Aumovio Aktie

Ladies and gentlemen, good morning, and welcome to the Q3 2026 AUMOVIO SE Investor and Analyst Call. [Operator Instructions] Please be advised that today's conference is being recorded.

Let me now turn the floor over to your host, Lutz Ackermann, Head of Investor Relations. Please go ahead.

Yes. Good morning, everybody. This is Lutz Ackermann speaking. On behalf of AUMOVIO SE, I wish you a very warm welcome to today's conference call on the Q3 results. All the documents for this call, you can find on the IR section of our homepage, and they are there since 7:00 a.m. this morning.

With me on the call today is our CEO, Philipp von Hirschheydt; and for the very first time, Claus Bauer, our Head of Finance. Claus joined us literally this Monday. So very happy to have him here. And before we go into the overview of the Q3 and the 9-month period, I want to hand over to Claus for a very short introduction.

Yes. Lutz, thank you very much, and a warm welcome also from my side. I think we can save some time. You have a nice slide here with a nice photograph. I'm looking a little older now than on the photo, but other than that, most of you should still remember and know me from my time as Schaeffler CFO. The only change in my resume is the headline. I'm -- since I ended my CFO career -- I thought I ended my CFO career at Schaeffler 1 year ago. I'm at the AUMOVIO Supervisory Board. Now I'm sitting here as the interim CFO. I'm excited. It's not according to my life planning, I have to be honest, but I'm still very excited from the Supervisory Board.

I know the company, obviously, to some extent. And I am very aware of the challenges of the automotive industry also from my prior career, but especially also AUMOVIO from my Supervisory Board activity. And I'm very excited to tackle the challenges together with Philipp and our colleagues. And I'm absolutely convinced that we are in a position that can make us a winner in the segments that we are competing.

And again, thank you for having me, and I'm looking forward to the discussions with all of you. Thank you.

Yes, Claus, thank you very much for introducing yourself. I can only say, although he's literally very short with us, I mean, we have already exchanged a lot in the Supervisory Board. And we are as an Executive Board team, are very happy to have such an industry veteran with us who knows the business, who knows the challenges, who actually yes, needed just a few seconds to immediately dive into our challenges and opportunities which are lying ahead of us. And we had already in the last days, very fruitful discussions, which are going to help AUMOVIO and its entire team to move forward as fast as we have been working on acceleration over the last years and is going to help us to accelerate even these accelerations.

Yes, you have seen the presentation already, which has been uploaded. We have recorded in the first 9 months now EUR 12.6 billion sales, which is a consequence of a challenging market environment. We do see volume and price pressure in the market. We are needing to deal with, which we have been managing so far quite okay. We have seen that the European market, the local Chinese market is down compared to last year. And as we are quite strong there, we have suffered and there a bit specifically also in the third quarter, but we are quite confident that this will change within the next -- in the next years to come.

Because what we do is, we focus on value creation. You will see during the course of today's presentation what we did and how much we live that meanwhile. And you can see that also in our results with close to EUR 300 million adjusted EBIT. You should always remember in all our figures, specifically for the 9 months results, we do have the BMW settlement in. And although going down, we have normalized by BMW made, again, I think, so quite significant step forward.

The BMW settlement has also had its impact on the normalized free cash flow after 9 months as well as we have, and that's something which we discussed already for quite some time. We do have a challenging situation in the overall semiconductor market, specifically on the micro, semiconductor -- on the semiconductor side and where we have decided to selectively build up some inventory. And that has, of course, a drag on our free cash flow. But we -- and we are confident, and you will see at the end that we reiterate our free cash flow guidance for normalized free cash flow for year-end. And that as always, the fourth quarter of our company is the strongest in terms of overall EBIT and of overall cash flow generation.

Talking about value creation, one thing we need to say that self-help works. We have again made significant steps forward to become a more efficient company. We have executed on the R&D program. We have executed on our divestment program of our production footprint. We have completed the sale of the Mechelen plant in Belgium.

We have also announced that we are going to sell our business in Czech, which is dealing with water and cleaning systems. We have closed a divestment of a share in SupplyOn. And we have then also reviewed our business area user experience where -- and I will come to that in much more detail.

We decided to maintain user experience within the AUMOVIO family because we are convinced that UX is creating most value, while being kept by us, while adding it and even more integrating it into our overall system offer and that through our technology leadership and the job the team already did while significantly improving the overall result, we are going to have a very value-creating asset going forward.

What we also have seen, we have always discussing our order intake. You will see that we have made a significant step forward. We have also again managed to get a new partnership for the localization of Chinese OEMs in Europe with Chery during the Paris Motor Show.

And we have in our Safety and Motion area, not only gotten awards for new products, new technologies, we have also supported VW in its world record attempt finally and successful attempt with the emission efficiency concept car. So you see we do make a lot of progress in all our different strategic angles.

Talking about strategic angles, you all know that we are together with Aurora developing the future of commercial trucking and preparing Aurora and us for making trucking autonomously driven by end of next year. And Aurora had this Capital Market Day where we supported and where new KPIs have been launched and also independent assessment rank Aurora meanwhile as the leading Level 4 trucking player, which you can see, and that's, I think, the important part for a technology company and for AI-driven is that the validation time for new routes or routes have been significantly reducing.

I mean, the first one took basically 6 years. And now the 12 -- 14 they are currently working on has been validated within 6 weeks. And the next steps is to go down now to 6 days. And we're not there yet, but I mean, you see the constant improvement in this. And that shows the availability of scaling the services throughout the entire United States, but then also maybe later throughout the globe.

So the target for this year is to, and this year it's only 6 weeks left, is to have 1,000 driverless trucks been assembled and on the road. And then in 2030, more than 30,000 trucks should drive driverless around in the United States. This has also convinced another customer, Charger Logistics, has been named as a new potential customer or not potential, a new customer of Aurora on top of the Hirschbach order they've gotten already in the beginning of the year. So all this is working very fine and according to our plan.

We are also advancing. We have our validation center in Ingolstadt ready. We are already validating the major part of all our hardware, which we produce. We have, meanwhile, our production significantly increased, and we do as well our testing, and we have currently working with the OEMs, providing them the track of how to integrate our systems into their serial production.

So all IP, which we are generating here, I mean, it is creating barriers to entry from our point of view. They are not easy to copy our hardware solutions. We have the redundant product system. So we do create a very distinct business model, which we are safeguarding for future.

I have already mentioned Safety and Motion, a second business area where we have, again, 3 proof points showing that we win traction there. We have with the Chinese OEM, and you see there as well that the first series award for distributed brake systems we do in China shows on the one hand side, our strength in China shows on the other hand, the technology ability, and willingness to adopt in China with the Chinese OEMs, we won the first project.

We have seen, which we have extended our long-standing relationship with Chery, where we work for more than 25 years with Chery already in China, also extended into Europe, where we have gotten the first nomination, and we expect to add significant more products to be nominated by Chery for their first local produced car in Europe.

And we are still working, of course, with our very strong European and German customers here in this case, we wanted to highlight on what we did with VW for the mission efficiency, which shows we are well prepared for automated driving in -- also in the passenger car side from a braking point of view as well as for electric -- electrical cars. So something where we are very proud of being at the forefront of technology development.

You might remember that we always said why do we review our partnership or our stakes in User Experience? You always said we are -- this is not so much software integrated, not so much software heavy. We always said it's -- we earn our money with the combination of software and hardware. And we said in 2023, there's a lot of CapEx in front of us on User Experience, and that's why we review of whether we want to keep User Experience.

Then we went into our spin-off and we stopped the sales process. And the last year, we reviewed up and down, back and forth, and what do we do with User Experience. And one thing is and remains very clear. We are here as a management team to create value for our stakeholders. And we do see that value creation is best been done while keeping User Experience within our group of companies.

You can, on the one hand side, see that the turnaround has stabilized. On the other hand, you see that we have a company which is fully invested now by end of this year. So in 6 weeks, we have 100% best-cost-country production share. We do see that the return on capital employed is going to go significantly up. So we do see, from a financial point of view, a very, very valuable part, which we want to keep.

And if we look into the synergies, we meanwhile win business out of the combination of User Experience and, for example, Architecture and Network Solutions in China, because we are capable of building systems. We built -- You can also think about, I mean, what do we do? We do in our ACM area, we have near-field and long-field radars. We have cameras, we have sensors, which all need to be displayed in the car. Information needs to be given to the driver or in the future to the one sitting in the car. And that is best been displayed by displays, which we produce. And out of that combination, we do see a lot of chances to move forward.

And from a technology point of view, we are the ones driving innovation in that area and in that industry. So we are very much convinced that we are well-positioned in this area. And if we think about the potential Investor Accelerator Act might come into play in Europe, we also do have a great chance to profit here on that side.

And that we are profiting from what we do technology-wise, you can see also in our order intake. I mean, of course, we have managed to get BMW, but you see here specifically the Architecture and Network Solutions, where we not only do have a very profitable business unit already -- where you've seen we are expanding absolute and relative profitability in the ongoing business. We also see we are very successful in gaining new orders. We are -- and that's what we always said, we are a powerhouse for the global automotive market in terms of architectures -- of electronic architectures. And that's where we have seen a significant increase in orders. And where we also do see also upcoming a lot of interest of our customers to work with us in that area. And all the rest did also very nice, very fine.

So we do see that what we always said the first half was mainly due to the fact that companies are still waiting for handing out awards. This is not going to come. We expect something similar in Q4.

And what's also nice, what you see on the right-hand side is the regional split. We get a much more diversified portfolio. We are today 50% basically European sales, and we are over-indexed in China, which also shows in a very competitive market, we are able to win business. And Rest of World is mainly the rest of Asia actually.

And you see that we are basically having 35% in Asia, meanwhile 40% in Europe, and then the rest in North America. So a much more balanced portfolio. That's where we're building up the resilience of our portfolio, I think the right steps towards the right direction. From what we said, we first focus capacity reduction, focus on self-help measures and now it's time to grow here.

And with this, I hand over to Claus.

Yes. Thank you very much, Philipp. Let's let the numbers talk here. In the package, you saw a few 9-month slides. I will, however, mainly focus on the Q3 numbers going forward. I also think that will be the focus. We will be reporting much more on the single quarter than on a year-to-date basis. The year-to-date, obviously, can be seen in the attachments and also our official reporting, and we are happy to answer any questions in that regard. But I think since we are meeting quarterly anyway, we should focus on what happened in the quarter.

Philipp already alluded to our 3 main KPIs that you're also aware here and the most interesting one might be adjusted sales here, because -- and many of you already gave us the feedback that the reduction is much more than expected and definitely more than the market and definitely more than most of our competitors.

But to some extent, it's the consequence of what Philipp just said. We are coming out of a period of lower order intake. The lower order intake is also driven by our strategy of profitable growth. We were not so much interested in order intake, but we were much more interested in profitable order intake. And I think as Philipp also just explained, we are at a turning point here. We are at a turning point in regard to customer split, which is beneficial going forward and also the order intake quantity, which meets our profitability expectations.

But when I look at the adjusted sales, there's a significant volume portion in there, 8 to 9 percentage points of the 11.6% sales decrease is volume and price, which I actually just explained. I think over the longer period, that will help and support our profitability, as you already see even in a sales weak quarter in our adjusted EBIT performance. But we are still also actively managing our portfolio, not just like going with the market, but also divesting in lower-margin business. That's around 2 percentage points of the sales decrease. And then there's a negative foreign exchange impact translational of around 1 percentage point. So that explains it.

I don't want to take it away that we have to work on our volume and the promising order intake, as I alluded to, will correct that going forward.

Now adjusted EBIT, that's definitely something that I, as the responsible Finance Head, really liked. We are able to improve, even slightly improve our profitability despite the market-driven headwinds and despite the headwinds that we have in restructuring and setting up our business towards more profitability, that really is testimony that our approaches are working. We are -- and I will come to that in my next slide.

We are working on our R&D efficiency. We are working on our cost management, not just rigorous cost discipline, but also structural cost improvements that will have a long-term impact. So that we are able to increase our profitability and definitely also be within our guidance range here.

Now last but not least, normalized free cash flow. I have to be honest with you. I have my difficulties with normalizing free cash flow. For me, EBIT is already normalized enough and adjusted enough. And for me, free cash flow has to be then the real proof point of what we are doing. So I like to be our free cash flow focused as close as possible to what cash is really coming in and going out. So I will focus. And we will have this discussion a little bit more even when we provide our KPIs for next year and our guidance for next year. So that's to come, but it's maybe already a little tease in that regard.

So adjusted free cash flow, that's the number that is close to our real cash performance. The adjustment -- unfortunately, adjusted already sounds dubious, so I don't like that either, but it's really the free cash flow before M&A activity. So it's a real cash flow number, and that's minus EUR 120 million. That cannot be satisfactory.

But as you have read in the documentation already, the main portion of that is tactical inventory build that will not continue to the same extent. We will still have pockets, and we will talk about material and semis a lot in the Q&A, I'm pretty sure. So we will continue to be smart about tactical inventory builds, but also see the potential to offset in the fourth quarter any increases in that area with decreases in other areas. So I think the inventory increase of EUR 140 million that you have seen in Q3 will not repeat itself at least from a total working capital position in Q4.

