Ladies and gentlemen, welcome to the Agfa first quarter 2026 results conference call. For the first part of the conference call, the participants will be in listen only mode. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now, I will hand the conference over to Pascal Juéry, Chief Executive Officer. Please go ahead, sir.
Good morning, everyone, and welcome to the Agfa call. I'm sitting here in Mortsel with Fiona Lam, our Chief Financial Officer, Viviane Dictus, Head of Investor Relations, and the Executive Team of Agfa. First quarter. Let me move the slide. Gonna briefly give the highlights, then pass on the mic to Fiona for the financial review. I will do the business review and the outlook. First highlights. Well, clearly Q1 for me is a robust performance in positive top line coming from a price in film area and volume impact in digital printing. The rest of the group being slightly below last year. Strong EBITDA increase year-on-year. You know, last year was a relatively weak quarter for us.
It reflects our ability to implement efficiently our saving programs, you will see it throughout this presentation. As well, the ability to pass on the silver price impact to our customers in the film activities. As you know, we've been seeing a tremendous increase of silver, I would say since a year and a half, with price having almost quadrupled in the same period. These results show our ability to navigate these market circumstances with efficiency. Saving programs that we have launched last year, I'm happy to report we are now in annualized savings of EUR 57 million. If you remember, we talked about a plan of EUR 50 million first, we launched at the end of last year, another plan for an extra EUR 25 million.
We are right on track. As we started to see in Q4, actually the impact of the cost measures are now coming to the P&L, and this is also what you see during the first quarter of the year. Silver, of course, had an impact, a specific impact on the cash, for a very simple reason. When we buy silver, you have an approximately five to six months cash cycle before you recover it in terms of cash from your customers. The P&L impact is faster, but the cash impact, of course is, takes a lot longer, and it has, of course, a tremendous impact on the cash of the group, and especially through the working capital.
More than EUR 40 million worth of silver price impact during the first quarter that we will start to recover over the year. The overall impact of silver cash during the year will be negative. Business by business highlights. Healthcare IT, I would say transformation to SaaS on track. As we repeatedly said, orders are larger in SaaS. We are also addressing just larger customers, and therefore the contract and the order intake is a bit lumpy. Meaning you can have significant variation quarter-on-quarter, and this is the case.
We have in Q1, I would say a quarter that is soft in terms of order intake, while we are expecting in Q2, and we know that because we have already signed a number of deals, we're expecting for Q2 a very strong order intake quarter. The last 12 months decrease that you see at the end of Q1, does not change the overall picture on the guidance that we have. That at the end of the year, we will be again increasing order intake to the highest level ever and probably high single digits at least. The good news also that we are seeing is in this context, our recurring revenue increased by 5% now. Now amounts to 67% of total Q1 revenue.
This is a number that three years ago was barely above 50%. It shows also the transition of the business to a recurring business. The total top line still decreased due to the fact of the change of model. As we explained several times that the short-term impact of the move to a subscription model rather than a project model. Industrial solutions, I would say, good DPS and very subdued green hydrogen business. Good DPS because we are back at 10% growth top line for the first quarter. It shows that what we've seen during Q4 has been confirmed. However, a very soft situation for green hydrogen in 2026. It's probably gonna be a lot softer than we even forecasted, actually.
We are already seeing shaping up 2027 that will be a kind of back to normal, but we are really going through a trough during the 2026. Last but not least, Imaging and Chemicals with our business, as you see, a significant increase in adjusted EBITDA due to savings and what we did around silver. We also discuss, of course, DR where here I would say things are top line is increasing. We are deploying our plan as scheduled. Overall, in a volatile environment, we have been able to navigate all the market conditions successfully. We are also confirming the drive, the impact of our cost savings measure. I'm gonna turn now to Fiona, who will walk you through the financials.
Thank you, Pascal. This slide summarizes the graph which Pascal actually just highlighted on top line and bottom line. On the top line, you see here the nominal sales growth, compared to comparable sales growth without currency impact is actually better like Pascal already mentioned earlier. The group actually posts a 1.7% comparable sales growth because of the higher silver prices. You also see, on comparable basis actually, the industrial solution also have a growth even though GHS was soft, but DPS was stepping up in that context. HealthCare IT, on a comparable basis is roughly 5% down without currency because of actually, if you recall last year, the first half of year of HealthCare IT was extremely strong. This year it would be in the normal seasonality.
