I mean, this year, you’ve given a bit of a wider range in both sales and EBITDA margin.

Can you just run through the assumptions what will need to happen to reach the upper and the lower bound of this range? And do you have more visibility on the revenue contribution of your top seven customers? And is the uncertainty more on the customers outside of top seven or maybe vice versa? And then also, what sort of order level would you require in H1 this year to get more towards the upper end of this guidance? And you’ve already flagged a subdued start to the year, so maybe the higher end of the guidance is even harder to achieve now.

That’s the first question, please.

Stefan Tregga, CEO, Genoptic: Yes. It’s essentially, again, a combination of mix and volume. And that is to a large extent part of the semi discussion that we had earlier already, the contributor to mix. If there’s more semi in the mix, then we have a richer margin mix basically. And then the follow on, of course, is to say volume.

If we have more volume, then we have better fixed cost coverage. But I would say it’s predominantly that mix effect that we see always within the optic. So if semi business goes more and faster than we see currently, And the orders come in earlier and the sales can be recognized earlier, then we get more to the higher end of both sales and margin and vice versa.

Friska Harven, CFO, Genoptic: Maybe one addition from my side to the customer mix. While obviously, we cannot disclose any particular customers, I think what we can say in the semi is that our inspection business is more, has less volatility at the moment that we see in our lithography business.

Olivier Calvi, Analyst, UBS: Okay. Interesting.

Martin Yungklaas, Analyst, BNP Paribas: But maybe since you’re flagging a subdued start already, do you still have confidence in potentially even reaching the high end of the guidance versus now issuing difficult and it’s more the midpoint is more achievable

Stefan Tregga, CEO, Genoptic: at this stage. We do communicate a fairly broad corridor because we don’t have that much of stability at the moment and the uncertainties are really high. So that’s why we communicate a fairly broad corridor and we would rather stick to that.

Martin Yungklaas, Analyst, BNP Paribas: Okay. And a follow-up is on silicon photonics. The last week, we had the NVIDIA’s GTC conference, and there was a number of new photonics innovations and networks and high performance computing announced. To what extent are you exposed to these kind of products or customers? And also what kind of R and D are you doing in this area?

So is it something you could focus on more in the future?

Stefan Tregga, CEO, Genoptic: That’s a very specific question, I have to say. An interesting one, silicon photonics is a very interesting game. We’re certainly part of that. Maybe you have seen that not too long ago, we have launched a new product called UFO Probe that goes into that emerging market. I’m more than, as a physicist and as a geek here, I’m more than happy to discuss way more details about silicon photonics.

But let me just say, it is an interesting area. We are certainly part of that game we’re playing there. I just launched a product where we won some innovation awards for that product. And we are playing that game as well. Hope that answers the question.

Martin Yungklaas, Analyst, BNP Paribas: Okay. But in terms of revenue contribution, you probably have it’s probably a fairly

Olivier Calvi, Analyst, UBS: That’s not

Stefan Tregga, CEO, Genoptic: very big at the moment, fairly small at the moment. But I think there is a big future there potentially.

Conference Moderator: And we are moving on to the next question from Michael Kum of Deutsche Bank. Over to you, Michael.

Michael Kum, Analyst, Deutsche Bank: Firstly, a a follow-up on ProteMax. Although I recognize it’s difficult to answer, let’s say with the lead time that a disposal would need, by when would we have to have clarity on a future tariff setup and let’s say on the overall trade environment to make a deal still feasible this year? And let’s say, is it still a realistic scenario from your point of view?

Stefan Tregga, CEO, Genoptic: As you said, it’s very hard to answer the question at the moment. Obviously, we are always in discussions, but everybody that we talk to at the moment is pointing to the uncertainty. And therefore, to give you a precise state and precise prediction is very challenging. Yes, full stop. It’s just almost impossible.

