Good morning. Thank you for your attendance. I would like to thank all the shareholders who cast their votes remotely before the meeting, and I would like to thank all those who are following the general assembly live because it's being broadcast. I hereby declare open the combined ordinary and extraordinary general meeting of Soitec. This meeting is convened to go over the agenda set out in the notice of meeting, which was sent to registered shareholders and also published in the official bulletin. As the Chairman of the Board of Directors, I am chairing this general meeting, and I would now appoint the meeting's officers. I hereby call upon the two members of the meeting which hold the largest number of votes, and they have agreed to fulfill this role to act as scrutineers.
The company Bpifrance Participations, hereby represented by Mr. Samuel Dalens, and the company called CEA Investissement, represented by Ms. Julie Galland. Samuel Dalens and Julie Galland are seated in front of me here in the first row. The chair and the scrutineers form the presiding committee of the meeting, and they appoint as Secretary Emmanuelle Bely, who's the Secretary General of Soitec and also the Secretary to the Board of Directors, and who is standing to my left. We now have the officers in place. Also present beside me are Laurent Rémont, our new CEO since April 2026, who is attending his first Soitec annual general meeting, and Albin Jacquemont, our Chief Financial Officer. The statutory auditors are also present in this room. One is Benjamin Malherbe for Ernst & Young Audit, and Laurent Genin for KPMG.
We also have with us the directors who were able to attend, those who could make themselves available, and I would like to thank them for attending. I would like to remind you that this general meeting is being video filmed and broadcast live on the company's website. The recording will remain available on the company's website after the broadcast. Now, I would like to ask Emmanuelle Bely to inform me of the provisional quorum as established at the beginning of the meeting, as well as to provide some further information about our meeting.
Thank you, Frédéric. Good morning, everybody. I would like to remind you that our general meeting is convening today on first call, and all of the preliminary formalities in compliance with the law have been duly completed.
I have before me all the documents attesting to the validity of the notice convening the general meeting and the proceedings therefor from the deliberations of documents and information required by law have been available to or communicated to shareholders in accordance with the statutory conditions and time limits. The agenda for this general meeting, together with the draft resolutions, were set out in the notice of meeting, which also serves as a notice of convocation published in the BALO official bulletin on June 22nd, 2026. The notice of convocation was published in Legal Gazette on the 10th of July, 2026. I'd like to point out that following the publication of the notice of meeting, the company received no request to include items or draft resolutions on the agenda within the time limits and under the conditions laid down by the applicable regulations.
Upon entering the meeting, the shareholders signed the attendance register, both in their own names and also in their capacity as proxies. The attendance register drawn up by Uptevia, our securities custodian, shows on a provisional basis that the shareholders present, represented, or having cast their ballot by post, collectively hold 18,000,287 shareholders, representing 27,746,000 votes for a total of 35,736,747 shares carrying voting rights, therefore, a quorum of 50.99% of votes. The statutory quorum has therefore been reached for ordinary and extraordinary resolutions, and if other shareholders attend this general meeting no later than the start of the presentation of the statutory auditors' reports, the provisional quorum may be revised, and the final quorum will be taken into account when we vote on the resolutions. The meeting is duly constituted and may therefore validly deliberate.
Thank you for your attention. I shall now hand back the floor to our Chairman.
Laurent Rémont will be opening the meeting by reviewing the group's performance by the 2025-2026 financial year, before discussing our sustainability strategy. Albin Jacquemont will then take the floor to outline our financial results for the same period, and he will also go over our growth prospects. I will then myself outline Soitec's corporate governance. I will then hand over to Emmanuelle Bely, who will present the remuneration of the Directors. Our statutory auditors will present the conclusions of their reports, and before we move on to the vote of the resolutions, you will have the opportunity to ask questions. Finally, Emmanuelle Bely will briefly review the resolutions submitted for approval by the Annual General Meeting.
I therefore propose to the Annual General Meeting that the management report, the corporate governance report, the auditors' report, and the text of the resolutions are not read because all of these documents have been made available to shareholders in advance of the meeting, so we don't need to read them. Now, I will give the floor to Laurent Rémont. He's going to outline the group's activities in detail.
Thank you, Frédéric, for the introduction. Dear shareholders, members of the Board, dear colleagues, it is a great pleasure to be here with you today for my first Annual General Meeting as Chief Executive of Soitec. Since I took my post on April 1st, I have devoted my time to getting to know the company from the inside and also meeting all the teams as well as our key partners.
I am delighted to share with you the observations I have made, what I believe to be Soitec's immediate priority, and also my assessment of our position within an industry in which I happen to have spent the last 30 years. To begin with, I would like to share with you the three main lessons drawn from the 2025-2026 financial year. I must say it was a challenging year for Soitec. Inventory correction weighed a lot on volumes. Visibility remained low in some of our end markets. However, at the same time, and like the rest of the industry really, we are seeing artificial intelligence picking up speed further and beginning to profoundly change and transform the demand for semiconductors. Our performance for 2025-2026, it really reflects the context. Revenue for 2025-2026 is down 30% year-on-year.
That is a deliberate action decision. It is weighing on margin. On the positive side, our balance sheet is solid, robust, our liquidity is strong. Free cash flow has returned to positive territory. Albin will go through the figures in detail a little later. My second message, we are continuing to innovate, optimize, strengthen our portfolio, so that we can capitalize on powerful mega trends. For instance, artificial intelligence, photonics in data centers, FD-SOI in edge AI, POI in advanced connectivity. We are currently consolidating what sets us apart from the competition, the very close relationship we have with our ecosystem, our unique R&D capabilities. Finally, an agile and scalable industrial footprint. Finally, my third key message. We started in 2025-2026. We are going to continue in 2026-2027 to position the company to make sure we return to profitable and sustainable growth.
We have achieved this by supporting our customers in reducing their RF-SOI, specifically inventories, by maintaining a very strong discipline on cost, and by managing working capital requirements and capital expenditure to improve cash conversion. With regard to the financial results for the financial year, I will give you the highlights before Albin goes over them in detail. Revenues stood at EUR 592 million, down 30% year-over-year. This is mainly due to the ongoing adjustments of RF-SOI stock levels among our customers. This is still in progress. The decline was partially compensated for by the fact that there is a very strong momentum in the AI area. Gross margin is 16.3%. This is a temporary low. It's a decision we made strategically to reduce factory utilization in order to give priority to stock level returning to normal and maintaining discipline regarding working capital requirements.
Our efforts have begun to pay off. Free cash flow is back to positive territory at EUR 63 million, thanks to our control over working capital requirements and discipline regarding capital expenditure. Restoring the free cash flow is the first step of the journey. Before we can return to revenue growth. Then deploy operational leverage as Albin will explain a little later. With all that I just said in mind, let's look at the 2026-2027 outlooks for the financial year. Last week, ahead of schedule, we published our first quarter revenue, EUR 113 million, up 23% year-on-year compared with the first quarter of 2026. It's a like-for-like basis for exchange rates and perimeter, exceeding the previously announced target by about 15%.
This growth mainly reflects acceleration of Photonics-SOI used for very high-speed optical transceivers, which are designed for AI data centers, the revenue of which has been doubling in one year. We have also reached an important milestone. We qualified our Singapore factory for mass production of Photonics-SOI for our first customers. This is a key step for Soitec. It is going to enable us to meet the surge in demand which we are currently witnessing. We will progressively extend the qualification to other customers. Finally, something also very important that led us to publish our first quarter results early in the interest of rigor and transparency towards the market. I'm referring to our visibility in the photonics industry. It continues to improve and our capacity to deliver at scale are strengthening.
Barring any major disruptions in the AI market, revenue from Photonics-SOI could more than double year-on-year compared with 2025-2026 financial year, when it stood at just over EUR 100 million. We have also confirmed our investments for the 2026-2027 financial year in the region of EUR 100 million. This is the take-home message. We are capitalizing on the fungibility of our assets and our past investments because we believe this is going to help us moderate cash outflows, and capital expenditure will be brought down to EUR 100 million this year. We are making sure that we maintain our capacity to capitalize on future growth opportunities. In summary, after restoring positive free cash flow in 2025-2026, our priority is to return to a growth trajectory and then to improve profitability. A major trend is driving the acceleration of our business.
