Hello and good afternoon, everybody. Warm welcome to the Hönle AG earnings call for the third quarter of the current fiscal year 2025/2026. Today's speakers will be Dr. Franz Richter, the CEO, and Robert Stark, the CFO of the company. They will walk us through the company's performance of the first nine months of this current fiscal year. Before we dive in, a few side notes. This conference call is being recorded, and you will have the opportunity to review it later on Research Hub.
If you have any questions, please feel free to submit them using the chat box on the lower right-hand corner, and you will also have the opportunity to ask questions live once the presentation is done. Please make sure if you ask questions live to also state your name and your company name so that the companies know who they're talking to. With all this in mind, I will hand it over to Dr. Richter and Mr. Stark. It's all yours.
Yeah, thank you very much and good afternoon to everybody also from our side. I will go through two introductory slides, and Robert will then talk a little bit more in detail about the numbers, and then we will go into the Q&A session. The nine-month figures were published this morning. We basically have revenues at the same level compared to prior year, last year, and 1% below. Of course, we have seen an overall hesitance or reluctance for investments in general, especially in equipment, in the engineering. We will see later a little bit different from consumables. But the investment part is still a little bit under pressure. We did take efficiency measures during the last year and made sure that we achieve a certain cash flow and profitability level.
Basically, stated in earnings increase, we did see mainly in the Adhesive Systems and the Disinfection, and of course, the Curing is still suffering, and we will come to that in a minute. Profitability has been increased by EUR 0.9 million. Although we have, on the same revenue top-line level, we could increase our EBITDA level. If you look to the business units in general, the Adhesive Systems, as I mentioned also here, the equipment market for the adhesives, as you will recall, we offer adhesive and also the equipment for curing the adhesive. Adhesive equipment still challenging also here, hesitance to invest. It's below our expectations. But the adhesive itself, the material itself is well above prior year. So here we have a growth and the whole business unit also had an increase due to the adhesive increase. We are also going through a transformation in the Adhesive Systems.
That means we basically focus on certain focus fields, medical, optics, electronics as target markets, and focus more and more on scale so that we have less small orders, small volume orders, and focused on higher volume, as you probably recall from our previous discussion. The costs is basically in the formulation, in the qualification of the material. Then of course, it depends whether that order comes in with a kilogram or a ton. A ton is of course much more profit, whereas gross profit margins are usually with the material, with the Adhesive Systems, pretty high. So to gain higher volume orders, we have to set up the team and the team structure in that way. We have to talk to key customers, OEM customer from engineering to engineering level. It is not just the sales approach, it is also a kind of collaboration.
If we support our customers with their challenges, then we become a partner, then we are designed in, and then we can benefit from higher volumes in that field, in that application. So that is well on its way. Of course, it takes some time. That is nothing you can do within a quarter. But we do see an increase in the discussion, engineering discussion with key customer. Curing. Here we have a little bit of a split between the classical sheet-fed print application, which is still suffering. So we do see a decline compared to previous year in the volume. But right now, the last weeks and months, the activity has been increasing. The amount of the order, the quotation volume is going up. There is more activity coming also from the published numbers from our customers. It looks that there is life coming back to that market.
We see already an increase in order intake. So the order intake in the industrial application for Curing has been increased, I think, about 15% above previous year to date in the order intake, and a significant number of these orders are coming from the U.S. We are increasing our market presence, expanding distribution network in Brazil, Mexico, Gulf region. We increase also sales force in the U.S. because there is activity and there is demand. And the whole transformation for that Curing business unit, of course, is to get into positive numbers results, positive results, and to avoid the drain of money in that business unit. So the goal here clearly is to get into a profitable level. Again, the Disinfection basically is pretty stable. We are also increasing our sales force, because in some regions we were weak in Disinfection.