We still expect a full year of HealthCare IT, which lead to a certain growth. If you look at adjusted EBITDA is step up of EUR 10 million for Q1, driven again by imaging chemicals, largely related to the savings program now that we have larger savings program kicking in now, starting this year. Step by step, you see that as well, and the ability of course to pass through the silver impact to the market so that we don't have any negative impact in our P&L on the relevant parts. For industrial solution, you also see a step up, although the step up could have been larger, if we don't have the headwind of GHS, but all in all it's still a step up, driven by DPS on that.
Agfa HealthCare, I already mentioned is a seasonality of Q1. Q1 last year and Q2 last year was very strong. Also with the goods, cost control, et cetera, they still are delivering a good decent numbers on bottom line. Corporate is more or less in line than what we have expected the seasonality as well. Thank you. Next slide. If you look at the bridge, it says about the EUR 10 million earlier slide that we have seen. You see here exchange rates on bottom line. Luckily, we have a very diverse geographic spread, you see all the business at the end, on the bottom line, exchange rate has zero impact.
Then you see the gross profit of healthcare IT driven by a strong first quarter last year, and this year has been down. You see also the step up of imaging chemicals on the gross profit because of the saving programs and the silver pass-through ability. All in all also, the Agfa team delivers, I think, a resilience, continuous cost control. You see also R&D, SG&A continue to contribute with a significant high cost control that also contributed the results. It's been a decent work solid quarter. On free cash flow, I must say I'm pretty happy with this result even though you see a first quarter of EUR -42 million free cash flow.
Bear in mind that there's a EUR 41 million ZIRFON impact with the resilience of all the efforts which is continuously on working capital improvements. It really delivers. We have been already in the last, I think six quarters improvements of working capital, and this can counterbalance the ZIRFON impact that we have for this year, for this quarter. CapEx is expected and also provision and others, we continue to monetize the customer lease portfolios as well. All in all, if you look at, without ZIRFON impact, actually free cash flow would have been zero at breakeven level, which is significant to be able to fund the pension and all the transformation programs in this case.
If we look at the next slide on the net debt, financial debt evolution, we are also evolving right. You see in Q1 normally is always a step up because we need to build the working capital pipeline again. Despite the silver, you see the working capital pipeline is still significantly lower for all business units, and therefore we step up by from 21 into EUR 58 million. If you look at actually on the revolving credit facility, we draw in Q1 EUR 129 million of the EUR 180 million. For Q1, there's only one applicable governance, that's the liquidity headroom, that is at the EUR 120 million of the minimum, certainly.
As for the reference of all the other ratios, it's not applicable in Q1, but applicable as or from half year testing. We actually have also a good headroom there. Leverage you can see is basically Q1 of 1.1. Half year in Q2 should be at three as well, and year-end 2.75. Interest cover is at 12.5. EBITDA, we actually step up the headroom compared to end of Q4, now to 51.6 with the good EBITDA results. In terms of numbers, I think I don't need to repeat it once again. You have seen them, the same that's in the first two slides on this one. Maybe just next slide.
I think we should still look at operational expenses or significant impact.
Yeah
delivering our results.
It's also in this, same as in the bridge, where it shows R&D, SG&A significantly down. You can see it here, basically EUR 8 million down. I guess that's a conversion of the graph. You see them there.
Yeah. Yeah. Sure.
Next slide would be good to just shortly discuss because we didn't show them in the graph. You see the net result at the end is also still a -EUR 12 million, but it's a step up of compared to last year of EUR 8 million. And that has to do with the better operational adjust the EBITDA performance. Although we have adjustment restructuring expenses, which is higher for this quarter. And in line with net financing costs expectation and taxes as a bit positive as well.
Thanks a lot. No, free cash flow, sorry.
Yeah.
You already showed it in the graph.
We already discussed in the graph.
Yeah.
It's exactly the same you have seen.