We are performing a major change in our industry, artificial intelligence. The trend can be observed on two levels. First, data centers. Investments made by hyperscalers is expected to double within a year, driven by the rise in inference and agent-based AI. This requires more GPUs, more processors, but it also requires GPUs that are more closely interconnected. Because we are facing a growing or even exponential demand for data, optical connectivity is replacing copper in such a way that it increases data rates and reduces energy consumption. Our Photonics-SOI platform delivers superior performance for optical interconnects that makes us stand out, notably with optical losses in wavelengths that are very difficult to match at scale. With regarding edge AI, we have new battery-powered AI assistants, and we also have what we call physical artificial intelligence.
A large proportion of the estimated 40 billion connected devices which we expect to have by 2030 will still be running in the background. This makes us very sensitive to energy consumption, and they also require a very high integration capacity between analogic, RF, and digital components. FD-SOI is very good in both dimensions. AI co-processors, automotive microcontrollers, portable AI assistants, Internet of Things sensors, they all share the same requirements. More intelligence, more capacity to compute, less energy, greater integration. FD-SOI meets this challenge on all three levels. More broadly, we expect AI to generate new performance requirements, both on the level of the electronic components, but also on the level of the materials from which they are made. This is going to have an impact on the majority of our portfolios.
We are focusing on three main technological trends arising from the disruption caused by artificial intelligence: AI computing, connectivity, and finally, energy efficiency. In practical terms, what does it mean? Well, we have three short-term priorities. First, accelerate the strong momentum that we are right now enjoying for AI. The opportunity is certainly there, but we must make sure that it is properly executed. Success will also depend on external factors. I believe we are well-positioned to capitalize and leverage this opportunity with both ambition but also caution. Second priority, refine our focus and resource allocation. A comprehensive review of portfolio priorities and capital allocation is currently underway. Our potential for technological differentiation remains, but we want to improve our execution and the concentration, the focusing of our resources. Third priority, we need to adjust the size of the organization. The cost-cutting program launched in 2025-2026 is continuing.
The aim is to reduce, in a structural way, the fixed cost base and improve operational leverage across the entire cycle. But at the same time, the R&D intensity and our strategic capabilities are being safeguarded. We are not going to sacrifice neither on our innovation or our strategic areas. This is my take on the Soitec situation and the orientation I would like to provide. We have a well-built portfolio on the right technological megatrends with a unique position in the AI value chain. Secondly, we have talented teams, and they have developed structural advantages, and they will continue to do so. Finally I believe we have applied a very disciplined approach to gradually translate all of this, all we have done, into financial performance.
We have our work cut out for us, but I am confident we are doing the right thing, in the right order, with the right team. Let us now turn to a fundamental issue for Soitec, our sustainability strategy. Because sustainability is at the heart of our strategy, and it provides a competitive advantage that we are continuing to nurture. Our raison d'être reflects our conviction. We are the soil on which innovation will grow energy-efficient electronics are turned into sustainable life experiences. This ambition is built on three pillars: driving the transition to a sustainable economy through innovation and operations, execution, promoting inclusive culture, taking action to become a model for a better society. When it comes to climate action, our decarbonization roadmap is still continuing to bear fruit.
Quick reminder, our emissions reduction pathway was validated by the Science Based Targets initiative, based on the most ambitious scenario, 1.5 degrees Celsius. We met our target for reducing Scope 1 and 2 emissions two years ahead of schedule. Over the financial year, I must say, our achievements have been tangible. Gas consumption at Bernin was halved. Thanks to the first year of full operation of the newly installed heat pumps, 58% of the electrical power supplied to our Pasir Ris site in Singapore is now renewable, which means an 8 percentage point increase compared with 2024, and 41% of our shipments are now shipped by sea, compared with 36% last year. Air freight is down 23%. A few words on this progress and this momentum. This year, MSCI upgraded our rating to AA.
This is the fourth upgrade in five years, and therefore, Soitec is ranking among the sustainability leaders in our industry. This development reflects a series of measures taken to drive our sustainability strategy, and these measures include a roadmap for sourcing green process gases with nitrogen and oxygen already qualified for Bernin. Over 40% of our customers are qualified for sea freight, and over 90% of our strategic suppliers share and drive their own carbon reduction roadmaps. Our low-carbon energy supply is on track. Approximately 100% hydroelectricity in France, a target we already achieved in 2021, and approximately 60% green energy in Singapore, and this level has almost doubled since 2023. With regard to water management, we are continuing to pursue our target of halving our water consumption per unit of production by the 2030 financial year compared with the 2021 financial year. I believe we are on track.
Our water withdrawal intensity has fallen from 1.4 L per square centimeter in 2021 to 0.99 L per square centimeter this year, a 30% reduction. The target is 0.7 L by 2030. The key driver for achieving this result consists in reusing the water in our industrial processes. We have reached 49% of water reused compared with 16% in 2021, and the target is 50% by 2030. As you can see, we're very close to achieving the target. Something else I would like to talk about with regard to sustainability, our workforce. We are aiming for gender parity. Women make up 36% of our workforce. The target is 40% by 2030. Women hold 27% of senior management positions, and the target is at least 30%. We are continuing to make Soitec an attractive employer to support our growth. 20% of promotions have been internal this year.
We share the results of our growth with all of our employees. 100% of our coworkers are eligible for a free performance share scheme. Finally, safety. Our ambition is obviously zero accidents. No industrial accidents were recorded this year compared with two last year. The rate of lost time accidents has fallen significantly from 277 to 1.49 accident per million of worked hours. Finally, governance. Responsibility for sustainability is deeply rooted in each of our governing bodies. Within the Board of Directors, our Sustainability Committee works closely with all the specialists, all of the specialized committees.
To lead our sustainability approach, we have set up a Sustainability Steering Committee comprising the General Secretary, the Head of Human Resources, the Chief Financial Officer, and the Deputy Chief Executive in charge of operations and quality. Together, we assess and analyze our sustainability objectives, results, and action plans. The decisions we take are then submitted to the Executive Committee, then shared with the Board of Directors, the Sustainability Committee, and the Audit and Risk Committee. By doing this, we ensure seamless coordination and genuine strategic oversight at all levels of the organization. I will now give the floor to Albin Jacquemont, Chief Financial Officer. He's going to introduce the financial performance for 2025-2026.
Thank you, Laurent. Ladies and gentlemen, the 2025-2026 financial year was a decisive year of execution for Soitec. We took proactive and decisive measures to realign our operational base, safeguard our balance sheet, and position the company for the next phase of profitable growth. Despite a challenging demand environment, we delivered on all the commitments we set out at the start of the year. Key takeaways. Decisive measures to correct supply and restore balance. This discipline was essential to streamline our working capital requirements and support a healthy rebalancing act to rebalance the distribution chain across the entire RF-SOI ecosystem. Of course, this weighed on gross margin in the second half of the year due to temporary under-absorption of fixed costs. But it was a necessary step. It was necessary to restore structural balance. Second lesson drawn, restoring free cash flow generation and strengthening financial flexibility.
This was achieved thanks to disciplined management of working capital requirements and a more moderate capital expenditure profile. This strengthened our financial flexibility and increased our capacity to deploy capital when we find attractive, high-return growth opportunities and when we find them in the future. Third lesson drawn, executing a clear three-step roadmap towards a sustainable and profitable growth. Stage one consisted in restoring a positive free cash flow. We have achieved that. Stage two focuses on generating cash whilst progressing towards returning to revenue growth while we continue to reduce excess RF-SOI stock and inventories across the distribution network. Finally, Stage three. This will be the scaling up phase, during which we will rely on our structurally efficient operating model because we know this will drive significant margin expansion and strong cash conversion as the demand of our end markets improves and recovers.
If we take them together, these three priorities reflect a clear sequence of discipline, stabilization, and value creation, they position the company on the path of balanced and resilient growth. I will now turn to the key figures, some of which have already been highlighted by Laurent, our CEO. Revenue stood at EUR 592 million, down 30% year-on-year compared with the 2024-2025 financial year on an organic basis, which reflects highly divergent end market dynamics. EBITDA margin stands at 25.4%, a 118 basis point decline year-on-year, driven mainly by lower volumes and our deliberate decision to reduce production in our plants. We call this plant deloading. Despite this, operating cash flow remained resilient, EUR 202 million, broadly in line with last year's. This highlights the strength of our cash-generating model.
Consequently, we generated EUR 63 million free cash flow, a significant improvement on the cash consumption, EUR 23 million in 2025. By way of consequence, our net debt improved. It is now worth EUR 56 million, reflecting a solid and comfortable leverage ratio of 0.4x the EBITDA. During the FY 2025-2026, our revenue contracted by 30% year-over-year on an organic basis, reflecting highly contrasting end market dynamics within our portfolio. For mobile communications, decline by 41% year-over-year compared to 2024-2025, continuing to be impacted by RF-SOI inventory adjustments among our direct customers. This said, we are seeing encouraging adoption momentum for POI highlighted by a first multiple- year contract signed with Skyworks.