And then, you have the much discussed and talked about BMW settlement, where the first EUR 100 million came to a cash-out now in Q3. If I -- and now I'm contradicting myself a little bit because now I'm normalizing if I take out these effects, then really we are in a healthy basis for a stellar free cash flow Q4 that will be driven by these effects that I said on top of -- or additionally with the recovery with our customers, which you know from the past is always very backloaded in Q4. So therefore, the jump in Q4 to then be within our guidance range will -- or we are confident about that it will come.

So the next slide is a 9-month slide, which I will skip. Really everything that's on there is not so much different for the Q3 isolated. The price volume decrease for the 9 months period is a little bit more muted versus now Q3, but that might be the only difference.

So coming to the next slide, we talk about profitability, and there's really 2 points that I want to make besides everything else that is really self-explanatory. The one is the gross profit margin that you see from Q3 of prior year to this year. And again, that is a significant drop. You have, of course, the fixed cost absorption effect of the lower volume -- production volumes here. That's around 2 percentage points. But we also see in Q3, the first quarter where we have a significant and material price escalation, especially in the semi area, which cannot -- could not be offset anymore with the normal purchasing initiatives in non-production material in other areas. So there is about a 1 percentage point negative impact in the gross margin now already in this quarter.

And as I said or indicated and also Philipp already alluded to, I mean, that escalation will just go much further than the 1% that we are talking here. I mean, you saw in our messaging already that we -- especially for next year, we are expecting a minimum impact -- gross impact of EUR 1 billion in that area. And we will -- I'm pretty sure we will talk about that. But again, the escalation started with a moderate impact for the quarter. And of course, as you know, some of the recovery of that will also come in the discussions with our customers then in Q4.

However, if you now look at these impacts, there is the portfolio management on the sales towards more profitable sales mix and also the cost discipline that we have also in cost of goods sold area that we are countering these effects. And I can only say, and that's maybe also from my supervisory activity -- Supervisory Board activity, the timeliness of proactive self-help measures at AUMOVIO are here really helping us now significantly to weather the storm where we are in the middle of.

The second point I want to make on this slide, and you will not be surprised is R&D. R&D was in our focus, since our inception, I would say. And again, here, you see the monetary effect. I mean we are at 10.4% R&D net quota, which is a big step in the direction that we indicated, we think is sustainable.

If our sales would have been stable versus prior year, we would actually be even closer to our long-term target, but that indicates that we are on the right track here. And again, the art is not to reduce R&D cost. The art is to maintain your capabilities with reduced costs, so increased efficiency. And I think as our order intake indicates in that area, we are successful.

The next slide is again a 9-month slide, which I would skip. Here, you see -- let me just make one quick comment here. You see the adjusted EBIT margin is lower than prior year. But again, remember, that is the BMW impact. If I would take out the BMW impact, we would have the same development with 10 basis points better EBIT development than last year.

And so now the last 2 slides are indeed 9 months year-to-date slides. I think they are valuable in that regard, because it's about our business area profitability. And I think we have to look at that in a longer period just to also prove that our transformation efforts are successful.

And the next slide is then a free cash flow slide, where I will only add a few more comments. But let's look at the EBIT development for our business areas. And I start from the bottom of the slide, where the adjusted EBIT stands at around EUR 100 million lower than in prior year. And again, it's the BMW settlement, which is included still in adjusted EBIT with around EUR 100 million. And therefore, if I would put that back, then really on a comparable level, we are absolutely and not just from a margin standpoint, in the same range as last year. And that with the very difficult sales environment, I think is a huge accomplishment.

If I now look at the business areas, then you have 3 business areas: ACM, ANS, and UX, which from an absolute standpoint and therefore, with our sales also, of course, from a margin relative standpoint, made significant improvements. And I cannot emphasize that enough with the significant sales drop to accomplish that is really a proof point for the transformation process and progress working.

The reasons are clearly in all lines of the P&L, except sales. I say, the operating performance is improving. Cost discipline and self-help measures, as we discussed also in the past, are taking effect in Q3 and are also from my standpoint, sustainable into the future.

The one bar that is obvious to be talked about is the development in SAM. And again, you might be tired to hear that, that's the BMW settlement with EUR 100 million that is hitting this business area. And there, we have the same volume impact as in the other areas around 1, 1.5 percentage points. So that explains the drop from 4.6% to 1.6%. Excluding BMW, we would be closer to the 4%. So still a slight margin drop.

And again, with also the lucrative orders that we have taken in and also the attractive customer mix in that regard that Philipp already talked about that is, in my view, a rather temporary situation.

And last but not least, the free cash flow, don't be afraid, I'm not leading you through the entire slide, and I only will focus on the very right side of that, as I said, adjusted free cash flow for me is the important number, important proof point that is with close to minus EUR 300 million, including EUR 100 million for BMW, of course, a number that we have to deal with and attack.

However, there is still restructuring and spin-off payouts in there that will not repeat itself or phase out over some time and get smaller. So that our cash generation power, which the normalized free cash flow really is an indication for is positive. And again, the 9 months is a little bit distorted in that regard because we have the strong Q4 not in there yet where we will rectify some of the cash flow impacts in the first 9 months with the recoveries with our customers in the fourth quarter so that we are confident, as I already said, that we will have a strong Q4 performance, which drives us into the guidance range.

Talking about guidance, back to you, Philipp, to guide us through our outlook.

Thank you. Thank you very much, Claus, for the explanations. Let me make it very short. We confirm our corporate guidance. We -- but we do see and listening to what I've said in the beginning and specifically to Claus, on the sales side, we expect now that we are going to get more to the lower end of our range of EUR 17 billion to EUR 17.5 billion, based on current market expectations and what we have seen already in quarter 3.

However, we confirm the 3% to 4%. You know that we have reduced that recently because of the settlement agreement with BMW. But we are still convinced that we are going to make the normalized free cash flow and let's see how long we are going to keep that KPI.

But what we also do see now is -- and that's the change actually on that slide is that we increased the cash out for restructuring from EUR 600 million to EUR 650 million. And you see also, I mean, I interpret that as a positive, because what we do see is that our measures are starting -- have been executed even faster, which is in such an environment, only a good sign and shows the execution capability and ability of our management teams across the globe.

If we go into the different business areas, the picture is a bit more mixed. Of course, the total sales of the group stem from sales of the different business areas. So if we say we are more cautious and going to get more to the lower end of our sales guideline -- sales guidance, that stems from some changes, specifically on Safety and Motion side, where we do see that the strong business which we have in China, which is suffering from local market deterioration, has an impact on overall sales, which has then also an impact on the EBIT margin, where we have needed to lower a bit the forecast.

Same applies for User Experience where we had a moderate increase or improvement. We are now stable. That also shows despite all that sales reduction, the User Experience team is capable of maintaining all the fruits which they have been working on over the course of the last years.

And I think that's quite positive to be seen in our technological most advanced business area, where we are working on the future of autonomous driving, has worked heavily on improving our results, and we increased now to moderate improvement of the EBIT margin. Previously, we said stable, but that means we want to be above the zero line in ACM as well. And I think that's positive thing after 9 months, all business areas are positive.

And that's something which we want to explain to you also in more detail in actually 8 months' time. And we want to invite you for Capital Market Day next year here to Frankfurt to show you what are our plans for the future and what we are capable in terms of technological improvement. It has -- A lot of things happened since our last Capital Market Day, which we had 1.5 years ago. And I think it's a good time to reconnect all together here in Frankfurt and show what automotive suppliers are capable of and how the future has been driven and that mobility from us is going to be safe, exciting, connected and autonomous.

And with this, I hand over back to Lutz.

Thank you so much, Philipp and Claus. And now we come to the Q&A session. So operator, please take over for the moderation of the Q&A session.

[Operator Instructions] And your first question today comes from the line of Christoph Laskawi from Deutsche Bank.

I'd like to start with inflation recoveries in '26. I was just wondering when looking at the Q3 bridge and some of the moving items there, was there already a decent amount of recoveries in Q3? Or is it still mainly expected for Q4?

And then looking ahead, you mentioned for '27, the gross headwind of at least EUR 1 billion. Obviously, you will seek to pass this on to the largest extent. Could you comment on basically the phasing of the year that we should expect? Just thinking back to '24 when obviously Q1 was quite a disappointing start. And in the end, you still managed to get to your targets or where you wanted to be because the pass-throughs came through in the second half.

And then the last question would be on the order intake that is nicely accelerating. Should we assume that this basically turns into revenue momentum in '28? And that underlying growth or organic growth should accelerate with that in '28? Or could it be that some of that is already materializing slightly earlier towards the end of '27?

Do you want to take, Lutz?

I mean, I'll start with your first question, Christoph. I mean, there's very little Q3 recovery already in there. So the overwhelming portion of the 2026 recovery is coming in Q4. And -- but also in Q4, not spilling into Q1 of 2027. That is our goal, and that is also our assumption based on which we confirmed our guidance.

I try to start with your second part and then Philipp, you might take over and then also tackle the third question. I mean, just of you know me from my Schaeffler time, and I always talked about steel. So I still consider myself a steel guy, but now I have to be an electronics guy and the escalation and the dynamic of the pricing there is mind-boggling. And we see the escalation just softly started in Q3 will accelerate in Q4 and really explode next year.

Therefore, also our estimate of a minimum of EUR 1 billion. That really is, at this point, not a timing pattern within '27. We think all of '27 will be impacted by that. From the very first day, we have annual relationships with the chip suppliers. So therefore, that's also -- there's always a cliff at the beginning of the year.

But what is the reason for that situation? The reason are the data centers for mainly artificial intelligence. And we can tell you that there is no price sensitivity whatsoever in that area. And all of our suppliers in that regard could sell twice their capacity to this very lucrative non-price-sensitive area that, at some point, we will run out of energy for these data centers and everything. We are absolutely sure that will come. And then some of our suppliers will feel sorrow -- sorry that they didn't serve us better. But right now, we have to deal with the environment that it is. That will, in our view, continue throughout 2027. And we don't see any demand relaxation from the data center industry into that supply market.

So what do we have to do? I mean, you have to look at our balance sheet. We are, for sure, one of the stronger, financially stronger players in the market. And we have our business otherwise under a strict cost control. But there is no question that we will not be able to wait until the fourth quarter of next year to recover EUR 1 billion or more.

So -- and that is not just true for EBIT, that's also true for cash flow. So we will have -- first of all, we will need to have the agreement with our customers that we need full recovery of that impact, and we need the recovery not just from an EBIT standpoint, but also from a cash flow standpoint.

What models we might come up with is obviously subject to the next few weeks of discussions, but these discussions have to start and have to come up with a result very quickly.

And maybe I now explain more than the scope of the question, and maybe I also took away some of the momentum of Philipp. And Philipp...

All fine. Very good. I think I couldn't have explained it better. You see how good it is to have such an experienced guy in our team who within the very few hours learned everything about semiconductor market. But if you look into such a transforming industry like ours, you need to do two things in fact for a company. First of all, you need to become flexible and agile to be able to react to different situations. But you also need to build up a learning organization. And we have learned a lot out of 2024 and 2023 where we were dealing with our customers.

We have built up an organization which is capable of dealing with exactly what Claus just said. And that means we will not and cannot wait to the end of the year. The discussions I mean, we discussed that many of these things have been -- will need to be recovered still in Q4. But you can imagine that we discussed already today what is going to happen in 2027. And there is a very clear guidance. I mean, as Claus said, we need to recover that in full, and we need to recover that in full in cash in 2027, and that clear target cannot be only cater for next year.

And if we talk about order intake, some of the order intake might indeed come already next year and in 2028, and that's the Chinese OEM part where we do see some chances. But on the, let's say, more traditional part in Europe and with international OEMs, it will take most probably more than in 2029, where we are going to see that revenue getting into our house. So that's why I said the Chinese market is on the one hand side, the big challenge that it go up and down, but you have also the chance to relatively fastly recover and change direct.

We will now take the next question and the question comes from the line of Ross MacDonald from Citi.

I have three questions. The first one, just following up on the Q4 commentary. Just be interested if you could maybe give us a little steer on Q4 profitability given those -- it sounds like large price ups that are coming through in the fourth quarter. Specifically, you did 6.9% adjusted EBIT margins in the fourth quarter of last year. Could you maybe talk through the bridge components and whether that is a reasonable target to aim for? I know you can still hit the full year guidance with a lower margin than 6.9%, but it would be helpful to understand exactly where in the guidance range we may be tracking based on Q4.

Second one, I'm sorry to come back to DRAM. But specifically, I'm interested in what you're seeing today in terms of the DRAM pricing. If I look on Bloomberg, and I appreciate that's not a perfect tool. It looks like the pricing has at least come down a little bit or certainly stopped going up. So I'd be interested if you see that at year-end.

