Ladies and gentlemen, welcome to the Q3 2025/2026 Results Conference Call. I am Sandra, the conference call operator. I would like to remind you that all participants are in listen-only mode. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. At this time, it is my pleasure to hand over to Markus Wittmann. Please go ahead, sir.
Thank you very much, Sandra, and good afternoon to everyone, and warm welcome to our Q3 Result Presentation. Let me begin with a brief overview of our quarterly performance. The third quarter, Novem generated EUR 117.9 million in revenue, representing a 5% year-on-year decline. This development reflects the broader macroeconomic environment. While our Series production remains stable, the decrease primarily attributed to the tooling segment, where project shifts and phasing delays has a noticeable impact. Additionally, the extended year-end plant shutdowns at several customers further reduced call-offs during the quarter under review. Our profitability reflects these market dynamics. Adjusted EBIT came in at 5.8%, influenced by the lower revenue base. At the same time, the effects of our voluntary program in Germany are now visible in the quarterly adjustments, but supporting our ongoing cost discipline.
A key highlight of this quarter is our exceptionally strong free cash flow of EUR 21.3 million. This performance once again demonstrates Novem's ability to deliver solid cash generation, even in a challenging world market environment. As a result, we reduced our net leverage to 1.8x, underscoring the strength of our balance sheet. Our order intake remained robust. We received a highly promising nomination from a major U.S.-based EV manufacturer. Porsche awarded us with additional new business, further validating our competitive positioning and customer trust. On the sustainability side, we continue to execute reliably on our commitments. As planned, we reach CO2 neutrality in Germany by the end of 2025, reaffirming that sustainability at Novem is not a slogan, but a delivered promise. Looking ahead, the overall automotive market remains under pressure.
However, the early measures we implemented are now clearly paying out, reflecting most notably in our continued strength in cash conversion, which remains one of our core performance indicators. With that, let me guide you through the financial highlights of the quarter and the year-to-year, year-to-date performance. Coming to Q3, as already mentioned, we generated EUR 117.9 million revenue, which is EUR 6.8 million adjusted EBIT, compared to last year's EUR 10.0 million, ending up in a margin at 5.8% in Q3 2025/26. And free cash flow, as said, very good at EUR 21.3 million, compared to last year's EUR 1.3 million. Ending in a net leverage from 1.8x, and compared to last year's Q3, we stand at 2.1x.
Coming to the year-to-date figures, in revenue EUR 372.5 million, which is a decline of 7.7% compared to last year’s adjusted EBIT, with EUR 22.2 million and 6.0% adjusted EBIT margin, which continues to hold through the quarters now, compared to last year’s, a small decrease from 9%. Free cash flow EUR 38.5 million, and as said, also, net leverage for the year-to-date decreased from 2.1 x to 1.8 x in this quarter three and year-to-date. So with saying this, I’d like to hand over to Benjamin for the financial details. Benjamin?
Thank you very much, Markus. Good afternoon, good morning, everyone, from my side, and thank you for joining our earnings call for the third quarter of our financial year. I will walk you through our financial and operational performance, provide you insights into the regional developments, and share our strategic priorities moving forward. Turning to our top-line performance. For quarter three, total revenue amounted to EUR 117.9 million, which represents a decline of -EUR 6.1 million or -5% year-on-year. A major driver this quarter was the FX headwinds, which materially impacted reported revenues. At constant FX rates, revenue would have been EUR 5.5 million higher, equivalent to 4.7% versus the prior year.
Series revenue, which accounts for 91.7% of total revenue, remained flat year-on-year, despite the extended year-end shutdowns at customer plants, which are typical for this season. Underlying Series performance remained stable, as weaker customer call-offs in in Asia were offset by stronger developments in Europe and the Americas. For the context, the latest available light vehicle production data indicates a +1.1% year-on-year increase in the period under review, which aligns with our Series stability. However, the industry continues to face structural rebalancing. Global light vehicle production for 2026 expected to be roughly flat versus 2025, with regional gains and losses offsetting one another, and the mild recovery expected to begin late 2026. Tariff measures led to distortions in demand patterns, and EV penetration continues to increase, driven by affordability improvements, infrastructure rollout, and regulatory incentives.