The main application is coming from water Disinfection, water and surface. And that will be also the main focus for going forward, the ultra-pure water. Ultra-pure water is for process water cleaning, semiconductor fabs, and others. That is basically where we see growth coming, and we are here in the qualification processes. The qualification usually takes a little bit of time, but that is all in good shape and it is ongoing. So overall, I think what we see in the last weeks and months is an increased activity in all these three business. Also in Curing, where we expect better numbers going forward. Then I will hand over to Robert, and please go through the numbers in more detail.
All right. Thank you, Franz, and also good afternoon from my side. As mentioned, I will take you through the financial performance of our last quarter. In the third quarter, our revenue increased to EUR 23.7 million, compared with EUR 22.6 million last year. At the same time, EBITDA rose significantly from EUR 0.5 million to EUR 1.7 million in the quarter, resulting in a quarterly EBITDA margin of 7.3%, as shown on this slide. For the first nine months cumulated, our revenue remained broadly stable at EUR 69 million, like last year, but EBITDA increased by 26% to EUR 4.5 million. EBIT returned in a positive territory, to EUR 0.4 million. The main drivers behind that were more favorable product mix. More Adhesive Systems sales in the product mix. We had cost saving measures already implemented and getting traction.
Therefore, the material cost ratio improved from 37.6%- 35.9%, and our other operating expenses decreased by around EUR 0.6 million. Not yet. Basically, our equipment sales, as Franz already mentioned, remained under pressure, whereas Adhesive Systems, UV lamps, components, and spare parts developed more positively. Turning to the business units. Adhesive Systems delivered a recovery. Revenue increased by 6.8% to EUR 26.6 million. EBITDA rose significantly to EUR 4 million. Industrial adhesives projects in electronics and in medical technologies did more than compensated the continued weakness in the adhesives Curing equipment. For the Curing, revenue declined by nearly 19% to EUR 20.9 million. EBITDA amounted to EUR -2.2 million. The main factors, as already mentioned, weak investment activity in the mechanical engineering, especially in the printing segment and the lower business, also with Manroland Sheetfed following the bankruptcy proceedings.
Also, in relation to last year, the discontinuation of the solar simulation business. But there, yes, we had cost savings on the profitability side. They are visible, but they could not compensate the decline in the volume. Water Disinfection continued its positive development. Revenue grew by 12.6% to EUR 21.5 million. EBITDA increased to EUR 2.7 million, and the growth was particularly supported by higher sales of UV lamps and components, especially for the water disinfection and surface treatment in the food industry. To our cash generation. Our cash generated from operations increased by 23% to EUR 4.6 million. Our investing cash flow was EUR -1 million. These investments were fully financed and covered by our operating activities. In our financing cash flow, the minus EUR 2.7 million mainly reflects our repayment of bank liabilities and lease liabilities.
Therefore, cash amounted at the end of the quarter to EUR 7.2 million, a decrease of EUR 0.5 million since the beginning of the financial year. The net financial debt declined further to EUR 37.4 million, compared with EUR 38.4 million at the end of September last year. Basically here, we see a clear trend since 2021, 2022, we have reduced our net financial debt by EUR 12 million. A large part of this relates to our investments in our own commercial properties, with interest rates long-term secured. At the same time, equity ratio improved to 53%, and our long-term debt decreased basically by 6.2%. Mainly, we will continue to focus on our positive cash flow and gradually de-leveraging our structure. Coming to the guidance. Based on our current market environment, we revised our guidance in July 22nd. At this time, we maintain definitely our full year figures.
We expect a revenue of EUR 92 million- EUR 95 million and an EBITDA between EUR 5 million and EUR 6 million. Basically, for the whole business year, there are uncertainties, or there were uncertainties also in the mechanical and plant engineering, hit at the Curing business unit, especially. At the same time, we expect Adhesive Systems and Disinfection continue for this year, contributing positively, supported by our efficiency measures and cost savings management. For our next financial update will be beginning of December. December 8th, we will publish the preliminary results for the whole business year. Before then, we will attend at three capital markets conferences, and we will be publishing end of January our full year annual report of this business year. At this point, from our side, thank you for your attention, and we are now happy to take your questions.
