Ladies and gentlemen, welcome to the VAT Q1 2026 Trading Update Conference Call. I am Valentina, the conference call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. 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. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Urs Gantner, CEO. Please go ahead.
Thank you. Ladies and gentlemen, welcome to VAT's Q1 2026 Trading Update Conference Call. With me this morning are Fabian Chiozza, CFO, and Christopher Wickli from our IR team. After my introductory remarks, we will start the moderated Q&A session. We are pleased to connect with you again after our full-year results in March and the following roadshow. A lot has happened around the world since then, but the one thing that has not changed, and I can reconfirm today, the ramp is here. We are seeing very strong demand for our products from our customers across the semiconductor industry. Q1 orders of CHF 356 million represents a 17% increase on the previous quarter, and full 47% increase on the same quarter last year. This is the second highest order intake that VAT has ever recorded.
At constant currencies, orders would have been up 19% sequentially and up 67% year-on-year. The conflict in the Middle East has been a big topic in the past weeks, and we have not been completely immune to it. While we do not source components or commodities from the region, its important position in global shipping, including air freight, temporarily challenged our activities. We shared these challenges and their impact already in our short press release on March 31st. Overall, we achieved Q1 sales of CHF 221 million. This means sales were down about 14% quarter-on-quarter and down about 20% year-on-year. On a constant currency basis, sales would have been down 13% sequentially and 9% year-on-year. The resulting book-to-bill ratio amounted to around 1.6 x, and our order book increased by 42% to CHF 431 million compared to the end of 2025.
The Q1 sales impact due to the disruption in the supply chain amounted to roughly CHF 20 million. Let me provide you with some additional color on it. We had both our own components and components from our suppliers blocked in transit in the region for a limited period at the beginning of the conflict. As mentioned before, we do not source materials or components directly from the region. The main challenge was to figure out where exactly our goods were located, and then to find ways to get these components to our factories. As the globalized supply chain in semiconductors works with tight schedules and just-in-time deliveries, already small and unforeseen disruption can have a meaningful negative impact in the short term. This Q1 situation was a logistics challenge, but not in any form a sign that the ramp is in danger.
All orders placed for shipping in Q1 that got delayed will be manufactured and delivered in Q2. As a result, we do, at this stage, not expect any negative impact on our full-year results from these disruptions, barring any further escalation of the conflict, which we hope will not be the case. Within our business units, Advanced Industrials continue to see good demand for semi-related end markets such as metrology or inspection tools, but other project-related businesses remain subdued. Global Service saw a slowdown quarter-over-quarter following some restocking in Q4, but overall orders are higher on a year-on-year basis. The high utilization rate in the fabs will further fuel the Global Service business in 2026. Over the past weeks, we have been very closely engaged with all our major semi customers and everyone agreed on the strength of the current ramp.
Wafer fab equipment spending is estimated to amount to approximately $130 billion-$135 billion in 2026, and in 2027, this is expected to increase even beyond $150 billion. This wafer fab equipment spending is a result of the build-out for the artificial intelligence infrastructure, especially driven by the hyperscalers. Consensus expected to over $750 billion this year. The overall value of the semiconductor sales might even exceed the $1 trillion mark in 2026, which is certainly driven by higher average sales prices, but also reflects the increase of units produced. Thinking about the next quarters, we expect that the market is continuing its strong structural growth phase, with demand for advanced logic and memory chips outpacing the industry's ability to provide supply. 110 semiconductor fabs are currently planned or under construction for completion in the coming two to three years.
The very steep ramp environment is also tricky, as challenges can emerge from unexpected geopolitical events and their impact on the supply chain. Our globally diversified manufacturing footprint and its flexible operating model provides a good level of resilience. The ramp environment we are in requires acute adjustment of the staffing levels, and we are in the process to hire over 450 colleagues globally to support this ramp. We have discussed this with you in the past. Our flex model is capable to increase our factory output by 20%-30% quarter-over-quarter. Our operations run at full capacity in the second half of 2026. On this basis, we confirm the guidance provided at the full year results presentation in March, and we expect full year 2026 orders, sales, EBITDA, and EBITDA margin to be higher than in 2025.
