Good afternoon, everyone. Welcome to SECO's Q1 2026 Result Presentation and Business Update. Before I hand over to your host today, please be advised there will be an opportunity to ask a question at the end of the presentation. In order to do so, please use the "raise hand" function on your screen, or for those dialing in, it's star nine on your keypad. I now have pleasure handing over to Clarence Nan, SECO's Head of Investor Relations. Please go ahead.
Good afternoon, everyone, and thank you very much for joining us today for our quarterly earnings call. As usual, our CEO, Max, will share with you a detailed update on our strategy, as well as some trends on our business. Before that, Lorenzo, our CFO, will cover the key items of our financial results. First, let me start with the usual snapshot of our first quarter numbers. We are kicking off the year with a 3% year-on-year top line progression in line with the guidance we had given to the market. In what remains a complex market environment for memories, our P&L has shown strong resilience both at gross and EBITDA margin level.
The quarter was also punctuated by good momentum for our hardware business with our new Modular Vision product line receiving strong early interest, as well as for our Clea division, which is seeing a high level of conversion to long-term recurring contracts, as illustrated by the Hitachi win and the 20% year-on-year revenue progression. All of this continues to support a positive outlook for the year and keeps unchanged our 2026 management objectives. Now let me hand over to Lorenzo to go through our full year results in more details.
Thank you, Clarence, and good afternoon to all. I want to start by pointing out that this first quarter was marked by further and significant increase of memory costs with an impact on the availability of those components. In that context, the group was able to react promptly, securing the critical materials and negotiating with the customer the measure to protect its profitability. Therefore, a 3% growth in net sales versus Q1 2025 is for us an important result given the two very different market context. Regards gross margin, we recorded in the quarter a level of 52%, 1% less than Q1 2025. We are really happy about this result. Considering the spike in the memory prices, we were properly able to manage from a purchasing point of view. In the quarter, we registered also a positive sales mix in profitability terms.
Passing to EBITDA, we recorded a -1% of profitability, primarily explained by gross margin and by lower other revenues. These including matching grants over R&D development, which will be partially recovered in the next quarters. Having a look to the sales breakdown by geography, I want to highlight the good performance of EMEA, Germany in particular, driven by the important growth quarter-on-quarter of customers like Schaerer and System, Coesia Group entity. By industry, I want to point out that the industrial vertical is growing pretty well, while vending decrease as expected due to the completed rollout of our edge payment model over the tobacco sector. Most important is the 20% growth quarter-on-quarter of Clea recurring revenues achieved thanks to the progressive penetration of the platform among customers.
Analyzing our Q1 2026 EBITDA performance, we were able, still considering the cost trends that I was mentioning before, to preserve a profitability close to Q1 2025 level. We recorded a stable OpEx and similar operating leverage. The 1% EBITDA margin reduction follows mainly the impact of components cost increase over gross margin. I want to point out that from the second quarter, our price increase actions should start to take effect. Adjusted net financial position grows by about EUR 7 million respect to year-end due to inventory expansion. We reacted immediately to the memory cost spike through strategic purchasing of stocks at acceptable prices. Besides, we had to take in consideration the increase in procurement lead times, and so enlarge our inventory level. Despite this growth in net debt, our leverage position remain pretty solid. Thank you for your kind attention. I hand over to Max for the business update section. Thank you.
Many thanks, Lorenzo, for this clear presentation as always. Let me start with a bigger picture what underpins our strategy. We are witnessing a fundamental shift in the way how the artificial intelligence is being rolled out for industrial application. The direction of travel is clear. From the cloud to the edge. As an increasing deployed directly where decision need to be made on field device close to the action. This shift is being driven by three core factor. One, faster real-time decision-making in mission critical environments. Two, improved cost efficiencies at scale. Third, and greater resilience and data protection. As a result, we are seeing the emergence of a new class of AI-driven application, and this is placed directly into our core capability.
This is exactly where SECO is strategically positioned, and this is where the intersection between the Edge AI and all our end-to-end technology capability really play a crucial role for the customers. Let me now show you how we translate this positioning into concrete solution. Here in SECO, our approach is end-to-end vertical integration. We addresses a broad set of application where Edge AI can create tangible value. This include industrial automation through HMI, scalable embedded models, and advanced robotic, including autonomous and humanoid system. This sector, I can tell you, is starting to give us very good results, especially considering the business in the 2027 because we are getting traction with a couple of very good, very large, robot maker.
We are also active in the high-performance vision application, intelligent retail, and automatic vending, where Edge AI improve customers' experience and operational efficiencies. In addition, we support critical infrastructure such as smart energy grid, security system, and medical devices, all of which require reliable real-time data processing. Of course, we are more than ever a key partner in more specialized domain like defense, aerospace, and drone. Here is where we are facing a very strong [market], demand from the market. Having given this such of positioning, let me now to continue with some feedback that we are getting from the market by the launch of our Modular Vision, which is offering a very good beginning phase of market adoption. The core idea is simple but powerful.
