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Ladies and gentlemen, thank you for standing by. I'm [indiscernible], your operator today. Welcome, and thank you for joining the AT&S conference call on the results for the first 3 quarters of 2025-'26. [Operator Instructions]

I would now like to turn the conference over to Mr. Philipp Gebhardt.

Thank you, Mandy. Good morning or afternoon, ladies and gentlemen. Welcome to the AT&S 9 Months '25-'26 Conference Call. I'm delighted to welcome our new CFO, Gerrit Steen, to his quarterly -- first quarterly call for AT&S. As he has just officially joined us yesterday, our VP of Finance, Silvo Leitner, as in the previous call, will present the figures and answer any financial questions.

However, in the recent months, we have received an increasing number of questions about current technical developments. We see that as a positive sign that the focus is shifting from our balance sheet back to our core business. Therefore, we would like to use this call to answer these technical questions in a more qualified manner than if they were addressed to me. I'm, therefore, particularly pleased to welcome our CTO, Peter Griehsnig, today. He will address the 2 current trends directly in the presentation and will also be available to answer your questions afterwards.

So after this introduction, please allow me to begin on Page 2. As planned, Kulim and Hinterberg are now contributing to revenue. This marks an important milestone in our capacity expansion and supports our top line growth, bringing us up to EUR 1.3 billion in revenue. We also see positive momentum on profitability, product mix improvements and a more favorable pricing environment in Q3 have supported the margin recovery.

In addition, our efficiency programs continue to contribute to earnings and make a significant impact on our EBIT of EUR 35 million. On the downside, currency fluctuations, in particular, the weak U.S. dollar, created notable FX headwinds, partially offsetting both top line and operational improvements.

Nevertheless, supported by the restart of our factoring program, we achieved a positive operating free cash flow of EUR 223 million, demonstrating the strong cash discipline. And while global dynamics remain uncertain, we are seeing sentiment in our core markets becoming more positive. So based on the current performance and the outlook ahead, we have confirmed our full year guidance as well as the guidance '26-'27.

Moving on to Slide #3. The PCB market grew by 15% year-over-year or 11% in euro terms from '24 to '25. This growth is driven primarily by increased demand in high-end computing, networking and advanced packaging applications. The IC substrate market also expanded last year, growing 18% or 14% in Euro. This continues to be supported by strong AI-related investments and ongoing data center build-out, which remain the growth engines.

I'm continuing on Page #4. After adjusting the number of our Supervisory Board members last year, we now have, as of February 1, also reorganized the Management Board. Instead of 5 members, the company will be led now by 3: our CEO, Michael Mertin; our CTO, Peter Griehsnig; and our CFO, Gerrit Steen, to whom I would like now to give the floor.

Thank you, Philipp, and good morning, good afternoon, good evening, wherever you are, everybody. My name is Gerrit Steen, and I'm very happy and proud to have joined AT&S as CFO actually yesterday. So my immediate focus now is on gaining a detailed understanding of the business, the markets and the financial position of the company. But I can tell you already now that I have had very positive first impressions of the commitment and dedication I have seen across the organization.

But for today, as Philipp already alluded to, I will primarily listen and leave the explanations about our last quarter in the very capable hands of my new colleagues. Certainly happy to support the discussion later where relevant.

So thank you, and over to you, Silvo, to guide us through the numbers.

Okay. Also welcome from my side. I will lead you through the figures, starting with the consolidated group. You can see very nice on a year-to-date basis, we increased in our revenues from EUR 1.1 billion to EUR 1.3 billion, so roughly plus 10% and also a very nice development from quarter-to-quarter, roughly plus 18 percentage, and we are landing now in the third quarter with a revenue of EUR 468 million coming from positive product mix volume and pricing effects, but also from the ramping.

On the next slide, we go to the BU Electronics Solutions. There, you can see if we take Ansan out and compare apple-to-apple, I will say, we can see year-to-date revenue somewhere flat with EUR 670 million, so 0 increase. And over quarter-to-quarter, you see a declining of 4%, but you have to take in account that here, we have the seasonality of the mobile devices business. And even in the last -- Q2 quarter, we have really a nice revenue of EUR 256 million, so a little bit also on timing differences.

Maybe next slide. Here, we can see the business unit microelectronics. It's a very, very nice development year-to-date, we see we are growing from EUR 463 million to EUR 621 million, sure coming from the ramping in Kulim and Leoben, supporting also with volume mix and price increases and developments. Also quarter-over-quarter, you can see a 65 percentage increase from EUR 154 million to EUR 254 million. And even quarter-to-quarter, Q2 to Q3, nice increase and also an increase in the margin. And I think that is for microelectronics.

Coming to the maturity profile and our financial position. Also here, you see a very nice solid financial structure. We have EUR 886 million cash and cash equivalents, most of it, EUR 843 million in the cash and cash equivalent and some unused credit lines with EUR 43 million. If you look in our profile on the left side, you can see for this year, we have roughly EUR 140 million to repay next year, EUR 488 million. That is easily handled with our EUR 886 million on our pocket, I will say. Also, the financing costs are very nice with 3 percentage, everything from that point very well.

On the next slide, you see our working capital that we always show. I think we have a healthy level now with 14.6% or 13.6 percentage in our Q3. If you know before this 19%, 18 percentage, what you see in the quarters before is coming from our factoring that we leveled out over the time.

On the next slide, the cash flow. Cash flow from operating activities also very strong, coming from EBITDA and also a little bit helping from the factoring, EUR 332 million. Also the cash flow from investing activities, very nice, driven by the cash deposits that we have in the last year, but also lower CapEx, minus EUR 26, financing EUR 83 million, also okay. So we come to an operating free cash flow of EUR 223 million in this year. Last year, we had a minus EUR 357 million. So -- and the net CapEx is minus EUR 108 million. So everything I think also is very well.

Balance sheet, total assets flat, EUR 4.6 billion. Equity, we lose a little bit out of the headwind of FX, mainly in the U.S. dollar. Equity ratio is with 20.8 percentage. And also in the net debt, we can reduce it from EUR 1.4 billion to EUR 1.3 billion and the net debt EBITDA ratio with 2 is also very nice, I would say.