Automotive and industrial remained weak, down 44% year-over-year due to the persistent slowdown in the global automotive sector and continuing soft demand for both Power-SOI and FD-SOI. As to edge and cloud, AI was once again the standout performer, up 8% year-over-year and up a strong 19% excluding Imager-SOI. Photonics-SOI is now a platform generating over $100 million, posting growth of more than 30% year-over-year. This is in line with the continued expansion of our addressable market, driven by accelerating demand for optical interconnects in AI dedicated data centers. Since Laurent has already provided an overview of the operational context across all of our key product lines, I will move directly on to gross margin performance.
Gross margin stood at 16.3% of revenue, compared to 32.1% in fiscal year 2024/2025. Beyond the decline in volume, three factors contributed to this drop. A lower capacity utilization rate, around 50%, compared to approximately 70% last year, which represents a headwind of about 800 basis points. An unfavorable price product mix resulting in a contraction of some 300 basis points. Lastly, the operational and subsidies provided relief of approximately 180 basis points. Going forward, as the utilization rate recovers and volumes rebound, we should see a natural expansion of the gross margin driven by operating leverage. Now let's turn to our operating performance. We reported a current operating loss of EUR 8 million, compared to a positive current operating income of EUR 136 million last year, driven by the compression of the gross margin.
This was partially offset by disciplined cost management, achieved while maintaining our commitment to our investments in R&D. Net R&D expenditures decreased to EUR 45 million, reflecting the sale of Dolphin Design, increased recognition of grants, and lower use of materials, particularly in SmartSiC. Excluding these items, gross R&D expenses remained stable compared to last year. Selling, general, and administrative expenses decreased by 10%, driven by lower share-based compensation expenses. The reversal of provisions for variable profit sharing and incentive plans, and disciplined cost savings across the entire operational base. On the next slide, we present the details of our non-recurring items. The net loss announced to EUR 220 million, heavily impacted by exceptional items, most of which stem from decisions made prior to 2022. More specifically, we recognize EUR 123 million in other operating expenses, consisting mainly of an impairment charge of EUR 41 million related to SmartSiC assets.
And a EUR 39 million impairment charged on the Pasir Ris expansion, which is currently unoccupied, and an impairment charge on advance payments made in 2022 under long-term raw material supplies agreement, and a marginal loss on the earn-out of less than EUR 10 million associated with the sale of Dolphin Design. These non-cash charges reflect rigorous management of our portfolio and a clear-eyed reassessment of market dynamics, particularly in light of the rapid expansion of low-cost Chinese monocrystalline silicon carbide capacity and the resulting pricing environment for SmartSiC- related assets. Below operating incomes, net financial expenses totaled EUR 31 million, reflecting higher interest costs related to recent financing transactions and a non-cash foreign exchange loss of EUR 17 million recognized in April and May 2025. The group has since implemented enhanced hedging measures to reduce residual foreign exchange risk going forward.
When we adjust our reported net income of EUR -220 million for the exceptional non-recurring and non-cash items detailed above, we arrive at a net loss from continuing operations of EUR 14 million and an earnings per share from continuing operations of EUR 0.38. We have fully delivered on our commitment to restore positive free cash flow, which reached EUR 63 million for the 2025/2026 fiscal year, marking a sharp turnaround from the EUR -23 million reported last year. I would add that this generation of free cash flow exceeds the consensus, which was EUR 8 million, so it is extremely appreciable. The performance clearly demonstrates the quality of our execution rather than any support from market conditions. I would like to sincerely thank our teams for this achievement. This marks a structural turning point.
Soitec is once again generating consistent free cash flow across the entire cycle, supported by a more selective and profitability-focused capital allocation framework. This turnaround is based on two key drivers. First of all, strict discipline maintained regarding working capital requirements, generating a positive contribution of EUR 49 million to cash flow year- over- year. This was primarily driven by a reduction of EUR 145 million in accounts receivable, reflecting lower business volumes and more rigorous collection management, as well as a EUR 24 million reduction in inventory, resulting from deliberate actions aimed at reducing the workload of our plants and deliveries below the underlying demand, in particular in the second half of the year. This reflects a clear priority on cash generation and the strength of the balance sheet rather than short-term margin optimization, which would have been ephemeral.
To provide more context, this slide takes a closer look at these working capital dynamics from a balance sheet perspective. As you can see here, our optimization efforts have paid off, particularly in the second half of the year. That is when the plan was defined. Now let us turn to the second driver of our improved free cash flow, investment discipline. We have strengthened our capital allocation by reducing capital expenditures by 40% year- over- year to EUR 135 million. Our capital allocation framework has become significantly more selective, with resources increasingly directed towards the more attractive long-term value creation opportunities, in particular Photonics-SOI and POI. Alongside proactive inventory optimization, this more targeted capital allocation has enabled Soitec to return to a generation of structurally positive free cash flow. Leveraging our significant past investments in capacity expansion, which allows us to improve and secure growth opportunities.
This is a major turning point in strengthening our financial profits, and we are entering into a new phase of our development. Now, as to the balance sheet, we ended the fiscal year with a solid and strengthened financial position. Net debt decreased by EUR 38 million to EUR 56 million, driven by continued strong cash generation and disciplined financial execution. This further strengthens our balance sheet and increases our financial flexibility for the future. To conclude on our performance for fiscal year 2025-2026, we maintain a solid balance sheet supported by strong liquidity and a moderate net debt position. At the same time, we are continuing to make progress in our commitment to greater transparency, improved consistency, and high-quality financial reporting.
To summarize, we are very attached to our discipline in terms of managing capital with a CapEx for fiscal year 2027, which should remain contained in EUR 100 million throughout the whole year. As to the exercise in 2027 will be a transition year, the path to margin recovery is clear and linked to improved capacity utilization at our plants and the ramp-up of our high-growth platforms. Fiscal year performance in 2027 will reflect factory utilization rates that, although improving, will remain well below their optimal levels, as well as a level of subsidies expected to decline significantly. Indeed, discussions are underway as the calendar year 2025 marks the end of the IPCEI 2 program ahead of the anticipated launch of a possible IPCEI 3 framework.
The strengthening of the euro against the U.S. dollar is expected to create an additional headwind for our financial performance under current operating conditions. Our net exposure to currency risk for fiscal year 2027 is now 95% hedged with an exchange rate of $1.19 per euro. The company is well-positioned for the future, building on the significant diversification of its portfolios achieved over the past few years. The execution of the plan presented last November remains fully on track. As a reminder, this plan is structured around three distinct phases. Phase one, restore cash generation by reducing working capital requirements and returning to positive free cash flow. The initial results are already evident, and we expect further progress in the future as a significant portion of our working capital requirements is set to be converted into cash over the next few years. Phase two, return to growth.
You know the results of the first quarter, which demonstrate that Soitec is already back in terms of growth. Phase three, restoring a structurally higher level of profitability through operational leverage and cash conversion in line with our expected growth. Thank you.
Thank you, Albin, for the presentation. I'd like to have a look at Soitec's governance, starting with the composition of the Board of directors for the 2026 fiscal year. As of today, the Board of Directors has 12 members, including seven independent directors, representing 70% of the Board members, excluding directors representing employees. Six women, representing 60% of board members, excluding directors representing employees, and two directors representing employees. The governance structure is also characterized by its diversity, with four nationalities representing an average age of 53 years old. During 2025-2026 fiscal year, the directors' commitment was reflected in 88% attendance rate at board and committee meetings.
Let us now examine the composition of various committees and the work they carried out during the 2025-2026 fiscal year. As of March 31st, 2026, the Strategic Committee was composed of 64% independent members. They met six times during the fiscal year with an attendance rate of 84%. The Audit and Risk Committee, for its part, consisted of five members, 80% of whom were independent. They met seven times during the fiscal year with an exemplary attendance rate of 100%. The Board's Compensation, Nominations and Governance Committee also consisted of five members, 75% of whom were independent. They met seven times with a consistent attendance rate of 97%. Lastly, the Sustainability Committee, consisting of five members, all of whom were independent, met five times during the fiscal year with an attendance rate of 76%.
