Earnings call transcript: VAT Group Q1 2025 sees modest sales growth

VAT Group AG reported its first-quarter 2025 financial results, reflecting modest growth in order intake and sales. With a market capitalization of approximately $10 billion and an impressive gross profit margin of 63.92%, the company maintained a strong order book and continued its focus on technological innovation. The stock, however, experienced a decline of 2.86% following the announcement. According to InvestingPro data, the company maintains a GOOD financial health score, supported by strong profitability metrics.

Key Takeaways

• VAT Group’s Q1 order intake reached CHF 242 million, showing improvement from last year.
• Group net sales were CHF 275 million, at the lower end of the guidance range.
• The semiconductor sector saw significant growth, with sales up 52% year-over-year.
• The company’s stock fell by 2.86% following the earnings announcement.

Company Performance

VAT Group demonstrated resilience in Q1 2025, with order intake improving to CHF 242 million compared to the previous year. The company’s focus on advanced semiconductor manufacturing technologies contributed to a 52% increase in semiconductor sales. However, the book-to-bill ratio fell short of expectations at 0.9x, indicating a potential area of concern.

Financial Highlights

• Order Intake: CHF 242 million, a modest improvement year-over-year.
• Net Sales: CHF 275 million, at the bottom of the guidance range.
• Semiconductor Sales: Increased by 52% from the previous year.
• Order Book: CHF 339 million, up 5% from last year.

Market Reaction

Following the earnings release, VAT Group’s stock price decreased by 2.86%, closing at CHF 272. This decline reflects investor concerns over the company’s lower-than-expected book-to-bill ratio and the broader market’s cautious outlook on the semiconductor industry. Trading at a P/E ratio of 38.57, InvestingPro analysis suggests the stock is currently slightly overvalued relative to its Fair Value. The stock has experienced significant pressure, with a -40.53% total return over the past year. Analysts maintain a mixed outlook, with price targets ranging from CHF 330 to CHF 587.

Outlook & Guidance

Looking ahead, VAT Group expects market conditions to improve throughout 2025. The company anticipates growth in sales, EBITDA, net income, and free cash flow. With a current revenue growth rate of 6.43% and a strong current ratio of 2.46, the company appears well-positioned to meet its targets. For Q2 2025, VAT Group has set a sales guidance range of CHF 260-290 million. The company is also projecting a 20% growth for the full year, with an additional 10% growth expected in 2026. For deeper insights into VAT Group’s growth potential and comprehensive financial analysis, investors can access the detailed Pro Research Report available on InvestingPro, which covers over 1,400 top stocks globally.

Executive Commentary

CEO Urd Grumner emphasized the company’s strong position in the semiconductor market, stating, "We are set up to outpace the market growth anticipated for 2025 and beyond." He also highlighted the strategic importance of the Chinese market, noting, "China is really a very interesting business for us with the big companies you already know, but there is a lot of smaller companies also popping up here."

Risks and Challenges

• The book-to-bill ratio falling short of expectations could impact future sales growth.
• Geopolitical uncertainties in the semiconductor supply chain may pose challenges.
• Currency exchange rate fluctuations could affect financial performance.
• Potential tariff impacts on the semiconductor industry remain a concern.
• Shortened lead times and customer inventory levels may influence future order intake.

VAT Group’s Q1 2025 performance highlights its continued focus on innovation and market expansion, particularly within the semiconductor sector. However, the company faces challenges in maintaining its growth trajectory amid a complex global landscape.

Full transcript - VAT Group AG (VACN) Q1 2025:

Sandra, Conference Call Operator: Ladies and gentlemen, welcome to the VIT Q1 twenty twenty five Trading Update Conference Call. I’m Sandra, the Chorus Call operator. I would like to remind you that all participants are in listen only mode and the conference is being recorded. The presentation will be followed by a Q and A session. and one on your telephone.

For operator assistance, please press and 0. The conference must not be recorded for publication or broadcast. At this time, it’s my pleasure to hand over to Urd Grumner, CEO. Please go ahead, sir.

Urd Grumner, CEO, VAT Group: Ladies and gentlemen, good morning, and welcome to BSG’s q one twenty twenty five trading update conference call. With me this morning in our freshly opened innovation center are CFO, Fabienne Jota and our investor relations team is Michelle Gerber and Christopher Bickley. After my introductory remarks, we will start the q and a session. The call moderator will take your questions in the order you enter them. So let’s start.

We are pleased to connect with you again after the full year results of end March ’4. Following the full year results, we had great discussions during our Zurich and London road shows with a focus on the technology and the anticipated shifts relevant to our business this year. Since then, I spent a lot of time with customers, namely in Asia, which is especially important during these times of uncertainty we are seeing. Our customers rely on us to be ready with our products and services in the location they need us and with ever shorter lead time for engineering and new product introductions. Nothing has changed there.

My takeaway from these discussions is that our customers are not changing their views or expectations about the ongoing technology transition and capacity expansion. However, a new arrival has become relevant to tariffs. Tariffs are likely to impact the demand for and pricing of consumer products. The exact magnitude is difficult to estimate right now. Nonetheless, the advancement of the next generation of chip and thus, EUV core growth driver is still in place.