On the next slide, the cost saving program that we always show. Our target, as you know, is EUR 130 million. We achieved this in the third quarter, and our expectation is that we land at the year-end at EUR 160 million plus.

Next slide, I can confirm, as you have heard also in the beginning, the guidance for '25, '26, we will stay with the EUR 1.7 billion. The margin, as [indiscernible] mentioned also in the last quarter, 23%. And the net CapEx we've reduced from EUR 250 million to EUR 200 million. And we will stay with a positive EBIT and operating free cash flow.

And also the guidance for the year '26, '27 will stay as also mentioned in the last quarter between EUR 2.1 billion and EUR 2.4 billion. As I mentioned last time, have in mind that we have headwind from the FX and also a little bit maybe on glass shortage, itself shortage. So we see us at the lower level and other things are unchanged. I think that's it from my side.

Over to you, Peter.

All right. Good afternoon, good evening to everyone. This is Peter Griehsnig, CTO of AT&S. Allow me to take a few minutes to shine a little light on technology trends in the area of substrates, in particular, substrates for artificial intelligence because that's where the action currently is. AI has definitely changed the speed of progress. And with the traditional transistor scaling not being able to deliver what is needed as fast as it is needed, the industry turned to the package to support and with the package also the substrate.

So what are actually the challenges of the industry where substrates can support, where substrates need to innovate to deliver their input. It's basically what's mostly 3 topics. One is the size of packages. The other one is the data rates and the third one is the power delivery for those processes.

Now why are these challenges? And what can we do as substrate manufacturers? In order to understand that better, we need to look at the architecture of such a processor package. And you see that in 3 different variants. Take the middle one first, CoWoS. CoWoS is the workhorse of the industry. This is what TSMC does. This is how almost all the current AI processors are built up.

It consists first on top of the active dies, the memory stack and the GPU, which is connected first by a silicon interposer. Then all the signals that go in and out of the package are routed and fan out by the substrate. The substrate also routes the power to every place in the package where it's needed. And these 3 top layers is what generally is called the package and the package is then connected to a much larger PCB.

That architecture works quite well. so far, but it comes with its own challenges. When you want to increase the processing power, what you can do and what you must do is put more GPUs and more HBM, the high-bandwidth memories into that package, and that increases the size of the package significantly.

Over the last couple of years, package sizes have quadrupled. And going forward, they will quadruple again. Very soon, you will see substrates the size of a tablet. That means, of course, massive more manufacturing demand. Not only the unit numbers increase, also the unit size increase -- will increase dramatically.

Of course, also technology-wise, this is extremely challenging to deliver the very, very tight specifications that are necessary for a substrate on such large package form factors. What we can do, what we need to do is use alternative new, more exotic materials. They will be, of course, more expensive. They will be thicker in order to keep warpage under control. And ultimately, this may or may not lead to the introduction of glass-based substrates.

What also is a challenge coming from the package size is how to scale up the silicon interposer on top of our substrate. That's a large piece of rectangular silicon cut out from a circular wafer. That's not good when you want to scale it up. There are natural limits to do so, and it is becoming hugely expensive. So what to do going forward?

Multiple options are there. First of all, it would be an option if instead of cutting it from a round wafer, if we would cut the interposer out of a panel similar to what we do, a rectangular format, the size of maybe 0.5 meter x 0.5 meter, you could fill in many more, you would have much less waste, but it probably won't be silicon anymore. It should preferably be something organic, which then comes close to what we in substrates do.

Of course, the challenge will be to achieve those fine feature sizes that the semiconductor industry can do with silicon. 1 micrometer or below 1 micrometer line space is something that is very, very difficult to achieve with organic material as of now. But if we look further into the future on the longer horizon, it is an option, what could be done. There is already today something that is a smart solution to scale up the size of packages. And that is when you look to the left side, it's called EMIB, basically Intel solution.

And the thought is simple. You don't need an interposer full size. All you need is a connection from one edge of one die to the other edge of the other die. And so you can break down the interposer in multiple small pieces, which are called bridge dies. And when you scale up the size of the package, you need more of them, but not a bigger one. That makes scaling way more economic. And the larger the package size will be in the future, the more benefit this kind of architecture seem to have.

So going forward, if Intel can get some design wins in the market with that kind of technology, their share in the market could probably increase based on the smartness of that package architecture. And currently and probably also going forward, there's less than a handful of suppliers that can manage and manufacture the extreme tight tolerances that are necessary to embed those silicon bridges slightly under the surface of the package substrate.

So that solution has taken the advantage of merging interposer with a substrate, effectively eliminating the interposer at least for some applications. There's also another opportunity that you see on the right-hand side where the substrate is merged with the printed circuit board. effectively eliminating the substrate. That's what's called CoWoP. It is a new technology promoted by TSMC and tried -- NVIDIA is trying to build such kind of packages in the near future.

However, the challenges are substantial. The challenges are -- the PCB already is not so easy to make. It's a high layer count board and a large board. Now you need to merge it with the additive processing technologies of a substrate, and you need to fulfill all the tight specifications that usually only were applicable to smaller -- much smaller substrates. Can that be done?

Technically, probably, economically question mark. The future will show us how well that kind of architecture can work. Why would any customer want to have? What's the benefit out of it? There are lots of benefits. Probably the one that is reported quite often, the cost saving. I have some serious doubts that this will be much cheaper. But what definitely can be a benefit is addressing the second difficulty, which is data rates.

Signals. In order to keep this GPU running, you need to bring into the package and out of the package massive amount of data. A GPU makes easily 100 trillion operations per second, and accordingly, you need to bring in data constantly. It's not a secret that GPUs are idle significant time because not enough data available. So solving that issue would be very, very beneficial.

And signals, first of all, don't like to travel long distances. And secondly, they don't like to go through different metal while they travel along a conductor. So when I take out the substrate, I cut out 18 layers of substrates. Signals definitely like that. And also one of the layers of microballs, which is a complex sequence of copper, nickel, palladium, gold and tin.