Let me turn now to the business, Agfa HealthCare IT. As already said, indeed the cloud transition continues, that's gonna be lasting for the next years, I would say. Again, I repeat, more lumpiness in the order intake for two reasons: larger contract, very long-term contract. It's not unusual right now that we sign seven, eight or 10-year contracts with our customers, so larger amounts and larger customers as well. Our net new customer size is significantly higher than the average of the installed base. Indeed, we shouldn't be looking at these results quarter by quarter, but as a more long-term area. I'm not bothered, as I told you, by the -10% at the end of Q1.
Actually, it's gonna be significantly above at the end of Q2. That we already know because the deals are already landed. Q1 cloud deals relatively modest this quarter, 12%, net new customers 18%. As you see, recurring business 1/3 compared to project business 2/3. It was again kind of a soft order intake quarter, but the journey to the cloud continues. I'd like to remind everyone that we are gaining net new customer due to the fact that we are sitting on top of the customer satisfaction charts of the industry today. Meaning, I'm gonna be very clear, in customer satisfaction today in North America, which is the core market for us, we are number one in threee out of four categories. We are number one.
I show this slide. I've been showing this slide, again and again and again, so that we really are trying to explain that, you know, the top line decrease that we are seeing today as we are gaining customers purely mechanically due to the fact that project order intake is decreasing and SaaS order intake is decreasing. You see here the revenue model that explains a bit what it does to our to our P&L. Again, going to the cloud means business that is recurring, that is sticky, where we can do some upsell and we have embedded growth. It's all good news for us. Now the numbers. - 10% is unadjusted by currency. Adjusted by currency it's - 5, or it will be less than -5 actually.
With recurring increasing 5% and project revenue decreasing more, of course. In terms of EBITDA, quarter-to-quarter, well, again it can be a bit lumpy. Last year we recognized a significant number of licenses. Project business model not this year. We confirmed the overall guidance for Agfa HealthCare IT for the year nonetheless. Overall, I would say the transformation goes on as planned. Again, the difference of quarter is not really relevant this year. We're gonna have a stronger second quarter, second semester than first semester. Last year it was a little bit more balanced, let's say. Industrial Solutions. DPS, as I said, the good news of DPS is we were challenged a bit in terms of growth during the year 2025.
It improved in Q4, and Q1 is also showing a 10% top line growth corrected for currency. We have an order book that is building, and the mix is actually towards the more powerful machines for us. In number of machines is one thing, but what's important as well is the size of the machine you are selling and for us also the ink consumption. We are selling, I would say, our top range machines very well today. We continue to, of course, upgrade our product range as we see fit.
The only caveat I would put on the DPS business is the packaging market is very slow to develop whereby we confirm that really digital is the avenue to go. The current state of the packaging market slows down a bit the market introduction. For ZIRFON for the clean hydrogen membrane this is the area where we have announced already that 2026 was going to be a trough for us. There is momentum in Asia but that does not make up for the delays in Europe.
Actually, you know, the RED directive, the Renewable Energy Directive, is just being implemented in the member states in Europe. This is absolutely necessary to get the regulatory support we need to further develop projects in Europe, and it has been done with a bit of a delay. Meaning, in fact, today for 2026 deliveries, it's gonna be a very low year for us. However, when we look at the pipeline and the number of projects reaching final investment decision, we are a lot more confident for 2027, where we are gonna see this rebound. The implementation of the directive will also help us very much. We have also clearly addressed the emerging markets like India and China with our membranes.
We are successful in India. We are working in China and we hope that somehow we will also make inroads in this market. This is the one area that will, I would say, not work for us in 2026. If you look at the numbers, again, this number on the left, -1.9 is nominal. If you remove currency, it's +2.7. As you know, a strong contrast with double-digit growth in DPS and a retraction of the sales in ZIRFON membrane in 2026.
Overall, when you look, and this is a new reporting, when you look at the way the way it works for DPS, it's a bit, it's a bit like in other businesses, meaning the second part of the year is much stronger than the first part of the year, and the highest quarter of the year is in Q4. It's not unusual for us to make negative EBITDA at the beginning of the year and a lot of EBITDA at the end of the year. This is a bit how this market works. We install about 40% of the equipment of the year in the first quarter. This is the way this market works. Okay. These are, this is a P&L.