During the 2025-2026 fiscal year, the Board of Directors and its committees addressed issues ranging from strategy, finance, and sustainability to governance and compensation. The main points of these activities are summarized on the slide you have on the screen. Since these items are covered in full detail in the universal registration document and in the general meetings materials, I will not go over them here in detail. I will now turn to the annual evaluation of our Board and its committees, conducted in December 2025, in accordance with the recommendation of the AFEP-MEDEF Code. This evaluation was conducted internally via an individual anonymous questionnaire sent to all directors, with the exception of one director representing employees who was appointed in November 14, 2025.
Its findings, analyzed last March by the Board's Compensation, Nominations and Governance Committee and presented to the Board of Directors, reflect a high level of overall satisfaction with the global functioning of the Board and its committees, as well as a culture of continuous improvement. The findings first highlight several major strengths. Strong leadership, underpinned by the excellent relationship between the Chairman, myself, and the CEO, as well as strengthened ties with the Executive Committee. The exemplary quality of discussions characterized by freedom of expression and increased efficacy within our committees. Rigorous forward planning, particularly in succession planning and the management of Board renewals. Highly praised involvement in training programs reflected by a high level of commitment and a near- unanimous agreement on the relevance of the training provided.
Highly appreciated support from the secretariat, characterized great availability, strong responsiveness, and the quality of the proposed work options, all of which were warmly praised. Looking ahead, the Board has identified four areas for improvement. To continue to incorporate new types of experts during the upcoming renewals, to send documents earlier and prioritize more concise formats, to offer new targeted training programs, particularly on AI, and the availability of critical materials. Lastly, maintain the utmost vigilance regarding the confidentiality of discussions. Based on these guidelines, an action plan has already been established for the 2026 fiscal year, reaffirming our commitment to a process of continuous improvement. I will now turn to the rigorous process that guided the selection of a new Chief Executive Officer.
Following Pierre Barnabé's decision to step down on October 2025 from his position effective March 31st, 2026, the Board of Directors acted immediately to organize a managed transition structured in four main phases. The first stage began with the establishment of a dedicated select committee and the precise definition of the desired profile, which will be detailed on the next slide. Once the search was launched, we compiled a short list of internal and external candidates who were then approached confidentially. During the seconnd stage, all shortlisted candidates, whether from outside the company or from within its ranks, underwent in-depth interviews designed to assess their skills and their alignment with our strategic priorities. The third stage finalized the selection.
After a final round of interviews, the select committee submitted its recommendations to the Compensation, Nominations and Governance Committee, which then presented its conclusions to the Board of Directors, which had been kept informed throughout the process. Finally, during the fourth and final stage, the Board of directors unanimously decided to appoint Laurent Rémont as the Chief Executive Officer, effective 1st of April, 2026. His remarkable career at industry giants such as Infineon and STMicroelectronics proved to be perfectly aligned with our group's ambitions. This slide outlines the target profile we defined to guide our research. The Board of directors established very clear criteria to identify the ideal leader for Soitec. Regarding the profile and key competencies, initial preference was given to candidates who already had an experience as a CEO, who were high-potential talents. The candidate was required to have in-depth technical expertise in semiconductors or cutting-edge technologies.
We are looking for a strategic thinker with an international outlook and a strong commercial or go-to-market mindset. A strong preference was given to French or French-speaking European candidates. In summary, as noted in the box at the bottom of the screen, the Board's objective was to select a leader capable of maximizing the value of our diversified product portfolio while seizing new growth opportunities, particularly those driven by artificial intelligence. This rigorous process and these demanding criteria led the Board of Directors to appoint Laurent Rémont as CEO, effective April 1, 2026. His background meets all of the criteria of the profile we just described. Laurent Rémont brings world-class industrial and international expertise to Soitec. After starting his career at Philips, he spent more than 15 years at STMicroelectronics, where he held senior management positions in the Connected Home division, R&D, and Embedded Systems.
He served as CTO as a member of the Executive Committee at Kontron AG, and followed by senior vice president and general manager of MEMS division and Magnetic Sensors division at Infineon Technologies. He is a graduate of Grenoble INP and has an in-depth understanding of our local innovation ecosystem. He brings the expertise and the technological vision needed to steer Soitec towards its next successes. Let's turn towards the proposed changes in the composition of the Board of directors for the coming fiscal year. As shown on the slide, the renewal of our directors' terms is spread out evenly over three years. Today, three terms are set to expire following our annual general meeting. Pierre Barnabé resigned from his position as a director concurrent with the end of his tenure as CEO, effective at the close of business March 31st, 2026 in the evening.
These are the terms of Maude Portigliatti, Christophe Gégout, and Delphine Segura Vaylet. We would like to note that Maude Portigliatti has chosen not to seek a reappointment as a director due to time constraints linked to her other responsibilities. On behalf of the Board of Directors, I would like to thank Maude for her active contribution to the Board's work since 2022. To ensure these upcoming renewals are carried out successfully, we are following a rigorous selection process structured around four key steps. We define the desired profiles based on the Board's annual assessments and our diversity policy. A specialized recruitment firm identifies and pre-selects candidates. These candidates are evaluated and interviewed, ensuring strict compliance with the rules regarding independence and the holding of multiple positions.
Finally, the Board, upon the recommendation of the Board's Compensation, Nominations and Governance Committees, approves the selected candidates before submitting the nomination to a vote at the annual general meeting. I will now turn to resolutions four to seven, which concern the proposed appointments and reappointments submitted for your vote today. First, the reappointment of Delphine Segura Vaylet as an independent director. Her solid experience with governance and human capital issues will continue to enrich the Board's work. If you approve her reappointment, she will continue to chair the Board's Compensation, Nominations and Governance Committee while remaining an active member of the Strategy and Sustainability Committees. Next, the reappointment of Christophe Gégout, also an independent director. His leading financial expertise and insight into industrial risks are key to safeguarding our strategic investments. Subject to your approval, he will continue to chair the Audit and Risk Committee through April 2027.
Please note that in April 2027, having reached the term limit for independent directors set by AFEP-MEDEF, he will hand over chairmanship to an independent director. The Board's Compensation, Nominations and Governance Committee is working on this transition and on identifying a successor. The appointment of Laurent Rémont, our CEO. His presence on the Board is part of our commitment to creating seamless synergy between senior management and the directors. He will bring his key insight into markets and technological opportunities, particularly in the field of artificial intelligence. If his appointment is approved, he will join the Strategic Committee. Also, as part of resolutions number four through seven, we propose the appointment of Didier Fontaine as an independent director. Didier brings more than 30 years of financial and strategic experience gained at major global industrial groups such as IDEMIA, Plastic Omnium, now it's called OPmobility, Constellium, Verallia, and Safran.
His in-depth expertise in global financial strategies, issue strategy, and cybersecurity, as well as experience in supporting companies listed on international markets, will be valuable assets in supporting Soitec's performance and growth trajectory. Resolutions four through seven, if they are approved, the composition of the Board of directors will be as shown on the screen. The Board would thus consist of 13 members. The proportion of women on the Board will decrease from 60% to 45%, and the percentage of independent directors will decrease from 70% to 64%. Finally, all committees will continue to be chaired by an independent director. Mr. Gégout for the Audit and Risk Committee, Laurence Delpy for the Sustainability Committee, Delphine Segura Vaylet, who chairs the Board's Compensation, Nominations and Governance Committee, and myself for the Strategic Committee.
I will now turn the floor over to Emmanuelle Bely to present the compensation of the corporate officers for the fiscal year 2025-2026 and the fiscal year 2026-2027. Thank you.
Thank you. It falls to me in my capacity as company secretary to present the section relating to the remuneration of our corporate officers. I'd like to point out that all provisions set out here have been approved by the Board of directors in accordance with the recommendations issued by the Board's Remuneration, Appointments, and Governance Committee. You will find all the details on this information in the 2025-2026 Universal Registration Document, chapter 4.2, in the notice of the annual general meeting, and on our website. Let us begin with the remuneration paid or awarded during the 2025-2026 financial year to the company's directors, corporate officers. These, of course, fall within the framework of the policy approved by the annual general meeting in July 2025. These amounts are the subject of resolutions number eight through to 10, submitted today for your approval. This is an ex post vote.
Resolution number eight regards the overall approval of information relating to the remuneration of corporate officers. This is known as the overall ex post, to be distinguished from the individual ex post approval, which will be subject of resolutions nine and 10. Resolution number eight submits the remuneration of directors for the 2025-2026 financial year for your approval. Total amount, EUR 691,710. I would like to emphasize that as a gesture of solidarity in light of the partial furlough of our staff, the members of the Board then in office agreed on November 19, 2025, to a 5% reduction in their remuneration, applied on a basis equivalent to two months' service. The remuneration paid for this financial year reflects this measure, with the exception of Kai Seikku, whose term of office ended before the decision was taken.