Net income and free cash flow are also expected to be higher in 2026. The coming quarters will continue to be in ramp mode. For the second quarter of this year, we expect sales between CHF 265 million-CHF 295 million. This concludes my prepared remarks, and we are now turning the call back to the operator for the Q&A session. Operator, please.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their 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. Questioners on the phone are requested to disable the loudspeaker mode while asking a question. Anyone who has a question may press star and one at this time. The first question comes from Meihan Yang from Goldman Sachs. Please go ahead.
Hi. Good morning. Thank you for taking my question. Just having a question on the capacity ramp-up in the second half. Previously, you have mentioned that you could ramp up 30% quarter on quarter. If we look at the sort of historical pattern, the second half versus first half sales delivery has sort of been maximum 20%, whereas now consensus is implying you could ramp up about 50% in second half versus first half on the sales if we take midpoint of your 2Q guidance. Do you think this is achievable according to your current ramping up plan? I'll ask a follow-up. Thank you.
Yeah, thanks for that question. Yeah, we are confident that we can ramp up to 20%-30% in factory output. Of course, there is the lagging, then in sales. We have done all measures already started in Q1 and continue to do that now in Q2 to achieve the 20%-30% ramp-up quarter-over-quarter.
Got it. My second question is, do you see any signs of double ordering from your discussion with your major customers? On the second quarter book-to-bill, do you expect it to slightly normalize versus the first half as the sales ramp up? If you could give us a bit more color, would be helpful. Thank you.
Yeah. Well, of course, at the moment, the whole industry is in a ramp. Everybody has his own capacity, right? You have to fill the pipeline that you can deliver what your customer needs. It's not a double ordering. Of course, you are securing your supply chain. That's also normal behavior. Everybody has also its own capacity and has to build up the capacity as well. It's very important that the whole supply chain stays very close, each other discussing. In the end, this is a B2B business, and, well, you have to be very close, and they don't want to overstock as well.
Got it. The book-to-bill in second quarter comment?
Book-to-bill, I think you have seen we have a wonderful book-to-bill in Q1 and for Q2, we expect that it also will remain well above one.
Okay. Got it. Thank you.
The next question comes from Daniel Schafei from Citi. Please go ahead.
Hi. Good morning. Thank you for taking my question. The first one from my side would be great if you could bridge the sales number that you've guided now for 2Q from your current backlog. Obviously, we have this deferred component of, let's say, CHF 40 million. What are some other effects that hinder this translation from CHF 360 million to CHF 280 million? Because, for example, you've mentioned before that lead times are 8-12 weeks. I'm just wondering, is that now longer? Because given demand is ramping up and people are trying to order more, and that's why you have to extend your lead times, or are there some other factors? Thank you.
Thanks for that question as well. I think it's always this phasing of the revenue, right? Once you produce it and then you have your factory output, then you deliver that, and that is kind of like a phasing of the revenue generation. That's why capacity increase certainly the main focus now for us. Yeah, and we have roughly about 10% is always kind of in transit. We're shipping it from Malaysia, from Switzerland to our customer sites.
Okay, thank you. Would you be able to split the semi order that you have now into maybe something like leading- edge HBM in China? I know it's difficult for you to differentiate between the technologies, but at least could you give us maybe some color where you feel the split is, specifically China, because is it still accelerating, or do you see some customers being now more worried around the potential CHIPS Act enforcement?
Yeah. Well, in the last year, China was roughly 30%-35% of our sales. China is still hot. We just had SEMICON China in March, and so we could meet all our main customers there. Q1 was a little bit lower, roughly 25%, maybe 25%-30%, but it's also due to their holidays as well in China. Overall, the number will be around the 30% overall. This is what we expect. Of course, it always depends on the Western world as well. If they are ramping faster, then it can be a little bit lower. Overall, the Chinese market is still growing for us, because even though the wafer fab equipment will not grow a lot in China, the local wafer fab equipment manufacturers, they will gain share. We are working closely with them, and we will benefit from that situation.
Perfect. Thank you very much.
The next question comes from Martin Jungfleisch from BNP Paribas. Please go ahead.