I'm not coming back to that. I'm gonna turn now to imaging and chemicals. Really here on the film, again, the message, we are in control. We are in control of our savings plan. We deliver fully what we announce. We're also in control of our pricing and overall product management. Which means today, even in a context where we have to face a significant variation in silver price, we were able to stay on course and restore the profitability of the film. That is for me extremely positive in a context where the film market continues to decrease, but at a pace that is probably a little bit less than what we've seen in the past couple of years with China going down.
Overall, in control. DR, solid start of the year. Last year was a bit of surprising year for us with a very depressed end market, but we are seeing this market again back in growth mode. We are also seeing that in the order intake that we have. We are staying on course on this. If you see, it's a bit spectacular, but coming from a very low point, if you remember, most of the year last year was actually negative for medical film. Now we have restored the profitability in the current context. Top line is really the story of lower volumes but better prices, in fact.
When we look at the P&L, you can also see the step-up in the gross profit, which reflects also the improvement of manufacturing cost and the operational cost under control. This is really the name of the game for this business. If I turn to the outlook, I think broadly speaking, I would say that the global outlook for the group has not changed since we presented it in March. However, when I go in further details, there are a bit of changes, I would say. HIT, no change. We continue to say, we're gonna deliver the year as planned, and we continue to say yes, we are gonna see order intake growing at high single digits percent versus last year.
Actually, this should be the first year where we will have more than EUR 200 million in order intake. That's a bit what we have in mind, which is we are breaking record after record actually. Industrial Solutions, there is a change. I mean, our view on DPS has not changed, but the view we have on the membrane has been downgraded with what we see now. There is no possibility to improve volumes short-term. Imaging and chemicals, if anything, our view is more optimistic regarding the year on film and chemicals on the basis of what we are seeing today in the market and our ability both to control our costs and our prices to customers.
Meaning overall for the group, we are not changing, so to speak, the outlook, but the mix will be a bit, a bit different. I also want to stress that what we are going through with the year of 2026, we're already seeing 2027 shaping up as a significant rebound of the activity. In terms of cash flow, no change as well. Clearly, the silver price has put even more pressure on us, I would say to manage very well our liquidity and cash, which is what we are doing, as you see. With a very good mastery of the working capital.
We'll continue to do this. We know that due to silver and due to the cost of the transformation, we will be consuming cash, I would say, during the year 2026. I think, you know, I'm going to stop here and take the questions of the analysts and the press if any.
Thank you very much. This is a reminder. If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. The first question comes from the line of Alexander Craeymeersch of Kepler Cheuvreux. Please go ahead.
Hi, hello. Alexander from Kepler Cheuvreux here. Thank you for taking my questions. First one would be on the imaging and chemicals. I see the adjusted EBITDA rose there from EUR 2.6 million - EUR 12.8 million, helped by savings and silver-related timing benefits. The question is now how structural are the savings and timings benefits? I assume that silver is quite a significant portion of this. How should I look at the repeatability of this uplift towards Q2 and basically for the remainder of the year? Thank you.
Okay. Well, I can start, and you will complement Fiona, if that's okay. Well, I think the savings are there, and they will continue to amplify, huh. Clearly it's a positive.
Sorry. How much of the increase is related to savings and how much is related to silver?
We're not breaking down everything in the numbers. Clearly you see that you see that the savings have stepped up, have started to step up very much in Q4 and that we are continuing to implement our plan in the Q1. We are not splitting the overall impact of savings and silver. Again, savings will stay and even be amplified. For silver, the way it goes through the P&L is first with some revaluation of our inventory and increased selling price. You've got these two impacts and the negative impact of silver in the production cost. Overall, we are not splitting.
Yes. Maybe, add the answer to your question is, if you look at full year basis, in principle you do not expect silver really have an impact because we pass through the silver impact.
Yeah
To the customer top line and bottom line. There is a timing impact because in Q1, like now for example, of course, we still have stock, which were at lower costs of stock. There's a timing because you have a year-end cut-off in the end of December.
Sorry, sorry to disturb. Could you maybe get a bit closer to the microphone because I'm having a struggle to understand Fiona. Apologies.
Okay. Can you hear me better now?
Yes, that's better. Thank you.