A standardized modular HMI platform that can be configured across different chipset and application needed. This approach brings multiple benefits. For SECO, it reduces R&D complexity and enable a more scalable business model. For customer, it shorten their time to market and simplify the integration thanks to a ready-to-use customizable solution. We are seeing this translating into a grow pipeline across many verticals like industrial automation, medical, smart building, energy, and professional appliances. We are expanding our go-to-market through distributor and strategic partnership with leading silicon vendors. This altogether are very good early signals, the sales data that we are receiving are very positive.
I think that talking about the traction that we are seeing in the Modular Vision is almost the same also with Clea and the customer engagement is really growing also in this specific business. We recently secured a multi-year, multi-million agreement with a Tier 1 global leader in electrification. This is a strong validation of our end-to-end approach. Hitachi was looking for a secure and scalable way to digitalize distributed energy assets, including data collection, real-time processing, and device management across a global fleet. They also needed a unified platform capable of handling different kind of hardware, both new and installed base. Our Clea platform was selected because it's a very complete product with strong differentiation factors.
It enables secure data transfer, fleet management, and edge solution for AI models and for immediate deploy of this model into the hardware. All of this with a very agnostic approach on the hardware side, meaning that our platform is capable to run SECO as well as not SECO hardware, and therefore can be used successfully also for the retrofitting program that Hitachi have in place. I think that this is a very good example of how our technology stack can address complex, large scale industrial needs. This project moving to deployment, they also start to impact our revenue mix, which bring to me the next point. One of our strategic goal is to increase the recurring component of our revenue on the software side.
As project progress from development into deployment, more devices get connected to Clea platform, and this drives a recurring revenue growth. In the first quarter of this year, the recurring revenue presented 60% of the total mix and showed 20% year-on-year growth. This is an important trend and confirms that our platform-based model is gradually getting traction. Of course, you will see this growth path continue growing over the next forthcoming quarters, because as much as our strategy of deployment goes into revenue, as much as this progression will be even better. Let's now look at the order intake, which provides good visibility on the future performance. We are seeking to continue momentum in order intake.
The pipeline is converting into confirmed orders at a healthy rate, contributing at a growing backlog and improved visibility. As you can see, we have very good data point, like the 60% of the order intake year-over-year, counted from January to April. This is encouraging, particularly in a market environment that remain somewhat volatile. At the same time, our order book-to-bill performance remain consistent, which is suggest a balanced flow between demand and delivery. Again, we view this cautious optimism as a positive trend, but one that we want to continue to monitor because it's a tough year, you know. Supply chain, macroeconomic tension, so geopolitical tension. A lot of things are happening as we speak, and therefore we need to continue to monitor it very closely.
I can tell you that data are growing and moving definitely in a positive direction. Looking ahead at the second quarter of 2026, the environment remain, as I told you, complex. However, the year started with a solid pace, supported by continued demand for our product and our solution. We expect our revenue to continue along this trajectory at a EUR 15+ million revenue. We think that this growth path will accelerate further significantly in the second half of the year, and this is based on an already taken orders, and therefore we remain positive for the rest of the year. Overall, our priorities remain clear: executing on our pipeline, scaling our recurring revenue base, and maintaining discipline in a still uncertain environment, especially on the cost control.
In the summary, we see encouraging signals across multiple dimensions: technology adoption, commercial traction, and order momentum, while remain focused on a consistent execution. I think that's all. I hope that this presentation has addressed all the key points, and I want to thank you again for your attention. We can now open the line up for questions. Thanks again.
Thank you to the speakers today. We now have an opportunity for questions. As a reminder, if you would like to ask a question, please use the raise hand function on your screen or for those dialing in, it's star nine in your keypad. Once your name is announced, please unmute your line, state your company name before asking your question. Thank you. The first question today comes from [Marco Vitale]. Please, Marco, the floor is to you.
Good afternoon. Thank you for the taking my question. Two from my side. The first one is on the, say, 2026 outlook. On one end, we noted that, I mean, you provided very encouraging comments on the order backlog year to date. And also, on the, say, positive interaction you're having with your clients. On the other, we see still growth, say, in the low single-digit you're guiding for a flattish revenue trend basically in the second part of the year. We're looking at consensus numbers, top line is seen increasing at, say, high to high single-digit to low double-digits, requiring an acceleration in second part of the year.