With regard to the arrangements and in accordance with the remuneration policy you approved during the 2025 annual general meeting, the budget is allocated on a pro rata basis according to the director's actual attendance at board and committee meetings. As is customary, participation via video conference or conference call is treated as physical attendance, and travel expenses are reimbursed upon presentation of supporting documents. Finally, I would like to remind you that the chairman and the chief executive officer receive separate remuneration, which is not drawn from this overall budget. Similarly, directors representing employees do not receive any remuneration in respect to their role as directors. Let's move to resolution number nine, which concerns the remuneration awarded to Frédéric Lissalde in his capacity as Chairman of the Board of directors. As a reminder, our chairman's remuneration policy provides exclusively for the payment of a fixed annual remuneration.
The Chairman of the Board of directors receives no other remuneration nor any other benefits in kind, with the exception, of course, of reimbursement of expenses incurred in the performance of his duties, but this upon presentation of supporting documents. Accordingly, for the 2025-2026 financial year, Frédéric Lissalde received a fixed annual amount of EUR 277,667 gross in accordance with the policy approved by you on the 2025 general annual meeting. As with the other members of the Board, I would like to point out that this amount includes a solidarity measure mentioned just now, namely a 5% reduction applied on a basis equivalent to two months of service. We now come to resolution number 10, submitting for your approval the remuneration awarded to Pierre Barnabé in respect of his duties as Chief Executive Officer, which he held until March 21st, 2026.
For the 2025-2026 financial year, his remuneration breaks down as follows. Fixed remuneration, EUR 525,673 gross. This amount includes a 5% solidarity measure based on two months of service. Short-term variable remuneration set at EUR 443,080, representing an overall target achievement rate of 83.6%. For the record, this variable component was based, on the one hand, on three financial criteria, turnover, revenue, EBITDA, and free cash flow. On the other hand, on four strategic criteria, innovation, commercial performance, human resources, and ESG. In detail, with regard to financial criteria, only the free cash flow target was fully met, 30%. The actual performance is standing at 147% of the 100% target. Regarding strategic criteria, they achieved an overall fulfillment rate of 53.6%.
Finally, the 10% bonus on the results achieved against the financial and strategic targets payable in the event of increased diversification of the product lines currently marketed by the group, it was not triggered. As part of his long-term variable remuneration, Pierre Barnabé was granted 28,754 performance shares valued at EUR 1,218,506. This allocation lapsed on March 31st, 2026, following Pierre Barnabé's departure from the company. Furthermore, he was granted 2,829 shares during the financial year under the Onyx 2025 scheme. In addition, a non-competition indemnity of EUR 262,837 was paid to Pierre Barnabé, representing 50% of his gross fixed remuneration for the previous 12 months. This provision was activated in November 2025 in order to fully protect Soitec's technological and strategic assets by prohibiting Pierre Barnabé during this period from taking up a position, accepting a directorship, or acting as an advisor for one of our direct competitors.
To complement this package, he benefited from a mandatory retirement savings scheme called PERO, with contributions totaling at EUR 14,941. Finally, benefits in kind, which include the provision of a company car and company accommodation, as well as private GSC unemployment insurance, totaled at EUR 36,262. Having reviewed the remuneration paid or awarded to the directors during the 2025-2026 financial year, we will now turn to the remuneration policies applicable for 2026-2027 financial year, which are subject of resolutions number 11, 12, and 13. We will start with remuneration policy for our Chairman of the Board of Directors, which is submitted to your approval via resolution number 11. As I mentioned a moment ago, the Chairman receives no variable component or benefits in any kind in respect of his directorship. His remuneration is exclusively fixed.
For the 2026-2027 financial year, it is therefore proposed that this fixed annual remuneration be kept at its current level, EUR 280,000 gross. With regard to the remuneration policy for directors submitted for your approval via resolution number 12, no change is proposed to the total annual budget allocated to them, which remains fixed at EUR 820,000 gross since the 2022 annual general meeting. This policy is strictly in line with the one you approved last year. The allocation will therefore continue to be made on a pro-rata basis according to the actual attendance based on the grid that you see now with the scale detailed in this grid calculated on a basis of 100% attendance rate. We now come to the remuneration policy for the Chief Executive Officer for the 2026-2027 financial year, submitted to your approval via resolution number 13.
The Chief Executive's remuneration policy provides for remuneration comprising a fixed component, a short-term variable component, and a long-term variable component, as well as certain commitments and benefits. On January 8th, 2026, following appointment of Laurent Rémont as CEO of the company with effect from April 1st, 2026, the Board of Directors, on recommendation of the Board's Remuneration, Appointment and Governance Committee, reviewed the remuneration components applicable to him from the date his term of office takes effect. In structuring this policy, the Board of Directors has based its approach on four fundamental pillars: strict compliance with the recommendations of the AFEP-MEDEF Code and the Board's guiding principles, direct alignment with the company's strategy, performance, and long-term objectives, competitive positioning of a CEO's remuneration in relation to the two benchmark groups, a European benchmark group comprising 17 international companies and a French benchmark group comprising 21 listed companies.
These two benchmark groups were reviewed by a specialist independent consultancy firm and represent comparable companies in terms of market capitalization, total turnover, area of activity, and geographical location. The last element is the fact that Laurent Rémont does not have a working contract in alignment with the recommendations of Article 23 of the AFEP-MEDEF Code. To illustrate this principle, the slide compares Pierre Barnabé's remuneration structure with the new policy proposed for Laurent Rémont for the 2026-2027 financial year. The aim was to rebalance the composition of the remuneration so that it is closer to a breakdown of one-third fixed remuneration, one-third short-term variable remuneration, and one-third long-term variable remuneration, which is in accordance with the benchmark I mentioned. Laurent Rémont's target remuneration is thus split between 28.5% fixed remuneration, 28.5% short-term variable remuneration, and 42% long-term variable remuneration.
Consequently, the total variable component, short and long term, represents approximately two-thirds of the total target remuneration. The proposed overall remuneration places the Chief Executive's total target remuneration, i.e. EUR 1,750,000 compared with EUR 2,385,000 envisaged for the former Chief Executive Officer, slightly above the median of French companies in the benchmark group and slightly below the median for European companies in the benchmark group. So here you have the gross amounts and the ceilings for the 2026-2027 financial year. The gross annual fixed remuneration is EUR 500,000. Short-term variable remuneration is set at a target of 100% of the fixed component with a strict cap of 150% in the event of outperformance. Long-term variable remuneration is also capped and may reach a maximum of 150% of the fixed remuneration.
With regard to pension and benefits, the policy includes membership of the PERO scheme, the provision of a company car, a relocation allowance, and private unemployment insurance. Upon taking up his post, Laurent Rémont was granted 8,012 shares free of charge under the Onyx 2028 scheme, representing the equivalent of 85% of his fixed remuneration. It should be noted in conclusion that should Laurent Rémont cease to hold the post of CEO, he might be eligible for a severance payment and a non-competition allowance and would not receive, in accordance with our corporate governance principles, any additional remuneration for his seat on the Board of Directors. Having looked at the overall figures, we will now examine in detail the specific performance criteria, which are simplified and aligned with the company's strategy and market standards that determine these variable components for the 2026-2027 financial year.
Let us begin with short-term variable remuneration on the left. This strikes a balance between financial and non-financial goals. Financial targets account for 60% of the target and up to 90% in the event of outperformance. They are based equally, 20% each, on revenue from the Photonics business, current EBIT, and free cash flow. Non-financial targets account for 40% of the target, up to a maximum of 60%, and are divided equally, 10% each. They cover commercial strategy, i.e., key agreements with the major accounts, customers, product portfolio management strategy, reducing the carbon footprint, Scopes 1 and 2, as well as talent retention and organizational structure. With regard to long-term variable remuneration on the right, the assessment is based exclusively on quantitative indicators.
Financial criteria account for 75%, measuring, on the one hand, adjusted net current profit per share, 35%, and on the other hand, total shareholder return, TSR, 40%, compared with the European Sector Benchmark Index. ESG criteria. They account for the remaining 25%, divided equally between specific water recycling targets and diversity indicators. This set of specific indicators allows us to link the Chief Executive's remuneration directly with Soitec's operational, financial, and sustainable success.
T hank you, Emmanuelle. I shall now hand over to Benjamin Malherbe of Ernst & Young Audit and Laurent Genin of KPMG. They will now present the conclusions of their reports.