The overall demand for semiconductor chips and therefore for semiconductor production equipment remains consistent, but we are seeing a slowdown in order intake of around 10% since the fourth quarter. This is due to the high level of some uncertainties caused by this geopolitical situation and, for example, announcements of potential factory shortage. The semiconductor supply chain is on a standby to serve where and what kind of demand will arise. Our customers are reflecting this situation as well, and lead times remain short. They expect us to remain on standby for deliveries.

As we mentioned previously, we have seen a recovery for PSE from the bottom in 2023. The market seems to have plateaued in the past two years around a record wafer fab equipment of around $100,000,000,000. It will be the mix of applications that will drive this growth going forward. In this investment announcement by major hyperscalers or the reconfirmation of the previously made commitments is in our view a strong signal that AI will serve as a key driver of the technology transition and of investments in additional capacity. These long term plans reaffirm that despite of all these short term obstacles, the semiconductor market continues to grow towards the $1,000,000,000,000 mark by 02/1930.

In the advanced industrial business, we have seen a slowdown in orders compared to q four. Again, the volatility from uncertainty in global trade has been eating into the business. Furthermore, US based research institutions have been experiencing cuts to their funding. All this is expected to be temporary, and we have had still expectations of a recovery and growth in our ABB business during this year. Global services completes the picture.

Demand for consumables and repairs remained at the same level as in the fourth quarter, and staff utilization has gradually improved over the course of the year. The segment shortfall is due to the lower demand for refurbishment and upgrades, which, similar to the valve, is related to uncertainty around investments in upgraded wafer fab equipment. Let me repeat what I said at the full year results in March around our expectations for 2025. First, the semiconductor market is doing well as demonstrated by our 2024 results. We still expect 2025 and 2026 to be growth year for VAT.

It’s up to us in the industry to provide the latest chip to bring in the next generation of electronics while mitigating the development in global trade. Second, we are progressing with our capacity and capabilities expansion. In heart, we just moved into the Innovation Center, a very impressive building where we will get our r and d capabilities running faster. Innovation is what our clients expect from us and what distinguishes us in the market. Third, the thesis of the $1,000,000,000,000 semiconductor sales in twenty twenty thirty is still intact.

It’s not even accelerated by additional AI investments in the years to come. The two nanometer adoption is in progress in logic. HPM capacities are fully booked in 2025, and our customers are preparing to introduce NAND chips with more than 200 layers. All of these trends require a shift in wafer fab equipment towards more leading edge with higher spectrum content. Let’s turn to q one results that we published this morning.

Q one order intake of 242,000,000 Swiss francs represent a modest improvement on last year’s q one numbers. Group net sales came in just above the bottom of our guidance range for Q1 at CHF $275,000,000. Compared to Q1 last year, our semi sales were up 52%, which ties back to what I said previously. Our semi route business is doing well, but we are still anticipating growth to pick up from here. The significant U.

Dollar swings, especially against the Swiss franc, have only taken place in the past two weeks, which means we will talk about this at the half year call and that’s the FX impact during Q1, but only around a negative 1% to 2%. We maintain a healthy order book of 339,000,000 Swiss francs, which is 5% higher compared to last year and represents a book to bill of around point nine x. This is below our expected book to bill over 1x in 2025. Looking forward, we maintain our 2025 outlook that we expect market conditions to continue improving over the course of the years. We continue to expect greater sales, EBITDA, EBITDA margin, net income, and free cash flow in 2025.

I can only repeat my statement from our fiscal year results. The technology transition in 2025 is one of the key drivers of our business for this year. And based on our technology leadership in leading edge, we expect to benefit over proportionate from this transition. We have also spoken about increasing vacuum intensity. This still holds true as the increase in process steps will drive the overall required installed process chambers, which will increase the installed VAT content in the newer fabs and drive demand for our adjacencies.

In ABB, there is no change to our expectation and a rebound in scientific instruments and in industrial application will drive demand for VSE. We also anticipate further investment in fusion research and uranium enrichment. In global services, we expect upgrades and retrofit of existing fabs to pick up as fab utilization overall is high and additional demand will drive upgrades. On tariffs, we are working with our customers to find solutions to the con conundrum. Vals represent a small portion of the highly complex supply chain and remain mission critical.

Therefore, we believe the immediate impact is going to be limited at this stage. What is more difficult to anticipate is the impact on the overall consumer electronics market. We are set up to outpace the market growth anticipated for 2025 and beyond. The mix is going to be very supportive, leading edge, deposition and edge tools and our ability to service our customers globally. We are optimistic about the coming quarters and for the second quarter of this year despite the FX hit.

We continue to expect sales of between CHF $260,000,000 and CHF $290,000,000, which at the midpoint is in line with the full year consensus run rate. We will provide more details on our strategic focus and business drivers for the coming years at our Capital Markets Day on May 20 at our new innovation center in Hague. Formal invitation to the event will go out soon. We plan to offer a plant and innovation center tool before diving into our strategy in the afternoon. This concludes my prepared introductory remarks, and we are now turning the call back to the operator for the q and a session.