The first question is on if you can comment on these, say, different trends and which are the key factors that should end up being the, say, a very strong acceleration in second part of the year, whether second quarter guidance is just driven by, say, temporary factors, low backlog execution. The second one is on the if you could provide us an update on the ongoing, say, supply chain tensions. You mentioned that the gross profit margin is a just a temporary effect, and you already increased planning an increase in, say, prices from the second part, from the second quarter of this year.
If you could share with us, that, if you still see this as a very temporary factor, you should be, say, able to overcome the supply chains, over the next quarters, and also if you could provide us a rough indication of the magnitude of your share price increase. Thank you.
First of all, let me start with revenue. As you said, and I can confirm, based on the trend of the order intake and the book-to-bill that we are observing in this slide, I can confirm that we are expecting a significant growth path in the second half of the year. This is confirmed, based on the order as well as, on forecast that we have from client. I would say, this is something that will happen, based on data, and I have no doubt about it.
On the margin side, I guided personally the market over all the interaction that I had, both in a public speech like this one, as well as during all my meetings in the roadshow, that the memory, we cannot think that having a so big and event like this one with a magnitude of 700% of price increase on the memory side, we cannot think that we can come out with having no impact on it, clearly. As well as, I confirmed that we already secured with all the customers negotiation about the price increase. Therefore, we will see our margin improving over the next quarter.
I would say the normal situation will be achieved in the second half of the year, but we will see a sort of progression as we go. As Lorenzo said, first quarter was affected negatively by the memory for over 3% in gross profit margin, which was also positively affected by the recurrent revenue increase on Clea in one end and a positive sales mix by margin in the second end, that was able basically to neutralize a large portion of this impact. We was able to see just a 1%. That was good, and I think is a, is a concrete proof how the SECO business model is resilient or also in a very tough market condition.
On the supply chain in general, we are seeing and facing delay into shipping, especially with the boats, also the guidance of the second quarter take it in account because we have components that will arrive later the quarter. And therefore are not included into this guidance. We was able also to did a very good job increasing our level of inventories, stocking a lot of memories to cover the entire 100% of the demand of our budget to 2026, as well as I would say a portion of the 2007 demand. Thank you very much for your question.
Thank you.
Thank you, Marco. As there are no question queue, we will wait just a few moments to give everyone the opportunity to ask a question. The next question comes from Bharath Nagaraj. Please, go ahead.
Thank you for taking my question. Just a quick clarification on the previous answer, Max, if I may. Did you say that the delays in receiving some of the components, et cetera, has been taken into consideration for your Q2 guidance? Can you clarify that? I kind of misheard it, please.
Yes, I can. as I said, there was an unexpected delay into all the shipping, basically, over the boats because, there are no war. That's not a secret. Therefore, when we did our own calculation about the second quarter guidance, we had to carefully review our shipment dates, arrival of the components, and therefore production dates available, and we took everything carefully in consideration. It will shift in some way some revenue from Q2 and Q3, and we will see a very good effect later in the year.
Okay. Understood. Thank you. My questions include, the first one, would be around the Hitachi revenue, the contract that you won. Has that already started contributing in Q1 to your revenue, and How much should we expect? Should we start expecting it to ramp up during the course of the year from Q2 onwards? Then a related question on Clea. Given the decline in the non-recurring engineering revenue, obviously because it's moved to the recurring revenue, the customer has moved to recurring revenue contract, should we be expecting decline in Clea revenue for the full year given this mix effect?
Yes. On the non-recurring revenue, absolutely yes because as I already guided the market many times, we changed our business model into Clea, shifting from a big NRE in the very beginning and the time to revenue between one year and two years into something that is more ready-to-use with a very low barrier in terms of no recurring fee. Advanced, let me say, no recurring fee. Therefore, I would see the decline into the no recurring portion of the business consistent for the entire year, as well as a strong growth of the recurring revenue. Just because the multi-year, multi-million agreement we just signed with Hitachi, the good news, it will be already making a positive effect on the recurring revenue side starting from the second quarter this year.
We'll continue to give more and more positive effect as we go. We have a good line of additional customers that are entering into Clea as a very short time to revenue now, thanks to the new business model. I think it will contribute to a further acceleration into the recurring revenue in the second part of the year. That's important, not only because it's proving that the strategy and the business model that we designed is working well, but it's important because it contributes even better to our profitability as well as to our capability to generate the free cash flow.
Super. That's very helpful. Thank you. The last question from me is around, just a question around your peer Advantech, who I know are more into standardized manufacturing. They have a lower gross margin than SECO, et cetera. In the context of them growing much quicker, I just wanted to understand if there's anything to call out with regards to the demand profile from your customers, SECO's customers versus Advantech. Thank you.