Tooling revenue, the most volatile part of our portfolio, amounted to EUR 9.7 million, a decline of -39.2%, driven predominantly by a project phasing shifts, not by structural market weakness. On a 12-month basis, total revenue reached EUR 510.3 million, showing a slight decline compared to the previous quarter, driven entirely by the tooling volatility and FX movement. Let's now turn to the profitability. In Q3, adjusted EBIT declined by -EUR 3.2 million, resulting in a profit margin of 5.8% for the reporting period. This movement is fully aligned with the top-line developments we discussed earlier. The operating result continues to reflect the continued soft revenue environment, particularly in Asia, where weaker call-offs impacted the contribution margin.
At the same time, the year-on-year comparison is again influenced by unusually elevated income from others in the prior year quarter, which creates a naturally unfavorable comparison base. Additionally, the bottom line was diluted by significantly lower tooling contribution year-on-year, driven purely by different project phasing rather than any structural change in customer demand or program pipeline. On the positive side, the quarter benefited from selective one-time effects and favorable commercial items, which provided for sure targeted relief within the operating result and helped partially offset the weaker revenue backdrop. From a cost perspective, the measures we initiated early in our financial year continue to gain traction. Our cost control initiatives remain fully embedded across the organization and continue to support profitability.
In addition, we implemented further restructuring actions during the quarter, most notably the voluntary severance program in Germany, which has now been extended across both direct and indirect employee groups. These measures result in higher adjustments in the quarter, but will sustainably strengthen our cost base moving forward. On a 12-month basis, LTM adjusted EBIT stands at EUR 34.9 million, which is EUR 3.2 million, or 8.4% below the previous quarter. This movement is consistent with the reduced LTM revenue level and the expected normalization following the extraordinary prior year income effect. Overall, despite the temporary phasing-related headwinds in prior year comparatives, our profitability remains resilient and supported by disciplined cost management, targeted restructuring, and operational improvements across the regions. Let's now turn to our cash flow performance, which remains one of the strongest indicators of the resilience of our business model.
For the quarter, free cash flow reached EUR 21.3 million, an increase of EUR 20 million compared to the prior year. This is a very robust result, particularly in the current market environment, and highlights our continued ability to convert earnings into cash reliably and consistently. So the strong free cash flow was driven primarily by the operating cash flow, which amounted to EUR 23.6 million, up EUR 20 million year-on-year. This improvement stems from several working capital-related movements. First, the trade receivables decreased by EUR 18.4 million, reflecting a strong cash collection discipline and lower revenue level towards the quarter end. We also benefited from lower cash tax payments of EUR 6.1 million compared to last year. Other liabilities increased by EUR 5 million, while other items contributed an additional EUR 3.6 million.
These positive effects were partly offset by higher inventories, as well as lower trade payables in the amount of EUR 6.5 million, following supplier payment normalization. On the investing side, cash outflow amounted to EUR 2.3 million, essentially unchanged versus the prior year, underlining our disciplined and well-phased approach to capital spending. As a result of these combined effects, last 12 months free cash flow reached EUR 65.1 million, which is +20 million, or +44.3% above the previous quarter. Once again, this substantial improvement underscores both the sustainability of our cash generation and the increasing efficiency of our working capital processes. Overall, this quarter, as I mentioned, demonstrates that even in a challenging demand environment, our cash conversion capability remains structurally strong, an essential differentiator in today's automotive supplier landscape. Let's move on to capital expenditure.
In quarter three, capital expenditure amounted to EUR 3.6 million, remaining broadly in line with the previous year. Despite the softer revenue environment this quarter, we continued to invest in a disciplined and targeted manner, aligned with our long-term growth requirements. Given the weaker top line, our CapEx ratio increased slightly to 3.0% of revenue, compared to 2.8% in the prior year. This movement is purely mathematical and does not reflect a change in our investment behavior. The underlying investment level continues to be carefully managed and aligned with our operational priorities. Geographically, Europe accounted for the largest share of CapEx, with EUR 2 million, reflecting ongoing enhancements across our production footprint and preparation activities for upcoming customer programs. The majority of our quarter three CapEx was growth-related, supporting, as I mentioned, both new program launches and upgrades to core production infrastructure.