And signals also would like it if you take them out. Data rates could be increased by such a solution. Whether it's feasible to do so, we will see definitely. As a substrate manufacturer, you want to be prepared should this kind of architecture pick up in the future.

Then the third topic, if -- before we talk about power, let's have a look how this -- such a package looks like in reality. You see the MD MIA350 accelerator bottom left. In the middle of that picture, the colorful thing are the GPUs surrounded by these squares, which are the memory stacks. They all sit on this darker gray, which is the silicon interpose and then you see slightly greenish with a lot of yellow dots, that's our substrate.

And that's basically the package with a metal frame around it, and that sits on what's called the accelerator card, a large PCB that has, amongst other things, most of the power, the last stage power conversion on it. And that power conversion are all these black cubes that you see at the edge of the PCB.

And that's the important topic that we need to talk about. Because power delivery has come from being a side show to the main stage of designing powerful processors. Such a processor today needs easily 1 kilowatt, and that's current generation, and you can expect to double that in a few years and to quadruple even further down the road. That's a massive amount of electrical energy that you need to feed into these processes through our substrate.

And the art is to deliver that electrical power without losing half of it on the way to the processor. One noteworthy thing is that these processors run unfortunately for us at very, very low voltage levels, like 0.7 volt or 1 volt. That means we need to route about 1,000 amperes through the PCB first and then through the delicate structures of our substrate. And that's not that easy. 1,000 amperes is twice the amount of current that a Tesla supercharger would use to charge the battery of your e-vehicle.

A lot of losses are happening at such gigantic currents. We can help. We cannot reduce the power that the processor needs, but we can help to reduce the losses significantly. Now these power modules here indicated as PMIC power management IC, also called voltage regulators. They reduce the voltage level from the incoming, let's say, 12 volts to the 0.7 or 0.8 or whatever voltage the processor needs. While it converts the voltage, it loses power. And the amount of power that gets lost is directly linked to the distance of the components inside this module.

So the closer you can bring components, the less losses you will see. And it's perfect, a perfect application for our embedding technology. With embedding, we can bring components from millimeter distance to micrometer distance, and effectively cut down the losses that happen in all these black cubes that are there for power conversion.

And in the next step, power loss also depends on the distance between this PMIC and the active dies. The longer the route is, the more power gets lost. So why not bring this power conversion stage closer to the active dies. We can do that by, again, embedding it, for example, in the PCB bringing it down from 5 centimeter to 1 centimeter distance or we can even go one step further and bring the power conversion into the substrate, effectively reducing the distance to the die to millimeter.

And again, embedding technology is the crucial part, the crucial enabler of reducing the losses significantly. We have shown for these PMICs that power loss can be cut down in half. A first generation of such product is already out in the market, very successful. We're working on next generations and the demand is picking up significantly in the future.

And with that, I hope I have given a little light on what's going on, what are the challenges and what are the trends on the physical layer of artificial intelligence.

And with that, I believe we are open for questions.

Okay. Yes. Thank you, gentlemen. We will now start the Q&A. [Operator Instructions] Now I would like to hand over to Mandy to handle the session.

[Operator Instructions] And I can see the first question from George Brown from DB.

I have 2, if I may. I can take them one at a time. Just firstly, we've had a stronger Q3 report this morning, but you've not changed the full year sales outlook. So I'm just looking at EUR 1.7 billion, then that implies basically quite a big sequential step down in Q4. However, we see news around pricing in ABF substrates improving from the beginning of this year and stronger demand for server applications from Intel, AMD, et cetera. Apple, of course, just had a great quarter and is sort of now in supply chase mode as they sort of stated on their earnings call. So I'm just wondering how we should interpret this implied Q4 guide, it feels quite conservative. And then I have a follow-up.

I will answer this question. Yes, I would say I agree with you. It's a conservative guidance for this year with this EUR 1.7 billion. We are very confident that we will achieve, and it will be surely EUR 1.7 billion plus.

Okay. brilliant. And secondly, just on the FY '27 guide, actually, whilst I have you. So again, that's been reiterated. I remember you stated in your report, I think, in Q1 or Q2 that you have shifted your expectations from the high end to the lower end of the guide due to FX headwinds. But I think more recently, again, like I said, we've seen positive pricing developments in the last few weeks or months in ABF substrates. People are talking about ABF substrate pricing being up potentially 15%, 20% in 2026. And you also added in your report interestingly that customer forecasts are being revised upwards for the second half of 2027. So could that -- could the high end of the '27 guide be within reach? Or are you still sticking to the low end basically?

I take also this one. I told it, I think in the last call, our guidance was calculated with U.S. dollar from 10.7, and we are now at 11.7, 11.8, even we have last week 12.0. So there's a lot of headwind in the FX. And the second point that we see is also glass shortage. Even if there are demand, we have to see if we can then fulfill everything so that we stay with the lower end.

And the next question is from Daniel Lion from Erste Group.

I would like to follow up on next year's guidance. Can you give us maybe a little bridge in terms of where you stand now in terms of capacity utilization and capacity itself? And to what extent you will need further capacity ramping up in order to meet the guidance? Just to give you some insight where I come from, the delta is EUR 350 million at least, it should be EUR 350 million to EUR 400 million if you exceed the EUR 1.7 billion for the full year. So where should it come from? And how you think about additional capacities here?

Yes. Sorry, Daniel, as Silvo already answered, I will take this one. You will get the IR answer. Well, that's an additional capacity coming out of Kulim. So we are in the middle of the ramp. And in not technical terms, having the CTO next to me, I have to be careful, but just add another line, and that brings you the revenue into the EUR 2.1 billion up to EUR 2.4 billion. Don't forget also Hinterberg contributing to this, but really the big change in the setup is more capacity out of Kulim.

Okay. And maybe a second one also somehow related to this. When you look at peers announcing already additional capacities, substrates in order to live up to increased market expectations or market demand. How would you think now of going forward in terms of CapEx? You level down to EUR 200 million for this year, obviously, cash flow due to free cash flow reasons. But how should we think of next 1 or 2 years? Would this be a level that is reasonable? Or would we have to add maybe the lower CapEx this year to CapEx in the coming 2 years maybe?

