Earnings call transcript: Kion Group Q1 2025 misses EPS, stock stable

Kion Group AG reported its Q1 2025 earnings, revealing a significant miss on earnings per share (EPS) expectations. The company posted an EPS of -€0.36, falling short of the forecasted €0.0341. Despite this, the stock price remained relatively stable, with a minor decrease of 0.11% to €36.12. With a market capitalization of $5.35 billion and a P/E ratio of 13.04, InvestingPro analysis suggests the stock is currently undervalued. The market’s reaction suggests a cautiously neutral sentiment, balancing the earnings miss with positive order intake and strategic partnerships.

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Key Takeaways

• Kion Group’s EPS of -€0.36 missed the forecast significantly.
• Stock price remained stable, decreasing by only 0.11%.
• Order intake increased by 11% year-over-year.
• Partnerships with NVIDIA and Accenture highlight innovation efforts.
• Free cash flow remained positive at €30 million.

Company Performance

Kion Group’s Q1 2025 performance was mixed, with a notable increase in order intake by 11% year-over-year to €2.7 billion. However, the company faced challenges with a decrease in revenue and a 14% drop in adjusted EBIT, reflecting operational and market pressures. Despite these setbacks, the company’s strategic focus on innovation and partnerships aims to bolster its competitive position in the warehouse automation sector.

Financial Highlights

• Revenue: Slightly down from previous periods.
• Earnings per share: -€0.36, a significant miss compared to expectations.
• Adjusted EBIT: €196 million, down 14% year-over-year.
• Free cash flow: Positive at €30 million.

Market Reaction

Despite the earnings miss, Kion Group’s stock price experienced a minimal decrease of 0.11%, closing at €36.12. This stability suggests that investors are weighing the negative earnings against the company’s strategic initiatives and market position. The stock remains within its 52-week range, reflecting cautious investor sentiment in line with broader market trends.

Outlook & Guidance

Kion Group confirmed its full-year 2025 guidance, anticipating continued improvements in its Supply Chain Solutions segment. The company targets double-digit margins for this segment by 2027, highlighting its commitment to long-term growth and efficiency. Strategic investments in production and R&D, particularly in APAC and the Americas, underscore its focus on global market expansion.

Executive Commentary

CEO Rob Smith emphasized the company’s innovative strides, stating, "Physical AI is an exciting part of Kion’s supply chain solutions." He also highlighted the company’s robust customer base and pipeline, indicating a strong foundation for future growth. Smith’s comments reflect a strategic focus on maintaining operational flexibility and resilience amid geopolitical uncertainties.

Risks and Challenges

• Geopolitical uncertainties could impact market conditions and supply chain stability.
• High efficiency program expenses may continue to pressure profitability.
• Potential tariff impacts and supply chain disruptions remain concerns.
• Market saturation in key segments could limit growth opportunities.
• Macroeconomic pressures, such as inflation, may affect cost management.

Q&A

During the earnings call, analysts inquired about the positive order intake mix in the Industrial Truck & Services (ITS) segment and trends in warehouse automation modernization. Executives addressed concerns about potential tariff impacts and emphasized the company’s flexible supply chain strategies. Pricing strategies and cost management approaches were also discussed, highlighting Kion Group’s proactive measures to navigate current challenges.

Full transcript - Kion Group AG (KGX) Q1 2025:

: Ladies

Moritz, Operator/Call Moderator, Qion Group: and gentlemen, welcome to the Qion Group Q1 twenty twenty five update call. I’m Moritz, your Chorus Call operator. I would like to remind you that all participants will be in a listen only mode and the conference is being recorded. The presentation will be followed by a question and answer session. If you would like to ask a question from the webinar, you may click the q and a button on the left side of your screen and then click the raise your hand button.

If you are connected via phone, please press star followed by one on your telephone keypad. For operator assistance, At this time, it’s my pleasure to hand over to Rob Smith. Please go ahead, sir.

Rob Smith, CEO, Qion Group: Thank you, Moritz. Good afternoon, ladies and gentlemen, and welcome to our update call for the first quarter. Please refer to our update call presentation on the IR website for continuity during this call. I’m gonna start with a quick summary of our first quarter twenty twenty five and share some key highlights of the quarter, especially coming from some trade fairs that we’ve had done some key trade fairs in Europe and in The United States last month. Then Christian’s going to take you through our detailed financials.

He’ll reiterate our guidance for 2025, and I’ll be back with some key takeaways, and we’ll go into questions and answers. So let’s go together, please, to page three. Keyon had a solid start this year, in line with our expectations. Group order intake was €2,700,000,000, an 11% increase compared to the prior year and reflects high higher demand in both operating segments during the first quarter despite the increasing geopolitical uncertainties surrounding tariffs and their impact or potential impact on economic developments around the globe. Revenue was down slightly at the Keon level and in both segments due to the subdued demand in the new truck and project business in recent quarters.