Thank you so much, Dr. Richter and Mr. Stark, for the insights that you've shared with us. Let's go into the Q&A, and this time we have something that's slightly different from the previous calls that we have made. You are able to ask questions live using your microphone, in addition to, of course, the chat tool that we've had all the time. In case you do feel like you want to ask questions using your microphone, please write the term question into the chat box. I will then permission your microphone and you will be able to, and that's the same with every system, permission the system to use your microphone, then unmute it and go live, and then we will be able to hear you. I will leave this slide up for a little while, but already dive into the questions that we received.
We did receive some questions on the various business units that you were talking about. Let me start out with the Adhesive Systems business. There we have a question. How many meaningful qualification projects are currently active in Adhesive Systems? If you could tell us a little bit more about the approximate addressable annual revenues that they could convert into, and what percentage historically convert into serious production from the order intake or from projects that you're working on, and when should we expect the first material revenues? Four questions wrapped into one. Maybe let's start out with how meaningful qualification projects you currently have in the Adhesive Systems business.
There are quite a number of meaningful qualification processes. The question is then what the volume in the end will be, because usually they are more than one supplier. If you talk to bigger customers, they usually have two or three suppliers, and then it's a question who gets the order, or let's say, who gets which part of the order. There's probably a handful of qualifications ongoing. Then I'm talking about meaningful, which means which would really go into higher volume, and whatever higher volume means.
I know that everybody is waiting for an order in the range of tons, me included, but that is hard to say. I mean, we have to be realistic. Qualification, especially these high volume that takes almost a year to qualify and to get signed in, so that is taking time. Smaller orders go faster. I would expect that we would have, within the next year, some meaningful numbers, which we can report, but too early now.
Do you have any feeling as to looking at the sales funnel, what goes in and what eventually comes out in the end that turns into revenues percentage-wise? Like if you have a project, can you say that 50% of those usually end up in sales, or 30%, or is that a very difficult number?
That's difficult to say. I mean, it's different in equipment, of course. Here, I would say from the orders, because if you look to the equipment and the discussions with customers, we have a history with those customers there. Usually, you can say it's just a question of timing and if the investment goes through. Then I think we are probably in the range of 10%, 15%, 20% conversion rate. But over the years, usually you place three quotes for three lamps or some two lamps, so that it's. So it's usually if we are in an intense discussion that we come to the quoting process, usually something comes out of that. But I would say probably a gut feeling is 10%, 15% conversion rate.
Thank you. Let's move on to the Curing business. We've seen that the Curing business, even though restructuring was working, was not able to offset the decline in revenues that you were showing. The question is regarding, are you taking any new measures besides the restructuring to stabilize, or besides the actual restructuring to stabilize the Curing segment? When do you expect to return to year-over-year growth and ultimately EBITDA break even?
I mean, of course, the goal definitely will be that within the next year, we will come to the point. It depends very much on the top line. As we also expected last year already in growth, it was the plan to grow, but then of course, with all the international conflicts and the non-investment mode of our customers that slowed down everything. You can see it also in the Adhesive Systems. Usually if there is the hesitance, then the investment. Customers have to decide to spend a budget, investment budget that is then held back versus consumables. Of course, it's an ongoing process. Consumables continue. Also, we see it in the Curing business for some spare parts. Spare parts still this is working, but not investing in new equipment then takes the order entry down.
Usually also from the experience that goes for a while, so customer can hold back a year or two years, and that is what we see right now, that there is significant more. I think our total order, quoted volume has increased significantly compared to last year. So there is much more activity. Hence, assuming there's not another big international conflict, you never know, then I expect definitely an increased top line for the Curing this year, which then pretty easily should bring us also into a positive range in the EBITDA. Of course, uncertainty is still there.
When you're talking about this year, you mean fiscal year 2025, 2026? Because I have a question that-
No. This year, I mean, I'm talking about the next year. This year we have already given our guidance, what Robert Stark just said, and that includes, if you look from the business units itself, we will have a negative EBITDA on the business unit Curing in the running year. So I'm talking about the coming year.
Yeah, that is what I understood as well. Just wanted to clarify that point.