Yeah. Hi, good morning. Thanks for letting me on. I have two questions, please. The first one is really just a follow-up on the first question. You have a total capacity of around CHF 2.3 billion in sales across the Swiss and the Malaysian fabs. Can you just disclose your current utilization rates or production capability of that and your maximum quarterly sales output based on that? So, for example, could you potentially reach a quarterly sales output volume of around maybe CHF 400 million by year-end? Going back to the question that consensus is looking at around CHF 1.3 billion in sales this year. So this will be around CHF 380 million on average in sales in the second half per quarter. Is that kind of achievable with your views? Thank you.
Yeah, thanks for that question. Our current utilization rate in Switzerland is roughly 65%, and in Malaysia, we're at the 80% level. Sort of showing that, of course, semiconductor business is accelerating more also in Malaysia. This is based on all our relocation and efforts we have done in the past years as well. Yes, our clear target now is the 20%-30% quarter-over-quarter increase, that we come to a run rate of at least CHF 400 million in the second half.
Great, thank you. The second question is also maybe a bit of a follow-up on the order momentum. In the media release and just now, you said that you expect the book-to-bill well above one. I know it's early in the quarter, but would you expect orders to increase consecutively in Q2 versus the Q1 and maybe also a bit more further out in Q3 versus Q2 and so on? It's just like a consecutive increase that you're seeing from here.
Yes, of course. I also expect that the order is slightly higher, but it's not big jumps anymore. I think now the whole supply chain has to digest as well. We are now in the ramp, and a certain point, it's more a constant than what the order and sales or deliveries are more in balance in the end. Now we have typical ramp. That's why we have this 1.6x in Q1 and certainly well beyond the one in Q2, and then it will level out once the capacity in the whole supply chain is in balance. You also expect that service will go up as well. This can have a positive impact then also in the second half of the year.
Cool, that sounds good. Thank you very much.
The next question comes from Craig Abbott from Kepler Cheuvreux. Please go ahead.
Yes. Hi, good morning. Also from my side. Yeah. First question, please. I know obviously in this Q1 call, you don't report EBITDA for the quarter. I just wondered, as we're heading toward the mid-year point, if there's anything you could flag that we should be thinking about on the likely margin progression in the first half. I'm thinking about things like potential feed-through of the higher oil prices on the material cost side, aluminum, things like that. Plus maybe things like the ramp up you were talking about in terms of the 450 new hires or so. Any indication you can give here on the margin progression would be very helpful. Then I have a follow-up. Thank you.
Yeah. Good morning, Craig. This is Fabian speaking. Let me give you some additional color on the expectations regarding the margin. Look, we do not expect any material adverse effects out of the situation in the Middle East and its consequences. Most of our main commodities are hedged well through the first half, and as such, I do not see that as a negative on margin. What we certainly do have is a bit of freight cost increases here and there, but overall freight costs are not material to VAT, so I would also not expect this to have a material effect on H1. On the other hand, with the ramp now happening in our factories, we will see a reversal of the inventory effect in the first half. There I would expect that we can have a positive contribution to the bottom line margin from additional inventories.
Overall, we are on a trajectory towards the midpoint of our communicated margin band for the full year. I would say a first step will be accomplished in the first half.
Okay, that's very helpful. Thank you. My second question is basically, for the most part, already been answered in talking about the ramp of the capacity on a quarterly rate going forward. Again, just to follow up on that, I'd like the order conversion rate into sales. Can we expect that to be speeding up in the next couple of quarters?
Yeah, definitely. So that we are now increasing capacity and speeding up then also this conversion. The last year, the lead time for our customers and our products has been reduced. Now, of course, with the ramp, we have to catch up now with capacity and bring lead time to the market expected level.
Thank you. This is my last question. Sorry. Any early views at this stage already heading into the first half of 2027?
2027, our expectation still is that it will be a fantastic year. We can just also confirm what our customer sees and what is published everywhere, that 2027 again will be a growth year. Certainly a record year, 2027. This is how we see that, how we prepare our capacity at the moment, also in this midterm horizon.
Okay. No risk of an overhang of capacity heading into the report next year. Okay, thank you very much.
Thank you.
The next question comes from Jörn Iffert from UBS. Please go ahead.