Operator, please.

Sandra, Conference Call Operator: Thank you. We will now begin the question and answer session. You wish to remove yourself from the question queue, you may press and 2. Questions on the phone are requested to be disabled to allow speaker mode while asking a question. Anyone with a question may press star one at this time.

Our first question comes from Mayhun Young from Goldman Sachs. Please go ahead.

Mayhun Young, Analyst, Goldman Sachs: Thank you for taking my question. So I have two questions. First of all, have you seen any potential prebuybacks given there are potential taxes to tariffs on semiconductors upcoming according to your customer interactions? And I’ll ask the second one.

Urd Grumner, CEO, VAT Group: I think so far, we have not seen that, but I think you are anticipating correctly this could happen. But at the moment, it’s still too volatile and to changing too fast that our customers would do such actions. They are also analyzing everybody’s kind of analyzing the situation and find the the right measures to answer the new kind of challenges.

Mayhun Young, Analyst, Goldman Sachs: Understood. And second question is on on the advanced industrial rebound that you mentioned. How sensitive is the the rebound assumptions that you’re having now to the macro development?

Urd Grumner, CEO, VAT Group: Yeah. That’s also a very good question. I think you will need also a little be a quick call how the overall economy will evolve now and to and how the the whole pricing overall is is is change. I think our advanced industrial business is heavily on on energy. I think this we we still see positive that this will continue.

And then also on the scientific instruments that goes more often in the health care and all these so I don’t expect that there will be a a big pushback. And our footprint also in certain areas that are heavily impacted on the tariff is not that high. So overall, in VAT, it’s less than 20% what we sent to US. So I think this is also for us and, again, leveling out the the impact.

Mayhun Young, Analyst, Goldman Sachs: Very helpful. Thank you very much.

Sandra, Conference Call Operator: The next question comes from Diviya Shemama from Bank of America. Please go ahead.

Urd Grumner, CEO, VAT Group: Yes. Good morning. Thank you for taking my questions, gentlemen. I’ve got a couple. First, if you could give us an update on your business with the Chinese Seneca vendors.

Have you seen any changes in behavior, any pull in, any push outs of any sort? And, you know, if you could give us a a quantification of the the the revenues coming from Chinese handset? And I’ve got a follow-up. Thank you. Yeah.

China is a is hot topic and the question, and spent quite some time now in in the after the March event we had in China. And I met all the the major customer and also a lot of new ones. So China is really a very interesting business for us with the big companies you already know, but there is a lot of smaller companies also popping up here. I have I think the situation in China is kind of completely decoupled what we are discussing here in the West. They have the clear mission.

They wanna achieve this self sufficiently in in China, not only in the chip manufacturing, but also in in the equipment. I think today or last year, the the share of the self sufficiency was around 20%, and this shows that there is huge potential for for our customers in China to serve the domestic market going forward. And this is also what we see. They have to develop a lot of new products, tools, new applications, and there is a I always say, kind of a gold rush, engineering rush that they have to come up with this new solution. So it’s very positive, and I really it’s kind of decoupled from all the geopolitics data set their own agenda and Western supplier at VAT.

We can support that and and also benefit from from this situation. Very clear. Thank you. And also, sorry to asking for the share. I think that it was Yeah.

Last year, it was roughly 30% of our total than in q one. It was a little bit higher than the 33, 30 two percent. Oh, thank you. So let’s come back to to tariffs on the second question. So there there are tariffs from Malaysia and in Switzerland, which are quite punchy.

I think you’ve been giving us earlier your exposure to shipments to The US of about 20%. Is that from Switzerland or is it from Malaysia or is that, like, an average that we should use as a as a sort of bogey for the for the business? Good morning, Vidy. This is Fabian speaking. So the the 20% are the total shipments in both locations.

Okay. Brilliant. Thanks very much.

Sandra, Conference Call Operator: The next question comes from Yaron Isett from UBS. Please go ahead.

Urd Grumner, CEO, VAT Group: Hi, and thanks for taking my questions. And the first one would be, please, on the auto trends with high bandwidth memory capacity additions being in full swing. And my question is, is this not something that’s already supporting your order intake quite materially already today, and there’s just some weakness in some other legacy CapEx materializing right now? This would be the first question, please. Yeah.

From your sense, I think in the in the we always have to distinguish this as a build out of capacity or or also the tech transition, right, that they are just doing upgrades. And, of course, the first first that they are doing tech transition, so they are upgrading upgrading their tools, reusing the tools they have before they go into further capacity expansion. And this is something that is holding back. And as I also mentioned before, lead times are extremely short now, and everybody is kind of trying to reduce the short lead time and just deliver when they need and to to not go into commitment for too long to long long time. And I think the situation is changing quite dramatically from day to day.

I think this is this volatility we see, and everybody’s holding back. So request from our customers on these ends is extremely short, and this certainly reflects the situation. Thank you. And then maybe a second question is a kind of follow-up. I mean, when I step back three, four months ago, I mean, everybody was expecting some serious and CapEx recovery or acceleration because it is already what’s not happening.