These investments are essential to maintaining our premium quality standards, ensuring process efficiency, and securing our competitiveness for future product cycles. Looking at the broader time horizon, based on LTM revenue, our CapEx ratio remained unchanged at 2.4, demonstrating a stable and consistent investment pattern over the last 12 months. This level remains fully aligned with our strategic ambition to balance prudent capital discipline with the necessary investments to support OEM program pipelines and innovation in initiatives. Overall, our CapEx profile continues to reflect forward-looking, efficiency-oriented investments, executed with financial discipline and aligned with the evolving needs of our global customer base. Turning now to working capital, which continued to develop positively through the end of the calendar year.
As of 31 st December, total working capital stood at EUR 126.8 million, representing an 11.5% reduction compared to last year's EUR 143.2 million. This improvement reflects also our continued discipline in managing both operational and project-related balance sheet positions. The year-on-year variance of EUR 16.4 million was driven primarily by a lower tooling net in the amount of EUR 16.6 million, which resulted from a reduction in tooling receivables, combined with higher tooling advance payments received. Lower trade receivables, as I mentioned, reflecting strong cash collection and slightly softer volumes toward the quarter end and lower inventory levels. These positive contributions were partially offset by lower trade payables, following the normalization of supplier payment patterns and higher contract assets, influenced by the specific timing of project execution milestones.
As a percentage of last 12 months' revenue, total working capital recorded at 24.8%, an improvement compared to 25.9% the prior year, demonstrating a consistent and measurable increase in overall capital efficiency. Focusing on trade working capital, excluding both tooling net and contract assets. We also delivered a positive development, decreasing from EUR 48.7 million to EUR 45.6 million year -on -year. This further underlines our continuing focus on optimizing inventories, receivables, and payables within the normal course of business. Therefore, looking also at our key working capital KPIs, DSO improved to 27 days compared to 29 days last year. DIO improved to 42 days versus 44 days last year, and also DPO declined to 34 days, down from 39 days, reflecting lower trade payables and timing effects on supplier settlements.
Overall, our working capital performance for the quarter demonstrates strong structural improvement, supported by our disciplined operational execution and the improved tooling advance management and targeted initiatives across receivables, payables, and inventory processes. This remains a key contributor to our healthy cash conversion profile. Let's move to our capital structure, which continued to strengthen over the past 12 months. As of 31 st December 2025, the gross financial debt stood at EUR 290.5 million, representing a reduction of EUR 13 million versus last year's EUR 303.5 million. This decrease reflects the further reduction in gross financial debt, our lease liabilities of EUR 39.8 million, down significantly from EUR 53.3 million in the prior year. This reduction is mainly attributable to contract expirations that reduced our lease exposure. On the liquidity side, our principal sources of funds remained robust.
We closed the quarter with EUR 169.9 million in cash, up from EUR 130.4 million last year, reflecting a strong underlying cash generation. In addition, we continued to utilize EUR 36 million from non-recourse factoring, broadly in line with EUR 36.3 million in the prior year, supporting our working capital flexibility. As a result, net financial debt decreased significantly to EUR 120.6 million, compared to EUR 173.1 million last year, a substantial improvement driven by both debt reduction and strengthened liquidity. This translated into a net leverage ratio of 1.8x adjusted EBITDA, improving meaningfully from 2.1 x in the prior year. The improvement underscores the combined effect of consistent free cash flow generation, disciplined balance sheet management, and the absence of any material changes to our financing requirements.
Overall, our capital structure continues to move in the right direction, I would say. We are lowering gross debt, maintaining solid liquidity, and strengthening net leverage at a pace that positions us well for future. Then, let's now turn to the regional revenue performance. From a geographic perspective, revenue declined in both Europe and Asia, while the Americas remained broadly stable compared to the prior year. This regional pattern mirrors the underlying call-off behavior of our key customers and the different timing of project-related tooling activities. So starting with Europe, revenue decreased by -EUR 2.1 million year-on-year, largely due to the differently phased tooling business in the quarter. Importantly, Series revenue in Europe actually increased year-on-year, underscoring the resilience of ongoing programs despite the extended holiday shutdowns and the overall muted market environment in this region.