Adjusted EBIT decreased 14% and was €196,000,000 corresponding with the adjusted EBIT margin of 7%. While adjusted EBIT in Supply Chain Solutions improved strongly, performance in ITS reflected the expected negative impact of lower volumes. Free cash flow was positive €30,000,000 and earnings per share were minus €0.36 reflecting €191,000,000 expenses for the efficiency program recorded in the first quarter. Moving to page four. You will recall Consumer Electronics Show in Las Vegas in January.

We announced the first results from our cooperation with NVIDIA and Accenture. We’re the first industrial company to adopt NVIDIA’s physical AI and are creating a vision for warehouses that are part of a smart, agile system that evolve with the world around them and can handle nearly any supply chain challenge. We’ve seen three developments in recent years. We’ve seen a huge rise of e commerce and software centricity in the warehouse. We’ve seen a demand for speed and delivery.

Delivery overnight or same day delivery is now the new normal worldwide. And supply chain resilience is a critical factor and is increasing in importance in all our customers’ minds. Physical AI is an exciting part of Keyon’s supply chain solutions for our customers that address these important developments in our market. March was a busy month for Keyon at key trade fairs in Europe and The U. S.

At LogieMatt in Stuttgart, Linde Material Handling presented a physical AI powered omniverse solution in the form of a fully integrated goods in solution featuring an autonomous mobile robot, we call those AMRs, and an electric truck both AI powered and both digitally represented in NVIDIA’s Omniverse in real time. The onboard and stationary cameras in the solution run on NVIDIA hardware, capturing and processing live operational data and they work in an ever evolving physical and digital environment, preparing to optimize vehicle coordination and route planning at scale. Our branch, Stihl, also offered exciting insights into the entire spectrum of automation to Logimat visitors, demonstrating fully automated material flow using stationary solutions such as Stihl’s pallet shuttle warehouse with Stihls serial production automated trucks. Customers saw that with our smart software, our standardized series production trucks and our consulting and service expertise, we can implement automation projects of all sizes. And at NVIDIA’s GTC Technology Conference in San Jose, California in March, Dometic demonstrated its AI control tower, which represented in a digital twin built with NVIDIA Omniverse technologies and the Mega Omniverse blueprint.

This solution will give customers the ability to run an almost infinite number of scenario of their supply chain, constantly optimizing their operations, and thus showcasing the capability of physical AI technology for applications to automated inter logistics. And at the PROMAT in Chicago, Illinois, Dometic reinforced its commitment to industry wide innovation, demonstrating how our technology can advance and enhance operational efficiency, scalability, and adaptability in today’s involving supply chain landscape. Customer interest and feedback on all of these events have been extremely positive, and we’re following up on the many, many leads that we’ve got. We expect to provide you with the next update on innovations after we’ve attended the CMAT in Shanghai, China in October of this year. I’ll now hand over to Christian, and he’ll take you through our detailed first quarter financials and will reiterate our outlook for 2025.

Christian, CFO, Qion Group: Thank you, Rob. So let’s go to Slide six now for the key financials of the IDS segment. Order intake showed the usual sequential seasonal decline, but increased by 10% year over year to sixty five thousand two hundred units. New orders in money terms increased 9% year on year, driven by a 14% increase in the new truck business. The service business also showed continued growth at 4%.

The order book reflects the ongoing lead time normalization and its margin quality is in line with our expectations as reflected in our outlook. The revenue declined by 2% year over year to EUR 2,100,000,000.0. The 4% growth in service almost made up for the expected 7% decline in the new truck business. Remember that in 2024, the new truck business revenue significantly benefited from the tailwind of a high order backlog. Adjusted EBIT at EUR186 million and the corresponding adjusted EBIT margin at 8.8% reflected the expected impact from the lower volumes resulting in from reduced fixed cost absorption as well as lower gross margins due to the reduced pricing realized in 2024 in the new drug business as a result of the increased competition.

I’ll now continue on Page seven on the summary of the key financials for the SCS segment. Order intake significantly benefited from the 47% growth in the Service business, driven by modernization and upgrade projects. Business Solutions orders were down 2% year on year. Demand from the pure play e commerce vertical increased, while the remaining verticals continued to be

: impacted by the customer’s ongoing hesitancy to sign new contracts due to the geopolitical uncertainties. The year on year decline in

Christian, CFO, Qion Group: the order book reflects the subdued order intake of the past quarters, but is starting to stabilize sequentially. Overall, revenue declined sequentially and year on year. The 14% growth in the service business partially made up for the 16% decline in the project business, which was impacted by the lower order intake in the past quarters. The adjusted EBIT improved strongly year on year to EUR 36,000,000 with a near doubling of the adjusted EBIT margin to 5.3%, mainly due to the growth in the Service business and the solid project execution. Now let’s quickly run the key financials for the group on Page eight.

Order intake benefited from the improvement in new truck demand and the continued growth in the Service business in both segments. Continued lead time normalization in ITS and subdued demand in past quarters in STS led to the decrease in the order book. Revenue benefited from the growth in the resilient service business in both segments, nearly compensating for the softer ITS new truck business and lower SCS Business Solutions revenue. Adjusted EBIT at €196,000,000 and the adjusted EBIT margin at 7% was impacted mainly by the lower fixed cost absorption in ITS, which was partially compensated by the strong earnings improvement in SCS. Now Page nine actually shows the reconciliation from the adjusted EBITA to group net income.