And then linked to that, on the EUR 1 billion figure you quote, what non-pricing mitigations can you put through quite quickly? Is there a reasonable assumption that we can de-content some of the vehicles and maybe bring that figure down just through content per vehicle? That would be my second question.

And then the last question, just looking at the valuation of the shares and obviously, the lack of follow-through today. Do you think there's an argument for bringing forward the cash returns of AUMOVIO, maybe specifically on buybacks? It's probably more a question for the CMD, but it does feel like you have a very strong balance sheet, shares are very cheap.

Just be interested in pushing you maybe, Claus, since you joined on how you think about cash returns in the short term.

Yes, I start maybe with your first question. I mean, I have hard time to indicate more than confirming our guidance. But as you already said, the drivers are in place that structurally, the Q4 will be a strong profitability quarter. And by the way, also a strong sales quarter relative speaking, because the recovery goes into the sales line. And it's, therefore, besides the volume impact, a significant price impact. And both will then lead to a similar pattern than last year. And please understand that for the time being, I wouldn't like to be more concrete in that regard. But we are safely year-to-date in the guidance range and with a good Q4 in front of us, that should be directionally as much as I want to say.

Maybe let me add one thing. What we historically always have, we have a major part of our research and development reimbursements in Q4. And that's not a one-time effect. That's a pattern which we have in our industry. And as we do have -- and as we are a very technology-driven company, we do get also overproportionately compared to other competitors, reimbursements for the research work we do. So that's something which is going to come in Q4, where the entire team is prepared and which is going to be there as we speak. And yes, I mean, we are used to get reimbursements or recoveries, as we say then for prices, and that's what needs to come and will come in Q4. There's no doubt.

With regards to pricing of our memories, yes, what we do see is that the huge increase in spot prices is now calming down a bit. But you can imagine that we don't buy for spot prices. We have long-standing relations with our suppliers and supply agreements.

What we do see is still that the prices, as Claus said, is going to go up next year still on the memory side. That's what we expect. And what we also do see, and I guess you have also heard about it that printed circuit board, so-called PCBs are also very much accelerating in price due to the severe competition of artificial intelligence and data center buildup. So that's something which we need to bake into our assumptions for next year and the first of minimum EUR 1 billion additional cost we have already discussed.

But I fully agree what we do is, we work with our customers on de-contenting. We work on how do we overcome from a product technology design into a less heavy product, which should help to get the overall costs down. These are all things which we do, which we regularly do, where we have big research and development teams working on in order to improve that prices are not skyrocketing.

And with regards to the valuation of the shares and the potential buyback, I think that's something which I understand. We discuss also very regularly when we meet. We are needing -- I mean, the decision of the Board, and you might imagine that this has also been discussed with the Supervisory Board when we went out in August is very clear into that direction. We want to use share buybacks for excess cash that we need to get the approval of the Annual Shareholder Meeting, which is going to happen in May. And then you are absolutely right in general -- in June is then a perfect time to detail out what we are going to do.

Our next question today comes from the line of Jose Asumendi from JPMorgan.

A few questions, please. And Claus, great to see you back again. I guess it's a bit going into 2027 as much as you can say, but I'm trying to get a bit of a steer of the revenue projection to '27, '28. If you don't want to talk about '27, maybe you can talk a little bit about the longer term or how much of the revenue deceleration we have seen in '26 is driven by product discontinuation and getting out of some of the contracts because hitting your full year revenue number or guidance is going to be -- is as usual, but it's a bit of a challenge as well from my perspective. That's question one, if possible to get some steer on revenues and a bit of a sense.

And then second, as much as you can probably say, please, for the fourth quarter, do you think autonomous mobility can print in the fourth quarter another return above 0? It's difficult to forecast this one through EBIT. And can you talk also a little bit around SAM whether we should expect also an improvement on a year-on-year basis. And obviously, trying to get a bit of understanding as we think about '27, whether we can see some earnings momentum for the company.

Maybe, Philipp, I try to start with question one, and you can, obviously, with your knowledge that's much deeper than mine in this company. But -- and maybe it's not so bad to start that question with a more outside view that I still have. But for me, from a longer-term perspective, with sales, we are really at a crossroads where -- and more detail, obviously, is to come on June 22. That's why we also chose that date because I think that has to be a point in time where the crossroads clearly in our confidence will look into the right direction.

But with the portfolio management, with the spin-off, with being a stand-alone company with the soft but managed order intake over the last 2 years, but now again, a strong order intake going forward with the soft market environment, which, by the way, we don't think that there's a lot of help from a market also in the midterm. And I think we are in line with many of the specialists in that regard, the forecasting markets and so on.

But all that considered that we are approaching a point with a profitable -- a reasonably profitable sales portfolio and mix. We still continue to adjust our cost structure to that mix and then have a very promising platform where we then can go back into a growth mode. And again, I think the order intake right now and the customer split that we are seeing is indication, as Philipp said, 2028, 2029, we will see the benefits and effects of that. And again, I think we are really at that point where we have to set our starting point to be a growth story again and absolutely convinced that we will be able to convince you on June 22 that, that is the case.

Yes. Maybe I add to that. Thanks for your question, Jose. I mean, we -- as Claus already said, we do see that we are now working on moving top line up. '27 is going to be a difficult year. We don't see that markets are going to help us. I mean, we are more conservative than maybe some of the research institutes. But we assume that somewhat '27 should be in the range of what we managed in 2026, so stable revenue projection. And then 2028 is going to go up, then Aurora also starting to kick in. And then we are going to see then progressively sales are going to grow again.

Talking Aurora and your question with regards to ACM in the fourth quarter, I mean, we don't work on one hit wonder. I mean, the clear expectation towards the ACM management team is to maintain that result and be also in the fourth quarter breakeven. And I'm confident in that team that they are going to manage that. So that is, I mean, we always work on sustainable improvements. I mean, we don't do -- how do you call that accounting checks...

Focus.

Focus. We work on sustainable operational improvements. That's what we expect also then from the ACM team. SAM has indeed some challenges this year. That's what you have seen in the results. We have the BMW case. We have had a significant hit on the Chinese market. They are very much also FX affected. So the 2027 -- 2026 is going to be less than 2025. But then we expect also a strong recovery. I mean, we have taken out all the negative ones. We have -- if you look into our major restructurings, which we have done, Rheinbollen; we sold Mechelen; we sold Jicin, Safety and Motion plant. We are now going to close next year, Gifhorn. So there is a lot of improvement on the cost side. And we expect now also the team to turn that invest, which we did into that business field into a value-creative improvement of the EBIT margin.

As a follow-up, is it possible to get a bit of an indication how you think about restructuring charges? If you kind of give us guidance for '27, '28, at least whether they're going up or down, stable? And also I'm missing a bit what are the cost savings? You're restructuring a lot, so there might be some cost savings feeding through the business somewhere in terms of earnings improvement, which is, by the way, what you're seeing on UX? There's not a onetime solution for everything, but you are showing some improvement there in User Experience. But can you give us a bit of a steer on restructuring, maybe some of the benefits where we could see them?

Yes, you're absolutely right, Jose. I mean, that's what's needing to come now next year. That's what I said on the Safety and Motion side. I mean, we have taken out a lot of costs. We now need to see the improvement next year. Same applies to User Experience. They need to get better. Next year, we have significantly restructured the ACM on the R&D side. And then we need to see now next year the improvement. That's what needs to come. We expect also that the one-offs, the restructuring cash out is going to reduce next year. But I mean, there are still elevated levels next year, but that still needs to be done. But on the EBIT side, there is actually no reason of why not to get better.

Jose, you see the improvements actually already today and they will -- they are sustainable and going on. And if volume helps us, you will also see the jump in relative margin. But to keep the margin flat or even improve by 10 basis points with over 10% sales drop, I mean that is a testimony that the actions are really working. And they are working exactly in the areas where we informed you about our plans and now execute it in a very disciplined and rigorous way.

It's R&D efficiency, again, not sacrificing our capabilities in that regard, but having a clear focus on the right things and doing it in a very efficient way. And, UX, I mean, it goes -- especially in UX, it goes definitely beyond R&D there, the operational cost performance improved significantly this year. And I think we still have a significant potential in that regard.

We will now take our final question for today. And the final question comes from the line of Stephen Benhamou from Bank of America.

I have four questions, please. Can you hear me?

Yes, we can hear you. Not loud and clear, but we can hear you.

Can you hear me?

Yes. Go ahead.

I have four questions, please. The first one is regarding your sales guidance. I come back on that because the low end of your sales guidance implies revenues down about 4% year-on-year, which is a clear improvement versus Q3. So what gives you confidence in reaching at least the low end of the guidance? This is the first question.

The second question is about the line orders in your EBIT bridge. So the Q3 margin has been boosted by this line orders, which is mainly FX tailwind. What should we expect from this line in Q4?

The third question is regarding your R&D savings. You reached EUR 240 million over the first 9 months of 2026, ahead of your initial guidance of above EUR 200 million. So what do you see for Q4 and for 2027?

And the last question is about your free cash flow and your inventory build. So the free cash flow in Q3 was impacted by your inventory build. So how large was the impact in Q3? And how much do you expect to reverse in Q4?

So Philipp, I start again and then you just -- I mean, R&D, I will completely leave to you. But sales guidance, I mean, yes, I think Philipp said it clearly. The potential to be at the upper end of the guidance is statistically there, but not the most likely one. And we need the 100% recovery with our customers' cost recovery that we indicated to be safely in the guidance range. But that is really the driver. There is some volume impact also, I think Q4, and we have some indication with October that was according to expectations. So the volume will not deteriorate further, maybe stabilize or even increase a little bit.

But the major driver to stay within the guidance will be the success in our cost recovery with our customers. And that obviously then helps all the other parameters like free cash flow, okay? The cash flow will most likely come the next year, but especially EBIT margin accordingly.

The line others is indeed the biggest impact is foreign exchange effect. That's mainly the translation of balance sheet items, receivables and payables in foreign currencies that is helping us. And if I would now know how Q4 would develop in that regard, I think then I definitely wouldn't sit here. Then I would be a trader.

But I -- it's difficult. I mean, we have a good transparency and visibility what our foreign exchange-related pools, currency pools are. But how the currencies really develop, I mean, I -- it's beyond my expertise to make any prognosis in that regard.

And then free cash flow, what was the exact question about free cash flow?

How much inventory in Q3?

Yes, yes, inventory build. Yes. I think I said it in the presentation, it's around EUR 140 million of inventory built in Q3. And that is, by the way, also almost the entire inventory build for the year. So that is, I think, a proof point to what I said because it's correlated with the significant semiconductor price increases. So it's really mainly tactically driven.

Of course, when you have a negative sales development, then you always have with some time delay also to reduce and adjust your inventory that is not always 100% synchronized. But as I said, at least from a working capital standpoint in total, not just inventories, I don't see any negative impact on Q4 free cash flow. So in other words, working capital will stay at least stable.

The portion of inventory in an isolated way now to make a firm prognosis on that is a little difficult because, as I said, we want to increase inventory in or tactically increase inventory in specific areas, especially the TCBs and memories that Philipp talked about. And how successful we will be in that regard with the market demand that we are seeing, that remains to be seen.

But actually, and maybe I shouldn't say that as a CFO, we would take on whatever we get in that regard. And therefore -- but my promise here is also that we will counteract that with other working capital measures and that includes reducing in more conventional inventory pools that we have.

Let me quickly answer the R&D question. I mean we made -- as I said, we pulled forward quite some savings, and that's why the restructuring cash out is a bit higher than we have foreseen in the last quarter. But we cannot now use a run rate of reduction also for the fourth quarter. The major parts have now been done.

In the fourth quarter, there is not going to be a significant improvement in this. We always said we want to have over EUR 200 million and there will be a slight improvement also in the fourth quarter, but not at that same level like it has been in the 9 months.

For quarter -- for next year, we said last time it needs to be above EUR 150 million, what we get on top. That might be now a bit better because we preponed some of the measures already. And -- but that's something which we are working out and we are going to give you as a guidance then for next year. But I mean, this is something you see -- I mean, as we said, we are consequently executing our measures, and we are quite confident that we are reaching the ones for this year and that the ones for next year will be also increased a bit.

Yes. Thank you very much. We have come to the end of today's conference call. Thank you for your participation. Next conference call will be in February next year when we have the full year release. And if there are any further questions, don't hesitate to reach out to us. We're happy to speak to you, and you may now disconnect.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Good afternoon, ladies and gentlemen, and welcome to the Aumovio Pre-Close Call Q3 2026. [Operator Instructions] Please be advised that today's conference is being recorded. Let me now turn the floor over to your host, Lutz Ackermann. Please go ahead.

Yes, good evening, everybody. This is Lutz Ackermann speaking. On behalf of Aumovio SE, I welcome you to today's pre-close call ahead of our third-quarter 2026 results, which will be published on November 5, and the quiet period, which will begin tomorrow on October 6. This call is intended for sell-side and buy-side participants. If you do not belong to either group, we kindly ask you to disconnect now.