Yes. I think the lower CapEx that you see in the Q4 is -- or will see in the Q4 compared to what we planned for full year is, of course, again, at every year a bit of a timing difference. So we are shifting it a bit into the next year, whatever is possible, so you can add it to whatever you expected for the maintenance next year and the additional line might be a bit higher than what we said a year ago. When it really comes to the big expansions that we heard from competitors in the recent hours, I think that is something that we have to look in very carefully. And we will announce whenever there is something happening there.

Next question comes from George Chang from Aletheia Capital.

Just a couple of questions. First of all, what are the considerations for the ASIC clients when they choose between CoWoS and EMIB-T?

Well, it's technology-wise, difficult to say what really drives one in this direction, what drives one in the other direction because both of these architectures have their own benefits. It is also traditionally when you have bought from TSMC, you only get CoWoS. If you have bought from Intel, which very few had in the past, then you get EMIB. Only recently, Intel opened up for EMIB.

When they decide now, what you probably will assess is the overall the total cost for your package. There could be going forward, in particular, when the size becomes bigger, there could be a significant difference. Other than that, that's a question that's better answered by the package designers than by the substrate manufacturers.

Okay. Great. The thing I just want to just verify that my understanding is that the capital intensity for EMIB-T is probably double of that regular substrate. And it sounds like it's a lot more than traditional EMIB. So I'm wondering, can you explain sort of why EMIB-T investment is so expensive?

Yes. It is -- well, is it expensive or not that is in the -- everyone might have a different judgment on that one. But it is more expensive capital-wise, definitely to build an EMIB compared to a standard substrate because one of the reasons is the precision that you need to exhibit when you assemble the die into the cavity of the substrate. That precision is semiconductor level precision talking about micron 1, micron, 2, 3 microns.

And when you go from EMIB where you have a single-site connection to EMIB-T, where you also connect from the bottom side, all of that becomes even more tight. The tolerances are going down and the process steps are going up because connecting from the bottom side in an architecture where you have the die not in the center, in the core of a substrate, that is a complete unique process that requires a lot of additional process steps that make the whole process more expensive, the investment bigger. But whether it's twice as much as a normal substrate, that remains to be seen. I would challenge that.

The next question comes from Lucas [indiscernible] Bank.

I had the same question as my colleague, so...

Then we have the next question from Gustav Froberg from Berenberg.

I just have 3, please. Just looking at the slide on the contribution from new customers. I'm just wondering from which facility or where are you intending to serve them from? And do you have sufficient space in your factories considering current customers as well to serve new customers at volume? Question one.

Question two, a technical one, just on CoWoP, does this not disrupt the business that you have in Kulim and Chongqing, thinking that there's no package substrate involved at all? I'd be very curious to hear your view there.

And then lastly, on EMIB-T as well, are you EMIB-T ready in Kulim? I know there's a lot of talk about the future there. So just wondering if you're fully ready to start manufacturing EMIB-T packages or if you need to invest anything further to get ready for that type of technology?

I'll take the first one regarding the new customers. Everything is linked to Kulim. And the second one was white space. There is white space and we can put additional things in, it's possible.

Then the question regarding CoWoP and will it be a challenge for our business? Well, we cannot ignore it. That's for sure. However, will it come? Will it come in the way it is intended now? Will it be for a niche of products and which customers are going even for that kind of architecture. That all remains to be seen. That won't happen from today to tomorrow.

There are not even capacities in the world that can manufacture that kind of PCB or SLB or however you want to call that thing. That will take time, a lot of time, a lot of massive investments going forward if that should really spread out across the whole industry. So let's see where it goes. And we will observe it very carefully. We will make our preparations to be ready when it's needed.

And the third question was about EMIB-T in Kulim, whether this is requiring additional investment. Well, yes, generally, Kulim so far doesn't have EMIB-T capabilities installed. So if we want capacity there for EMIB-T, it definitely will need a certain amount of investment.

And we have the next question from George Brown from DB.

So 2 more questions from me. I can take them one at a time again. Just thinking about Kulim and the second plant you have, which is effectively a shell today. In the context of capacity utilization and your peers already sort of nearing 100% and a lot of capacity being increasingly absorbed by the likes of NVIDIA. Is it likely that Intel or other customers are looking at K2 with more interest today, especially if you consider Intel, the road map for EMIB as more external demand, but these substrates are becoming much larger, higher layer counts, which obviously absorb much more capacity today relative to 5 years ago. So should we expect any developments in this regard for K2 over the next sort of 12 months or so?

Yes, very good question, but reminded of Daniel's question. If we would consider there's something or the Management Board would decide something in that direction, of course, we will let you know. I'll talk right away, let me phrase it that way.

Okay. Perfect. And then just maybe a technical question. On the vertical power opportunity, thanks for highlighting. It seems very interesting. I assume you're working with big players here, whether that's Infineon. Infineon, they've outlined quite a big TAM, I think, for vertical power by 2030 within the sort of EUR 8 billion, EUR 12 billion mark.

Do you have a sort of figure in mind as to how big this opportunity could be for you guys in the '28, '30 time frame? As I assume as you shift from lateral to vertical power, you're shifting towards embedding more components within the substrate. So the complexity is going up. I assume the substrate share of value is also going up as well. So any sort of data points to share that would be helpful.

I think your considerations are all correct. The value add for the substrate must increase if we embed active or passive components. But giving a concrete figure at this point in time, I'm not in a position to do so.

[Operator Instructions] And we have one more question from Daniel Lion from Erste Group.

Can you maybe provide us also an update on glass substrates? Has anything changed in your perception? The market is still some time away from implementing such a technology?

Yes, right. Glass substrates have gone through the whole hype cycle. Intel starting 2.5 years to trigger the hype. Everyone was talking about it. And then Intel was also the first one to become quiet about it. And in the meantime, I think a sort of realism has come into that, that glass is not a simple thing to introduce, in particular, the fracture mechanics of glass is not enough study to ensure enough reliability.