Nonrecurring items amounted to minus EUR 194,000,000, and this included EUR 191,000,000 of expenses related to the efficiency program. You will recall that we expect the total expenses for the efficiency program to be between EUR $240,000,000 and EUR $260,000,000. Therefore, you should expect some further expenses for the efficiency program in the following quarters. PPA items were at the usual quarterly levels. Net financial expenses improved year on year mainly due to FX as well as an improved interest result relating to the leasing of the short term rental business.

This resulted in earnings of minus EUR 59,000,000 in the quarter. As the majority of the expenses for the efficiency program is tax deductible, we had a tax income in the quarter. This resulted in a net loss attributable to shareholders of minus EUR 48,000,000 in the quarter, corresponding to earnings per share of minus EUR $0.03 6. On Page 10, let’s continue with the free cash flow statement. Free cash flow in the quarter reached positive EUR 30,000,000.

The development in the net working capital reflects the usual seasonality of the first quarter. The expenses relating to the efficiency program were not cash effective in the first quarter. They are expected to become cash effective in the second half of this year, and this is fully included in our full year 2025 free cash flow guidance. Page 10 then shows the development of net financial debt and our leverage ratios. We had a slight decrease in net debt at the end of the first quarter twenty twenty five, but continued to remain below EUR

: 1,000,000,000.

Christian, CFO, Qion Group: This had no impact on the leverage ratio across both net debt definitions compared to the December the December 2024. Our leverage ratios remain slightly lower than the level last seen post our December 2022 capital increase, but this time, we achieved improvement entirely through self help measures. We continue to remain committed to improve the leverage ratios metrics further to defend our two investment grade ratings as we believe they are supportive to our business model. Now moving on to Page 13. We had a good start to the year with Q1 twenty twenty five performing in line with our expectations.

Looking ahead, we cannot ignore that the economic environment is characterized by considerable uncertainty. Geopolitical risks and potential negative impact on our value chains and our markets could arise from the escalating trade conflict. Over the past years, we have invested in our production and R and D capacities and into our sales and service networks, particularly in the APAC and Americas regions to prepare for shifting geopolitical scenarios. We therefore confirm our outlook for fiscal year twenty twenty five for the group and our two operating segments as of today, subject to the condition that there is no significant deterioration of the overall economic environment. Consequently, Slide 14 lays out our guidance as presented with the full year 2024 results.

As I provided a detailed walkthrough of our guidance at the end of the full year 2024 update call at the February, I will skip it here in the interest of time. For those of you who are interested in the explanation, please refer to the transcript, which is posted on our Investor Relations website. And as always, you will find a slide on the housekeeping items in the appendix of this presentation. I will now hand back to Rob for our key takeaways.

Rob Smith, CEO, Qion Group: Thank you, Christian. Let’s turn together to Page 15 for our key takeaways. We had a solid start to the year with first quarter twenty twenty five performing in line with our expectations. Looking ahead, the economic environment is characterized by considerable uncertainty. In particular, the escalating trade conflict could potentially have negative impact on our value chains in our markets.

EON’s innovative AI and automation solutions are very well received by our customers. Europe is historically a home market for us. Thanks to the considerable investments we’ve made in past years to strengthen our footprint in production, in sourcing, in R and D, as well as our sales and service networks, in particularly, in APAC in the Americas region. APAC and Americas are also home markets for us. We’re therefore well prepared for shifting geopolitical scenarios.

We’re monitoring these situations very carefully, and we’ll manage changes in the market conditions in an agile manner. We confirm our outlook for fiscal year twenty twenty five for the group and for our two operating segments subject to no significant deterioration in the overall economic environment. This concludes our presentation. Thank you for your interest. And now we look forward to taking your questions.

Mauriz, let’s go back to you and let’s open the line please for the Q and A.

Moritz, Operator/Call Moderator, Qion Group: Ladies and gentlemen, we will now begin the question and answer screen and then click to raise your hand button. If you are connected via phone, please press star followed by this one on your telephone keypad. You will hear tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press the lower your hand button from the webinar or press star and two on your telephone. In the interest of time, please limit yourself to two questions.

Anyone who has a question may queue up now. One moment for the first question, please. And the first question comes from Gael de Bray from Deutsche Bank. Please go ahead.

Gael de Bray, Analyst, Deutsche Bank: Thanks very much. Good afternoon, everybody. Actually, I have a few questions. So maybe one at a time. The first one is around the mix for the ITS business.

I mean with Q1 orders clearly showing a better mix with a higher share of EMEA and counterbalanced trucks. So do you think the trough in terms of the mix was reached last year and is now firmly behind the group? That would be question number one and then I’ll come back after.

Rob Smith, CEO, Qion Group: Gail, let’s go to that mix because as we shared, we had a 10% year on year pickup in order intake in the ITS segment. And the mix was for counterbalanced plus 15% year on year and for warehouse trucks, was plus 8% giving us an overall 10% pickup. In addition, the increases year on year were seen throughout all regions. It was 10% worldwide. It was 11 in the EMEA market.