Today's call is designed to ensure all market participants have equal access to the latest publicly available information regarding Aumovio's performance. The key points we discuss are also available on our reference sheet, which has been published on the Investor Relations section of our website. Now, just over 1 year after Aumovio's stock market debut, I would like to highlight some of the key milestones and achievements that have shaped the company's first year as a publicly listed company.

We successfully reached a settlement with BMW and expanded our partnership with business awards of EUR 1.5 billion, established our capital allocation framework, advanced our transformation program and executed structural measures to streamline our footprint. Taken together, these actions are strengthening Aumovio's competitiveness and creating the foundation for sustainable value creation and future growth.

While we continue to make good progress on our strategic measures, the underlying market environment remains challenging. According to September Mobility data, global light vehicle production declined by 2.3% year-over-year in the third quarter. Ongoing geopolitical tensions in the Middle East continue to contribute to an environment of elevated uncertainty for the global automotive industry.

In Aumovio's key European market, production remained broadly stable year-over-year, while North American production declined by 3.8% and China recorded a 5.5% decrease. The weaker performance in China was primarily driven by subdued domestic demand, although the impact on production was partly offset by continued strong export momentum from Chinese OEMs, which are further expanding their presence in international markets.

China remains an increasingly important market for Aumovio, where the company continues to see additional growth potential going forward, having reorganized our operations there. Aumovio is also well positioned to participate in the growing international footprint of Chinese OEMs, supporting growth opportunities both in China and across global markets.

Our sales development continues to be influenced by regional production trends, portfolio measures, the phaseout of lower-return business activities and foreign exchange movements. Foreign exchange effects remained a headwind in the third quarter, however, at a lower level than observed in the first half of the year.

From a sales perspective, we currently expect the third quarter to mark the trough of the year before sales accelerate in the fourth quarter. On the earnings side, our continued focus on self-help measures, operational improvements and restructuring execution continues to support profitability with the restructuring program and expected savings progressing as planned.

We continue to expect the second half of the year to be stronger than the first half and remain confident in delivering our full-year outlook. Price recoveries and customer compensation mechanisms require an explanation of the underlying cost increases and subsequent alignment with our customers. Consequently, the larger portion of the related recoveries is now expected to be recognized in the fourth quarter, while the associated cost increases are already reflected in the first half of the year and the third quarter's earnings.

As a result, we currently expect third-quarter profitability to be at the lower end of our 3% to 4% margin range. The fourth quarter, by contrast, is expected to benefit from the recognition of customer compensations and reimbursements and, as in prior years, deliver an improved margin profile compared to the previous quarters of the year. Nevertheless, the timing of customer compensations and reimbursements does not change the underlying trajectory of the business.

Overall, business development will be supported by operational improvements as well as the continued execution of our restructuring program and the delivery of associated savings. Free cash flow generation remains one of the highest priorities at Aumovio. While cash generation in 2026 continues to be impacted by restructuring and transformation-related payments, the underlying cash-generating profile of the business continues to improve.

During the third quarter, we continued to see disciplined spending across the organization. Both capital expenditures and overall cash spending remained under tight control, reflecting our continued focus on efficient resource allocation and value creation. We have also continued to make progress in managing net working capital, which remains an important lever for the cash generation and financial flexibility.

At the same time, it is important to remember that we expect selective inventory increases to strengthen our resilience in a volatile semiconductor and geopolitical environment. Free cash flow in the third quarter was additionally impacted by the initial cash payment related to the BMW Group settlement. Aumovio made a payment of EUR 100 million at the end of September, which fully hits adjusted free cash flow in the third quarter, while only 1/3 of the payment is reflected in normalized free cash flow.

The remaining approximately EUR 250 million is expected to be paid in the fourth quarter. For the full year, the BMW Group settlement will reduce normalized free cash flow by approximately EUR 150 million. Adjusted free cash flow will be impacted by a further approximately EUR 200 million, resulting in a total settlement-related cash outflow of roughly EUR 350 million. Overall, we remain focused on working capital discipline, portfolio optimization and improved earnings quality in order to further strengthen cash generation over time.

With regard to our transformation program, execution continues according to plan. We remain focused on reducing complexity, increasing productivity and bringing our cost structure to a competitive level. This also includes ongoing portfolio optimization initiatives. Over the last weeks, we completed the divestment of our plant in Belgium and signed the divestment of our cleaning business in the Czech Republic, with expected completion by end of 2026.

Another key objective is the ongoing R&D transformation, where we remain on track to reduce our R&D-to-sales ratio to below 10% by 2027. We continue to focus our development resources on technologies with the highest value creation potential, intensify collaboration with ecosystem partners and implement additional efficiency measures across our global R&D network.

Execution remains strong with EUR 115 million of R&D-related savings realized in the first half of 2026, more than EUR 200 million expected for the full year and further EUR 150 million planned for 2027. Looking ahead, our ambition is clear -- to move from restructuring and efficiency to profitable growth. Transformation is a journey, and we have deliberately focused first on shaping our organization, reducing capacity and boosting efficiency to ensure distinct competitiveness. We have been foreseeing strong headwinds, and we have acted early.

So, we feel comfortable to the future to come. And this is also why we are now turning our organization towards growth. Now, let me provide an update regarding raw materials and memory products. We continue to observe elevated volatility in a number of raw material markets. However, for the majority of key raw materials, we have sustainable solutions with our customers in place that help mitigate the impact of raw material market volatility over time.

Semiconductors remain an important part of products across the automotive industry and therefore naturally also for Aumovio. We are one of the key purchasers of semiconductors in our industry and therefore also for memory chips. At the same time, given our portfolio profile, we are not over-indexed in memory content relative to the broader market.

For 2026, we have secured our supply requirements. Our focus now shifts increasingly to 2027, and we are currently aligning with customers the mechanisms on how to deal transparently and efficiently with the future volatile cost development.

Here, we expect to make further progress over the coming months. Before I conclude today's call, I would like to highlight one final point.

Earlier, I spoke about sales expectations for the third quarter and about growth ambitions prospectively. Against this backdrop, it's encouraging to see that one of Aumovio's most important future growth drivers continue to develop very positively, our partnership with Aurora. I had the opportunity to attend Aurora's Investor Day in Dallas in person and came away with a very positive impression.

The key message was clear -- the discussion is no longer about whether the technology works, but about scaling deployment and commercial adoption. Aurora reaffirmed its ambition to deploy more than 30,000 driverless trucks by 2030, supported by strong customer demand and a growing partner ecosystem. For Aumovio, this provides further confirmation that we are partnering with one of the industry's leading players in autonomous trucking.

We continue to expect the Aurora project to become a revenue contributor from the second half of 2027 onwards with the most significant growth contribution expected from 2028 and beyond as deployment scales and commercial adoption accelerates. That concludes my remarks for today. As always, I'm happy to take your questions now. Operator, please take over for the moderation of the Q&A session.

[Operator Instructions] And your first question today comes from the line of Christoph Laskawi from Deutsche Bank.

Two, please. The first one, could you just comment if management made any statements or there was further detail provided in recent meetings, if the decline of the margin in Q3 versus Q2 underlying is primarily volume driven and with the top line as the main driver? Or was there any incremental cost headwind in Q3 over Q2? And then just on free cash flow. Was there anything extraordinary outside of the EUR 100 million either to the positive or negative? Or should it follow outside that the usual seasonality with regards, obviously, taking into account CapEx and working capital comments that you made?

Yes, thank you, Christoph, for your questions. On the margin development, Q3 versus Q2, it's primarily the effect from costs that we had for higher raw materials and for memories, but not yet the compensation. And I think we make very good progress. We're tracking intensively where we stand each week with regard to the compensations we get, but it's simply a matter of timing. So, as much as we make good progress here and there, it takes a bit of time. And this is why we have more cost in the third quarter, but not yet the full compensation. It's basically that.

Apart from that, as I just pointed out, we made good progress on reducing our structural costs with regard to R&D. So, with regard to that, we make very good progress. It's simply a matter of timing. Apart from that, we are very well on track.

With regard to your second question on free cash flow, it's basically the normal pattern. I think we do make progress on streamlining our operations. And as that is the case, we also improve on net working capital that we have.

Of course, when we speak about higher cost on memories and raw mats, that also applies to a little -- to a certain extent on free cash flow, but that's in line. We have been, again, very disciplined on CapEx spending. So, here as well, we are on track and only see those effects I just mentioned.

[Operator Instructions] And your next question comes from the line of Vanessa Jefferies from Jefferies.

Just wondering on the cost recoveries in Q4. Is there any chance that these slip into next year? Is that something a couple of your peers are highlighting?

Yes, thank you, Vanessa, for the question. So, that's not what we see today. I mean, we make very good progress on -- in the negotiations we have.

Of course, and this is what I pointed out earlier that as of now, pretty much the discussions on 2027 volumes begin. This is something that we have. But for 2026 for those volumes, we are confident to see a large majority of that to be finalized by the end of this year.

And then just wondering if you have any comments on order intake and if that's picked up in the first half unless I missed that.

Yes, I think order intake has been okay. So I think this has been a bit better than recently. I think we have to, a little bit, differentiate between top line and order intake as much as order intake was a touch better than we've seen the trends earlier in the year. Top line was a bit more difficult or, let's say, developed a bit more softly in the third quarter, but I think this has already been discussed in earlier touch points, communication touch points that we had. Order intake was okay, I would say.

And then a quick one. I know you just mentioned more positive coming away from Aurora and expect growth from '28 onwards. Is that a push out of late '27? Or is it just that late '27, the volumes are so small, the real growth comes in '28?

Yes, it's pretty much that. So, there's no change to communication. I mean, second half of next year, as always, as we always said, we expect first sales, but only to a limited extent. This is why I said 2028, you will see a more substantial pickup in sales, but this is the normal ramp-up that we foresee, no postponements. It's rather the opposite. I think that came out during the Capital Markets Day that there was a strong commitment to volumes and trucks that are expected for 2030, the 30,000. So, that was rather a confirmation than a postponement.

And the next question today comes from the line of José Asumendi from JPMorgan.

A couple of questions, please. I apologize, I joined slightly late. The Q3 on the adjusted, am I understanding this right that the comments from your previous meetings and management team have been more or less in the direction of the lower end of the margin range on adjusted in Q3? And is there any sort of magnitude in the delta between the adjusted and reported that we should be aware of for the third quarter?

Yes, I think that's right that the third quarter should -- on the EBIT adjusted margin side, on the lower end, I can only repeat what I said earlier. It's rather on the 3% side of things. If it comes to EBIT as reported, this is what we have to see.

I mean, it's always like what kind of restructuring charges you can book as a one-off. This is too early to say now, but there's no change with regard -- I mean, what we always said with regard to restructuring charges on the free cash flow side that we expect the EUR 600 million, of which EUR 400 million, let's say, are restructuring-related, EUR 200 million are related to BMW. If it comes to, let's say, the P&L items, we have been not so explicitly for the third quarter. That's too early to say.

Got it. And then on a full year basis, have there been any directions in terms of the midpoint of the margin range guidance for '26 or the lower end or the upper end? Any additional color there?

No, that's unchanged. As I said before, as much as we make good progress on the compensations we collect -- for sure, timing is an aspect, but there's no change in direction. We have to see month by month and -- but that's unchanged.

We look confidently into the full year with all the changes we have, for sure, there are also some risks, but that's normal course of the business. So, we have to discuss that when we are getting closer to the end of the year.

There are currently no further questions. I will now hand the call back to Lutz Ackermann for closing remarks.

Yes, thank you, operator, and thank you, everyone, for participating in today's call. Just remember that we will enter the quiet period tomorrow on October 6. Over the coming weeks, you will once again be approached by Vara, our external service provider for the compilation of consensus estimates.

We highly value your participation and contribution. Thank you for your continued interest in Aumovio. We look forward to speaking with you again on November 5 when we publish our third-quarter results for this year. Have a nice evening, and goodbye.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Yes. Hello, everybody, again, and welcome to our Q&A session, which we have now. First of all, as [Daniel Bowinmen] just said from EQS, we have to apologize for the technical issues this morning. The provider had some technical problems that are hopefully solved now. And as we switch the format here to this tool, we now hope that we can go into the Q&A session without any interferences. Maybe [Mr. Bowinmen], you can once again say how to raise a question. There's already a first one, but maybe once again, how that works because I think there have been some questions with regard to that.

[Operator Instructions] We have already two questions in queue.

First question comes from Christoph and hopefully, you can hear us. And Christoph, please go ahead.

I hope you can hear me now. Just checking on that.

Yes.

Excellent. That's a good sign. I'd like to start with the capital allocation framework and the share buyback. Obviously, right now, you don't have the approval. You need that from the AGM. But once you have it, could you please comment on if you would be willing to start with the share buyback in '27 already right away? I mean, obviously, your guidance would be for free cash flow potentially close to 0 as a stated free cash flow, but you seem very confident in your cash generation also looking ahead and you have the balance sheet to start. So that will be the first question.