Good morning, and thanks for taking my questions. The first one is please to double-click on the capacity. I think you mentioned you should have a quarterly sales capacity of at least CHF 400 million coming through in the second half. May I also double-check, as you have outsourced around 70% of your component production, are your sub-suppliers also ready to ramp this? Do you have some good visibility here that this will not be a bottleneck? This would be the first question, please. The second question on China. You said, I think the China share of local OEMs was going down to 20%-25% in the order intake in Q1. On average, you still expect to 30%. It's not so easy to get the data, but did you get insight that their 12-month inventory was coming down? That they're normalizing this somewhat?
Any color here would be appreciated. Thanks a lot.
Yeah, let's start with China again. I would say, overall, of course, if you go to China, you really feel the heat in China. They are building up their own ecosystem. At the moment, they are less interested in any stocking inventories. They want technology. They want to bring up and be capable to produce leading-edge chips. At the 7 nm, 5 nm, that's the strive. They want to have all the processes produced and manufacturers on their soil. I think that's the main drive in China at the moment. What your question is implying, so more the commercial optimization, that will follow afterwards. Right? At the moment, it's really a battle and race, who will win the different process steps and in China. I think that's certainly still ongoing, and just that we have now a little bit lower sales in China in percentage, in Q1.
This is just also a seasonal effect, as I mentioned. There is a Chinese New Year, and everything ongoing. Overall, the OEMs in China, they will win share. Their share was pretty low. Their self-sufficiency rate is in the range of 20% only, and they want to increase that to the 70%. This is what I always say, this is the opportunity we have to grow in China. Just to grow with them, and since they want to increase the self-sufficiency rate. Second question is about capacity. Yes, of course, we have maybe three main areas we are following. That's our workforce in assembly, ramping up there. Our own workforce in machining as well, so producing our own parts. As you know, that's only 25%, and we have the 75% in the supply chain.
Of course, since the last ramp, we did our homework, and we have for most of the components, we have meanwhile second sources as well. We cannot only rely on one source. This gives us much more flexibility. Everybody has to ramp up. That's certainly true. Everybody needs some time to ramp up. I think I mentioned even during the roadshow, sometimes it's like a diesel engine that was idle for a year, and then you start the engine and there is some smoke and noise at the beginning until it runs smoothly. This is now the phase, and this is the ramp-up phase for us, but also for our suppliers, but also for our customers. That's the whole industry, the whole value chain, working on that.
I think I feel very comfortable for many of the critical suppliers, like in electronics, like in elastomers, we have second sources.
Thank you.
Yes. Thank you. Okay.
The next question comes from Sandeep Deshpande from JP Morgan. Please go ahead.
Yeah. Hi. Thanks for letting me on. My first question is regarding your ramp-up of your sales. This is a follow-up to one of the earlier questions as well. Historically, your lead times from the orders to the sales are much shorter. You've seen very strong orders, but the sales is somewhat lagging. Is this because of where we are in the cycle, that things are just recovering, or it is because associated with customers, that things are much more second-half loaded? Or is it something to do with VAT's own supply chains which are taking time to ramp up?
Yeah, thank you. You gave the answer already. I think it's really that the ramp-up as well, that everybody's now building up the capacity coming from, let's say, 50%- 60% utilization. Everybody has to staff facilities to ramp up, and this needs some time. Even if you would deliver everything that was spoken, then our customers could also not digest it, right? That's why it's also good in a ramp that the forecasting becomes better than in earlier times as well. It's also scheduled to the Q3, some of our order intake. I think we have a very good order book and visibility now for Q2. Going to execute that and still the order inflow is very healthy. That's why we are very comfortable and planning to ramp up also in Q3 and Q4.
In following up to that, your orders are very strong. Would we expect to see maybe your orders translate directly, so whatever your bookings are into sales in Q3 or Q4? Because that would substantially lift your sales number in the second half of the year.
That is correct. We expect that now with our forecast, in the first half year, we will end up above CHF 500 million. We still are very comfortable with the overall consensus, close to CHF 1.3 billion. This will be luckily an increase in the second half of 50%-60% in sales.
Understood. Thank you so much.
The next question comes from Michael Foeth from Vontobel. Please go ahead.