We’ll have to see. If the April 2 comes along and everything sort of goes smoothly, then maybe the markets become more stable and then it’s easier to answer the question. But at the very moment with almost hourly changing, are we or are we not going to get tariffs between United States and Canada, are there already tariffs from Canada? And it’s like, yes, it’s reading the tea leaves here, Really, it is. And therefore, I’d rather please say, please do understand.

I just cannot give you any more details because I don’t know. I really don’t know.

Michael Kum, Analyst, Deutsche Bank: Okay. Fair enough. Other one, let’s say, also in the context of U. S. Uncertainties, different aspect.

We’ve heard from other companies that there is a significant slowdown on the side of U. S. Administrative bodies right now because of the, let’s say, shock waves that the savings efforts are sending through those public big bodies. Do you experience that as well? And could it potentially slow down business of smart mobility in The U.

S?

Stefan Tregga, CEO, Genoptic: We have not experienced a big slowdown here in terms of approvals or anything in The U. S. At this point, but that might be due to the fact that we didn’t offer any particular approvals at the moment. So we haven’t been exposed to that development. There is a in that public, there are certain large tenders currently out in North America, in particular in the state of New York and city of New York, where there had been a start and then stop and now start again of activities.

And we’re participating on that. But we haven’t seen significant slowdown in governmental activities on our end. And again, that might be just simply due to the fact that we’re not exposed to that. Again, smart mobility, in particular, as you pointed out, is the area that could be affected. And yes, as I said, we are participating in this one large tender that we talked about, and we have to see where, what that means.

It still seems to be going on as far as we can tell from our end here.

Michael Kum, Analyst, Deutsche Bank: That sounds good. And then one more on CapEx. You talked about a significant reduction this year, which is not a surprise. Could you roughly quantify that reduction? And maybe also give us a hint on what you expect for annual CapEx for the next three or four years?

Stefan Tregga, CEO, Genoptic: And we said below this year, right? All out year.

Friska Harven, CFO, Genoptic: Yes. I think we, as I said before, our aim is to get close to our maintenance CapEx, which we estimate at 5% to 6% for the company step by step. Now there will always be some growth CapEx, for example, in the semiconductor, as we anticipate the long term picture to be intact and robust and growing. And for this year, significant, we had a 3,000,000, as we were above 100,000,000. I would say double digit would definitely be what I would expect, but I cannot quantify this, specify this any further.

Bear in mind that there will be, there are some investments, particularly in Q1, spilling over for the dress and fab, I would say, in the first half of the year into this year. So that is an impact. But overall, we are committed to reducing our CapEx this year.

Conference Moderator: Next question is from Malte Schallmann from Baobak Research.

: First question is also on Photomax. I mean, orders have been developing quite quickly throughout the year ’twenty four and that it doesn’t probably. So what’s your take on I mean, it developed already week before the tariffs discussion came up. So what’s your take on are you losing orders to competition? Are customers pushing out the project month by month, quarter by quarter?

Or are these projects pushed out by longer term? Are we talking years here before? So what’s your view on the pipeline? I mean, once we get some visibility on the tariff situation, do you then expect orders to recover quite quickly? Or how do you assess the order situation of products?

Stefan Tregga, CEO, Genoptic: Yes, thanks, Majte. To the third part of the question, I think up to, if I may correct you to some extent, the discussions about tariffs have been raised by the now President of The United States Of America during his campaign already. And so therefore, the uncertainty has been with the business since a longer timeframe, essentially since the almost like the start of the campaign of the now President of The United States. And since then, we have this situation, not just since the inauguration of the President, but since the even before the election, to be honest, even before the election. Do we expect that to unlock?

I think that’s the best way of saying it. Well, hopefully, because what we still see is a fairly large funnel. There is still an order funnel there. Maybe not as big as it used to be, but still fairly large, but no movement in the funnel. And that’s the way to discuss it.