Then the second one, if you would target a tender buyback or an ongoing buyback in the market. And then as a second question, it's potentially still a bit early for that, but could you comment on '27, just roughly what you see in terms of sales momentum, how the phaseout business and the divestments or portfolio management would impact potentially '27? And also when you think about the pass-throughs to the OEMs, you said you reached some progress already on the DRAM side. And I think you wanted to negotiate part of '27 already, too. If you could factor that into the comments as well. And last question will be, when can we expect an update on UX and a final decision if you want to sell it or keep it?

Okay. Should I start with the capital allocation and then maybe, Philipp, if you want to take the other two questions. And thanks everybody, thank you for taking your time again to connect a second time with us today. We really apologize and we really hope that now for the next 30 minutes, this will work well. Christoph, thanks for the question on the capital allocation framework and the share buyback.

Exactly. First of all, we would need the AGM approval in next AGM is set up for, planned for May 2027. And then it really depends on our cash flow -- free cash flow development in '27 and also our expectations how the overall cash flow situation will develop. As we clearly stated, we think about the distribution or using for share buyback program, the excess free cash flow, so after dividends and also after potential M&A. And we will then see in the course of next year what the outlook for this excess free cash flow would look like.

The question on what format we would choose the open market buyback or a tender. We have not yet decided while at the same time, we think that for our situation, there are a lot of arguments for going with an open market share buyback.

Can I ask a follow-up to that, please? So just on the timing of the share buyback, just to be precise on this, are you ruling out, you start in '27 and you will only use the '27 cash flow in calendar year '28 to start buying back shares? Or is '27 very much an option to use cash and start the buyback?

I'm actually not ruling out that we could start in '27. So first half of '27 because of the timing of the AGM is I can rule out. But then in the second half of next year, it really depends on how we start into '27, how the free cash flow development will be and what else we see as capital needs for 2027. But it's too early, obviously, to really say yes or no, but I would definitely not rule it out for '27. Is that precise enough? I guess that's what I can say right now. Christoph can you hear?

Yes, thanks. That was clear.

Okay. Then I take over. We have -- I mean, our view on 2027 is that we don't see a significant improvement in the market conditions. So I think it's fair to say that the markets are going from our point of view, going to be relatively stable and not going to grow next year. And consequently, we at Aumovio see then a similar development year-to-date, but it's actually relatively early in the year to already phrase clear expectations towards the next year.

What we do see is, I mean, we are discussing with our customers, as I were mentioning in the morning, intensively over the rollover of -- or participation of these customers into the additional costs where we made significant progress. Which is, as you all know, in our industry as automotive supply always back-end loaded. So that comes then like in the last year's -- in the second half of the year because you first need to record the raw material costs and then you can discuss them. And that is then also something which we are preparing for 2027 with our customers where we are also seeing a lot of positive momentum to deal this situation in a strong partnership together going forward.

With regards to User Experience, we always said we are in a strategy process, and we have -- we are in the mid of it. We will come to in a discussion in the second -- a decision in the second half. Exact date, we're not going to mention. But as you have seen, User Experience makes significant progress. Also from the bottom line and turnaround perspective. And that's something which we are going, as I said, going to mention of how we are going to deal with that portfolio part in the later part of the year.

Then the next question comes from Stephen Benhamou from Bank of America.

I have three questions. The first one is a follow-up on Christoph's question regarding capital allocation. So more on dividends. Despite the likely net loss in 2026, is it fair to assume a potential dividend distribution as of 2027 based on 2026 results given your strong net cash position? This is my first question.

The second question is regarding the restructuring charges. Can you please give us an update of what you anticipate in terms of P&L impact and cash impact for 2026? And what's your view for 2027 as well? And the last question is regarding Aurora. So you are mentioning that you will reach the industrial scale from H2 2027. My question is simple. How many trucks you need to be on the road to reach a breakeven in terms of EBIT and free cash flow?

Okay. I start with the questions on the capital allocation framework, the dividends, in particular, I hope that I understood the question correctly. You asked if it's fair to assume that there will be a dividend for '26 and '27, given that we have a net cash position. And this is not what our capital allocation framework is suggesting. We say that we pay dividends from a net income, a 30% payout ratio, around 30%. That is what we are targeting. And if there is no net income, then there will be no dividend.

I think it's also important to understand that there is a second element, as discussed a few minutes ago, the share buybacks, and that is linked to excess free cash flow that we are going to generate. But if there's no positive net income for '26, then we are not going to pay out the dividend and in particular, not from the net cash position because the net cash position, we want to keep because this is providing us financial flexibility and is also a factor that is differentiating us from our competitors and is important to keep that balance sheet strength.

With regards to P&L impact, restructuring, there has been, as you have seen, a significant portion of special items affecting our earnings already in the first half of the year. We do not give a guidance for the overall amount for special items or restructuring-related items for the full year. But what we are expecting is obviously then embedded in our guidance. We are not guiding reported EBIT, but we are guiding something on net income where we say that overall, at the end of the P&L, we are expecting an improvement compared to what we have showed last year.

To follow-up on this one, if you don't mind. Is there any reason to anticipate any further restructuring as compared to what you've already recorded in H1?

I think it's too early just being in the middle of the year to rule out that there will be more to come. However, what I can say is that for the ongoing restructuring programs, we have built respective provisions, and they are already embedded in our financials.

I think it's fair to mention that in automotive, you will always have smaller restructuring. But as said, there is no big additional one to be foreseen. Shall I answer the question?

Yes, please go ahead.

Yes. With regards to Aurora, this one is a real innovation and technical breakthrough. I think there we all agree that we say H2 2027 means we will most probably see that more back-end loaded and then in 2028 and then significantly ramping up then in 2029, the amount of trucks equipped with the Aurora driver and then consequently with our hardware kit. What we do is we have an agreement that we sell these parts hardware-as-a-service. So we do get the compensation per mile driven. So the topic is not necessarily that we need to have -- but I mean, the more trucks on the road, the more driverless miles are driven. But first of all, and important is how many miles are driven. And that's something which we are -- where we do foresee a relatively fast improvement to the bottom line, but we are not disclosing how many trucks or miles we need.

Okay. And the next question comes from Michael Punzet from DZ Bank.

I have one question with regard to your ADAS business. My impression is that we currently see a trend from Level 3 down to Level 2+ and 2++. Is that something you can confirm with regard to your order book and with regard to your request for projects from customers? And maybe you can give us any kind of guidance what will be the difference of content per vehicle between Level 3, Level 2+ and 2++?

Philipp, you want to take over here?

Okay. Yes. So we also -- and that is -- it depends significantly on the region you're looking at. If you look into the Chinese market, you do see a significant improvement means a level up in the market where Level 2, Level 2+ and then also Level 3 is being introduced. In the European market, it is actually the trend you are mentioning already that markets are less -- that the technological movement from 2 to 2+ to 3 is less pronounced than in China as the local content and the costs, of course, are different. But in regards to what are the exact difference in overall content per vehicle, that very much depends on what you're actually wanting and willing to deploy. So that is a figure which is very difficult to be mentioned and generalized.

Okay. There are currently no further questions. Maybe as a last reminder, if you want to ask questions, that would be time now to go for it. Otherwise, we would come to the end, but maybe one last chance to raise your hand. There are no further questions. So with this, we've come -- Sorry.

Vanessa, you can go ahead.

Can you hear me?

Yes.

Okay. Sorry, having some IT issues myself, so I sympathize. Firstly, just interested in hearing more about your level of desire to do M&A and what focus areas you're thinking of. Obviously, it's a tough sector, but I guess there's also a good opportunity for consolidation on your side. So just keen to hear about what you're thinking about? Is it something I didn't expect you to talk about today?

And secondly, if you could just talk a little bit more about the order book, which was obviously significantly down year-on-year. I mean I know there's delays and timing differences throughout the year. But if you could especially speak to percentage of Chinese OEMs, which was maybe a little bit lower than expected? And if you could talk about your progress there in China.

And then thirdly, obviously, we know the market changed last year since you spoke at your CMD and your sibling company has had to come out last week and lower 2028 targets. So just wondering, do you need to have to think about the EUR 20 billion to EUR 22 billion medium-term sales target? Or is that something that you might make up with M&A?

Philipp, do you want to take the first one?

Yes, I can take -- I mean, I have understood the first and the second part of the question. The third one, I had problems, I think acoustically to understand. The first one -- very loud. Just a second. We do have -- in terms of M&A, what we want to do in our capital allocation strategy is to build up our operational existing business and to invest into projects where we do see value creation potential. That is, first of all, organically. The second one is then to say, if we do see chances to extend our portfolio and to make add-on acquisitions, which creates significant value creation potential for us, then we are also willing to invest into M&A. But there are no concrete targets and no concrete time line to do so. That's with regards to M&A.

With regards to the order book, we have had a significant order intake in our Asian region. On the one hand side, in China, where we continue to have significant successes specifically also with Chinese OEMs, where we are basically now at 3/4 of our order book ruff-tuff meanwhile. And we do see a lot of interest to work with us not only in the local Chinese market, but also to support the expansion and globalization activities of our Chinese OEM customers. What we do see, and that's why we are a bit shy compared to previous year is that we still have with the traditional OEMs, specifically in Europe, still a lag and a delay of order intake, which we are swapping into the third or even the fourth quarter. So there is still a robust project and product pipeline, it's just not yet decided.

And the third one, I really need to -- sorry that I haven't understood. Maybe I took as it that's all.

That was on the midterm targets, if I understood that correctly. Yes, I can take that, Philipp.

Yes, that would be great.

So I think we remain convinced that the fundamental drivers of our business are intact. And we also all agree that the market environment has become more challenging, and we remain very mindful of the overall macroeconomic and geopolitic backdrops that we have seen, particularly in the first half of this year and that those obviously could also have further effects going forward and overall conditions could deteriorate further.

So that's -- first of all, we remain very focused on what is under our control. And second, we assess what the implications on any midterm targets would be. We have never precisely said that what we mean with midterm. But obviously, as we are moving from capital markets further into the future, midterm targets will become closer. We are now starting our budgeting and planning process and we'll assess the situation. And if there are any changes also with regard to the midterm targets communicated previously, we will obviously communicate them.

Next one will be José Asumendi from JPMorgan.

Hopefully, you can hear me. Can you hear me?

Yes.

Just 2 questions, please. As we think about '27, '28, the opportunity is clearly there to improve the profitability for SAM and UX. Can you describe a little bit in the planning, which actions do you have across both divisions to improve the profitability? And maybe what Philipp was mentioning also that update around UX, -- maybe I misunderstood, but maybe there's potentially an upcoming update on UX, which could materially improve the profitability of this division.

Second would be around Q3, short term, anything you think we should be mindful of? Any negative or positive one-offs we could be thinking about for Q3? Yes, those two elements.

Philipp, do you make a start here on UX and SAM next year, profitability?

Yes, I can make a start. I mean we are working now, as you know, José, for quite some time on overhauling our product and project portfolio. We have also significantly invested into disinvestments and into restructuring. So we do see an overall improvement of project and product profitability going forward. And a lot of our restructuring efforts are going to take real grip the next year. I mean we mentioned that we are going to have EUR 150 million less R&D -- net R&D costs in 2027 versus the 2026 on top of the EUR 200 million. We do see now that the plants are going to fall out of our portfolio. So we have managed to have a lot of measures taken into place, which should help then in the next years to improve the bottom line going forward.

And as I said, on the User Experience side, also there, we do see significant improvements on the profitability side, and we are going to go into the strategic review and the strategic decision of how to continue with User Experience then in the second half of this year, I mean, basically somewhat beginning of fourth quarter, I assume.

Okay. Then I take the question with regards to Q3. I think it's fair to say that Q3 has started broadly in line with our expectations. Overall market environment remains challenging and therefore, so overall visibility is a bit limited. And as also very usual, the summer season is a bit slow. Looking ahead, I think that we can reiterate that we expect the overall profitability perspective to be better in the second half than in the first half of this year, supported by the ongoing execution of our structural measures as well as the typical phases when it comes to R&D reimbursements at the end of the year. And as we explained before, the compensation by our customers for the cost increase that we are experiencing.

And Philipp said before, we are negotiating with our customers with regards to the cost recovery, and we are seeing progress, and we expect that to see in the second half of the year. And also, as Philipp explained before, you first have to see and realize the cost before you can discuss with customers how to and when to get it back. So if that would only come later in the year, that would probably not be a surprise. But all in all, I think it's important to reiterate that the significant improved profitability that we have previously stated for the second half of the year, that is something that we are still expecting. And that is also reflected in our overall guidance of the adjusted EBIT margin of 3% to 4% for the entire year, taking into account the BMW effect.

So just apologies, my line went down in that particular moment where we were talking about the profitability for the second half. So second half margins higher than the first half for the group. Is that what you just confirmed that?

Yes. It will be 3% to 4% from next year.

Next one will be Alexandre Raverdy from Kepler Cheuvreux.

I would like to quickly follow up on portfolio diversification and the non-automotive activities. In particular, I was wondering whether you could provide an update on the potential partnership you have with Mentee Robotics and whether you see other opportunities in humanoids?

Philipp, do you want to take that?

The question was our partnership with Neo Robotics.

Mentee, Mobileye.