Yes. Hi, good morning, gentlemen. Two questions from my side. The first one is in your Q1 sales impact that you mentioned, the CHF 20 million-CHF 25 million, you initially said one of the reasons was also changes in customer specifications. Could you be a bit more specific what that refers to? That would be the first question. The second question is, you said order intake was up 67% in constant currencies and 47% reported terms. That's a 20% differential due to FX, whereas in sales you only have 10% differential. Can you explain what the FX mix in there or what's going on in that differential there, please? Thank you.
Thanks, Michael. Let me take the first part of your question. The impact of the CHF 20 million on that configuration was in such a ramp, of course. Also our customers have to optimize which configuration, which tool they can deliver. Then certainly there is higher activity in pull-in or push-out for certain orders. Then at the end of a quarter, of course, this can have quite an impact then also on that. But that's a typical situation, especially if a ramp is coming or if it's slowing down dramatically. Then we see more pull-in or push-out activities also from our customer side, where we have to react. This also led partially to this CHF 20 million delayed sales recognition.
On the second question, Michael, this is purely a mixed topic. Whenever these orders and sales have been received and then translated at the respective FX, and also remember that in Q1 2025, we had quite a huge volatility, which was not the case this year.
Okay. Thank you.
The next question comes from Martin Marandon-Carlhian from ODDO BHF . Please go ahead.
Hi, and thanks for taking my question. My first question is on WFE. I think you kept your assumption of WFE being at $130 billion this year, which would imply growth of around 13%. I think most of your customers talk about 20% growth now. Is there a reason why you kept the same forecast? Also, is your expectation to continue to beat WFE growth by five to seven points of growth through 2026, 2027, as you highlighted at the last CMD? I have a quick follow-on.
Yeah. With the growth, of course, it's always also where we start, where is the base and the different models, they don't have the same number, also historically. That's certainly the starting point is important. I think we feel comfortable at the moment. It's $130 billion-$135 billion. If it's more, certainly we are happy to do that. I think it's like the growth we calculate at the moment is 13%-15%, also considering at the moment that everybody has to ramp up, right? Then you see that in theory, demand might be even higher, but there might also be delay because of the constraint in the whole supply chain.
Okay. Clear. Thank you. About the expectation to beat WFE growth by 5-7 points, so 2026, 2027, do you think that's still a valid scenario?
Yeah, that's still a valid scenario. Our ambition is always that we want to outgrow by 2x and I think what is now up to 2x. Yeah. At the moment you also see a lot of orders going in leading edge as well, leading edge fabs, and there we have our higher share of wallet on the equipment.
Okay. Thank you very much. The last question from me is on EUV. EUV lithography is growing quite fast, especially versus DUV. My question is how material is it in the order intake momentum, and do you see actually lithography-related orders are going faster than other deposition and etch orders?
Well, lithography, historically was not a big business for VAT because the legacy machines, they don't need vacuum. Now with the EUV, that is a very interesting business for VAT as well. Also here, there is just a limited amount of machines going into the market, and this compared to etch and deposition machines. Here you see probably also the relation, what it means for VAT. Lithography is very interesting, important pillar for us, but of course, the deposition and etch are still dominant.
Okay. That's clear. Thank you.
The next question comes from Nabeel Aziz from Rothschild & Co Redburn. Please go ahead.
Hey, thanks for taking my question. It was just follow up on the disclosure at the 31st of March prelim announcement on reconfigured orders. I was just wondering, is there any color that you can provide in terms of whether it's related to certain deposition technologies or etch technologies that have been reconfigured, or whether there's a difference in the impacts between memory and between logic? I've got a quick follow-up.
No, I think it was just through the band. In the end, you can imagine if a new factory, a new fab is equipped, they need everything, right? They need deposition, etch, lithography, and all the other process steps as well. It's more kind of which customers wins which part of a fab, and then this reconfiguration and optimization takes place. If you talk about push-outs, then maybe they are delayed and don't want to take the products yet. If they're asking for pull-ins, then they want something and have to accelerate something. This is the dynamic in the industry. It's not related on a specific device. It's more than on a customer level and the dynamic to equip the fabs.
Okay, sure. Very clear. I guess in terms of your order intake, I know you mentioned growth through the year or modest growth from the CHF 350 million that you disclosed at 1Q. Is there anything through this year that you would point to in terms of customer build plans, fab build plans that would mean that order intake may not grow through the year? Whether there's anything seasonally that you would expect or call out from a demand perspective. Thank you.