And so while a lot of companies are working on it, a real introduction in high-performance computing seems still to be out some years. And Intel said in the second half of this decade, yes, let's see if we can really make it in that decade. That is the perception I have from the market at this moment in time.

Perfect. And then one question again. How do you expect the cost-cutting program impact your profitability going forward? How much of this EUR 160 million that you earmarked this year savings target? Would you expect to see converting your cost savings next year?

Let's say, the program is a sustainable program. So our expectation is that most of it will go also in the next years. But I cannot tell you now a number, but the most portion should be sustainable is my view on it.

And we have one more question Frederik Dreyer from Fountain Square Asset Management, GmbH.

I just wanted to ask if you can elaborate a bit around your plans with your hybrid capital, please.

It's difficult because I can tell you that we evaluate on a hybrid. And as you should know, I have to go then I talk if it will come to it. And we have a little bit time because it's until January but we will inform then the market.

And we have one more question from George Chang from Aletheia Capital.

Just one more question on CoWoP. You've talked about, let's say, the new challenges for CoWoP. Can you just give us more details on, let's say, the technical challenges for CoWoP because my understanding is that the line space for IC package is already about 5 micrometer, whereas NSAP is still probably about 20-20 or 15-15. So how do you close that gap between the two?

That's a good question, something we also scratch our head, how that package designer will overcome that. Either you need to introduce an SAP-like processing and get down with your line space to 8 micrometer, which is the typical space that -- the line space that you need currently for most of the substrates or else, you probably get stuck with around 15-micrometer line space and ends up, which would be easier to handle for the manufacturer of this CoWoP thing. But then you need to transfer some of the complexity upwards to the still remaining silicon interposer or whatever the interposer will be made of in the foreseeable future. So one of these 2 directions needs to happen. I don't think the judgment is out which way it goes. That's as much as we can say at this moment in time.

Great. So in terms of, let's say, the time frame development, it would be probably, let's say, EMIB-T first and then maybe CoWoP sometimes down the road, like 2033 time frame?

I can't give you any concrete number, even I believe in all honesty, and the customers themselves would not know when and with which product they are going to intercept that kind of technology as the fundamental technology bricks to solve all the issues that come with warpage and coplanarity and God knows what. They are still not completely available, tested and the whole system proven that it can work that way. So you need to give it a little bit more time to go through all the necessary testing until anyone will dare to give you a concrete date for the implementation of such a technology.

Okay. So as there are no further questions, we will conclude today's conference call. Thank you for your participation and questions. If you have any further questions, please feel free to contact the IR team, Johannes Mattner and me any time. Thanks again, and goodbye.

Ladies and gentlemen, thank you for standing by. I'm Alexander, your operator today. Welcome, and thank you for joining the AT&S conference call on the results for the First Quarter 2025-'26. [Operator Instructions].

I would now like to turn the conference over to Mr. Philipp Gebhardt. Please go ahead.

Thank you, Alexander. Good morning or afternoon, ladies and gentlemen. Welcome to the AT&S Q1 '25-'26 Conference Call. With us today are Michael Mertin, CEO; and Petra Preining, CFO. Mr. Mertin will give an overview of the key developments as well as a market update. Afterwards, Ms. Preining will comment on the financial figures and our guidance. As Alexander mentioned, the presentation will be followed by a Q&A session. Now I would like to hand over to Mr. Mertin. The floor is yours.

Thank you, Mr. Gebhardt. Hello, everyone. Good morning, good afternoon. My name is Michael Mertin. I'm the still relatively new CEO of AT&S, and I welcome you to our conference call on the Q1 figures, numbers and our view on the actual markets.

The positive side is, revenue and EBITDA for the company increased. So together with this increase, we have a positive cash flow development. What is essential, maybe you heard from my previous calls and from my statements I've given so far that focus on cash flow as well as on profitability, that means not just EBITDA, but also EBIT to, on the long run, fill up our equity again, is important and is a key figure in the company, and we are focusing on that. So I'm very proud on the organization that this focus, especially on cash flow, works. More on the figures later on from Ms. Preining, our CFO.

We opened 2 of our new mass manufacturing sites. We opened Kulim in Malaysia as well as our site here in Austria, Hinterberg 3 for the volume manufacturing of IC substrates. And what I've seen is even if this went quite positively without any technical hurdles and problems so far, some of you had the expectation that with the first switch of a key, such a kind of a mass manufacturing starts immediately with full volume. I will show you some pictures later on, giving you an impression on the complexity of this technology. And then I suppose you will share my opinion that we can be proud that from a technical point of view, everything runs perfectly, and we are starting the run of the qualification of all the products together with our customers successfully.

Unfortunately, we had impacts on the FX, especially on the dollar. So this had a significant impact for us, especially against our planning. The equity ratio went to our [ unfortune ]. So we will see the impact a little bit later on. We have it on both. We have it on the top line as well as on the earnings side. The uncertainties stay high, so that we decided in the Board not to forecast the entire year. We have a good view, of course, for the first half. We have ideas on how we proceed. So we are not nervous at all. But the prognosis will stay, because of all these uncertainties, just for the first half of this year.

We had a positive market development in both for the printed circuit boards as well as for the IC substrates, especially if we have a close look to these markets in dollar. So for the printed circuit boards, we see 8% positive market development, prices more or less equal during that quarter. And for the IC substrates, there was a market growth of roughly 10% in dollar. Price pressure also relatively low with minus 1%. So the problem is for us that this market growth has been eaten up by the dollar exchange rate. Nevertheless, you will see it later on, we had some success in the market.

The artificial intelligence-related investments remain drivers for the substrate business and the PCB market for computer and consumer communication as well. So both markets are not just stable, they are coming up again, and they will be, and we are pretty sure about this, they will be prospering for the upcoming years. It is very hard to give a prognosis when the artificial intelligence installations really will be in place. So it is a little bit difficult actually on a monthly basis or even on a quarterly basis to give an exact prognosis when these revenues will come into effect, but definitely, they will.