It was 1% in APAC and in the North American market, was a 67% pickup. So that is a positive year on year increase. It’s also positive from our perspective to see that across all regions and the counterbalanced is a favorable mix for us. Maybe if we go to follow on thoughts, we did not see in the first quarter any pull forward effects. In fact, I in either segment.

And in current trading in the month of April, we have not seen any reversals in the positive development so far going into this year.

Gael de Bray, Analyst, Deutsche Bank: Okay. That’s great. So maybe just a follow-up on this one, on this commentary you’ve just had. What sort of discussions do you have with clients now? I mean, are they all rather on the wait and see attitude because of the greater uncertainties coming from the tariffs?

Or is it rather the opposite that you feel that more and more corporates now have been forced to rethink their supply chain organizations because of the tariffs and are accordingly ready to invest more in logistics because these trade tensions eventually mean that they have to relocate production, shift sourcing, shorten supply chains and so on.

Rob Smith, CEO, Qion Group: Thanks, Gail. A couple of thoughts on that. I mean, I think it’s truly too early to tell. And you got to put yourself in the shoes of companies all over the world with the tariff story changing daily or hourly. It’s very difficult to get some planning stability for people to be making new investments.

And so we’ve been discussing geopolitical and economic uncertainties and the the tariff discussions are are certainly exacerbating these uncertainties. And so we’ve described people slow to be making new invest to start new investments on large scale, for example, greenfield automation projects. What we do see though and you do see in our results is a very significant pickup, almost a doubling in the order intake for our modernizations and upgrades, which are brownfield projects. We report them in our service business. However, they’re like small automation projects, small new business projects on a brownfield basis.

We’ve got a very exciting product offering for or solution offering for that where, you know, the customers will run their facility till basically lunchtime on a Friday. In between lunchtime Friday and Sunday afternoon, we’ve been able to tear out, rebuild and upgrade their facility their brownfield facility to have better throughput and better productivity. And so what you see is customers that have existing facilities and existing automation solutions choosing to modernize and upgrade those rather than doubling down on new greenfields. And we think that’s a normal and natural reaction in a against a climate like this. We do see that growing and excuse me, we do see that growing and we think as I say, that’s a normal and naturally reaction in an economic climate like this.

Gael de Bray, Analyst, Deutsche Bank: Okay. Very helpful. Thanks very much.

Moritz, Operator/Call Moderator, Qion Group: Then comes the next question from Tore Frankman from Bank of America. Please go ahead.

: Hi, Rob. Hi, Christian. Thank you for taking my question. I would start with the first one, basically a bit of an add on of the Lastware’s automation question. So if I see it correctly now, the service part or as you said, the modernization part is growing strongly.

And can this going forward, if this is the case that this will improve over coming quarters and also improve the margin trajectory of the segment? Or should we not assume a higher margin for this business than for the greenfield part of your offering? And I’ll wait with the second question. Thank you.

Christian, CFO, Qion Group: So I think it’s a fair assumption that the margin quality on sort of service business overall and that does also include these modernizations and upgrades, actually has a favorable margin profile for us, yes? So we had like we said, right, we had a very good development, not just now in the first quarter, actually over the past quarters already with modernizations and upgrades, and that’s to the point that Rob described actually. We had almost a doubling in the first quarter in the order intake for mods and upgrades compared to the same quarter last year, right? We should not expect that we will grow that business compared to last year at the same rate, though, right? But that’s helpful, obviously, to our margin and the margin development going forward.

: Okay. Very, very well understood. And then the next one is, yes, let’s call it double question on your IT and S margin. On the one side, we saw year on year now revenues coming slightly down by 2%, but the EBIT was much lower. So to me, it just feels like that’s a little bit more than just the usual missing operating leverage here.

So maybe you could go deeper into this. And then here, as an add on on the efficiency program, do you still feel well on track to be back to the over 10% margins in IT and S by 2026? Thank you.

Christian, CFO, Qion Group: So to tackle your first one there, right, on the IT and S margin development, right? I mean you lay out the elements already, right? I mean there is an element there. We had the rundown of the order book last year, and we have less of that effect, obviously, as we have said starting this year as the order book has normalized. So that has an impact on our volume and such has an impact on the operating leverage, if you will, and the consequence on the margin.

We have also seen that and then also included in our guidance for the revenue as well as for the EBIT for this year in the IT and S segment, we have included that not just that we see lower volumes, right, for new business this year in the revenue, but that we also see that the pricing that will transfer into revenue this year will be lower than sort of the pricing that we have seen throughout 2024, right? And as such, the order intake and also the margin quality of the order intake and also the revenue is in line with what we have expected, right? And the is a combination of those factors. When it comes to your second question, which is then on the efficiency program, right? We have announced that, and we have said, we are starting the process.

We are 100% in time on the process. And the effects that we are looking at, so to remind everybody, 140,000,000 to 160,000,000 full year effect effective fully for 2026. We’re still looking at that. We also look at the same number of restructuring. I said in my presentation already, we have built a provision now for a significant part of that in the first quarter, but we still look at the same NII level, if you will, for the full year then for EUR $240,000,000 to $260,000,000, fully in line with what we have laid out and in line with our plans.