Now the world is slightly looking for more challenging macro picture versus two, three months ago. So when you’re listening to your customers also at Applied and Land, I mean, what do you hear? What is the trigger point actually that really gives you confidence that we have an end market growth happening over the next one or two years on senior equipment CapEx and what’s that maintaining in practice at least 95 or 100,000,000,000 and run rate. And it’s certainly an an interesting observation in the in the past. We were always talking about that the past cycles.

Right? That’s the policy up and down the in the the three to five years. And I think if you analyze data today, I would say it’s just going fresh in the three to four years cycle to the next plateau. So coming from the the 30,000,000,000 to the 50 to 60, and and now we are have reached three years ago to 100,000,000,000. And maybe we stay there this year and maybe slightly higher next year before the next big jump build will happen and from potentially this will go to the $1.25, 1 30 5 next to to achieve the next level of hearts.

It’s less about the swings in the way for fabric business. It’s more about the what kind of what kind of tools and the shifts within the way for fabric treatment that becomes more and more interesting. And we also try to elaborate that on on our full year event. That there was a quite a shift in the last year towards more lithography and especially the, like, let’s say, the the legacy lithography tools driven by China as well. And what we anticipate now in 2025, it will level out again to the more depth and edge tools.

And as as you in the right way, as before the HTM and also then the gate all around technology, they will ask for but they will require more and more to leading edge tool where our content will be. I mean, this is the growth story. So even if the 100,000,000,000 wafer fab equipment will remain on that level, This is in a position that we will outgrow the market, so we will have to see significant growth in 2025 through this technology shift in the wafer fab equipment.

Navarich Najj, Analyst, Octavian: Thanks a lot.

Sandra, Conference Call Operator: The next question comes from Sandeep Deshpande from JPMorgan. Please go ahead.

Sandeep Deshpande, Analyst, JPMorgan: Yeah. Hi. Thanks for letting me on. I have two questions, if I may. I mean, in terms of the order intake in the first quarter, I mean, you’ve seen this a a weakening of the orders.

I mean, is this because I mean, what is happening macroeconomically, or is it something else that you saw during the quarter, which is making it happen also your revenue in the first quarter, you know, was was in the bottom end of the guidance. Normally, I mean, you guys are pretty good in in achieving what you have guided at the midpoint. So can you just give any indications of what how it’s played out in the first quarter? I have a quick follow-up. Thanks.

Urd Grumner, CEO, VAT Group: Yeah. I think you you gave yeah. So already in your question, somehow, it’s series of macroeconomic uncertainties that’s coming in. And it’s not only one. It’s it’s several factors that play in here in in the industry itself.

So kind of the reshoring activities, not not every company is in, let’s say, in best shape or has some changes internally. And then, of course, also the geopolitics playing in here as well. Tariff is one, but also the reshoring and every every region, every country want to have the cheap manufacturing on its soil. So that gives a lot of opportunities for sure. I think great excellent great direction for the industry as well, but also a lot of uncertainties.

And as long as this is in in in this flow and changing that path, everybody’s kind of cautious and waiting until there is more security again.

Sandeep Deshpande, Analyst, JPMorgan: And my follow-up question would be on one which was asked earlier, which was on the China percentage of your revenue in in semiconductor. I mean, this 30% on revenue that you’re getting from China. I mean, the semi cap companies in China do not have that sort of market share in the global semiconductor equipment market. So maybe how do you understand that share you have in revenue coming from the Chinese semiconductor equipment suppliers given this dynamic?

Urd Grumner, CEO, VAT Group: See that you have very, very long term relationship as well here in China. Of course, just in the last year, China was growing that fast, but this is always building on a long term, a good relationship with customers. And I think if you have done your homework 20 ago and you have great fall for former management as well, that they were very wise enough to also start working with them, and that’s kind of stakeholder to the customer for them. That’s very important, especially our base of business that our church is not that attractive. It doesn’t look that attractive.

If you are very close to them and support them, I think that’s now where we benefit as well, this trusted long term relationship and, of course, the technology they need. They are on a technology path now in China. They what they want to achieve in the next five years, the Western world maybe have have done the last ten to fifteen years. So coming from the 28 nanometer node down to the seven or five nanometer. And in China, this will go much faster.

They will also have their challenges for sure. Not everything will go smooth, but they they will find a way to to to succeed on on that road map. I think our our not only D and T, but also other suppliers, component suppliers will benefit from that since they deliver quality proven quality products into China and and support them partially on that journey. Thank you.

Sandra, Conference Call Operator: The next question comes from Aviz Nabil from the Redburn Atlantic. Please go ahead.

Urd Grumner, CEO, VAT Group: Hey, guys. Thanks for taking the questions. I had two questions, if I may. Firstly, just on gate all around. So how’s the supply chain looking in gate all around ramp and for a ramp in the third quarter, fourth quarter?