It seems as if there is no movement in the funnel, which does also indicate that others haven’t won anything either. I don’t think we’ve lost a lot of business. It’s just that nothing moves at the moment because nobody knows what to expect, I guess.

: Okay. So there could be the chance once clarity is there then that some projects move forward, but yes,

Stefan Tregga, CEO, Genoptic: particularly the sales Yes, I would think so. I would think so because you

: would think that at some point

Stefan Tregga, CEO, Genoptic: that funnel has to move again, to become liquid again. Now of course, there is also the whole situation, which is going on since quite a while with the electro, like the EVs versus ICE business, the internal combustion engines versus electromobility. In Detroit, there had been a lot of investment into electromobility, and that’s now postponed and all the rest of it. But I would think that at some point, if the market calm down again and the projects need to move forward. Okay.

And how

: do you deal with that situation at Potomax? I mean, order backlog has probably declined quite significantly at the end. So I’m not so sure how much of the planned revenue or revenues are likely to decline quite substantially this year. So any chance for cost savings or?

Stefan Tregga, CEO, Genoptic: Yes, I think, but specifics of Prodomecto is almost a bit too early to tell because up until the end of twenty twenty four, we have been producing as much as we possibly can and it’s been very successful, good sales growth, good margin expansion and so on and so forth. Now at some point, we are going to run out of work in Canada if the situation with the others doesn’t change. And then we have to obviously adjust our cost base there and see what other support we can get maybe from the government in Ontario. There are signals that the government would maybe support, but that’s, I think, way too early to tell. At the moment, the situation is so uncertain that I would anticipate.

If the order situation doesn’t change, then we have to adjust the cost base.

: Yes. Okay. I think that’s fair enough. Then I was hoping to get more granularity in the, yes, let me say, old segment APS. I I mean, if you’d transfer that to the new segments, then semiconductor business is probably troughing in

Stefan Tregga, CEO, Genoptic: the first

: quarter of this year. Maybe you can confirm that. And then are you expecting growth in biophotonics and life science? So what are better areas you see probably developing somewhat better or more positively here? And then maybe then thirdly on what is now in the manufacturing area, trioptics, cellular, your situation?

I mean, we have talked a couple of times about ARVR. What’s your current take on the environment for trioptics?

Stefan Tregga, CEO, Genoptic: Yes. Let’s start with ARVR. I think ARVR, from what we can tell, is still there. It’s not gone, but it’s later than originally anticipated. We have seen activities by all the big clients in those goggles and the like.

But the big commercialization, in particular, on the consumer front is, I would say, later than the regions. I don’t think that’s going to happen this year. What we do see at developments for trioptics is still a stable business in the traditional trioptics application segments. So I think it’s, will be we don’t see a lot of big decline in traffic or anything like that. It’s a stable business, but the big growth factor with ARVR is hopefully going to come later.

And I’m still confident that it will. I mean, even if you talk about the industrial metaverse and things like that, it is still in discussion and people are investing into that. But the uptake on the consumer mass production level is not probably later than originally anticipated. When it comes to the other part of the business, particularly biophotonics, there we do see nice growth patterns this year. There are certain applications in the medical and in industrial areas where we believe that we will see nice growth in 2025.

And I think that was the question, wasn’t it? Did I miss a part?

: Yes. Maybe more, can you, the growing area in medical biophotonics applications, are these new projects, new customers? Or is it just growth in existing applications?

Stefan Tregga, CEO, Genoptic: I would say existing product, I’d say, existing customers, existing applications. And let me point out again in two parts in Life Science and Health Care. And what we call industry, there is part of that is classical industrial applications and part of that is more defense related activities.

: Okay, good. And finally, quick one on silicon and silicon photonics. What’s your take on the potential time frame once that kind of application might become relevant for you guys?

Stefan Tregga, CEO, Genoptic: Why is everybody talking about silicon photonics all over? Is that anything happened that we missed? I guess I can only say that it’s an interesting application. We’re participating in that, but I am not aware of any particular development. Maybe I missed something.