Mentee, okay. Sorry. I was just wondering whether -- since we have such a partnership, no. But with Mentee, we are working on the industrialization of the respective humanoid robot. We are in intense discussions with Mentee or Mobileye and are working on it. And I mean, news and new developments are only going to be expected later this year. I mean it takes still some time to define and how fast are we able to take that part then over and the necessary feasibility is currently, as said in investigation, but we do make considerable steps forward in that area. We have a dedicated team working on it and look forward to the results.

So there are no further questions left.

Okay. Thank you very much for the participation. And once again, thank you for your time to participate in this only Q&A call. And if there are any further questions, you can approach the IR department at any time. Now we've come to the end of the Q&A session. You may now disconnect. Bye-bye.

Thank you.

Bye.

Ladies and gentlemen, hello, and welcome to the H1 2026 Aumovio Investor and Analyst Call. The conference will be recorded. [Operator Instructions]

Let me now turn the floor over to your host, Lutz Ackermann.

Thank you very much and a warm welcome to everyone joining us today for Aumovio's H1 2026 results presentation. Joining me for today's presentation are our CEO, Philipp von Hirschheydt, and our CFO, Jutta Donges. As always, all relevant documents are available for download on our IR website. Following our remarks, we will open the line for a Q&A session with our sell-side analysts.

I would like to hand over to Philipp. Philipp, please go ahead.

Yes. Thank you very much, Lutz. I'm very happy to be here today after missing the Q1 call. I'm really excited to share with you our latest news. So we are now close to one year a standalone company, and what you will see and what you have seen already is that we again made big progress. One of the progress you can see here, and I guess after you most probably have seen this slide, you're very familiar meanwhile with that slide. I will try to summarize it very shortly. BMW has been always one of our main innovation partners. As a very innovative company, we have been working with them on many different projects, which we first brought to the market together with BMW. That's why we are very happy to be back and to deepen our long-term cooperation and strengthen the technology partnership with a very diverse portfolio of new businesses ranging from brake technologies, access systems, and different other electronic solutions. So a portfolio of different projects which we agreed upon and which are around EUR 1.5 billion lifetime sales.

For our MK C2, our integrated brake system, we agreed to deliver and to extend the series deliveries through the mid-2030s. While paying these EUR 350 million, which are scheduled to be paid in Q3 and Q4, we have finalized our warranty case, and we are happy to be back there with BMW, extending our portfolio and working on new and fresh products. And we have started actually with the first workshop the day after our announcement.

What you see on the next slide is then our financial results, where we have in a demanding environment, where our sales went down with close to 8.5% made before the BMW agreement, just roughly EUR 4.3 billion sales. And we managed while having these sales down to keep our margin of 3.5% in the second quarter, although we have had one significant positive one-time event in Q2 last year in User Experience. So we do reflect this result as a very decent one and very confident that we will build on to this result and now also into the second half.

The normalized free cash flow is slightly below zero, and that's mainly due to the fact that we have had higher variable compensation payments than we have had last year. That's something we actually also deem to be necessary for our organization, because why have we been missing or have been negative because we had higher variable compensation payments. As you know, we are forming our organization into a high-performance organization, where we do say that we are very tough on fixed costs, but if we do have success in 2025, we have deemed to be a very successful year. So variable compensation, we also pay out to have our people participating in successful financial results. And that's why we had in the second quarter, a significant cash out, also compared to last year, significantly higher.

If we're looking onto the customer side, we have seen that we have major project wins in Asia across all business areas. What we see that the size, the structure of our order intake is quite fine, and we are happy with that. We do see that there are still challenging decisions in a challenging environment, specifically in Europe, where we do see that sourcing decisions have been moved into the third and the fourth quarter. So it means we have not really lost projects, and we still have a very robust project pipeline. We have seen the EUR 1.5 billion BMW, which we will record now in Q3, but we have already managed to get some other projects in. We are quite confident to reach our goals here in 2026.

Within Q2, we have successfully completed the sale of our Rheinbollen plant, and we have at the beginning of the quarter, also signed a sale of our Mechelen plant in Belgium. The transaction is expected to be closed in the third quarter. With that, we come closer and closer to our ultimate goal to have less than 45 production locations worldwide, which shows our clear commitment towards operational excellence and to have production costs into the right direction.

About R&D, I'm going to talk later as well, also there we are full on track. We have delivered and will deliver measurable savings. You will see for the first half, already above EUR 100 million Jutta will show. We expect them to be at more than EUR 200 million and additionally to EUR 150 million next year in order to reach our target to be below 10% in 2027. Yes, and then one topic on the customer side, we have made quite some progress on the compensation for higher memory and raw material costs. I mean, we have concluded with the first customers. And we do see that these significant headwinds, which we experience, we can discuss with our customers quite intensively and made, as I said, quite significant progresses.

Today, we will also mention the long-term updated capital allocation framework. Jutta will explain what we have established. And I think on the one hand side, we will preserve our financial flexibility as well as supporting then the long-term value creation. That should serve as a compelling foundation for all our shareholders.

Gabriel, do we have it? Okay, the slides are back. What you can see here is that this slide shows that our technology thrust strategy is translating into tangible commercial proof points across all our four business areas. So our purpose is that we make mobility safe, exciting, connected, and autonomous. And we do see that we have significant customer tractions through different awards, through launches, and also through ecosystem progress.

As you can see, for example, the ecosystem progress on the Autonomous and Commercial Mobility side, where our AD components continue to gain market relevance, in that our radars and sensors are being qualified for all leading AD stacks, example here, NVIDIA and others. So we do see that we gain traction, not only on the Aurora side, which I am going to go a bit more into detail on next slide, but also on the pass car side. I come to that as well on our Architecture and Network Solutions, HPC wins. On the commercial vehicle and specialty vehicle side, we have further broadened our portfolio. By that, diversifying out of the pure pass car business into commercial and specialty vehicle business, in a region and an area where we do see quite some growth and quite some potential for us.

On the Architecture and Network Solutions, we can see here we have important wins in high-performance computing, specifically with one of the emerging autonomous mobility provider, from the U.S. We have won businesses on the telematic side, on the zone control side, and on ultra-wideband-based. And that's where one of our focuses are, is in Asia, where we do see significant improvement and significant potential for our business.

In Safety and Motion, we continue to see strong customer demand for safety-critical technologies. I think recent awards, specifically in China, for airbag control, One-Box and other braking-related solutions, are showing our success here. Also in Europe, we have reinforced our business with two other European OEMs with various awards.

In User Experience, we secured two series production awards for our under-display camera technology across LCD and OLED technologies. You can see that across all our four business areas, we are operating in attractive technology fields, which is reinforcing our confidence in the competitiveness of our portfolios, and then also the future growth capabilities and abilities in our industry.

Let me today focus one more minute on one of our highlights in our portfolio. That is our partnership with Aurora. For us, the direction is very clear, and that I think we can all agree upon. With Aurora and the ability to scale autonomous trucking, we have a great chance and a great future ahead of us. We do see that the structural pressures in the U.S. trucking market, particularly the driver availability and capacity constraints, are accelerating, and that the interest in these autonomous freight solutions are constantly increasing.

Some of you might have followed up to recent U.S. policy discussions, which include programs which are aimed to bring more veterans into truck driving as we do have really a scarcity here, which underlies that the industry demand is increasing for technology that can add capacity and, that's one very important part, increase the asset utilization for carriers. So we believe that this will create a long-term market with significant upside potential for this partnership, for Aumovio and together with Aurora. That's one of our highest strategic priorities where we are working on, and you're following up now for the last four years. And We come closer and closer towards the production, and you see that it's going to be second half of next year. It's an innovation. It might be some days earlier, some days later, but we are very confident that we are going to get there.

What you see here, and that's what we wanted to demonstrate, is Aurora is, from our point of view, the industry leader in safe driving freight with the most mature partner ecosystem to deliver then these solutions at scale. Aurora launched its first generation of driverless trucks last year and has expanded its network to support 10 driverless routes in the U.S. Sun Belt. And this expansion is accelerating customer adoption, and Aurora has now nine driverless customers. And customers you might heard of it, like Hirschbach, are now planning to buy 500 trucks, and delivery will start then next year. So this further reinforces the opportunity for us to deliver this transformative product at scale.

Aurora now, and we might have seen that last week, they deployed its second-generation driverless trucks without a person behind the wheel to meet this accelerating customer demand, a very important next milestone. And the third generation is then with our hardware. Today, Aurora expects to deploy 200 driverless trucks on the road by the end of the year. And what we are doing is now we are -- that's our proof points, which we wanted to share with you today here is that we have the design validation started. We have -- and that includes validation tests and equipment readiness and the calibration facility here in Germany in Ingolstadt is already operative. In New Braunfels in Texas, we extend our facility. You might have heard we are investing more than USD 100 million. [Foreign Language]

Hello? Operator?

Yes, you can go on. Thank you.

You can move on.

Okay. I mean, now we really need to hurry up. Okay, then we have the new robotics. I mentioned that, and we are on the course of having the Fallback path field test done. Five sensor trucks collecting target routes in the U.S. Yes?

Now, we are back again.

Okay. We are back again. Good. Okay. So I have explained a whole and in great detail shown you what technology, what awards, what ecosystems we are building up in all our four business areas. While doing that, and that you see, we focusing our R&D on innovation, and we do not rest to invest into the future. And innovation is nothing which we are reducing in invest, but we also need to take care of having a competitive R&D cost per sales. That means our holistic approach has diverse measures which we are executing. And you can see here, we are sticking to our goal to have long-term, less than 9% R&D. We are preparing ourselves this year in order to achieve also our long communicated target to be a single-digit R&D to sales already next year.

With that, I leave it, and hand over to Jutta. I'm very sorry for taking too much time.

Well, that's okay. Thank you, Philipp. A warm welcome to everyone also from my side. Apologies again for the quite bumpy start this morning and the technical issues that we are still experiencing. So hope that we get through that call now in the remaining time.

I'm going to talk about the numbers. And just as a remark upfront, to provide a clearer view of our underlying business performance, all comments on Q2 and the first half results actually refer to the figures excluding the BMW settlement effects, unless I stated otherwise. While the settlement had a significant impact on reported EBIT and adjusted EBIT, our underlying financial performance remained relatively strong. This is the focus of our discussion today. Let me start with an overview of our Q2 performance.

Adjusted sales in Q2 came in at EUR 4.3 billion compared to EUR 4.7 billion in the prior year quarter. The decline of 8.6% was mainly driven by volume and price effects of EUR 231 million, portfolio management measures of EUR 160 million, and a negative foreign exchange translation effect of EUR 60 million. Despite the lower sales base, our adjusted EBIT margin remained stable year-over-year at 3.5%. When taking into consideration that the second quarter 2025 margin was elevated by reimbursement effects in User Experience, as also Philipp pointed out earlier, our underlying profitability of the second quarter was in fact stronger than in the second quarter in 2025. This resilience reflects the continued benefits of our transformation measures, disciplined operational execution, and our ongoing R&D efficiency improvements.

Now turning both normalized and adjusted free cash flow were lower than in the prior year quarter. The main driver, also Philipp mentioned that already, was higher than prior year variable compensation payments. These payments represent a recurring seasonal cash outflow in the second quarter and were partially offset by lower CapEx. Adjusted free cash flow was impacted by ongoing transformation effects, including spin-off and restructuring cash outs.

Now turning to the next slide 10. Turning to our first half-year performance, adjusted sales amounted to EUR 8.7 billion, representing a decline of 8.2% year-on-year. This development reflects the impact of ongoing geopolitical uncertainty and continued softness in the automotive market. In contrast to sales, profitability continued to move in the right direction. Adjusted EBIT margin increased from 2.7% to 3.0%, driven by the ongoing impact of our transformation measures, cost discipline, and further R&D efficiencies despite sales and cost, material cost, and memory cost headwinds.

Normalized free cash flow improved by 34% year-on-year to EUR 130 million, mainly driven by lower CapEx. Adjusted free cash flow, however, remained on prior year level, primarily driven by increased restructuring cash out. Overall, the first half of '26 shows that even in a challenging market environment, we are able to improve our profitability.

Now, on slide 11, let's have a closer look at the key financial KPIs for the first half-year, and I start with the development of our top line. As a reference point, adjusted sales in the first half-year '25 amounted to EUR 9.5 billion. During the first half-year, our adjusted sales performance was also influenced by the continued execution of portfolio and footprint measures.

These effects amounted to minus EUR 196 million, primarily driven by the discontinuation of the display business in User Experience amounting to EUR 130 million, as well as the phase-out of contract manufacturing, contributing minus EUR 66 million. Excluding these portfolio effects, sales for the first half-year period came in at around EUR 9.3 billion. Looking at the remaining drivers, H1 was characterized by two items. Sales were further reduced by EUR 586 million, with the largest share coming from lower volumes and pricing effects of EUR 434 million, as well as negative foreign exchange translation effects of EUR 152 million. Accordingly, adjusted sales amounted to EUR 8.7 billion in H1. From a regional perspective, adjusted sales exposure remained unchanged to previous quarters.