Ladies and gentlemen, in fulfillment of the mandate entrusted to us by our annual general meeting, we are pleased to present to you the reports we have prepared for the financial year ended March 31st, 2026.
These reports cover the annual accounts, the consolidated accounts, the regulated agreements, the sustainability statement included in the group's management, and the capital transactions provided for in resolutions 15, 16, and 17. As is customary, we propose to summarize the key points and conclusions for you. With regard to our reports on the annual and consolidated financial statements, which are the subject of the first and second resolutions, we hereby certify that the annual and consolidated financial statements for the financial year ended 31st of March, 2026 are in order and true and fair in accordance with their respective accounting standards and give a true and fair view of the results, financial position and assets of the group and the company at the end of the financial year ended March 31st, 2026.
The key areas of our audit focused on recognition of turnover in the annual and consolidated accounts, tax compliance in the annual and consolidated accounts, and valuation of financial fixed assets in the annual accounts. As part of our mission task, we also verify the fairness and consistency of the information provided in the Board of Directors' management report with the annual and consolidated financial statements. This includes information relating to remuneration, benefits, and commitments paid or granted to corporate officers. Finally, we would like to point out that our work was carried out in accordance with the professional standards applicable in France and that we conducted our audit in compliance with the rules on independence.
I'm now going to take the floor regarding the other reports, our report on regulated agreements. We inform you in this report that no agreement was authorized by our board and signed.
In the second part of the report, we summarize the agreements which were previously approved and had an effect on the 2026 year. The memorandum of understanding entered into with STMicroelectronics International N.V., which now expired and which resulted in invoicing the $10.4 million for the financial year with the CEA. Also, there was a multi-year framework agreement for collaboration on research and development on the one hand, as well as the license agreement covering patents and the transfer of knowhow for the manufacturing and sale of substrates. Finally, the third agreement with Shanghai Simgui Technology, an agreement to supply raw materials to that company to manufacture SOI wafers and furthermore, under agreements relating to licensing and technology transfer, as well as supply of SOI wafers.
The purpose of these agreements is to enable Shanghai Simgui Technology as part of the expansion of its SOI wafer production capacity to manufacture these products in China and sell them exclusively to your company for the global market using Soitec's Smart Cut technology. The next report regards the certification on sustainability information. This is the sustainability report. It's part of a report on the group's management. It is a limited assurance report that covers compliance with the ESRS, European Sustainability Reporting Standards, and European regulations on the process implemented by Soitec to determine the information disclosed, which means the setting up of the DMAs. The second part of the report covers the sustainability information included in the report, finally, taxonomy on the sustainability indicators.
For each of these checks, based on the procedures we carried out, we did not identify any material errors, omissions or inconsistencies regarding compliance with the ESRS and European regulations.
I will close with the last three reports in support of the extraordinary resolutions, which are recurrent every year. First of all, a report on resolution 15 regarding authorization to issue ordinary shares or securities with the preemptive right being waived in favor of categories of persons meeting specific criteria being waived. We've confirmed that subject to a subsequent review of the terms and conditions of any issue that might be decided upon, we have no comments to make, neither on the methods used to determine the issue price, nor on the use. If the Board decided to use this, we would include a supplementary report in the next general assembly.
As regards the 16th resolution, it concerns authorization to issue shares and/or securities reserved for members of a company savings scheme. We have no comments to make regarding the method for determining the issue price of the equity securities to be issued. If the Board were to use this right, we will release a complementary support during the next general assembly. Finally, this will be the last report. Report for resolution number 17 relating to the authorization to reduce the share capital by canceling shares. We have no comments to make on the reasons for and the terms and conditions of the proposed capital reduction. Ladies and gentlemen, shareholders, thank you for your attention.
I would like to now open the question and answers session before we proceed to the vote on the resolutions. We have received no written questions from the shareholders. I would like to give the floor to Alexandre Petovari, who is in charge of investor relations to manage the Q&A session.
Thank you, Frédéric. Ladies and gentlemen, if you would like to ask a question, please raise your hand and you will be given a microphone. Before you ask your question, please introduce yourselves. This is a Q&A session only for the company shareholders.
For the individual shareholder. It's the first time I attend the meeting. It's quite interesting. I'm a little concerned regarding the 2025- 2026 results. Obvious decrease in the profitability since 2025, even in comparison with the previous years when it was very high. Compared with the international competitors who still have a sustainability that has now dropped in 2025 and 2026. I am concerned about the inventories. You said you had inventories issues for your customers, for yourselves. Is there an issue with the provisioning on the constituted inventories? What is the age of the inventories, and how do we restore the loading charge of the factories and the usability that is 50% currently? This is my first question.
Well, maybe we will answer the first question before you ask the second question because you already have some sub-questions in the first question. With regard to the strength of our company, the debt is very limited. The lever is limited. Really the question is the financial structure sustainable? The answer is yes, because the free cash flow is back in positive territory, and the debt has decreased over the last financial year, and the actions taken, starting in November and even last summer, have borne their fruit and will continue doing so for the next accounts closing. There is no real issue, and I would not worry about the company's strength.
Now, the second part of your question, inventories. The inventories level. Both for our company's balance sheet and our customer's balance sheet. Well, it is true that the inventories for the company are quite high. Right now the trend is that the inventories are decreasing rather quickly. I cannot give you any figures, but I can tell you that the inventories are going down very quickly, and the trend will continue in the near future. Why? Why is that?
Because last year we wanted to improve on the basic rule, adjust production to deliveries to the customers. We don't produce what we can't deliver. We adjust the production to the demand from the end users, the end customers, and we also adjust our raw material procurement to production. By aligning our production in such a way, we have decreased our inventories. I'm not done with the inventories. Obviously, this has a cost. The factories, as you rightly pointed out, are being utilized, and therefore our workload has decreased, and the cost of underactivity has increased. Obsolescence of the inventories, we don't really have an obsolescence issue. Our products are not fungible, and we have many different products, and maybe some product references are not being sold enough. In that case, while we take the necessary provisions for impairment.
In 2026, we conducted a rigorous analysis, and we did take in consideration provisions for impairment. Regarding our customers' inventories downstream, Laurent Rémont described the situation. Excessive inventories are specifically for RF-SOI products, and I can tell you that our current turnover level, it accounts for 50% of the final demand of the market, means that the inventories are resolved every six months, and by improving the logistics chain, we will bring this problem to an end sooner or later.
I think you had a second question.
Yes, I did. I have two more questions, actually. I was taking notes of your previous reply. Second question. You announced a tax agreement with the French government. You were actually rejoicing over a loss for EUR 300 million, and the loss that would be postponed, and I find it difficult to understand how you could be happy about a loss to be postponed. The statutory auditor said that you underwent a tax control from the French government, but you never mentioned the agreement with the French state. On these EUR 320 million loss of a deficit that can be postponed, and the publication is recent. I only read about it a few days ago.
Well, we're not rejoicing. We're simply not showing any emotions. But we're not happy. The CEO, in his presentation, talked about a fiscal tax check from the government for 2021, 2022 financial year. But it was really due to two things. The way in which the company was restructured and the fact that we limited solar activities.
These operations were conducted in 2018, so it was even before 2018, 2020. And also the way the different interpretation of our assets value for the securities transfer in our company in Singapore that belongs to the group. But what is really the heart of the matter? The company deducted in France losses that were incurred abroad. It's not really black and white because we did not reach an agreement with the French tax administration. The sanctions actually were based on much higher amounts. So it's not black and white. The initial amounts were much higher than the agreement we finally reached. And actually, we reached an agreement yesterday afternoon following the discussions that took place a few weeks ago. That was started a few weeks ago, and the final decision is protecting us from a significant risk that was bearing down on our company.
Well, EUR 320 million, it's a big loss. It's almost a year and a half worth of financial results for 2025 and one year in the previous years, considering that the previous years, the turnover was EUR 1 billion, and the profitability was approximately 10%.
But that's precisely what I mean, because the amounts were high, we disclosed the agreement in the hours following the signature of the agreement.
Okay. I'm still concerned. I don't feel reassured. Third question. You know that the Chinese are very good for open source, especially Kimi K3, the new Kimi K3 model that was just released 10 days ago. I think it's going to create a real turnaround in the LLM industry. It's going to be a game changer. And is there anything you can think of in your own industry?
How can you influence this on the markets you are currently developing for data centers, for afferents and computation capacity? Because the model, the new Chinese models, Kimi K3, more specifically Moonshot Kimi K3, is apparently as good as ChatGPT and the Anthropic Claude Fable, although that is supposed to be the gold standard on the market at a very low price. They will cost 90% less. That kind of product will definitely be a game changer in the industry for data centers, and more specifically for us as Western companies on this market, because they're just changing the rules on the market.