: Okay, great. Thank you both.

Moritz, Operator/Call Moderator, Qion Group: Then the next question comes from Sven Weier from UBS. Please go ahead.

Sven Weier, Analyst, UBS: Yes. Good afternoon. Thanks for taking my questions. The first one is kind of, again, sorry for following up on ITS. But my simple question would be to say, is the sales mix that you had in Q1 in terms of split between the lower margin warehouse units and the higher margin CB trucks, Is that consistent with the splits that you have also now in the order intake?

So is that the same? Or should we see any difference going forward in the sales mix then on the back of what you had as a Q1 order intake? That’s the first one. Thank you.

Christian, CFO, Qion Group: So just to clarify, Sven, you’re referring to a difference in the mix in revenue to the mix in order intake. Is that your question?

Sven Weier, Analyst, UBS: Yes. Because, I mean, you’ve been thankfully talking about the order momentum and the counterbalance trucks and the warehouse trucks. And I was just wondering, is kind of the mix that you see on the revenues, right, between warehouse and the others kind of relatively similar to the mix you have in the order intake?

Christian, CFO, Qion Group: Yes. So I mean, the sort of Rob made this explanation, and actually, he referred to the order intake mix in the first quarter, right? So obviously, when we are the way we came out of last year, right, I mean, we had a slightly different mix. So the order intake in the first quarter turned to the positive, if you will, right, compared to what we had have overall in the order book.

Sven Weier, Analyst, UBS: From that end, we rather get margin support in the coming quarters as well as from increasing amount of cost savings, I guess, as we go closer to the second half. Is that Yes.

Christian, CFO, Qion Group: Well, the cost savings, right, like I said before, we expect to have the effect of the efficiency program in 2026, right? So it would because you say later in the year, right, I would more look into sort of the effect is in 2026 for the cost savings program. And the sort of mix, like we saw the mix now also in the order intake when it comes to the product mix, regional mix. This is sort of what we have also sort of incorporated in our outlook for the full year already. So therefore, the mix that we have seen now in the order intake does not change our view on the full year for the segment.

Sven Weier, Analyst, UBS: Yes. That’s exactly what I was after. And the second question is just on warehouse automation orders, where you obviously saw the sequential pickup. I mean my understanding in the pre close call was that you had some order slippage from Q4 into Q1 on the OE side actually and that this would be helpful kind of. But I think the message we’re getting today is a bit different, right, that you actually had very good order momentum on the service side, on the smaller project side, which would sound more sustainable to me as an order level rather than if you had slippage?

Can you just give some more color on this point?

Rob Smith, CEO, Qion Group: Yes. Certainly, we’re not dampening any order intake expectations, Stan. There were indeed there was a reference in the pre pre close call to several large greenfields that move from Q1 to Q2 that did move from Q1 to Q2. So I expect that that’ll be what we’re talking about three months from now or they will be part of our discussion three months from now. But we’ll certainly be part of order intake in q two.

What I’m and and and maybe actually this gives me an opportunity to pick up on where Gail’s question was going a bit and where I think yours is too. I’ve been talking now for several quarters. We’ve been having a discussion about when was the warehouse automation market going to be turning to the positive. And we all recall back in COVID when there was such a massive investment in warehouse automation, especially in e commerce that has taken the industry a couple several years actually to grow into the capacity that we helped put in place during COVID. And you recall now for about three quarters, I’ve been discussing it’s been a positive step to see the ecommerce customers coming back now to the table and restarting their ordering for for greenfields.

I’ve also talked about that that’s been a continuing trend and the econ we report that that part of our so you see that now for several quarters that I see that as a a a hearkening for maybe a a early demonstration of the market coming back. And I think on top of that now, this this pickup in the where in the modernization and upgrades is another demonstration of people needing to improve their capacity. Right? I talked last time about the warehouse the e commerce customers coming back and now putting us on good visibility to their future needs and they do need and are asking for more capacity. And the fact that customers with existing facilities and I guess what I would say is not only is that a warehouse a a brownfield trend now, but it’s beneficial because Keon’s got a very large installed base of automation projects worldwide.

And so with the reason customers are upgrading and doing modernizations and upgrades is because they need more capacity and are choosing to do that on existing facilities as opposed to starting brand new greenfields with some of the uncertainty out there. But both of those trends are saying that the market needs more capacity and is investing in that. And I think that’s a demonstration or another data point that we can all be seeing together that the warehouse market, automation market is indeed returning into growth mode. I think it will certainly be helpful for the world to get through some of these tariff gyrations and get into a bit more stable planning environment. And I think that will be some tailwind to the trend that we’re discussing.

Sven Weier, Analyst, UBS: Thanks for the additional details, Rob. I mean, just to reconfirm, so you did not have slippage from Q4 into Q1, but you actually had slippage from Q1 into Q2. So that I must have misunderstood that on the pre close call then, right?