We still have regional differences. They remain strong. We also have different market developments in automotive and in industrial. Especially in Europe, we know these market environments. This is still a weak market environment.

We have a look on the next slide. We see the development for our Electronic Solutions unit, that is the printed circuit boards. And we see in euro now that we achieved a growth of 4% year-on-year and at least of 1% over the last quarter. So we performed with, slightly outperformed the dollar exchange rate. Interestingly, we see an effect, especially in that very stable business, very foreseeable business for us. We see the effect from our cost down projects. I will refer to that later on, so that we have a positive development on our earnings basis here.

Next slide is microelectronics. Here, we have the strong growth from the substrate business here in euros again. So overcompensating the dollar exchange rate significantly with 29%. And in last quarter, we see a slight growth of 2%. And please take into account, as I said before, just switching the key to open and start the runs and qualifications does not mean that we have a full-blown production with full capacity. And even if you run a circuit board through production, through operations from the first stage until it is ready and can be sold, it takes up to 6 weeks even in process times in a running process. Nevertheless, qualifications are all perfect so far, customers are satisfied, and the ramp-up is in process.

Next one. I'm not sure if you've seen these pictures before. I especially choose these 2 pictures, both from Kulim and here from Austria to give you an impression what it means to have these kind of production sites. You see clean rooms, you see big machines. And those of you which have seen a semiconductor manufacturing fab so far will be reminded exactly on these fabs. So these are huge costly installations. You need perfectly educated and taught persons to run this, and you need the very stable processes.

Everything is not just ready. The qualification is going on. So in Kulim, we started exactly with these kind of qualifications with our core partners, for example, AMD. April 1, the investment was more than EUR 1 billion. And end of June, we already have 1,600 employees, and we not just follow the headcount, we also follow the level of qualification of these people. The people we need for running these first lines are already qualified, so that the ramps are in plan with qualified people. That's the important message.

The products we are producing there are IC substrates for high-performance processors, especially for these artificial intelligence centers, the huge centers where you have not just thousands, maybe in the future up to 1 million processor units working together. And there's definitely more to come, and we are looking forward for these ramps.

Key customers here, and we are proud that we can say the name, this is a little bit unusual, is, for example, AMD, a well-known company here, and we are further developing and qualifying other of these large-scale customers in Malaysia as well.

The site in Leoben-Hinterberg here in Austria was opened in June 2025. So I was proud to be, just for first days, present during that opening. So I had the chance to visit this company directly after it was opened. The investment was more than EUR 500 million, more than EUR 0.5 billion. And also here, we have the employees in place. The qualification runs are going on. And what is so special here is that we have both in one side. We have a volume manufacturing site on the one hand, qualified for the latest generations of IC substrates. And hand-in-hand with this, we have an R&D facility for the further development of all kind of new processes.

This is especially of interest because we are in a more or less safe haven here for all new technologies for all kinds of markets. If we listen to what is going on actually with tariffs, with China, with the ideas moving away from China for certain products in certain industries, all these uncertainties will not be here in Austria. So that's the safe place for many kind of new developments. As I said before, the qualification is already going on here, and we will see the revenues now coming up over the next months and quarters up to full loads in the upcoming future.

On the next slide, #7, you will see our cost saving and efficiency program. You've seen in the past that the company was a little bit overinvested. So the assumptions of future growth have been significantly over the demand, so that cost savings are necessary for AT&S. And we had a very successful program, or my predecessors already had a very successful program in place. And they saved roughly EUR 120 million from operations, from procurement, but also from the overhead costs in the last fiscal year.

We continued this program in this fiscal year, and we are actually underway to deliver more than EUR 130 million additional in cost savings as a run rate on top of the run rate of already EUR 120 million, which have been realized. We are confident that we can reach that target. These many projects and/or sub-projects and tasks are sorted by their status, so how far they are developed, what is the status from which point in time when they can deliver to the bottom line. And so we are quite confident that we reach step-by-step over the upcoming quarters, the full amount of these savings to the bottom line.

So all in all, we expect end of this fiscal year that we drop our cost bases by roughly EUR 250 million against the status of the beginning of the fiscal year '24-'25 as a sustainable basis. So that's important. Due to that effect, we also think that our profitability step-wise will increase in the future, and we have to counterfy the price pressures in the market exactly by these measures.

So now, of course, you are interested in more details of our numbers and figures, and I will hand over to our CFO, Petra Preining. Ms. Preining, please, it's your turn.

Thank you very much. A very warm welcome also from my side. I will directly jump into the comparison year-on-year and quarter-on-quarter. Allow me one comment upfront. We have, as you do know, guided only 1 quarter on 15th of May. And this quarter, we are very happy to announce that top line-wise, we have fulfilled it on spot, and we have even outperformed the EBITDA margin guidance we gave by reaching roughly 18% in Q1.

Q1 as such, was a very good quarter for AT&S. We managed to increase year-on-year 14% our top line and achieved a stable EBITDA margin of 18% also compared to 18% in Q1 '24-'25. Please note though that the growth of 14% is at current exchange rate. On constant currency, the increase would even have reached 19%. Similarly, our EBITDA has increased by 9%. On constant currencies, we would have talked 24%. The downside definitely is on the net loss to be found with minus EUR 56 million, very heavily impacted by FX and ramp-up costs in that particular quarter. One comment on the top line on the roughly EUR 400 million. Please note though that the price effect and the foreign exchange effect has eaten up half of our growth in volume that we could have reached at constant currency.

Over the page. We have our maturity profile and financial position for you. We have managed to not only sign in last quarter of last year, the first tranche of the IFC loan with $250 million, but also now have already signed the $150 million tranche with the second tranche with the IFC. Therefore, we have a solid financial position of EUR 924 million cash in, which includes cash, cash equivalents and unused credit lines. That is a strong increase from roughly EUR 841 million, including the cash deposits by 31st of March this year. Our current financing costs have come down from 4.34% to 3.9%, which is in light of the current interest structure, but also our internal structure on loans.