Has there been any sort of particular development in that area lately? I’m not aware of anything. We’re very excited about it. We always had been, as I said, we launched a product and, but it’s not a triple digit million business for us at this point.

Conference Moderator: The next question is from Peter Reutzenijsjern of Madewenk.

Peter Reutzenijsjern, Analyst, Madewenk: I have some additional question on the pro max issue because in your guidance, you had the business unit metrology and production solutions, the expectation of stable sales and EBITDA, which would be really a positive surprise for me given all these problems at the Protomax. What makes you here so relatively confident?

Stefan Tregga, CEO, Genoptic: Protomax is not part of NPS. I think that’s what makes us confident. Protomax, maybe if you can look at the page, it’s in the appendix someplace. You can see that MPS, the metrology and production solutions business comprises TriOptics, our laser processing business and Hommel. So Hommel goes into MPS or Metrology and Production Solutions and ProtoMax will be stand alone reported as all the good junctions.

On Page 17 of the deck. Okay. Otherwise, I would have understood your question. No, but that’s really is the rationale here.

Peter Reutzenijsjern, Analyst, Madewenk: Okay. So you did not provide then the guidance for Probatimaxo, is it correct there?

Stefan Tregga, CEO, Genoptic: No, we did not.

Peter Reutzenijsjern, Analyst, Madewenk: Okay. Yes, definitely. Then the second point, more housekeeping area. So financial results was last year a much worse. What is your expectation here for the current year?

To what extent are you able to bring down financial expenses?

Friska Harven, CFO, Genoptic: So I’ll take that question. Of course, we are repaying our debt as we, particularly the debenture bond as we see fit. So with our, let’s say, with debt and the lower leverage that you’ve seen, that is an impact. Overall, I would take the it’s always hard to predict FX movements. So I would take this year broadly as a 24 broadly, maybe will be a tad better, but only a tad as a proxy for your assumption for this year.

There won’t be moving much in this.

Stefan Tregga, CEO, Genoptic: Okay. And

Peter Reutzenijsjern, Analyst, Madewenk: perhaps one point, could you give us an information what the PPA charges in 2024 were? So I had not the opportunity to look through the annual report in detail, but PPA, how much was it?

Friska Harven, CFO, Genoptic: Top of my head, I think it was around 20,000,000, but we will confirm that with Investor Relations.

Conference Moderator: The next question is from Lasse Stueben of Berenberg.

Lasse Stueben, Analyst, Berenberg: Just one follow-up on the new biophotonics division. Just going back a bit, I think I remember when you acquired the businesses from Benignard Glass, I think it was 2021. I think those businesses at the time you said were generating a healthy margin, which I took to mean, rough, I don’t know, high teens, mid teens. I think in ’twenty four, the EBITDA margin was around 13% for this new division, let’s say. Would you say that this is the run rate you’re expecting?

I understand there’s mix effects going on with some areas doing better than others. But in a steady state, what do you expect that division to make? And what’s, I guess, changed since 2021?

Stefan Tregga, CEO, Genoptic: Yes. First of all, let me point out that we acquired a combination of Berliner Glass and Swiss Optics. And Swiss Optics is part of our semi business now. So let’s be just to be precise. But you’re right, the margins in the HealthScam Glass Science business have been higher in the past.

There are certain effects in there from the industry business and the laser business that are mixed into it or tucked under it, if you want. The laser business that we discussed on that where we have margin issues, shall we say, is in that, in the mix of that business unit pulling down margins for the unit.

Friska Harven, CFO, Genoptic: Maybe let let me add to that. If you keep in mind, this is a revenue of around million now, right, in this link. So this, the Dental business is part of it, but of course, not all of it. And as we have also pointed out over the last calls and in our roadshows, I think we have to improve the portfolio, the product portfolio in this era overall that will not go overnight. But we are definitely working on that.

And with that, I also some expansion of the margin over time.