Rob Smith, CEO, Qion Group: No, Stan. I mean, look, talking about slippage and this and that, people push buttons at different points in time. In fact, there were some q four projects that we expected to get in q four that came in q one. In fact, in q one, there were a couple projects we expected to come that indeed came in the first couple weeks of q two. It’s kind of a natural that’s why we’ve talked for many years about lumpy order intake is because projects, each one of them is discrete and they push buttons at different points in time.

So your understanding was accurate. There were a couple from one that moved into ’2 and there are a couple from Q4 that moved into Q1. And I think in any given quarter, you’ll probably see that. And so I wouldn’t call that out as unusual.

Sven Weier, Analyst, UBS: And the I mean, given that you are a big partner of AutoStore, right? I mean, that caused any disruption for you? Because obviously, they had a major disruption in Q1, the way they generate their revenues. I mean, has that maybe also affected you or is that not really relevant for you guys?

Rob Smith, CEO, Qion Group: No. You recall, please, Dan. I mean, we integrate our own technology. We integrate third party technology. We put an entire software stack around that and have solutions to all our customers’ different automation needs.

And the integration of auto store technology is one technology in our overall solutions is clearly part of our offering. And you’re exactly right. We are a major player in the market with that. On the other hand, that’s had no impact on our overall business. No.

Sven Weier, Analyst, UBS: Good. Very clear. Thank you, Rob.

Moritz, Operator/Call Moderator, Qion Group: And the next question comes from Ben Uglow from OxCap. Please go ahead.

Ben Uglow, Analyst, OxCap: Afternoon, Rob, Christian and Raj. Thank you for taking the question. I had a couple. I guess one is almost a follow-up and thank you Rob for quite a lot of helpful color around the warehouse automation segment. I think we’ve all seen the kind of improving trend from e commerce over the last couple of quarters.

The question on my mind is from your customer conversations, and I appreciate that we’re talking about things that are happening week by week, but obviously you’ve had ProMat and all of those conferences and events a month or so ago, then we’ve had Liberation Day and tariffs. And I guess, have those customer conversations changed at all? Are you detecting a pause in the greenfield environment? And have any of the projects that you were originally talking about been pushed to the right? If you can just give us a a recent sense of those conversations, that would really help.

Thank you.

Rob Smith, CEO, Qion Group: Ben, let me just share. I think people all over the world are scratching their heads around Liberation Day at this moment.

: However,

Rob Smith, CEO, Qion Group: we work with a long term pipeline. We’re working with our customers on on really solutioning for them to meet a multi year and long term needs for their automation and helping them set up their supply chains and their supply chain automation. And therefore, those long term pipeline discussions are not particularly interrupted at any one given point in time. They continue. They usually conclude with a bunch of head scratching around Liberation Day in the past three weeks, but those conversations continue.

We’ve got a very solid pipeline. We’ve got a very strong customer base. We’re in this together for the long run. If anything, and I’ve called this out a couple times before, I think the world’s waking up to the fact that more and more optionality in their supply chains is a good thing or incrementally more. You can’t overdo it and invest everywhere and everything, but increasing the optionality in your supply chain through adding incremental capacity in places where they consider their supply chain underrepresented in terms of presence and foot footprint is something that’s going through the minds of warehouse automation and CEOs all over the world.

And so I anticipate that this kind of wanting to have a supply chain that enables further optionality as geopolitical shifts come should be a positive thing for the warehouse automation market. And I think trying to call that shot inside of three weeks of gyrations on Liberation Day would be a short term call. I think the long term trend of people wanting to have increased flexibility will be a positive thing for the market.

Ben Uglow, Analyst, OxCap: That’s understood. Thank you. And then my second is really just about the cost. Are you beginning to see or have you begun to think through the higher cost of components and or raw materials? Is that something that you are already dealing with?

And I guess my question is remembering obviously what happened in COVID, are you yet implementing sort of unusual price actions or surcharges to offset any of those increases, I. E, where are we right now in your kind of pricing fight back?

Christian, CFO, Qion Group: So the point is, we have to see where we are actually affected at this point in time, right? That’s the starting point, right? And basically, we have very much and that’s true for both segments of the business, right? We have very much a setup that is sort of in the region for the region, right? So that is, if you will, already sort of a natural hedge in this context, right?

So if we look at our effectiveness at this point in time or so, it’s very much focused on North America or U. S. In particular, obviously, right? It’s very much focused on The U. S.

And the relationships that we have, what we trade in The United States basically, right? So therefore, there’s one particular element everybody knows. We have a facility in Monterrey in Mexico for that supplies the Supply Chain Solutions segment, the MEDDIC for The U. S. That is run under the so called USMCA agreement, the successor to the NAFTA agreement.

And so far, even after Liberation Day and the Rose Garden event, that is still exempt from a tariff situation. So therefore, that actually limits our exposure to tariff or cost increase to a vast extent. We have other cost elements that are also affecting us. Obviously, there is an import from a very few products on the ASCI side from Europe. We have a bit of sort of imports from other countries.

And we also have this on the IDS side. Now we have put in place contract language. You made a reference to COVID, right, and the times 2022, right? It’s rightfully so. We have put a language in place that allows us to actually transfer cost increases of significance to our customers, right?