I think, what we are seeing into the growth of Advantech, we will see it, historically speaking, and this will be true also, this time, six or nine months later. This is simple because the different kind of product we are selling. Basically, they are more based on a standard solution, therefore they have a time to revenue which is faster than SECO. The positive effect of the demand, they captured it earlier. We are more focused on system HMI customized.
This is such of a product have a longer time to revenue, and therefore we are able to capture the same kind of trend of in terms of growth, which is confirmed by the way, by our book-to-bill, as well as by our order intake. It will come into the results in the second half of the year.
Okay. Got it.
And also-
Thank you very much. Very clear.
Also in 2027.
Okay.
We will see a very positive trend into revenue and thanks to our capability to have operative leverage profitability starting from the second half of the year but moving into 2027 in a very consistent way.
Very helpful. Thank you very much.
Thank you to you, Bharath.
Thank you, Bharath. The next question comes from Aleksandra Arsova. Please, the floor is to you. Aleksandra, please unmute your line.
[audio distortion]
Hello? Alexandra?
If you mute.
I think we have some problem in connection over there, so I would suggest skip this one and to go ahead if we have any other questions.
Thank you. The next question today comes from Pietro Nargi. Please, go ahead.
Hello. Good afternoon. Do you hear me?
Yes, very well.
Okay. Thank you for the presentation, for taking my questions. The first one is on the organic growth. We have seen 3% growth in the first quarter. I would like to understand what could be the organic growth at constant exchange rate since more or less 20% of your revenues are outside the EMEA. I would like to understand what is the impact from the effects. I guess it would be negative since you are exposed to the U.S. dollar. I think the organic growth at constant exchange rate could be higher than the 3% we have seen. The second question is on the OpEx side. We have seen OpEx almost stable year-on-year. I would like to understand better if this trend could be, let's say, a proxy also for the coming quarters. Just to have an idea on the path of these operating expenses. Many thanks.
Okay. On the exchange rate, I think you should consider between 1% and 1.5% in terms of better growth, but as a constant effects. Into the OpEx, I think we are working with the entire team, especially with Lorenzo, to well control the OpEx. I think this is a good proxy. However, keep in mind that as we are expecting, as I said already many times, an important growth into the second half of the year, I would suggest also to take it in count in terms of OpEx, because maybe we can have some temporary workers just to execute the production in addition during the second half.
As a company structure, I think we are controlling carefully the level every quarter because that is the level where Lorenzo and I, we want to keep the company also to scale in terms of profitability, as soon as we will see the growth of the revenue accelerating.
Okay. Thank you.
Thank you, Pietro. The next question comes from Tommaso Martinacci. Please go ahead. Tommaso, can you hear us?
Hello?
Hello.
Can you hear me?
Yes. Now yes.
Can you provide more color on Germany in the first quarter, including its current weight on group revenues versus the historical level of 30%? Clarify whether the weakness remain purely micro-driven or if you are seeing early sign of stabilization in customer orders, even with the last all-time high order intake. Thank you.
All right. Germany is counting, roughly speaking, about 30% of our total revenue, and is growing. In the first quarter was above 10% year-on-year. Showing a very good growth path. Not only because the revenue we recorded into the quarter, but more important, looking at the order intake as well as the pipeline, which is growing every week in the region. I can confirm that the positive sign of a recovery for the German economy are really happening right now. Meaning that we will see positive impact as we go and especially in the second half of the year as well as for the 2027.
Looking to the situation of the order intake as well as the pipeline, despite the, let me say, the environment condition, which is really tough here on the war in Ukraine that is never stopping. I think a lot of problems on the supply chain, not only for memory, but shipping longer time to market. All these types of things. Despite all of that, I think what is really exciting in this moment is looking at how many large project we are facing right now with a new logo, so new customers that we are winning also a lot of them actually with a very strong conversion rate into design win. It looks very promising. Also I add the 2026.
In general, the level of discussion that we are having both with existing and new customer is very good. It's actually client are asking for more in terms of innovation, in terms of new generation of project. All these types of things are mainly driven by the first slide, the trend that I showed to you during the today presentation, which is basically the physical AGI. Physical AGI is happening. It's something that agentic AI, LLMs, are starting to be used into the HMI, into the machine, into all the product that we are selling. This is driving basically the adoption and the demand of the market at a very high level. Very high level. This is a really good for the next future.
Thank you.
Thank you to you.
Thank you, Tommaso. As there are no question queued, we will wait just a few moments to give everyone the opportunity to ask a question. As there are no question queued, I will now hand back to the speakers for any final comments before bringing this presentation to a close. Please go ahead.
Thank you very much to all for attending. Clarence and I, we will be always available, and we will be on the street already this, later this week and then next week having a meeting with many of you. We will see you soon. Thank you again, and have a nice day. Bye bye.
Thank you everyone for joining today. This presentation will now come to a close. Thank you.