I'm a user, and the users will think, "Okay, we might as well adopt a new Kimi K3 model and insert it in our data centers, in our new [Shark] PCs." Because the new [Shark] PCs allow to host directly in our own premises, in our own offices, a data center which is directly allocated to AI for approximately EUR 10,000. It is really a change in the industry, and I really would like to understand what you think you can do, how you think you can have an impact on your own production with regard to those markets.
There are several parts to the answer of what your question is, which is exact. Currently in the AI industry, the race is to reduce the cost of tokens to ramp those up in scale. Now, today, the value of AI is demonstrated in various use cases. The question is no longer that. The question is how do you ramp up in scale? Ramping up in scale has a cost. All of the industry now is orientated towards reducing the cost of a token to ramp up, and there are several levers to get there. One that you mentioned was a type of large language model. In optimizing the model itself, that's one lever. Yes, in China, they're working on that. Everybody involved, and not only the Chinese, are working in that direction. That's one of the levers, but it's not the only one.
There are levers on processors. Having dedicated processors and agentic processors, that's another lever. The third lever, which is the one that we're interested in, is how can we connect the various processors. Photonics is one area, and that's for reducing the cost per token. What we're doing is going exactly in that direction and reducing the cost of tokens by reducing the energy consumption and making it possible to better use the various processors, whether they're waiting for data. The more you use those, the more you reduce the cost of the solution. We are totally involved in that dynamic, whether it be with American players or European players or Asian players. We cover that whole palette.
Thank you, Mr. Chair. Hi, everyone. Individual shareholders, three questions. What are the opportunities of SOI for AI, separating it out as was just done, AI of perception and generative AI and agentic AI and physical AI?
Today in AI, we observe mainly in data centers. This just started more with model training, now it's moving more towards inference, using models in specific use cases for enterprises. For us, the real opportunities for us are essentially, in terms of data centers, in connectivity between GPUs, in other words, photonics. Today, SOI photonics and related technologies, which makes it possible to have better integration and to develop a roadmap based on that usage in data centers. That covers model training. It involves inference and agentics, which you were speaking about. The data centers we see today, that's what buoys up our growth in the short term.
In the middle term, there are opportunities there as well, more in edge AI, as you said, physical AI, closer to users, basically. Use cases today are mainly companies, they will be increasingly migrating towards individual users. We believe that this will draw forward a certain amount of growth for us because most of these physical AI use cases require very low consumption technologies, consumptions that will include analog and digital. One of the technologies that we have is FD-SOI is very well positioned. There is no equivalent of that for this type of low consumption technology. This will be one phase of growth for later that we're planning on when physical AI develops further.
Thank you. The second question was about photonics. Globally, this is about optical interfaces. Could you give us a bit more indications of the SOI content per GPU or per TPU or XPU, or per flow rate in terabits per second or something like that? Do you have anything at least for [Cook]? Are you in the NVIDIA blueprints?
Estimating the TAM, we work on that every day, I can guarantee you, not only ourselves, but with all of the partners that we have. That's a very difficult exercise. Yes, we have an estimate of the TAM. Now, do we want to share that right now, as long as we're not sure of our figures? No. What's clear is that the trend to reduce the cost per token, there is a real strong motivation on the part of players to move over from copper connectivity to optical connectivity. There's no doubt. The question is only how fast is this going to happen?
What we observe, as we indicated in our quarterly results, is that transition is ramping up. No doubt about that. As to what we call the scale-out, which is more connectivity between racks in data centers. The scale-out part, which is simplified to exchanges within the racks, which is not exactly that, what the rhythm is going to be, that's what we're trying to validate. The TAM today, we're going to put that off to communicate that.
The last question about FD-SOI. We talked about edge AI. Congratulations, because I think you're behind the win design for STM32, which is very interesting for you, I imagine. I don't understand why you don't have the STM32, which is the edge AI chip for ST.
I'll let ST comment on their own product rather than making my own on their portfolio. What I can confirm is that we also see a good traction around FD-SOI, which is more continuous. It's not an acceleration like Photonics, which is brutal, but it's more continuous in nature with ST. It's not only with ST. In the automotive industry, radar solutions for automobiles, other major market involvement. In our partners and customers and GlobalFoundries that you're referring to, who also communicates on these topics and who attests to growth or an adoption of this technology in different markets.
Hello. I want to get away from the technique, which is exceptional at Soitec. Mr. General Director, you're anticipating strong acceleration in activity, more than 30% growth in T2, in CapEx. That would be around EUR 100 million compared to EUR 135 million, and it was EUR 250 million a couple of years ago. However, in Mr. Jacquemont's slides on page 33, you indicated a global profitability down for that year that would be penalized by the underloading of factories. My question is twofold. The first part is, based on what quarter are you anticipating the positive point in current EBIT values? In the profitability slide is the indicator which has replaced EBITDA in your variable portion. That's the first part.
The second part is the strong dynamic of Photonics- SOI. Now, would this make it possible to preserve positive free cash flow throughout the whole of the fiscal year, despite the tax payment of EUR 60 million that you announced last night after closure of the stock market, as Mr. Jacquemont indicated a few minutes ago? Thank you.
I'll start, and I'll let Albin add to my response about the transition with respect to EBIT and free cash flow as compared to taxes. Our CapEx has reduced in the last few years. At the same time, we have a strong acceleration. The question arises, is that the right thing to do, reducing CapEx? You have to bear in mind, in the previous period, the loading of factories was only 50%. That acceleration has an effect of reloading our factories, an immediate effect on the gross margin. That's very clear. Both, we have a dual effect on the gross margin with respect to these expenditures in factories, but there's also the product mix. These are high-margin products. These are two factors that have a conjugate effect, a very positive nature on the gross margin.
Now, with respect to Albin and the transition in free cash flow, I'll let you take over.
In about profitability, you've understood the progression in profitability is now. To help you assimilate, you have to understand that in our manufacturing cost, there's roughly 30% fixed expenditures and the rest are non-cash. If you have any hypotheses for sales, you're well able to determine or simulate the increase in profitability, which is now. In terms of free cash flow, we don't guide over a year. Why don't we? Because in industry, there are very few people that do guidance over a year. The industry is volatile. There's a German that does it over a year, but we don't. We do it quarter by quarter based on sales. The next appointment with our investors and shareholders is in November.
Without talking too much about it, you can observe that the free cash flow is continuing its trajectory that is positive. For the end of the year, I will not adventure to give indications for years in, but we're very confident. No, I said it's now. The change is now.
Hi. I'm [Kevin Guéneau]. I represent the staff at the CSE. There are a large part of the 2,500 staff we represent. Since Grenoble, we've been waiting, so I'd like a response to three questions. First of all, having to do with the compensation of general directors who's left, Mr. Barnabé, who'd already caused quite a controversy last year, who's calling us to change our project. This year you're proposing several elements that we are questioning the well-founded nature of these.
Reducing the salary and the publication was surprised at this payment in a recent article by Mr. Barnabé since February, Dassault Systèmes, who's not a competitor of Soitec. This is at the discretion of the Board. Could you go into detail now the effective risk that Soitec is confronted with, according to you, which justifies additional expenses of EUR 270,000 plus social charges?
It's very simple. Our role is to protect the company. On 19th of November, the Board decided to activate the non-competition clause without knowing where he was going. You should know that even at Dassault Systèmes, he could be a member of the Board of a competitor or consultant for a competitor. Our objective is these are clauses that are provided for in the statutes, in the bylaws, and we just apply them, which makes it possible to protect us. A former general director that has any activity that would be to prevent him from causing problems for us, whatever the situation may be.
Concerning his conversation as well, the same media, La Lettre, raised several questions of illegality. A free cash flow corresponds 150% of over-performance, whereas in your brochure, it's indicated that it's only partially reached. I noted 69%. The payment would be more EUR 85,000. Can you explain your calculations here?
In the information that we published in the URD, the 69% corresponds to the EUR 30 million. This corresponds to reaching the 50%. As I said previously, we reached EUR 63 million in free cash flow compared to the target that was EUR 43 million. The EUR 30 million reached at 50%, EUR 43 million for 100%, so EUR 63 million was above the criterion for over-performance, which was EUR 55 million. That EUR 55 million was much more than EUR 63 million, that's why the application of the 150% was done.