When do you expect to see orders pick up? Thanks. Yeah. Gate all around is certainly very from a technology side, very, very interesting. It’s always goes into the the two nanometer and then in the next phase and also to the one nanometer, even more equipment will be required.

So what the data around means is that there would be more process that required to produce total process towards the wafer. And a lot of them is more, for example, ALD or PLD process that’s the leading edge process that then we have here also a higher share compared to the legacy tools. I think this is what what we will benefit. The build out will be certainly driven by one major effect, leading one. And if you see what kind of chips they are producing, we are really focusing always on the on the leading edge, and that build out will happen.

And also there, right, they have a very nice announcement about the spend they will have in the market this year. So that’s certainly what’s driving that, and our customers will benefit from that with the leading edge tools. And you see the benefit since you are qualified on these tools. Okay. Great.

And then I guess, for my follow-up, there’s just another one on China. So AS and I yesterday commented that China demand held up better than expected. I was wondering how you see overall China WFE spending this year, whether you feel like it’s trending better than expected? And, you know, whether you expect it to be relatively stable this year or small small down this year? Thank you.

Yeah. Unfortunately, our business cannot be compared to the OEM business directly. But, yes, China, we also anticipate that the wafer fab equipment overall will be reduced in China this year, let’s say, 20%, but will be still on a on a very high level. But even on this reduced wafer type equipment, the domestic OEM will win. And this is where we will grow in China through the domestic OEM.

Alright. Thank you.

Sandra, Conference Call Operator: The next question comes from Michael Inouin from ZKB. Please go ahead.

Urd Grumner, CEO, VAT Group: Thank you much. Good morning, everyone. Just two questions on the first, on the order intake q one. How how has it evolved actually quote month over month? Has it actually just basically stopped like a shock that we could have anticipated with the president of The US just bringing up this tariff discussion to a new extreme level.

So has it been okay at the start of the year and then basically dropped, I would say, a couple of weeks ago? That would be my first question. And the second question would be I mean, the discussion is obviously still ongoing on tariffs. There is an empty day pause, but between The US and China, it’s still escalating, I would say. So what are your assumptions for a for VAT for a good outcome of this, and what would be actually a bad outcome for you going forward?

So how should we have how should we look at these options that we have on the table here? This would be my two questions. Thank you. Thank you, Michael, for the questions, and good morning again. So on the, let’s say, order pattern throughout q one, I wouldn’t see any specific driver here other other than the genuine underlying demand.

So what you usually observe in a q one is that you have a slow start, then then then you go into Chinese New Year, which which usually has an effect on your Feb numbers and then then March picks up. And I think that has been not much different than what we have observed in the in the past. On the on the tariffs, I think that the way I look at it is is on our own plate and that we, let’s say, symbiotically work with our customers on solutions, but at the same time, do everything possible to ensure that the tariff impact on our financials will will be limited. So I think I I’m not in in a position at all to to kind of now look in the crystal ball and and anticipate what might happen. I think we, on our side, we just need need to be prepared and then react as we have done it in the past.

And and also going forward while staying very close with our customers and elaborating the solutions jointly. Makes a lot of sense. Thanks, Fabian. Pleasure.

Sandra, Conference Call Operator: The next question comes from Craig Abbott from Kepler Cheuvreux. Please go ahead.

Urd Grumner, CEO, VAT Group: Yes. Good morning. Thank you. Yes. I just wanted to in the full year conference call, you indicated that you felt quite comfortable with consensus top line growth this year of around 20%.

And if I look at the midpoint of the Q2 sales outlook and I add that to the Q1 sales, which is just nearly half of this has already been achieved in h one. And, you know, you said from the beginning and also in the quarter conference call, do you expect q two to be stronger with the ramp starting to pick up pace? And I just wondered, given all the, you know, all the uncertainties that we’ve been talking about in the call, how comfortable you still feel with that? You suggested earlier in your comment that, you know, it was still sort of trending in line with consensus. If you could just elaborate a bit on that and but and also just as a final question on that.

I guess though it would nevertheless be fair to say visibility on this has maybe declined a bit. And then just one really quick follow-up. Thank you. Yeah. Thanks for that question.

I think I also tried to indicate that in in in my introductory remarks that we still are very positive that that we can achieve and not not our guidance, but the the content is is out in the market and that we have we are on the run right now to to achieve that. And then the other thing is, of course, they play in, but not only the tariffs or the reshoring. I think the industry itself, the demand will be there. So semiconductors are on the path to to grow to this 1,000,000,000,000 as well. So investments will be needed.

The exact timing of the investment is always the big challenge, but certainly, there will be major major capacity expansion, especially new technology going forward already this year as announced by the the big fabs and earlier this year. A big impact, of course, we also have the FX. I think that’s certainly something that’s that’s critical to us always in the still ensure our business in the US dollars and and have an impact to see on the Swiss franc. That certainly is something we have to watch carefully, but it’s not completely in our hand. But I think our global footprint, we also started already in the past to balance that out, that we are that’s dependent on that as well.

But short term, still, there might be a hit on that as well. So that’s why the guidance, if you read that correctly, it’s actually a growth. Right? So it’s a growth in the Q2 if you would normalize that in the FX. Thank you.