Well, we just see what we hear from our customers and what we read out there, that hyperscalers are investing fabs. The 110 fabs that get online, wafer fab equipment will be needed, $10 billion-$20 billion for each fab. Wafer fab equipment in total is going up, we say, beyond $150 billion, some say $170 billion.
This kind of indicates that we will see continuous growth as well in order intake. If you don't see that, then maybe also something in the fab utilization or fab completion is delayed. There is the question, are there enough clean rooms out there? Has nothing to do with us, but that's kind of just the infrastructure. Is the infrastructure ready to digest all the wafer fab equipment? At the moment, it's heavily driven by DRAM and logic, and then in the coming 2027+ , we can also expect that even NAND will also have investment cycles again. A very positive environment. Very volatile as well. As you know, the situation out there in the world. In semiconductors, certainly, the long-term trend is just going in one direction, and that is growth.
All right. Thank you.
The next question comes from Oliver Wong from Bank of America. Please go ahead.
Hey, guys. Good morning. Thanks for taking my question. Wanted to go back to the capacity sort of ramp up. Would you say that you were kind of surprised by the order intake, by the demand, hence, you're not able to kind of ship to the full demand in at least the first few quarters of the year? And then also, you mentioned 25% kind of on your end, 75% supply chain. On your end, assembly and machining workforce, where do you expect that to show up the most on the income statement? And then also, is there potential risk in the supply chain ramping to the timing that you expect, given that it's the bigger chunk of the capacity ramp? Thanks.
Let me address the second part of the question. According to our flexible operating model, we are able to source staff when we need them and then also have them productive within a couple of weeks. That said, the additional cost follows quite well. Also, the increase in volume and as such, does not have a material lag effect on the P&L. In terms of the input factors, I just talked about workforce. We talked earlier on about the scaling of our supply chain, which is now in full swing. Fortunately, we do not see major constraints on important commodities such as electronics or aluminum for the time being. Right? Last but not least, the assets that we need in order to convert all these components into end products are also in place. We do have sufficient machining capacity. We do have sufficient assembly capacity.
It's just basically a matter of bringing the parts from the supply chain together with the increased workforce and then convert this into product. As you can imagine, this is not an overnight exercise. This needs a couple of weeks, and we are now seeing that at the end of Q1, which, yeah, was unfortunate. Nevertheless, now we are seeing daily increases of our output capacity, and this is set to continue.
Thank you. That's helpful. Would you say that you're kind of somewhat surprised by the order intake? Otherwise, you would have started ramping capacity already, let's say, at the end of last year?
Yeah. Well, we are hearing about the ramp from our customer engagements since almost about two years, right? We have been talking about it. It has always been pushed out, and obviously, we didn't start to bring neither material nor manpower into the system as the orders didn't materialize. What we did do is wherever we have long lead times, this is on the brick and mortar, on the machines, et cetera, et cetera, we have invested ahead of the curve, and this is now enabling us within a couple of weeks, really to open the tap and now also increase our capacity according to the model and also the promises that we had made.
Thank you very much.
The next question comes from Timothy Lee from Barclays. Please go ahead.
Thanks. I'll get my question. My first question is, again, on the capacity ramp up, and also the guidance. In your second quarter guidance, do you kind of factor in any further potential impact from the supply chain or, let's say, the customer configuration?
Tim, sorry. It's Chris here. You're very difficult to understand. Can you find a different way to speak to the microphone? You're almost a bit lost there.
Can you hear me now?
Too close to the mic probably.
No, I don't think it's much better. No, it isn't.
Yeah. Sorry about that. Yes. My first question is about the second quarter guidance again. Is there any chance you have to take in any further supply chain disruption or customer configuration change in the second quarter?
Tim, it's Christopher here. Sorry, you're inaudible. Let's take this up bilaterally. I'm sorry about that. It's very difficult to understand you. I appreciate you're also the last person asking a question. Why don't we speak after this call directly, and I'll hand back over here to the operator, please, to conclude this call, please. Valentina, over to you.
Thank you, ladies and gentlemen. This concludes today's call. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.