In the Americas, we recorded a slightly positive development of EUR 0.3 million year-on-year, so a stronger Series sales supported regional performance, also this was partially offset by lower tooling revenue, again, reflecting the different project phasing. Overall, this region continues to provide a stable contribution to the group revenue. Turning to Asia, revenue declined by EUR -4.4 million year-on-year, driven mainly by the Series business. This was predominantly the result of ongoing soft call-offs and meaningfully reduced production and demand levels throughout the quarter. Finally, let's now take a closer look at the profitability by the regions. Overall, adjusted EBIT performance varied significantly across our geographic footprints, reflecting both regional demand patterns and project-specific effects during the quarter. While Europe declined sharply, the Americas posted a moderate improvement, and Asia exceeded prior profitability despite lower volumes.
Starting with Europe, adjusted EBIT came in at EUR -6.1 million, compared to EUR 1.7 million in the prior year, and therefore remained negative. This development primarily reflects, for sure, lower revenue levels in the region, as well as an unfavorable product mix during the quarter. But additionally, the year-on-year comparison is distorted by increased income from others in the prior year period, creating a significantly stronger baseline that Europe could not replicate this year. These effects combined explain the pronounced decline. In contrast, the Americas delivered a solid improvement, generating adjusted EBIT of EUR 11.7 million, up from EUR 8.5 million last year. The region continued to benefit from a leaner cost base, reflecting our ongoing efficiency initiatives and structurally stronger brand performance.
At the same time, the result was partly weighed down by lower tooling revenue and adverse FX effects, which muted what would otherwise have been an even stronger operational contribution. Turning to Asia, adjusted EBIT increased to EUR 1.2 million, compared to -EUR 0.2 million in the prior year, marking a notable improvement given the top line development. So this was achieved despite, as I mentioned, lower sales in the region, and was driven by consistent fixed cost management as well as lower input costs that helped to stabilize the margins. This region continues to demonstrate that even under pressure from softer call-offs, disciplined cost control can support profitability. Finally, on a consolidated basis, the last 12 months adjusted EBIT decreased by -8.4%, declining from EUR 38.1 million to EUR 34.9 million compared with the previous quarter.
So this movement reflects the softer demand environment, the impact of one-off prior year effects in Europe, and the lower overall revenue base. So in summary, while regional EBIT performance remains mixed, the overall picture shows that our efficiency measures are working, particularly in the Americas and Asia, and that the key driver of the year-on-year decline remains the combination of phasing effects, weaker European mix, and an exceptionally strong prior year comparison base. So let me conclude today's presentation with a brief summary of the key messages from this quarter. Despite a challenging market environment characterized by continued regional volatility, FX headwinds, and customer-specific call-off softness, our core series business once again demonstrated strong resilience. Revenues were impacted mainly by phasing effects in tooling and currency translation, not by underlying demand for our ongoing programs.
Profitability reflected these top-line dynamics, particularly the softer performance in Europe and the unusually strong prior year comparison base. At the same time, we saw continued margin support from cost discipline measures, operational improvements, and in the Americas and Asia, clear evidence that footprint optimization and efficiency initiatives are delivering benefits. A particular highlight of the quarter was our excellent cash generation. So free cash flow was significantly ahead of the prior year, supported by strong working capital management and stable investment levels. This translated into a meaningful reduction in net financial debt and a further improvement in our leverage ratio, strengthening our balance sheet and financial flexibility. So regionally, as I mentioned, the picture remains mixed. Europe still facing lower volumes and a less favorable product mix. Americas continues to provide solid operational contributions. And Asia, despite weaker call-offs, showed an improvement in profitability, thanks to disciplined cost management.
This again underscores the value of our diversified global footprint. In summary, while the quarter reflects ongoing industry headwinds, performance demonstrate structural resilience, strong cash conversion, and a solid financial position. These attributes place us in a strong position as we navigate the remainder of the fiscal year and continue delivering value for our stakeholders. Thank you for your continued trust and support, and we will now open the line for questions.