Well, that was gonna be my follow-up was to what extent maybe the recent FX volatility has led to this wide guidance range on the sales for Q2. I appreciate you said you would give us more of an update with the half year numbers, but that is the case, right? You sort of Basically, what those are in my speech, I had that confirming actually this consensus for for 2025 before. Yeah. Mhmm.

Okay. Thank you very much. And that’s great. Great. May maybe let me let me just add add to that also for the benefit for for the other participants.

So as as we have informed earlier on, we we have actually less than 2% of our sales are recognized in in Swiss Francs. And and therefore, in this, hopefully, volatile environment with the the the intraday swings that we have observed over over the recent days, we we have chosen then also to respond this guidance range a little bit, which I I believe is is mindful at this point of time, but still implies some growth for for q two. Okay. That’s very helpful. Thank you.

Sandra, Conference Call Operator: The next question comes from Martin Jungfleisch from BNP Paribas. Please go ahead.

Urd Grumner, CEO, VAT Group: Yeah. Hi. Good morning. I have two questions, please. First one is on inventories.

You mentioned that slightly higher than expected customer inventories in semi also contributed to slightly lower orders and sales in the first quarter. Could you point out any specific customer group that has seen elevated inventories? And would you expect this headwind to sustain in the second quarter on orders and sales as well? That’s the first question. On on the inventory, I think it’s it’s not not that it’s not let’s see.

Well, it’s not high that this inventory goes up there also kind of sometimes balancing out. And when the customer pays the goods or so they can have an impact on the on the finished goods. And of course, then in general, it’s also that we also prepared, of course, to to deliver as we mentioned before, as well lead time are very short. You also have to be prepared to deliver fast, and then you have to also have to long long lead items in in your inventory. And in the end, it’s all about the rebalancing.

Okay. Thank you. And the second question is on adjacencies. Just if you could disclose the rough revenue from orders generated with the adjacencies in the in the third quarter, and if you could call up any specific applications for customer groups that are currently driving sales in order for that. I understand.

This is a very interesting question. I think we have the answer on that in our half year because I’m done and not in the in the quarterly. Okay. Fair enough. Thank you very much.

Sandra, Conference Call Operator: The next question comes from Michael Firth from from Toubil. Please go ahead.

Urd Grumner, CEO, VAT Group: Yes. Hi. Good morning, gentlemen. Just one question left for me, and and I would like to come back on the tariff. You you say that you expect no material impact, but still you have these 20% sales into The US.

So I was just wondering how we should read that comment. Do you do you expect basically no tariffs or do you expect the exemptions or or do you expect to pass the tariffs on or how how should we understand the comment that there is no no impact from from tariffs on VAT? Mhmm. I think the the the the array of solutions is what you just introduced. So, ultimately, as I said before, we’re working closely with our customers on on solutions to to limit the impact.

And I think that there’s a there’s a range of of mitigation elements in here, which we will apply. Okay. I think that’s go to the same direction as what ASML, I think, also alluded to. Thank you for that. Pleasure.

Sandra, Conference Call Operator: The next question comes from Navarich Najj from Octavian. Please go ahead.

Navarich Najj, Analyst, Octavian: Morning, gentlemen. Thank you for taking my question. The first one would be on the book to bill. If we if we look at it, it’s probably the lowest since a year and a half. What do you expect for the coming quarters?

I mean, you have this historically heightened backlog, almost 40% of your sales. Could this go back to maybe 20% that we’ve seen pre COVID? So maybe a bit more reserved order intake, but still strong sales as maybe your guidance implies, at least on the upper end? That would be my first question.

Urd Grumner, CEO, VAT Group: Yeah. We have the expectation that we go back to book to bill of around one in q two.

Navarich Najj, Analyst, Octavian: Okay. And maybe in light of this, I mean, you you have a CapEx guidance for 90 to one hundred million of capacity of 1,500,000,000. Maybe in the light of all these tariffs, I mean, are you maybe reconsidering some of these investments or maybe you you you just your cost base, maybe some thoughts on that?

Urd Grumner, CEO, VAT Group: Of of course. We we are we are constantly reassessing our our investment plans to to cater for any potential uptick in in demand. But I would say we have set course strategically how we would like to expand our footprint, how we would also like to decouple the supply chains. I I will give you an update on that in about a month from now. So overall, the the game plan is is unchanged.

And also in light now of of the currency development, which we have anticipated. Actually, long time ago, our natural hedging activities here will will certainly also play in our favor with the footprint expansions, which which we are currently driving. And therefore, for me, it is not so much about only about the capacity, but also about how we attack the case strategically operate our production footprint amidst all these geopolitical and and macroeconomic uncertainties.

Navarich Najj, Analyst, Octavian: Okay. If I may, I mean, can we understand that maybe as part of it will be going to China? I mean, if the to speak maybe to some other companies, I I heard that maybe, you know, China wants to have more manufacturing locally. I mean, you’re now in Malaysia. I mean, is there any direction in in any moment in that direction or part of that capital is going there?