The third part, all of these advantages were attributed in a context where the staff has to tighten their belts, given the events. Management has run a survey about satisfaction that was judged by your council as over-performance for the bonus of Mr. Barnabé. The result of that survey, as the case for yes, was the worst for several years. The strong degradation in the feelings of staff and degradation of working conditions for the first time in 10 years are the main variable elements of pay, zero. Annual negotiations on salaries was put off the intention below inflation, 10 jobs have been removed, a collective operation is ongoing, eventual departures that would not be replaced. We'd like to invite the shareholders to vote against the resolution number 10 if they do not really serve the interests of Soitec.
A bout the third question, as indicated? Mr. Lissalde, since it has to do with proposal number seven to renew the mandate of Mrs. Segura, these events had negative consequences for the image and the functioning of the company. CGT Soitec called voting against that resolution to privilege a more adapted representative. Could you explain the reason that led the administration to renewing her presence? I hope that you measure the difficulties that these salaried workers are faced with.
Delphine has an experience which is known by everybody. We'll see the results of the votes. The renewal was natural. She makes a great contribution. She's very good at managing human capital. I have no other comments.
I'm an individual shareholder. To continue with the response you gave about the tax audit, tax difficulties were canceled. Now, are these tax amounts that can be carried over or are they applied against the stock that you have?
That's a good question. You're observant. Part of the deficit was activated at one point, and they were all deactivated as of the 31st of March 2026 for other reasons, such that as of the 31st of March, there's no longer any deferred active tax. The loss of that EUR 320 million will have no incidence in the results of the future.
After this purification, as it were, are there any tax debts that can be carried over?
URD, which stood at the 31st of March, my memory says around EUR 165 million. Well, they come from different jurisdictions, but in France, 50% of deficit can be carried over, up to EUR 1 million, I think.
The EUR 60 million that you're taking off or that you're going to be paying or that you have paid corresponds to what? Is this about to cancel?
No, these are two different things. The EUR 60 million of the cash agreement that was signed, it's cumulative. The EUR 60 million cash and EUR 320 million are carried over deficit. They're two separate things.
[Philippe Geniche], individual shareholder. I have a question about business and strategy. I wanted to know whether you had assessed the possibility of getting into this segment again. In the luxury segment, I work in this area, and I would say that in France, in Italy, because I'm Franco-Italian, we still have the opportunity of having a luxury industry which is quite strong and highly structured. Have you assessed the opportunity of penetrating the segment?
You could become ultimately a key player in this very important and augmented luxury. We are continually seeking companies that can provide us with technical solutions for increasing the perceived value of what we produce. Could you develop, I don't know, some kind of technology that could be integrated invisibly in materials, which could possibly enhance the authenticity of the experience we're seeking to convey for our customers? It could make it also possible for us to talk about sustainability that all brands are seeking to have. We can have a follow-up on the quality of our products and on quite a few things. I was wondering about that, whether you're envisaging this type of developing the solutions for this segment. Thank you.
As I explained, for 2025- 2026 is a difficult year, which pushes us to center on key activities that we already have to hand and have strong growth potential. Photonics-SOI and artificial intelligence, we've spoken about a lot. Today, the main issue for us is to focus primarily and to allocate our capital to areas with a promise to return as clearly and as quickly as possible. The whole company is focused on that right now.
Our discussion is closed. Perhaps one last one.
The interpreter doesn't hear the question. Yes, I'll get back to you. I heard the question of my neighbor. There's a second question, underlying question, which was the amount of tax debt, EUR 700 million it was mentioned. At one time understanding, in the last years, 2022 to 2025, you were making money. EUR 7 billion sales every year. You had a net profitability of at least 10%, 12%, maybe even a bit more. This is profit tax. You could perhaps clear your previous deficit to reduce your taxes in these areas. You had at least three years to deal with the carryovers, but you just got EUR 700 million left. That's a considerable sum. It represents practically four years of profits from various years. Could you explain where that comes from?
If we have a tax risk, if part of that may be carried over through negotiation with the French government, as you did yesterday, with a government that must be happy to get back EUR 60 million of cash, plus a debt that you had in terms of a carryover that you lost. EUR 300 million. That's EUR 1 billion in all. That means you're a taxpayer that did a lot of losses in the past. I'm worried. That's my third point, about which I'm worried. If it's Soitec The fact that you're not worried, I think it's important that we take a position in new markets and develop new products and recreate value, which apparently had been lost over the last few years because you had to carryovers year after year with astronomical values.
Thank you for your comment. In fact, there's not EUR 1 billion, I'll repeat it. There's EUR 320 million carryover and EUR 60 million in cash. Those are the figures. Secondly, about the origin of the disagreement with the tax authorities, I already gave you the whole picture.
We cannot hear the question. Could the gentleman please use a microphone? Could someone pass him a microphone, please?
It was EUR 700 million, now we've taken off EUR 320 million. It's been amputated by EUR 320 million. It was EUR 700 million, the reasons for that I already gave to you.
Let's close our Q&A and move on to voting on our resolutions.
I'm going to take the floor again to provide information on the final quorum. The quorum that was given at the beginning of the general meeting was a provisional quorum. The number of shares on the attendance form, or the number of shares present or presented or having voted is 18,000,226.40 shares. 51% of the shares with a voting right. The final quorum for the ordinary and the extraordinary general assembly has been reached. Regarding the votes, you have received a ballot paper with two options. Either you vote in accordance with the Board of Directors' recommendations, namely you vote in favor of all the resolutions on the agenda, or you can cast your votes resolution by resolution by ticking the box that corresponds to your choice.
Your ballot form will be signed and handed to the Uptevia representatives once we have voted on the resolution number 18 of the general meeting, it's concluded. I will outline the purpose of each resolution, the titles of which are displayed on the screen. We are not going to read the full text of each one during the meeting. The slides summarize the key points of each resolution. I shall now put the resolutions on the agenda of the general meeting to the vote. You may therefore start casting your votes now. Resolutions number one, two, and three. To approval of the company consolidated financial statements for the 2025-2026 financial year, to appropriate the profit for the financial year. One to five are appointing Laurent Rémont and Didier Fontaine as directors.
Resolutions six and seven are seeking to renew, respectively, also for a term of three years, the terms of office of Christophe Gégout and Delphine Segura Vaylet for the reasons set out above. Resolutions eight, nine, 10 seek to approve the remuneration of the company's corporate officers paid during or allocated in respect of the 2025-2026 financial year. Resolution number eight seeks to approve the information relating to the remuneration of the company's corporate officers referred to in Article L22-10-9, 1 of the Code of Commerce. Resolution number nine seeks to approve a remuneration paid during or allocated in respect of the 2025-2026 financial year to Frédéric Lissalde, the Chairman of the Board of Directors. Resolution number 10 seeks to approve the remuneration paid during or awarded in respect of the 2025-2026 financial year to Pierre Barnabé in his capacity of Chief Executive Officer until March 31st, 2026.
Resolutions 11 to 13 seeks to approve the remuneration policies applicable to corporate officers for the 2026-2027 financial year. That of the Chairman of the Board of Directors concerning resolution number 11, that of the members of the Board of Directors concerning resolution number 12, that of the CEO concerning resolution number 13. Resolution number 14 seeks to authorize the Board of Directors to carry out transactions involving the company's shares. We move to the resolutions falling within the competence of the extraordinary general meeting. Number 15 seeks to grant a delegation of authority to the Board of Directors to issue shares and/or securities conferring immediately or in the future, rights to the company's share capital with the exclusion of shareholders' preemptive subscription rights in favor of categories of persons meeting specified criteria.
Resolution number 16 seeks to grant a delegation of authority to the Board of Directors to carry out one or more increases in the share capital through the issue of shares and/or any securities giving access to the share capital reserved for members of company savings schemes with the preemptive subscription rights of shareholders being waived in favor of such members. Resolution 17 seeks to authorize the Board of Directors to reduce the share capital by canceling shares acquired by the company pursuant to Article L22-10-62 of the Code of Commerce, up to a maximum of 10%. Resolution number 18 proposes to amend Article 21 of the Articles of Association concerning general meetings in order to allow shareholders to be convened by any means subject to the conditions laid down by law and regulations. Voting is now closed. Representatives from Uptevia will be circulating to collect the voting forms.
The votes will be counted. I will be in a position to announce the results in a moment. I can confirm that all the resolutions have been adopted with more than 98% of the votes. The details of the votes will be published on our website by this evening. I would like to thank you for your attention. I will now hand back to Frédéric Lissalde.
Thank you very much for your attendance, for having come here. I would like to thank the shareholders who are watching online. I will close the meeting. I hope to see you very soon next year. Thank you very much.