Okay.
If you look into the next year, 2026, 2027 in Curing, basically you are implying that there might be a return to organic growth in that year, because that is one of the questions that we got, if you see that return to organic growth next year.
I mean, that is the response from the sales force. That is the response from the total volume of quoted equipment. I mean, that is the first measurement. Usually a quotation quote, if it is fast, turns into an order in three months. If it takes longer, it is six months. So we basically expect an increase in order intake within this first or second quarter of the next year. Then, of course, to be able to ship the systems within that year.
That, of course, also would mean that the whole group will be able to return to organic growth, correct?
Absolutely, yeah.
Great. Thank you. Same with-
Just one question. The growth we saw in Adhesive Systems was eaten up by the Curing and also discontinued business, like the solar simulation business was taken out. But if we get the Curing business onto a growth path, then, of course, the whole group is expected to grow as well.
Great. Looking a little deeper into Curing as well, the print business has been weak for some time. Do you see any indication that the bottom of demand has been reached in that space?
This is what I basically said. If I look to the request for quotations from customers, also from different applications, there is the classical print, where especially sheet-fed offset is one thing. Also here we see an increased activity, and where we have seen growth already is in the industrial application. We had the running year until now, so the year to date, we have, as I said, about 15% higher order intake in that industrial segment. The industrial segment is only half of the volume of the print, therefore, of course, the relative added order size is lower. But we do see an increased order intake and increase in activity in the whole business unit. That is correct.
Thank you. Looking into the business units also on the ultra-pure water aspect, can you give us more color on the qualification projects in ultra-pure water and semiconductors?
Here is basically a process where this goes into infrastructure of the building. That is not an equipment, so that is basically into the buildings, and that, of course, has the longer lead time. We were a little bit expecting to be faster here, but there are some iterations where the whole investment goes through that is just postponed for the time being, and should come, but it is also here the overall, let us say, holding back of the investment in infrastructure and equipment in buildings, but also here the main reason for postponing of that orders. It is just a little bit out of our hands. We are in good shape here, but it depends when the investment goes through in these semiconductor fabs.
Thank you. I come to the last question that was entered into the chat. Once again, to everybody who is attending, if you do want to ask a question, you can do so either by typing the question into the chat and we will pick it up and address it, or you can ask a question live. If you want to use your microphone, please type in question into the chat, and we will entitle your microphone.
Coming to the last question, the fiscal year 2025, 2026 is almost coming to an end. You have got nine months in the bag, and you have a guidance, of course, for the full year, which implies a somewhat softer Q4 EBITDA with a margin of somewhere between 2%-6% after about 7.3% in the third quarter. Basically on the same top line. What exactly drives the sequential step down in margin in the fourth quarter?
It should be pretty in line with the Q3, between the 6% and the 7.3%, there is not much a big gap. We are a little cautious, but I think we will hit in the small range, the upper end, so that should be in line with our expectations and with our business here and the Q3.
There is no specific expectation that we have a weaker fourth quarter.
Yeah.
When we had to give the guidance or adjust the guidance, we took it down a bit, but the third quarter was already relatively strong.
Good to hear. I do not have any more questions at this point, and I will talk for a few moments to give people the last chance to maybe enter a question, but it does not look like anybody is typing, so I am very close to closing this call. Thanking, of course, you, Dr. Richter, and you, Mr. Stark, for your insights. Hönle AG's investor relations, Mr. Weinert, is more than happy to answer additional questions you might have. So is our analyst, Abed, who stands ready. With all this in mind, I appreciate the insights, the questions that were being asked, and wish you all a great afternoon and hand it over to the management of Hönle for the last words.
Yeah. Thank you very much for this discussion here. And of course, we will, as we showed in one of the last slides, probably have the opportunity here and there in the next months to have a live discussion in one of the conferences, and then we will talk again in preliminary figures. That is in early December, I think. Okay. Thank you very much for joining us, and have a nice afternoon.
Thank you. Have a nice afternoon. Goodbye, everybody.