Urd Grumner, CEO, VAT Group: Again, I think it’s it’s it’s not development now to to question the footprint that that we have currently established. I mean, we we are consciously monitoring that and and the observation that that other companies are are building kind of a local local production in China is also nothing new. So so this is is something that we that we keep in in our drawer that we’re analyzing. And at the given point of time, we will then also consider that. But for the time being, what what I would like to reiterate is that the the the two flagship sites that we are focusing on is gonna be Switzerland and and and Malaysia as per prior communication.

Navarich Najj, Analyst, Octavian: Okay. Thank you very much.

Sandra, Conference Call Operator: The next question comes from Jurgen Wagner from Stifel. Please go ahead.

Urd Grumner, CEO, VAT Group: Yeah. Good morning. Thank you. If you look at potentially weaker macro, let’s say, later in ’25, how resilient would your service business be? And then you mentioned lead times are very short.

Can you can you give us a number? Thank you. Well, first, to to the lead time, of course, it’s always depending on on the on the product lines, but I think we are on on a on a very low level in in the six to to ten weeks. Meanwhile, it also depends. It’s a high volume product, a new product.

I think lead time is especially required to be faster in in new products as well. This is typical now in in this race of technology as well. Everybody has to be ready when the end users are requiring that the new tools for the new processes. I think that’s the biggest challenge in the meantime also in connection to the engineering part. The second one was On the recent years of your service business.

Service phone connects to consumer. I think it is our service business. Should heavily or connect connected, of course, with the fact utilization. I think that’s the the most important. And, for example, for the high band high end memory, there is a capacity booked for the whole year.

That’s that’s certainly a positive sign. Also from other large fabs, logic and in the foundry business, They are fully booked for the leading edge, so it means they do do they may keep maintaining their tools for now to do expansion. I think these are still the positive signs we see that especially also in Japan and Korea, you know, that of course, a typical semiconductor company in Japan, not anymore than number one many years back. They also are up in in the service business quite a bit. And also here, it’s very important to stay very close to these customers to the fabs to serve them also globally.

And I think that’s also a trend of of VAT that these global customers can benefit from our global footprint. Okay. Understood. Thank you.

Sandra, Conference Call Operator: The next question comes from Nigel Van Hooten from Morgan Stanley. Please go ahead.

Urd Grumner, CEO, VAT Group: Hi. Good morning. Just starting with a clarification. Last quarter, you said you’re comfortable with consensus and especially that we should looking for 20%. So when you’re saying you’re still comfortable with consensus today, to to what number are you alluding to?

I think you said before, you’re analyzing the second quarter. The first half will get you to to consensus that implies 60 to 70% growth. Is that correct? Or I’m missing something here. It’s the same number.

Yeah. For for for the for which number? Sorry. But can you just make a I mean, it’s a financial around 11:40. You know?

I mean, maybe maybe there will be some adjustments consensus by you guys after after today. But, of course, there’s also a bit of FX consideration in there. So we’ll see. You know, of course. Now I’ll tell you, the the consensus for the fourth quarter, I mean, consensus has moved, and and we’ve also provided average compile consensus at the median.

We have Bloomberg visible other consensus, so it just be helpful to just get the number because Okay. It’s Bloomberg, and it was the eleven forty back then. Eleven forty back then, you’re still comfortable. Okay. So so when I that that would imply sort of growth in the second half, but, you know and you’ve mentioned FX.

Right? I mean, perhaps can you remind us sort of what the percentage is of sort of US dollar in the in in your sales mix typically? Yes. The US dollar accounts for about 65% in our 65. Right?

Yes. And and against the Swiss franc, we’re talking through to almost a double digit headwind as of sort of current levels. Right. So that that’s quite steep. So so is there anything that’s sort of offsetting that in terms of you you’re still being comfortable with sort of the 20% growth into full year?

Yeah. But remember that in the in the sales recognition, you take the year to date average. So so we started quite high, still above 90, and so that it takes quite a while up up until this comes down. But at this point of time, I would estimate if if if we look at it on a on a like for like basis that the FX impact full year is is still below 5%. Yeah.

But but but strengthening into the second half. So I’m just asking specifically to the second half seems to imply then that growth from the first half even though the macro situation, etcetera, is is tricky. So and given your you’ve sent out quite short lead time, just asking if there’s anything that, you know, gives you confidence that the second half would indeed sort of grow both organically and even even offset the FX sort of headwind that is that’s gonna strengthen the second half. Yeah. We always have been in in our mind that we that the industry has this 100,000,000,000 billion razor fab equipment.

That’s our assumption around that. And as I mentioned pointed out before, there will be a share on the on the leading edge as well, and this is fueling our growth. And also mentioning before that the China the growth in China, you can sort of make a better view more there, but our growth could be there as well. So I think it comes together. It’s not one not one element, but the different element that makes us really positive that we will have this growth in 2025.

Yeah. So it’s sort of a press point, but I think this is indeed very consistent with you said last quarter. But since then, we’ve seen the macro environment worsening. We’ve seen FX worsening. So I’m saying you seem to have to fill a gap here.