Over the page. Mr. Mertin has already mentioned this, high focus on cash flow and working capital. We have shown in the middle, you can see the quarters where our factoring program was not yet ready to be deployed. Now as I told you in the conference call for Q4, in Q1, we are up and running. And as promised, our working capital position is again single digit, 9.5%, very strong signal. So all the measures are in place.

Over the page. As mentioned, cash flow, very strong increase from operating activities. A number which doesn't really make a lot of sense, 1,236% on top, but in reality, EUR 184 million cash flow from operating activities, strongly driven by the factoring program I've managed, but also by the operating result as such.

On the investing activities, please note that at Q4, we had EUR 100 million invested in cash deposits, which run by 1 day longer than the allowed 3 months. Therefore, it was shown on a different line item. Therefore, the cash flow from investing activities shows here a delta. Cash flow from financing activities, more or less on par with Q1 '24-'25, resulting in an operating free cash flow of EUR 130 million, taking into account that we, as planned, lower our net CapEx by roughly 40%, which is in line with our investing program as announced earlier.

Looking into the balance sheet, we have a minus 2% impact on assets, which is driven by slight exchange rate, but also depreciation. The equity, and this is a topic Mr. Mertin has already announced, is strongly impacted by FX. That FX impact is translation of the other comprehensive income, our intercompany loans to our daughter companies. Just to give you a sensitivity outlook on how that would look like using current exchange rates. So as of today, you do note that the euro-dollar exchange rate, the dollar has improved significantly since end of June to end of July. So that impact would have been significantly less by roughly 1/3. That has definitely a negative income of the equity ratio, which closed on June 30 with 19.4%. Taking into consideration the effects I have just described, we would be definitely above 20%. Our net debt has increased by minus 7%, leading to a net debt-EBITDA ratio of 2.3x, reduced from 2.5x by end of March.

On the general current geopolitical situation, a situation you do know all very well. We have certain uncertainties, which results, a, from the trade conflict, but also from the military conflict. The trade conflict leaves us with uncertainties on the potential tariffs on our customers' products that depends on where those customers are assembled and then shipped to the U.S. That might lead into higher tariffs leading into higher recession risk in the U.S., and particularly even though reduced now from our point of view, the currency risk in particularly U.S. dollar-euro remains still high.

On the military side, we have effects that leads to longer or very complex transportation situations. So logistics is something to review. Our energy prices and the supply need to be followed and checked very carefully. And overall, we have an increased uncertainty of the market as such. Nevertheless, the opportunities for AT&S remain unchanged. The megatrends continue to be the same and also our global production footprint is an advantage AT&S has above other suppliers.

You might remember the substrate triangle, we have the same situation on PCB. So we have a triangle, which balance of different production sites when it comes to substrate production and the same we do have for the PCB production. The risk, nevertheless, is something you also do know quite well. Geopolitically and macroeconomics is something we have to review. And generally, we have a still volatile demand in case of recession.

Over the page. Thank you very much. We have decided, based on what Mr. Mertin has described earlier, to guide only half year '25-'26 and not the remainder of the full year '25-'26. We guide a revenue of approximately EUR 820 million and an increased EBITDA profitability margin of 20% compared to the 18% we had in Q1 only. On CapEx, we aim for EUR 110 million for the full year. Needless to say that we will inform you and the market on the full year as soon as there is more clarity regarding the U.S. tariffs for the remainder of the year.

Last point, our midterm guidance remained unchanged, EUR 2.1 billion to EUR 2.4 billion with an EBITDA margin of 24% to 28%, ROCE below the midterm target of roughly 12%, and a net debt-EBITDA of less than 3x. Equity ratio might be temporarily below 20%.

With this, I have come to an end, and I hand back to Philipp.

Yes. Thank you, Mr. Mertin; thank you, Ms. Preining. We will now start the Q&A. [Operator Instructions] Now I would like to hand over to Alexander to handle the session.

[Operator Instructions] And the first question goes to Gustav Froberg of Berenberg.

Two, please. First, on cost savings. You're now talking about another EUR 130 million worth of savings this year, which is a significant amount of money and, by my estimate, roughly 10% of your total cost base before depreciation. Could you elaborate a little bit more on where exactly the savings are coming from, if it's personnel cost reductions, for example, and maybe a little bit more about how you are arriving at this number, the EUR 130 million? And what then would be some of the offsetting items in your margins, which are not causing them to go up as much as a 10% cost reduction would imply?

Second question is around innovation in the packaging space. We've been reading a lot recently about packaging innovation related to chip-on-wafer on PCB technology coming out of TSMC, for example. Is this something you are looking at with customers? And does this potentially impact your business as it looks like co-op basically removes the need for an IC substrate altogether?

Okay. Let's start with our cost down. I think it would be the best if our CFO will answer that question. It's the most trustful answer if it directly comes from finance.

Thank you very much. Indeed, thank you for that very valid question. That is a very demanding program we have ahead of us. Why are we so confident that we can reach the EUR 130-plus million? Because that program, as already mentioned, has started a year ago. So those measure cards, and we talk roughly about 3,000 measure cards, which chip into that additional EUR 130-plus million are already in place. They very strongly come, or are supported by procurement savings. So that cost pressure that we receive from our dear customers, we definitely also ask our suppliers to contribute, but also efficiency gains by changing processes on the shop floor, but as well in the way we do business.

In a nutshell, this is clearly something we have to state very loud that this does not come by itself. It's a huge management attention. It has been a huge management attention last year, and so it is this year. We, in principle, talk roughly, if you like, 1/3 of procurement and 2/3 of operation that will chip into that amount.

Yes. And operation is both. It's not just cost down in terms of people, et cetera, but it's also the increase of yields. It is better processes, better handling of chemicals, et cetera. So all this contributes to cost down, of course, technology advancements in operations, Six Sigma programs and all that stuff. It's a full-blown program and nothing is untouched. And by the way, one of the good things is, if you go down that cost road on a technology way as well, with these improvements, you also gain customer satisfaction through improved quality. And this is a pretty nice side effect.