And to the extent possible, we’re going to use that language now and then transfer that to our customers. And therefore, overall, we feel that’s also a reason why we are in a position to actually confirm the guidance that we have put out a few weeks ago, right, because we feel that the exposure that we are having is well covered within the ranges that we have been providing.

Ben Uglow, Analyst, OxCap: That’s understood. Thank you very much. I’ll pass it on.

Moritz, Operator/Call Moderator, Qion Group: And the next question comes from Martin Wilkie from Citi. Please go ahead.

Martin Wilkie, Analyst, Citi: Thank you. Good afternoon. It’s Martin at Citi. Just a couple of questions. The first one just coming back to SCS, it was very encouraging the end market commentary you’ve given there.

When we look at the different customer segments, have there been any where you’ve noticed a change in trend? And I’m guessing there are some of your U. S. Customers are more at risk themselves from tariffs, whether it’s in electronics or apparel in clothing or areas like that? Or is it simply too early to see even at the customer level if there’s been any change in investment intention?

Rob Smith, CEO, Qion Group: Yes. I think a good question, Martin. Maybe if there’s a segment to call out, we’ve already talked about e commerce. What where where I also see continued focus and and and maybe some pickup is over the last several quarters, even the last couple of years, pre segment has been quite consistent in its drive to move from manual operations to automated operations. All of the trends that work in general on the automation segment also certainly apply to the grocery segment.

And you’ve seen good consistent focus in the grocery segment on automation in addition to what we’ve talked about around e commerce.

Martin Wilkie, Analyst, Citi: Great. That’s really helpful. And if I can have one other question just on the truck business. Obviously, lot of hope earlier in the year about Germany and the infrastructure spend and so forth. And I recognize a lot of that clearly has yet to sort of flow through to German economy, but we are seeing some signs, the eyeful reading and others, that some sentiment in Germany has picked up a little bit.

Is it too early for you to see those kind of conversations with your customers about their capacity expansions that might lead to a pickup in the truck business in Germany? Or what are you seeing specifically in the German markets?

Rob Smith, CEO, Qion Group: I’d tell you, Mark, maybe I do a shout out, Martin, for Gale from Deutsche Bank. He has put out a week, ten days ago, a quite good analysis of expectations of the beneficiaries of the infrastructure investment expected to come from the decisions being taken in Germany. What I would tell you is that we’re still six, seven days shy of the new government starting and that should happen on on June. And I think all I think part of that new government success and longevity is going to be underpinned by indeed implementing the infrastructure investment that it is foreseen and announced a little over a month ago. Should that not transpire, I think it will put quite a bit of pressure on the government.

I think the whole country is very focused on the new government being successful. So I would expect intensity of working to implement that investment program in the country. And I think that will certainly have macro benefits. And Gail’s done a nice job of calling out who he thinks is going to benefit from that, and you might wanna check into his report. We think it’s certainly going to be good for our company.

Sven Weier, Analyst, UBS: Very good. All right. Thanks for the answer.

Moritz, Operator/Call Moderator, Qion Group: And the next question comes from Alexander Hauenstein from DZ Bank. Please go ahead.

: Yes. Hi. Thanks for taking my question. I would like to come back to the optionality. You mentioned you also spoken on some of your slides about the prepared different scenarios for capacity, R and D, distribution network, etcetera.

So what are these kind of scenarios you have been preparing for? I mean maybe you can share some views here. Which stage are they in? And what can you tell you about your ideas about how to

Rob Smith, CEO, Qion Group: So, Alexander, thank you for the question. Look, I think optionality in running a supply chain gives people the opportunity to, as Christian was describing earlier, have a natural hedge, an operational hedge is conditions change. Those conditions could be FX conditions, they could be scarcity supply conditions, those could be tariffs increasing cost conditions in any one location or in any given market. And so, constructing the supply chain to having indeed optionality for sourcing in different low having alternatives for sourcing and alternatives for manufacturing sites. And indeed, you could even consider alternatives for R and D depending on geopolitical scenarios.

All those things give companies an ability to have continuity of operations as some of the different scenarios change or their or their current state is changing in a in a geopolitical or supply chain or natural disaster or any other kind of inter potential interruptions. If you don’t have any options and you get an interruption, you’re in real trouble. And so having more options on the table and having your supply chain set up to deliver that for you in reasonably short time gives companies an opportunity and an ability to have better continuity of performance and continuity of operations than companies that don’t have that. And so when I talk about Kian, actually, we have a home game in all the world’s major markets. We have a footprint that gives us the opportunity to do R and D, to to have a sales and service network, to have a supply chain, to have a sourcing team and supply base and to have manufacturing and assembly operations in all the world’s regions.

Obviously, no company has 100% vertical integration and complete coverage on every part in their bills and materials and for every product line in every market that would be exorbitantly expensive on a CapEx side and would be a drain on margin. But the trick is to give quite a bit of thought to that and be selective on how you set up that optionality in your supply chain and that’s indeed how we’ve worked to set up ours and it gives us a certain amount of natural hedging as Christian was describing a while ago. And so, as you work through different potential scenarios, you wind up all of them lead to having more optionality, a certain amount of optionality and flexibility gives you an ability to have better performance in unpredictable environments.