And I’m just curious if there’s anything specific you can point out that that gives you the confidence to be able to that. Our confidence comes, of course, and then our customer talks. Right? How we talk, you rest of all of them. And that’s that’s the best part you can do.

And our our customers, they are their customers, and they are the big investors as well. And I I think, overall overall, it’s just too early to judge all these developments. We we alluded now several times to the uncertainty that that we have. Let me also reiterate that we feel comfortable with the consensus which points at about 20 ish percent growth. And where this this whole FX situation is gonna take us, I think we just have have also here to to drive a site.

And at the next update, we’ll we’ll tell you more. So so I think that’s as much as we can say now, still reiterating the fact that we do see underlying growth also in the second half year as as you have rightly triangulated. Got it. And then and then so you said even on the so you’re you’re today for your internal budget. I get that now.

But then looking at sort of margins considering sort of your mismatch between, I think, 55 percent of dollars, obviously, producing elsewhere. Should we take into that into account for for gross margin, EBITDA forecast? Is there anything you can provide some rough color on in terms of the materiality of of maybe not tariffs, but but the FX on on EBITDA margins? Well, also, yeah, I think we we have our our financial model quite comprehensively in in place now as you have seen also in in rates years. We have not been vulnerable to any extreme extent to these FX swings.

And I think the same also applies going forward where our our hedging policy, both financial and also natural, that will provide certain mitigation to to these elements. And bottom line, I I would also hear not not expect a material impact on on the margin, so we we we stay course. Okay. And then maybe lastly on on sort of 26 view, I think, versus you’ve mentioned sort of a change in the in the structure of the industry towards sort of moving from plateau to plateau. Is that what you’re sort of implying for ’26, which is grow after 20%?

So so I guess no more cycles, but but growing at least a stable level and and potentially see growth from it. Is that the best way to interpret that that commentary? I think it’s too early for me to say, but I think for for 2026, the the content of here is that if you will be around the 10% growth that the the the better people will get one out of 10 in a Portuguese scenario, maybe one out of 15. That will be certainly something we are expecting. And it also shows now, if you have now, we start with one out of 10 and have a fairly growing with the shift, as I mentioned, that was more leading edge.

This is the growth story that’s underlying to our numbers. Okay. Got it. Thank you very much.

Sandra, Conference Call Operator: The last question for today’s call comes from Martin Marandon Carlein from ODDO BHF. Please go ahead.

Navarich Najj, Analyst, Octavian: Hi. Thanks for taking my question. The first one is on ALD. Could you give us maybe a bit more color on how ALD valve sales were configured in Q1? And in the sequential decrease of orders in q one versus q four, did AFD valve orders have decreased as well?

Another quick follow-up.

Urd Grumner, CEO, VAT Group: Are you talking about the advanced industrial? That’s correct?

Navarich Najj, Analyst, Octavian: No. I’m talking about the valves specifically for ALD application.

Urd Grumner, CEO, VAT Group: Oh. Well, of course, this is a new a new product, new production, new products that are coming and bringing in. So this is how it goes in the semiconductor industry. You start with lead customers to to qualify that, develop the technology, the portfolio. Think that’s a journey to go.

We had fantastic spec points in the past and certainly on the leading edge on the leading edge tools, but it will take time, of course, down to this will be in the in in higher volume. That’s why we always say this is kind of our our Horizon two initiatives. We are very proud of that. That’s the engineering work, and that’s the product going to the market. But so far, we we do not disclose numbers on individual product candidates.

Navarich Najj, Analyst, Octavian: Okay. Thank you. And maybe for my follow-up on China. On the broader view, what do you expect from China in 2025 and 2026 compared to maybe three months ago? Because, obviously, inventories to cost ratio seems quite high at Chinese equipment manufacturers, and now you have more tariffs and uncertainty.

But I was wondering if actually this geopolitical uncertainty could accelerate the decoupling of US and China economies and actually makes you more confident on the China business going forward.

Urd Grumner, CEO, VAT Group: That’s exactly the point. That’s also how we estimate the situation. Already the sanctions, the technology sanction accelerated, and now the tariffs are next accelerator for for the for the self sufficient in China. I think that’s the program they are running, and they will not stop that. Whatever the West is doing, it’s it’s not stopping them to achieve their goals towards self sufficiency in chip manufacturing and also in the equipment.

Navarich Najj, Analyst, Octavian: Thank you very much.

Urd Grumner, CEO, VAT Group: Okay. So thank you very much. That was a long question, and we conclude our our call here. We hope to see, of course, all of you at our Capital Markets Day on May 20 here in Hawk. I think we have a very interesting program with factory tour, innovation center tour, and then, of course, the the formal presentation from the afternoon.

Invitations also physical details will go out soon after after the Easter break. You should look forward this in your inbox. And we are happy to see all of you here in August. And we thank you very much for those of you who have a long Easter weekend ahead of them, just do all the best there and have fun and despite the markets, and talk to you on May 20. Thank you.

Sandra, Conference Call Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

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