I was saying on silver, if you look at a full year basis, you should anticipate normally we are not earning more profits bottom line on silver because we are passing through the silver impact to customer top line and bottom line, and also cost. That means they level each other out. You have a timing impact, a possible result normally in Q1 because of course we are still in a, you have a lead conversion cycle, a throughput time of three to six months. That means, basically Q1 we have large impact because the inventory were still from end of last year. Q2, you still have some impact because it depends on products. Some are conversion cycle is three months, some are six months.
On full year basis you still have, because you have a cut-off calendar at the end of the year, you have some silver impact in 2026 on a full year as well, as what is already reflected largely in Q1. The rest of the improvement is on the saving program. Of course, you also know in the saving program you are also a part of that got counterbalanced by the film decline as well. We will have a good Q1, Q2, second half of the year. There would be also holiday seasons, of summer holiday, lower factory load output, also Christmas, lower factory output.
You always see, also in the past years, Q, second half of the year on the film and chemical is always a bit slower in profit. On that regard, even though you have normally a high seasonality in Q4. Looking at that, we would have a step up on the full year outlook you can expect compared to last year, but it's not as amplified as Q1 and Q2 of this year.
Don't multiply the first quarter number by four, Alexander, basically.
Yeah, that's, it's Okay, thank you for that. It would be handy of course, and providing a bit more comfort into the increase in profitability if we see that split between the silver timing and then of course the savings, because I think the savings are structural. Of course, the silver timing is a bit less structural, but thank you for that. Maybe if I have a bit of questions on Healthcare IT, 'cause I think this is a beautiful business. You mentioned the shift to the cloud is the reason for the decline in sales.
I was looking at the slides of last year, and, if you look there to the order intake, you actually notice that, the cloud deals have declined, as a % of the order intake, and recurring business has also declined as a % of the order intake. How do I square, the two comments? Thank you.
No, well, as I said, don't look quarter by quarter, please, because it's, as I said, it's lumpy. You know, it was in Q4, I think cloud order intake was more than 50%.
In Q1 it was very low. In Q2, it's gonna be very strong, up to the roof. Why? Because it depends on the contract. The contracts are significantly, are significant when you are when we are landing like, almost a EUR 30 million contract that, you know, this is the order intake of the first quarter. If we have such a contract in Q2 plus other contracts, it totally changes the mix. Really please don't look at it quarter to quarter. You need to draw a line, and when you do that on a longer period, you see a continuous increase of the share of the cloud contracts.
Actually, I will even say today in the U.S., which is, as you know, the core market and more than 60% of the global market, all the contracts, virtually all the contracts that we are taking now are cloud contracts. We have extremely little today, project order intake in the U.S. The market has really shifted. You have still project orders in the rest of the world, which is probably less advanced in terms of SaaS transition. Again, I repeat, at the end of the year, we will be at, we will be growing the order intake, and I expect the share of cloud order intake for the full year will continue to grow as a proportion. All this is driven by net new customers. There is always a correlation.
We have a relatively soft Q1 order intake, and you see net new customers, 20%. This number in Q2 is gonna be extremely different. That's why we need to really look at it from a longer period. I think the key message here is, first, ordering, we are winning in the cloud, huh? We are winning contracts today even against Sectra and Intelerad in the cloud. Historically, the two fast movers and leaders of the cloud solution in the medical imaging market. Not only we are competing, but we start to win. We win new net new customers. We increase always recurring sales, and as I told you now, it's almost close to 70%. It was 50%, three , four years ago.
We are by moving to the cloud and getting new customers, we are addressing larger customers as well than the average of our install base. All this is very positive. What is not positive is the fact that the business model being changed, it's a significant delay before it hits the P&L 'cause an order intake that we take in SaaS, normally, typically, it's at least nine to 12 months implementation time. That's why. Sorry for my long answer.
Okay.
I really think.
No, it's, that's clear. Maybe if I can do, maybe one small follow-up in that respect. This can hopefully not sound a bit too punchy, but it's basically that the cloud is supposed to be a higher margin business. I'm following from a bit of an outsider, if everything is going to cloud and the mix is improving towards cloud, why the EBITDA is declining? I understand it's lumpy, but in the end, if cloud should bring a sort of positive mix effect, and right now it seems from an outsider's perspective that cloud is working at a negative EBITDA.