Stefan Tregga, CEO, Genoptic: And we did do restructuring in that business already in 2024. There has been a restructuring in one of the factories of this business in 2024. Understood. Thanks for clarifying.

Conference Moderator: Thank you very much. And next, a follow-up from Craig Abbotts, Kepler Cheuvreux.

Craig Abbott, Analyst, Kepler Cheuvreux: Yes. Hi. Thank you again. You have two follow ups, please, from my side. The one is, now that you’ve undergone the reshuffling of your divisional structures, And for instance, you’ve had TriOptics shifting over to MPS.

I just wonder if you could give us a feel for how much headroom you still have in terms of your goodwill positions on some of these acquisitions you’ve done in recent years? And I’m thinking in particular obviously about Triumphix, I mean, you still feel real comfortable with the headroom you have there because obviously it’s now been carved out of the APS cash generating unit? That would be the first question. And I have a quick follow-up on the medical business.

Friska Harven, CFO, Genoptic: Yes. I’ll let Craig, of course, I’ll take that question. So yes, we have sufficient headroom. Of course, we tested our headroom in the old structure. We also took a look in the new structure.

And in all of that, we have sufficient headroom for all this for the old segments but also for the new the reporting structure. So there are no concerns from our side on that one.

Craig Abbott, Analyst, Kepler Cheuvreux: No concern. Okay. Yes. And the second follow-up, please. Getting back to the Medical business, I just wondered, and I know you wouldn’t be able to tell us specifics before something might be loans or anything like that.

But I know you’ve had a lot of success with the optics components you supply for the three d oral scanners. I just wondered if you have any other OEM customers that would also be you will be supplying for this type of application with that we might start seeing pull through to P and L in the next couple of years or any other new apps there that we should be can and should be aware of at this stage to give us a little bit of a better feel about the growth dynamics there over the next couple of years? Thank you.

Stefan Tregga, CEO, Genoptic: Not with this particular application, Greg. And let me remind you that our strategy overall is to try to work with industry leading customers in the individual segments, which does indicate that most of the time, not always, but most of the time in a particular segment, we have a particular customer. And whether that’s DNA sequencing or lifestyle imaging or indeed the dental application, we typically work together with

: what we believe are the

Stefan Tregga, CEO, Genoptic: market leaders in these segments. And of course, that comes with the fact that we sort of depend on their success, but we enable their success, which you already look at it. We are working on other segments. We’re not particularly that are not particularly contributing to sales at this point in time, particularly like robotic adjusted surgery and other pharmacological applications. But we’d rather communicate that if and when we communicate sort of marketing or commercialization rather than just R and D efforts.

But particularly with robotic assisted surgery and other applications like that, we are always trying to get into new and interesting applications and work together with, this is at the industry, the market leaders in those particular application segments.

Conference Moderator: Thank you very much, dear ladies and gentlemen. As there are no more questions in the queue, I’m handing the floor back over to the host.

Stefan Tregga, CEO, Genoptic: Okay. Well, thank you very much for all your questions. Great to see the interest in our business. Again, I would say that twenty twenty four has been, in many ways, another record making year for us when it comes to sales and profitability. We’re proud of what the organization has been achieved in 2024.

Now we’re looking into 2025. And we all have discussed the uncertainties that we see, not just us, but the whole market, the whole industry, the whole economy really, given all the geopolitical tensions and problems and issues that we see. There are ups and downs, there are highlights and lowlights, there are uncertainties. But the gist of the matter, I think, is a business within Optic that has a strong technology background, a good set of people, and we’re well prepared, I think, to manage through the uncertainties that we see at the moment and to continue our growth pattern into the future. I’m very convinced that Enabtec has even more potential for growth and margin expansion next year and the year after.

Thank you very much for you being with us today, and we’re looking forward to discussing with all of you in our roadshows and individual meetings the development in the next days and weeks. Thank you very much.

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