But now coming to your technology question, what is going on there with advanced packaging? AT&S already is participating in all these technology parts you mentioned and which are under evaluation, for example, from TSMC and some of their customers and suppliers. So that's the big advantage. We are already in all of these technologies. And in most of these, we are leading. So we are already working with silicon interposers, for example. We are already working and developing with glass substrates. So this is a pretty nice thing for us. It's an advantage for us. And we are sure that we are well positioned here, especially, and please remember what I mentioned before, that we have a development unit here in Austria, as I said, in a safe place for all kinds of applications to co-develop innovations together with our customers. But be sure, this is something what I have on my agenda.

There will be innovations beyond what you already mentioned. And this is what I'm actually evaluating in my first talks to our cost customers along the supply chains. I'm not really finished with this. You know my first 100 days are not over so far. And I'm still traveling and meeting customers and talking about how our supply chains and how our technology base will look like in the future. And be sure that the key challenge for all participants in our industry will be that the technologies we are in are developing quite fast. And there will be technology changes in the future, which is leading us to a very close cooperation along the value chain, significantly closer than we've seen it in the past.

This is an experience from my side also from, let me say, industries from the neighborhood. If you have a closer look to the computer chip industry itself, if you have a look to the equipment industry, there these kind of higher integration, joint roadmaps, et cetera, already happened. So positive answer to your original question. Yes, we are in this kind of technologies in everything what is going on, what you mentioned, but we are consequently looking significantly beyond that, not just alone, but together with our customers. So hopefully, this is a satisfying answer for you. And thank you for your question.

And the next question goes to Daniel Lion of Erste Group.

I would like to focus on the FX side. Is it fair to assume that the IC substrate business is fully in U.S. dollars, in revenues, I mean?

I was expecting more questions from you. So I paused. It's fair to say that a large part of our customers are U.S.-based customers, and therefore, the revenue is billed in U.S. dollars. This is correct.

Okay. And what would be -- also FX related, what would be the assumption of FX that your guidance is based on?

Our guidance is based on $1.14, which is basically where we are right now. So that's what I've mentioned earlier, the FX rate, not only the euro-dollar, but please also keep in mind, because we produce in other currencies than dollar and euros to a large extent, that the status by end of June was very unfortunate when it comes to the dollar. This has settled to some extent as of today. And depending on the further development, this is currently looking for AT&S better than it was looking at the 30th of June. But the guidance for half year 1 is based on $1.14.

[Operator Instructions] And the next question goes to Bruno Read-Cutting of ADF Asset Management.

I just had a capital structure question just regarding your hybrid bond. Obviously, that's got the call/coupon step-up in a few months. So I was just wondering how you're planning to address that security specifically?

Thank you very much. That's a question we receive quite often. It's actually 1.5 years out. So call date is end of 2026. Therefore, there is still some time to go. Please understand that we reckon that this is of utmost importance that we currently have not made up our mind. However, we see also from recent transaction that the market is reacting quite positively on products like this, but there is no decision yet. And we, of course, will inform you as soon as there is a decision on that.

And we have a follow-up question from Daniel Lion.

Can you share maybe a little bit on your CapEx development? You guided of EUR 110 million in the first half year. In your full year call, you indicated some EUR 300 million in CapEx. Is there any variable in spending up to EUR 300 million in the second half of the year that you might be waiting for? Or what would be actually driving this increase then in the second half year again?

Thank you very much, and you know us quite well. So there is a larger portion upcoming for the second half of this year that much we are very sure of. However, there are certain milestones which trigger those payments. Therefore, the first half is a lot lower than we will see in the second half.

Okay. And then maybe the implied guidance, when we break it down to your divisions, looking at last year's development and factoring in the U.S. dollar devaluation, would it be fair to assume that we would more or less see a flattish development on constant currency?

Constant currency, of course, not.

Sorry, not constant currency based, on the current exchange rate.

On current, yes, we have closed the first half of '24-'25 at EUR 800 million top line if we focus on the top line. On constant currency, that definitely would show an increase of roughly 7%, 8% compared to the last year. However, the dollar eats away. The current exchange rate eats away some of the euro development. Needless to say that volume-wise, obviously, there is an increase, which we will see and which we are also seeing for Q1.

Volume-wise, you have a double increase. You have the increase coming from the exchange rate as well as from some price pressure, of course. And that's the reason why we are counterfying that hard by our cost measures.

Understood. Maybe one last one. Sneaking into the second half year in terms of volume development, to what extent would you see the volume development be positively impacted by the ongoing qualification processes of new clients? Do you see that this is positively impacting growth in the second half year? And by how much roughly? How many clients would there be that are currently still in the qualification process where you not yet produced in mass volumes or in bigger volumes?

So if we could answer that in detail, we would have a year-end prognosis. So the point is, it is going on in a very positive way. Everything what we qualified so far works perfect. But we can't influence the qualifying times from our customers. They have third parties involved. They have their own qualifying process chain. The only thing where we are quite sure about, and you see this from the fact that we renewed our midterm guidance, that we see all these processes going on, bringing us to a significant revenue upside for the next fiscal year.

But please don't punish us with the details on weeks and months now, especially, personally, I will be a little bit reluctant here, because maybe some of you know my history in my past. I don't give promises we can't hold as a company. So we are honest in what we are telling you. It's our best knowledge. And if we make a statement, this is a correct one. This is something what I give to you personally. That's my personal promise. So the process is underway. It is looking quite well. All the qualifications so far are not just good, they are perfect. But we can't influence that time line in detail.

But we are pretty sure that next year, you will see the results with a significant increase in revenue and as well as in profitability as you've seen. So if the volume goes up, we will cover the fixed cost of the site to a higher extent. And so the cost impacts we've seen so far in the first half, Ms. Preining mentioned it, they will be compensated by the higher volume in the future and the future is next year definitely. But please trust us a little bit. It is hard if you have a look to our past, but please trust the management team. We confirm the guidance for the next year and the revenue will come.

Okay. If there are no further questions, we will conclude today's conference call. Thank you for your participation and questions. If you have any further questions, please feel free to contact our IR team, Johannes Mattner and me any time. Thanks again, and goodbye.