Now, let's have a look at the key effects of the adjusted EBIT year-on-year on slide 12. With H1 2026 adjusted EBIT margin coming in at 3%, we have achieved an improvement of our profitability compared to the first half of '25. While adjusted gross profit decreased by EUR 96 million in absolute terms year-on-year, improved the adjusted gross margin by almost 0.6 percentage point year-on-year, reaching now 20.1% in the first half 2026. This improvement was supported by lower production costs and a favorable product mix. Adjusted net R&D expenses decreased by EUR 115 million, now reflecting the tangible progress of our R&D efficiency initiatives and the disciplined execution of our transformation program. As a result, adjusted net R&D to sales ratio decreased to 11.9% in the first half of this year, and this improvement was even more pronounced in the second quarter with 11.4%, despite the lower sales base. And that demonstrates our enhanced productivity and a structurally more efficient R&D organization.

Adjusted S&D and FG&A expenses increased by EUR 64 million year-over-year. This was mainly attributable to costs associated with the buildup of central functions following the spin-off, despite continued discipline across all functions. Other items contributed EUR 43 million to the increase in adjusted EBIT, also driven by foreign exchange effects. Taking all these factors together, adjusted EBIT for the first half '26 amounted to EUR 258 million, corresponding to an adjusted margin of 3%. Including the BMW settlement, adjusted EBIT is lowered by around EUR 100 million, coming in at EUR 157 million and an EBIT margin of 1.8%.

So let's now turn to the performance of our business areas. In the first half of 2026, our business areas delivered a mixed performance, reflecting the varying market dynamics and maturity profiles across our portfolio. Despite an overall challenging operating environment, Architecture and Network Solutions and User Experience achieved year-on-year underlying earnings improvements.

In Autonomous and Commercial Mobility, adjusted sales declined by 12.6% year-on-year, primarily driven by lower volumes amounting to 10.6% of organic sales decline. It is also important to note that the first half of '25 benefited from strong sales volumes related to the EU Mobility Package II. Following the completion of this program and the postponement of the third package, volumes declined in the current period, resulting in a less favorable sales mix. And as a consequence, adjusted EBIT decreased compared to the prior year. Autonomous and Commercial Mobility continues to invest in future technologies, while ongoing cost and efficiency measures helped offset part of the top line headwinds.

In ANS, Architecture and Network Solutions, adjusted sales decreased by 6.1% year-on-year, mainly reflecting foreign exchange headwinds and lower volumes. Excluding foreign exchange effects, the organic sales decline was 4.9% year-on-year. Despite the lower sales base, adjusted EBIT increased by almost 40% to EUR 142 million, resulting in almost 2 percentage points higher margin, supported by the continued execution of our disciplined cost management and efficiency program.

In Safety and Motion, adjusted sales declined by 6.7% year-on-year, reflecting market environment with the primary driver being lower volumes amounting to 5.6% of the organic sales decline. Adjusted EBIT, not taking into account the impact of the BMW settlement, decreased by 16.5% to EUR 131 million compared to the first half of 2025. Safety and Motion continued to face headwinds from elevated material costs. Lower net R&D expenses driven by restructuring and efficiency measures, yet have not been sufficient to compensate overall market challenges.

In User Experience, adjusted sales declined by 6.3% year-on-year, with price effects and demand shift contributing 4.4% of the overall sales decline year-on-year. At the same time, adjusted EBIT increased to EUR 14 million, benefiting from improvement of operational execution. Adjusted for the elevated reimbursement level recorded in the second quarter of the prior year, relative performance of UX was even significantly stronger. User Experience continues to show the successful transformation measures over the recent quarters. Overall, continued market and macroeconomic headwinds affected the top line and earnings performance across our business areas, while our transformation initiatives and self-help measures provide support on overall profitability of the group.

Now, let's turn to slide 14. Adjusted EBITDA amounted to EUR 605 million and forms the starting point of our cash flow development in the first half year. Employee benefits, provisions, and other cash items, including the reversal of non-cash items, impacted adjusted EBITDA considerably, amounted to EUR 125 million, resulting in an operating cash flow before interest and taxes of EUR 455 million. Cash effective investments of EUR 193 million reflected a more cautious spending in the first half, which we continue in the second half if market circumstances persist. Interest and tax payments totaled EUR 148 million, benefiting from lower income tax payments compared to the prior year.

As a result, normalized free cash flow came in at EUR 113 million. Cash effective restructuring and separation-related costs continued to weigh on the adjusted free cash flow. These special effects included EUR 230 million of restructuring-related cash outflows and EUR 55 million associated with spin-off and separation activities. After taking these special items into account, adjusted free cash flow amounted to a negative EUR 177 million in the first half of 2026.

On slide 15, we show that our liquidity position remains a key strength of Aumovio, providing both financial stability and strategic flexibility. Starting from a strong net cash position at the beginning of the year, the position remains strong at EUR 1.2 billion, affected by negative free cash flow as discussed on the previous slide, and minor changes in leasing liabilities. At the same time, the pension liability slightly decreased, mainly driven by the increase in the discount rate in Germany from 4.3% to 4.4%, which positively affected the valuation of our pension obligations. Overall, our solid net cash position, reduced pension liabilities, and disciplined financial management provide a robust foundation to navigate ongoing market volatility while maintaining the flexibility required to execute our transformation agenda and support future growth.

Let me now turn to our updated outlook for the full year 2026. Starting with adjusted sales, we now expect full-year adjusted sales in the range of EUR 17 billion to EUR 17.5 billion, compared to our previous outlook of EUR 17 billion to EUR 18.5 billion. The adjustment primarily reflects a lower light vehicle production outlook and the business performance in the first half of this year.

Turning to profitability, we now expect an adjusted EBIT margin in the range of 3% to 4%, compared to our previous outlook of 3.5% to 5%. The refinement of our adjusted EBIT margin outlook incorporates our revised assessment regarding higher raw material prices, as well as increased prices for memory components. In addition, it also reflects the impact of the BMW settlement. We are actively mitigating cost impacts through close collaboration with our suppliers, redesign to cost initiatives, and compensation mechanisms. We expect to see those effects to become more visible in the second half of the year.

Now, moving to cash generation. We expect normalized free cash flow to be in the range of EUR 500 million to EUR 700 million, compared to our previous outlook of EUR 500 million to EUR 800 million. This adjustment reflects partially the impact of the BMW settlement. Importantly, the outlook range was only reduced at the upper end. This effectively implies an improvement in the underlying normalized free cash flow outlook as we are confident in our ability to steer cash flows.

Finally, let me touch on our further assumptions. For full year 2026, we now expect cash outflows related to the spin-off restructuring activities and partially the BMW settlement of around EUR 600 million. In net income and earnings per share, we still expect an improvement compared to the prior year.

Now, let's have a look at our business areas on slide 17. The outlook for Architecture and Network Solutions remains unchanged compared to our previous outlook. For Autonomous and Commercial Mobility and User Experience, we have updated our outlook based on the first half 2026 results and our latest assessment of market developments. For Safety and Motion, the revised outlook also reflects the impact of the settlement agreement with BMW.

Starting with Autonomous and Commercial Mobility, we now expect adjusted sales to decline significantly year-on-year, compared to our previous expectation of a moderate decline. The assumptions underlying our previous outlook remain unchanged, while the revised outlook additionally reflects the business performance in the first half of this year and our updated view on market developments. For adjusted EBIT margin, we continue to expect a stable year-on-year development. Despite the lower sales outlook, this expectation remains supported by additional cost reduction measures as part of our R&D transformation program, as well as continued cost discipline across production, sales, and admin functions.

Turning to Safety and Motion, we continue to expect adjusted sales to decline moderately year-on-year in line with our previous outlook. For adjusted EBIT margin, we now expect a slight year-on-year decline. Previously, we had expected a moderate improvement. The revised margin outlook reflects the business performance in the first half of the year, the challenging market environment, and the impact of the BMW settlement agreement. At the same time, additional cost reduction measures across production, sales, admin, and research and development continue to mitigate the pressure from the market environment.

Now looking at User Experience, we continue to expect adjusted sales to decline moderately year-over-year, consistent with our previous outlook. Sales development continues to be primarily impacted by adverse foreign exchange effects. For adjusted EBIT margin, we now expect a slight improvement compared to last year's level of 0.4%, whereas our previous outlook assumed a moderate improvement. The revised profitability outlook reflects the business performance in the first half of this year and our updated assessment of the market development. However, our profitability expectations continue to be supported by structural measures, lower material costs, and further gains in operational efficiency.

Now, let's turn to slide 19 and talk about our newly established capital allocation framework, which becomes effective as we speak. The establishment of this framework marks another important milestone in our journey as an independent listed company, formalizing the capital allocation commitments communicated at our Capital Markets Day in '25 into a clear and actionable capital deployment framework. The objective of this framework is to provide transparency about our priorities and how we think about the use of capital in the interests of our shareholders.

Let me now walk you through the framework and the priorities that guide our capital allocation decisions. On slide 20, you see our first priority is maintaining a strong balance sheet and financial flexibility. This includes our commitment to an investment-grade credit profile and a prudent liquidity position, ensuring resilience across market cycles and preserving strategic optionality. Our second priority is investing in organic growth. We will continue to allocate capital to opportunities that strengthen our innovation capabilities, and support long-term profitable growth while having a disciplined approach to our spending. In this context, we confirm a net R&D to sales ratio of around 9% in the long term, and we align our target for investments with market reporting standards and introduce a cash-effective CapEx below 4.5% of sales in the midterm.

Our third priority is shareholder returns. We establish a sustainable dividend policy targeting a payout ratio of around 30% of net income. And beyond that, we plan to execute share buybacks based on the availability of excess free cash flow after dividends and M&A. And finally, we will pursue selective M&A opportunities where they can strengthen our technology portfolio, enhance our competitive position, or offer attractive value creation potential. Our capital allocation framework is fully aligned with our strategic and financial targets. It ensures that we balance growth, financial discipline, and shareholder returns in a consistent and value-focused manner and will support sustainable long-term shareholder value creation.

With this, I hand back to Lutz.

Yes. Thank you, Jutta. Now we come to the Q&A session. So operator, please take over for the moderation of the Q&A session.

[Operator Instructions] The first question is from Christoph Laskawi from Deutsche Bank.

Yeah. Okay. I think everybody can hear me. We will reach out to you, and to also make sure that you can ask the question. Sorry for that. However, we have to stop the call now at this point in time, and we will come back to you shortly.

[Technical Difficulty]

Yes. Hello, everybody, again, and welcome to our Q&A session, which we have now. First of all, as [Daniel Bowinmen] just said from EQS, we have to apologize for the technical issues this morning. The provider had some technical problems that are hopefully solved now. And as we switch the format here to this tool, we now hope that we can go into the Q&A session without any interferences. Maybe [Mr. Bowinmen], you can once again say how to raise a question. There's already a first one, but maybe once again, how that works because I think there have been some questions with regard to that.

[Operator Instructions] We have already two questions in queue.

First question comes from Christoph and hopefully, you can hear us. And Christoph, please go ahead.

I hope you can hear me now. Just checking on that.

Yes.

Excellent. That's a good sign. I'd like to start with the capital allocation framework and the share buyback. Obviously, right now, you don't have the approval. You need that from the AGM. But once you have it, could you please comment on if you would be willing to start with the share buyback in '27 already right away? I mean, obviously, your guidance would be for free cash flow potentially close to 0 as a stated free cash flow, but you seem very confident in your cash generation also looking ahead and you have the balance sheet to start. So that will be the first question.

Then the second one, if you would target a tender buyback or an ongoing buyback in the market. And then as a second question, it's potentially still a bit early for that, but could you comment on '27, just roughly what you see in terms of sales momentum, how the phaseout business and the divestments or portfolio management would impact potentially '27? And also when you think about the pass-throughs to the OEMs, you said you reached some progress already on the DRAM side. And I think you wanted to negotiate part of '27 already, too. If you could factor that into the comments as well. And last question will be, when can we expect an update on UX and a final decision if you want to sell it or keep it?

Okay. Should I start with the capital allocation and then maybe, Philipp, if you want to take the other two questions. And thanks everybody, thank you for taking your time again to connect a second time with us today. We really apologize and we really hope that now for the next 30 minutes, this will work well. Christoph, thanks for the question on the capital allocation framework and the share buyback.

Exactly. First of all, we would need the AGM approval in next AGM is set up for, planned for May 2027. And then it really depends on our cash flow -- free cash flow development in '27 and also our expectations how the overall cash flow situation will develop. As we clearly stated, we think about the distribution or using for share buyback program, the excess free cash flow, so after dividends and also after potential M&A. And we will then see in the course of next year what the outlook for this excess free cash flow would look like.

The question on what format we would choose the open market buyback or a tender. We have not yet decided while at the same time, we think that for our situation, there are a lot of arguments for going with an open market share buyback.

Can I ask a follow-up to that, please? So just on the timing of the share buyback, just to be precise on this, are you ruling out, you start in '27 and you will only use the '27 cash flow in calendar year '28 to start buying back shares? Or is '27 very much an option to use cash and start the buyback?