We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets when asking a question. Anyone with a question may press star and one at this time. Our first question comes from Klaus Ringel from ODDO BHF. Please go ahead.
Yeah, gentlemen, good afternoon, and thanks for taking my question. Actually, I would have two, which I would take one by one. One is, I would be, yeah, we're interested in your view for the remainder of the year. I mean, looking ahead, are there major new projects or platforms which are due to start up? I mean, we've seen the facelift of the Mercedes-Benz S-Class. Is this a driver maybe for, yeah, smaller quarters, which may lead to better top-line performance, or are there other projects that we should be aware of? That's my first question.
So, Mr. Ringel, so it was hard to understand you. There was a noise in the line, but what I understood is you'd like to know a little bit more about the quarter, the quarter end, quarter four for us, yeah? And for the ramp up for the new S-Class. So is that what I got it here?
Yes. Try now. Is it better to hear from me now, or?
Yeah.
Can you?
Now it's, now it's really good. Yeah. Yeah. Let's try again.
So, I would be curious to hear your view looking ahead in terms of, yeah, support for your top line, maybe from new project startups or platforms. And, I mean, the facelift of the S-Class was just an example. So if there are.
Yeah.
Let's say, this project or, or maybe other platforms that we should be aware of.
Yeah, yeah, yeah. So okay, yeah. As you said, so we, the automotive is still under pressure, what I also mentioned in the beginning. But nevertheless, so we see a flat development for the next coming months this year. What we already can see in our call-offs. And you're right, there are some new business ahead of us, starting in end of this quarter, beginning of the new fiscal year for us. And for sure, for this new ramp-ups, we are expecting increase in terms of call-offs. Yeah.
In addition to that, Mr. Ringel and Markus already mentioned that for sure you need to incorporate that for sure, we are in that ramp-up phase, right? So we will rather see the full effect of that, of the new models rather in the new financial year, but also helping for quarter four. But nevertheless, as already mentioned and highlighted, during quarter four, we will also see lifted tooling revenues due to the fact of shifted SOPs, of shifted programs. So, we will see a lifted tooling revenue during quarter four, which will help to support not only the top line, but also the profitability. So that's more or less our view on the full financial year.
But nevertheless, there is no quite material optimism to get listed margins here for financial year end. So there is a rather flat development, but underpinned, underscored by the ramp-ups of potential volume cars and tooling revenue. Yeah.
Okay, thanks. That's, that's very helpful. And the second question would be on your free cash flow performance. I mean, the last two quarters were quite impressive, with, say, a range of EUR 15 million-EUR 20 million per quarter that you generated. How should we take this looking ahead? Can you continue to deliver this quarter by quarter, or is there, let's say, the potential for optimization of net working capital or comparable things, at some point then exhausted? What's your view here? Can you continue at these levels?
Also, thanks to that question, Mr. Ringel. So I think we elaborated very deeply to that working capital balance sheet measures. So I think, yes, we are able to deliver ongoing, solid and robust free cash flow levels at that range. Given the fact and given our core KPIs, DSO, DIO, DPO, that this is well balanced and well managed without having any backlog effects, et cetera. So yes, we are able to deliver that level of free cash flow going forward. But for sure, because as I mentioned, the most and the major driver for the free cash flow is the operating cash flow. For sure, we need to stick and to see at least that call-off level, what we forecast here and what we mentioned here. And we are quite confident.
If this will come, then for sure we are able to deliver free cash flow at that level. That was always also in the history a core strength of Novem, that cash conversion, and that will also last into the upcoming months.
Yeah. Okay, thank you. That's very helpful. I step back into the queue.
As a reminder, if you wish to register for a question, please press star followed by one. Gentlemen, there are no further questions. Back over to you for any closing remarks.
Yeah. Thank you, Sandra. So I'd like to thank you, everyone, to participate to our Q3 presentation. Again, thank you for your trusting and supporting us, and hear us soon. Thank you.
Also, thanks from my side, and looking forward to our financial year closing. Thank you very much. Bye-bye.
Bye.
Ladies and gentlemen, the conference is now over.