How much cloud business do you need on a recurring basis, as a percent of sales to turn that into positive territory?
No, Alexander. I, thanks for the question, and I think it's a good opportunity to clarify. Yes, cloud margins will be higher than project margins. However, we are just at the beginning. Remember that for the time being, we have eight customers on the cloud, okay. More or less. We had, actually, four, I think, or five at the end of 2025. We are just at the start, meaning not everything is fully optimized in terms of cost, okay, Alexander. Meaning we know where we are going in terms of margins, but as we start, we don't have the full efficiency yet, and it's gonna be, like, going down the experience curve, okay. We are doing that, and we are already seeing significant improvement in our margins.
Don't for the time being in a, still in a launch phase, at the end of 2026, we will have less than 15 customers on the cloud, and it will continue to build up. We are becoming there more and more efficient. It takes time, but I confirm indeed that it's a business proposition where margins are extremely high. Not at the beginning.
Okay.
You need to have your patience.
Okay. Thank you for that clarification. That's all from me. Thanks.
Thanks, Alexander. Any other?
The next question comes from the line of Guy Sips of KBC Securities. Please go ahead.
Yes. Thank you. I want to concentrate on Green Hydrogen Solutions. What make you say that in Europe, the market sentiment began to improve in Europe, was one of the items on your slides, and you mentioned several large projects reached financial investment decision. How many of these projects are now dedicated or will choose ZIRFON? What is your penetration? Thank you.
Okay. I will start, maybe I will pass the mic to my colleague, Jorge Tomás, who is in charge. You know, hydrogen projects are very visible. These are hundreds of millions in terms of amount, sometimes billions of investment. If you, for this, we are a small part of it, as you know, as a membrane, but we have a good pipeline visibility. What makes us think that in 2027 we are gonna build it again? Jorge, what can you say factually to explain this?
Well, good morning, everyone. If you look at the pipeline of projects in recent announcements of FID final investment decisions of larger projects in Europe, as well as if you look at the recent auctions of new capacity that have been successful, you will see quite a, you'll see, one, an acceleration of projects coming to FID and going forward, particularly in regions such as Spain, but a bit across all over Europe. For 2027, I cannot exactly explain which of the projects we are engaged with, but that would be also revealing confidential information from our clients.
What I can confirm is that, the, good number, and I would say the large majority of projects that are flagged for water alkaline electrolysis, which is the technology where we play, have been, seized or have been won by our direct clients. I can also confirm that these direct clients have started discussions with us on commercial terms for the supply of these projects. We see, we see good indications that indeed 2027 will be a rebound as we start to supply these projects.
Further than that, towards the longer-term future, if you are also aware in terms of the national deployment of RED, of the Renewable Energy Directive, RED III, you will see that the pace at which the national governments are now deploying or implementing this directive into local legislation is increasing. The perspectives are that finally Europe is picking up speed and taking back lost time.
Just a quick question on this. The project in Spain that you were mentioning, is that the Move project that ThyssenKrupp did win recently?
Well, you know that ThyssenKrupp is historically a client of us. You know that they have a Move.
You can connect the dots.
You can, but I will not confirm that.
Okay.
No, it's based on real projects. Indeed.
Okay.
Thank you very much. At this point, there are no more questions, and I hand the conference back to Pascal Juéry for any closing remarks.
Thanks a lot. Okay. In a nutshell, again, confirmed outlook, but as you've seen, with an asset, well, with film imaging and chemicals, better than what we expected even a few months ago. ZIRFON more difficult but shorter. The rest of the business, DPS on track and Agfa HealthCare on track. Overall, I hope that message that I want to give you is the restructuring and savings plan that we have put in place is now deployed and starting to have its full effect, and you can see it in the results. It shows also, and I want to insist on that, our ability to really navigate the market conditions of silver very efficiently, in such a volatile context.
Of course, I want to stress also the drive we have to make sure we are managing our cash liquidity and, for instance, working capital in this context also quite tightly, I would say. The market context is what it is. In this market context, we believe we can indeed deliver out- the outlook we presented to you. Thanks a lot for your time and attention.
This concludes today's call. Thank you for your participation. You may now disconnect.