: So I understand you have kind of combined and bundled the things that you were looking into also in the past and especially since the pandemic. We’ve kind of bundled them and put them into different scenarios where you can take them more out of the box in order in the case you need them. But generally, I mean, you’ve probably done this kind of work on several items you mentioned already. I mean, has that materially intensified? Or is that well far progressing?

Or how should I think about yes, the way how intensive this is consuming your time, for example?

Rob Smith, CEO, Qion Group: Look, think if you equate intensity to urgency to short term trying to turn it on, companies that are in the short term trying to turn on flexibility are probably already behind the game. And we’ve consistently invested and built those capabilities in all the world’s regions over many years. And so, there’s a certain amount of installed base and capability and flexibility we’ve already built into our operations and that certainly is something that we’re think was appropriate and responsible decision making over time and gives us a certain amount of flexibility in this timeframe. And we’re happily not trying to create flexibility in the short term that would be quite difficult to do. We’ll continue to build it out, but it’s been important to have an important significant amount of installed base that already creates that flexibility.

Alexander?

: Okay. Okay. So understood. So I understand you’re well prepared and there’s no big need for you to take more actions in order to take out this option’s path, so to say. Okay.

So let’s come to my question number two, please. Looking into Supply Chain Solutions, I was wondering whether you could give us some idea about the margin progression path over the next couple of quarters until year end here. Is there any straight, let’s say, linear development to be expected or anything that could come across the lines apart from, let’s say, the normal fluctuations of the one or the other projects being slipped into another quarter?

Christian, CFO, Qion Group: Yes. Thanks for the question, Alexander, because that gives me to sort of lay out that, again, as it is underpinned with the guidance that we have provided for the full year. And as we have said also last time, we look at the continuous continued progression on the margin profile on our way to a double digit margin that we portray for the SAS segment also by 2027. And this year and the progress that we expect throughout the year will actually be on that path and in line and consistent with that path for 2027.

Moritz, Operator/Call Moderator, Qion Group: And the next question comes from Philippe Laurin from Bernstein. Please go ahead. Mr. Lorraine, your line is open.

Philippe Laurin, Analyst, Bernstein: Yes. Can can you hear me?

Moritz, Operator/Call Moderator, Qion Group: Yes. We can hear you now.

Philippe Laurin, Analyst, Bernstein: Okay. Perfect. The the the first question I have is, could you confirm please for SCS that the order intake and sales of the service activities are 100% comparable in any specific period because at the end of twenty twenty three, you were actually mentioning that the methodology was being aligned with ITS and that modernizations and upgrades would be excluded from the service order intake, which does not seem to be the case anymore in this quarter. So that’s the first one. And I’ll wait with the second one.

Christian, CFO, Qion Group: Okay. Then I’ll do the first one, right? So modernizations and upgrades are both shown in Services, right, in the order intake and in the revenue, obviously, right? But the bots and upgrades follow the same percentage of completion logic like the projects, the business solution pieces, right? Therefore, order intake of bots and upgrades that is shown as service order intake will actually translate then into revenue into services as the completion of the projects on a POC is done.

Philippe Laurin, Analyst, Bernstein: Okay. So you confirm that actually now the service the whole service order intake and the whole service sales is not 100% comparable in any quarter?

Christian, CFO, Qion Group: It’s not identical if

Philippe Laurin, Analyst, Bernstein: Okay. That was the first question. And the second question is, could you quantify a little bit the price reductions that you warranty to clients in 2024 in ITS, the ones that I mentioned on the specific slide? Or maybe slightly differently as well, you mentioned some pressure on the gross margins due to this reduced pricing. So can you quantify a little bit that pressure, please?

No.

: Okay.

Rob Smith, CEO, Qion Group: No. Look, our actions are rational and the market’s actions are rational, and that’s all the more we’d really be commenting on that. So appreciate the questions, Philip. Actually, we appreciate everybody’s questions today. We’re at the end of the time frame.

Think, Maurice, if you wanted to we could finish up here.

Moritz, Operator/Call Moderator, Qion Group: Yes. This will conclude our question and answer session for today. For any people who were not able to ask their question, please contact the IR team of KEON and they will happily reply to you offline. So it’s my pleasure now to hand back over to Rob Smith for any closing remarks.

Rob Smith, CEO, Qion Group: Thanks, Moritz, and thanks everyone for joining our call today and these very good questions. I felt like we were able to have a very good discussion about the dynamics and the state of play of the business and appreciate that together very much. We look forward. We’ll be continuing this dialogue with you in the next months at the upcoming conferences. We’ll see each other in person at those, and we’ll be back in three months with our second quarter results at the July.

So until then, take care and best wishes. Bye.

Moritz, Operator/Call Moderator, Qion Group: Ladies and gentlemen, the conference is now concluded and you may disconnect. Thank you for joining and have a pleasant day. Goodbye.

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