I'm actually not ruling out that we could start in '27. So first half of '27 because of the timing of the AGM is I can rule out. But then in the second half of next year, it really depends on how we start into '27, how the free cash flow development will be and what else we see as capital needs for 2027. But it's too early, obviously, to really say yes or no, but I would definitely not rule it out for '27. Is that precise enough? I guess that's what I can say right now. Christoph can you hear?

Yes, thanks. That was clear.

Okay. Then I take over. We have -- I mean, our view on 2027 is that we don't see a significant improvement in the market conditions. So I think it's fair to say that the markets are going from our point of view, going to be relatively stable and not going to grow next year. And consequently, we at Aumovio see then a similar development year-to-date, but it's actually relatively early in the year to already phrase clear expectations towards the next year.

What we do see is, I mean, we are discussing with our customers, as I were mentioning in the morning, intensively over the rollover of -- or participation of these customers into the additional costs where we made significant progress. Which is, as you all know, in our industry as automotive supply always back-end loaded. So that comes then like in the last year's -- in the second half of the year because you first need to record the raw material costs and then you can discuss them. And that is then also something which we are preparing for 2027 with our customers where we are also seeing a lot of positive momentum to deal this situation in a strong partnership together going forward.

With regards to User Experience, we always said we are in a strategy process, and we have -- we are in the mid of it. We will come to in a discussion in the second -- a decision in the second half. Exact date, we're not going to mention. But as you have seen, User Experience makes significant progress. Also from the bottom line and turnaround perspective. And that's something which we are going, as I said, going to mention of how we are going to deal with that portfolio part in the later part of the year.

Then the next question comes from Stephen Benhamou from Bank of America.

I have three questions. The first one is a follow-up on Christoph's question regarding capital allocation. So more on dividends. Despite the likely net loss in 2026, is it fair to assume a potential dividend distribution as of 2027 based on 2026 results given your strong net cash position? This is my first question.

The second question is regarding the restructuring charges. Can you please give us an update of what you anticipate in terms of P&L impact and cash impact for 2026? And what's your view for 2027 as well? And the last question is regarding Aurora. So you are mentioning that you will reach the industrial scale from H2 2027. My question is simple. How many trucks you need to be on the road to reach a breakeven in terms of EBIT and free cash flow?

Okay. I start with the questions on the capital allocation framework, the dividends, in particular, I hope that I understood the question correctly. You asked if it's fair to assume that there will be a dividend for '26 and '27, given that we have a net cash position. And this is not what our capital allocation framework is suggesting. We say that we pay dividends from a net income, a 30% payout ratio, around 30%. That is what we are targeting. And if there is no net income, then there will be no dividend.

I think it's also important to understand that there is a second element, as discussed a few minutes ago, the share buybacks, and that is linked to excess free cash flow that we are going to generate. But if there's no positive net income for '26, then we are not going to pay out the dividend and in particular, not from the net cash position because the net cash position, we want to keep because this is providing us financial flexibility and is also a factor that is differentiating us from our competitors and is important to keep that balance sheet strength.

With regards to P&L impact, restructuring, there has been, as you have seen, a significant portion of special items affecting our earnings already in the first half of the year. We do not give a guidance for the overall amount for special items or restructuring-related items for the full year. But what we are expecting is obviously then embedded in our guidance. We are not guiding reported EBIT, but we are guiding something on net income where we say that overall, at the end of the P&L, we are expecting an improvement compared to what we have showed last year.

To follow-up on this one, if you don't mind. Is there any reason to anticipate any further restructuring as compared to what you've already recorded in H1?

I think it's too early just being in the middle of the year to rule out that there will be more to come. However, what I can say is that for the ongoing restructuring programs, we have built respective provisions, and they are already embedded in our financials.

I think it's fair to mention that in automotive, you will always have smaller restructuring. But as said, there is no big additional one to be foreseen. Shall I answer the question?

Yes, please go ahead.

Yes. With regards to Aurora, this one is a real innovation and technical breakthrough. I think there we all agree that we say H2 2027 means we will most probably see that more back-end loaded and then in 2028 and then significantly ramping up then in 2029, the amount of trucks equipped with the Aurora driver and then consequently with our hardware kit. What we do is we have an agreement that we sell these parts hardware-as-a-service. So we do get the compensation per mile driven. So the topic is not necessarily that we need to have -- but I mean, the more trucks on the road, the more driverless miles are driven. But first of all, and important is how many miles are driven. And that's something which we are -- where we do foresee a relatively fast improvement to the bottom line, but we are not disclosing how many trucks or miles we need.

Okay. And the next question comes from Michael Punzet from DZ Bank.

I have one question with regard to your ADAS business. My impression is that we currently see a trend from Level 3 down to Level 2+ and 2++. Is that something you can confirm with regard to your order book and with regard to your request for projects from customers? And maybe you can give us any kind of guidance what will be the difference of content per vehicle between Level 3, Level 2+ and 2++?

Philipp, you want to take over here?

Okay. Yes. So we also -- and that is -- it depends significantly on the region you're looking at. If you look into the Chinese market, you do see a significant improvement means a level up in the market where Level 2, Level 2+ and then also Level 3 is being introduced. In the European market, it is actually the trend you are mentioning already that markets are less -- that the technological movement from 2 to 2+ to 3 is less pronounced than in China as the local content and the costs, of course, are different. But in regards to what are the exact difference in overall content per vehicle, that very much depends on what you're actually wanting and willing to deploy. So that is a figure which is very difficult to be mentioned and generalized.

Okay. There are currently no further questions. Maybe as a last reminder, if you want to ask questions, that would be time now to go for it. Otherwise, we would come to the end, but maybe one last chance to raise your hand. There are no further questions. So with this, we've come -- Sorry.

Vanessa, you can go ahead.

Can you hear me?

Yes.

Okay. Sorry, having some IT issues myself, so I sympathize. Firstly, just interested in hearing more about your level of desire to do M&A and what focus areas you're thinking of. Obviously, it's a tough sector, but I guess there's also a good opportunity for consolidation on your side. So just keen to hear about what you're thinking about? Is it something I didn't expect you to talk about today?

And secondly, if you could just talk a little bit more about the order book, which was obviously significantly down year-on-year. I mean I know there's delays and timing differences throughout the year. But if you could especially speak to percentage of Chinese OEMs, which was maybe a little bit lower than expected? And if you could talk about your progress there in China.

And then thirdly, obviously, we know the market changed last year since you spoke at your CMD and your sibling company has had to come out last week and lower 2028 targets. So just wondering, do you need to have to think about the EUR 20 billion to EUR 22 billion medium-term sales target? Or is that something that you might make up with M&A?

Philipp, do you want to take the first one?

Yes, I can take -- I mean, I have understood the first and the second part of the question. The third one, I had problems, I think acoustically to understand. The first one -- very loud. Just a second. We do have -- in terms of M&A, what we want to do in our capital allocation strategy is to build up our operational existing business and to invest into projects where we do see value creation potential. That is, first of all, organically. The second one is then to say, if we do see chances to extend our portfolio and to make add-on acquisitions, which creates significant value creation potential for us, then we are also willing to invest into M&A. But there are no concrete targets and no concrete time line to do so. That's with regards to M&A.

With regards to the order book, we have had a significant order intake in our Asian region. On the one hand side, in China, where we continue to have significant successes specifically also with Chinese OEMs, where we are basically now at 3/4 of our order book ruff-tuff meanwhile. And we do see a lot of interest to work with us not only in the local Chinese market, but also to support the expansion and globalization activities of our Chinese OEM customers. What we do see, and that's why we are a bit shy compared to previous year is that we still have with the traditional OEMs, specifically in Europe, still a lag and a delay of order intake, which we are swapping into the third or even the fourth quarter. So there is still a robust project and product pipeline, it's just not yet decided.

And the third one, I really need to -- sorry that I haven't understood. Maybe I took as it that's all.

That was on the midterm targets, if I understood that correctly. Yes, I can take that, Philipp.

Yes, that would be great.

So I think we remain convinced that the fundamental drivers of our business are intact. And we also all agree that the market environment has become more challenging, and we remain very mindful of the overall macroeconomic and geopolitic backdrops that we have seen, particularly in the first half of this year and that those obviously could also have further effects going forward and overall conditions could deteriorate further.

So that's -- first of all, we remain very focused on what is under our control. And second, we assess what the implications on any midterm targets would be. We have never precisely said that what we mean with midterm. But obviously, as we are moving from capital markets further into the future, midterm targets will become closer. We are now starting our budgeting and planning process and we'll assess the situation. And if there are any changes also with regard to the midterm targets communicated previously, we will obviously communicate them.

Next one will be José Asumendi from JPMorgan.

Hopefully, you can hear me. Can you hear me?

Yes.

Just 2 questions, please. As we think about '27, '28, the opportunity is clearly there to improve the profitability for SAM and UX. Can you describe a little bit in the planning, which actions do you have across both divisions to improve the profitability? And maybe what Philipp was mentioning also that update around UX, -- maybe I misunderstood, but maybe there's potentially an upcoming update on UX, which could materially improve the profitability of this division.

Second would be around Q3, short term, anything you think we should be mindful of? Any negative or positive one-offs we could be thinking about for Q3? Yes, those two elements.

Philipp, do you make a start here on UX and SAM next year, profitability?

Yes, I can make a start. I mean we are working now, as you know, José, for quite some time on overhauling our product and project portfolio. We have also significantly invested into disinvestments and into restructuring. So we do see an overall improvement of project and product profitability going forward. And a lot of our restructuring efforts are going to take real grip the next year. I mean we mentioned that we are going to have EUR 150 million less R&D -- net R&D costs in 2027 versus the 2026 on top of the EUR 200 million. We do see now that the plants are going to fall out of our portfolio. So we have managed to have a lot of measures taken into place, which should help then in the next years to improve the bottom line going forward.

And as I said, on the User Experience side, also there, we do see significant improvements on the profitability side, and we are going to go into the strategic review and the strategic decision of how to continue with User Experience then in the second half of this year, I mean, basically somewhat beginning of fourth quarter, I assume.

Okay. Then I take the question with regards to Q3. I think it's fair to say that Q3 has started broadly in line with our expectations. Overall market environment remains challenging and therefore, so overall visibility is a bit limited. And as also very usual, the summer season is a bit slow. Looking ahead, I think that we can reiterate that we expect the overall profitability perspective to be better in the second half than in the first half of this year, supported by the ongoing execution of our structural measures as well as the typical phases when it comes to R&D reimbursements at the end of the year. And as we explained before, the compensation by our customers for the cost increase that we are experiencing.

And Philipp said before, we are negotiating with our customers with regards to the cost recovery, and we are seeing progress, and we expect that to see in the second half of the year. And also, as Philipp explained before, you first have to see and realize the cost before you can discuss with customers how to and when to get it back. So if that would only come later in the year, that would probably not be a surprise. But all in all, I think it's important to reiterate that the significant improved profitability that we have previously stated for the second half of the year, that is something that we are still expecting. And that is also reflected in our overall guidance of the adjusted EBIT margin of 3% to 4% for the entire year, taking into account the BMW effect.

So just apologies, my line went down in that particular moment where we were talking about the profitability for the second half. So second half margins higher than the first half for the group. Is that what you just confirmed that?

Yes. It will be 3% to 4% from next year.

Next one will be Alexandre Raverdy from Kepler Cheuvreux.

I would like to quickly follow up on portfolio diversification and the non-automotive activities. In particular, I was wondering whether you could provide an update on the potential partnership you have with Mentee Robotics and whether you see other opportunities in humanoids?

Philipp, do you want to take that?

The question was our partnership with Neo Robotics.

Mentee, Mobileye.

Mentee, okay. Sorry. I was just wondering whether -- since we have such a partnership, no. But with Mentee, we are working on the industrialization of the respective humanoid robot. We are in intense discussions with Mentee or Mobileye and are working on it. And I mean, news and new developments are only going to be expected later this year. I mean it takes still some time to define and how fast are we able to take that part then over and the necessary feasibility is currently, as said in investigation, but we do make considerable steps forward in that area. We have a dedicated team working on it and look forward to the results.

So there are no further questions left.

Okay. Thank you very much for the participation. And once again, thank you for your time to participate in this only Q&A call. And if there are any further questions, you can approach the IR department at any time. Now we've come to the end of the Q&A session. You may now disconnect. Bye-bye.

Thank you.

Bye.

Good afternoon, ladies and gentlemen, and welcome to the AUMOVIO SE Pre-Close Call Q2 2026. The conference will be recorded. [Operator Instructions] Let me now turn the floor over to your host, Lutz Ackermann.

Yes. Good evening, everybody. This is Lutz Ackermann speaking. On behalf of AUMOVIO SE, I wish you a very warm welcome to today's pre-close call ahead of our second quarter 2026 results, which will be published on August 6 and the quite period, which begins tomorrow on July 7. This call is intended for sell-side and buy-side participants. If you do not belong to either group, we kindly ask you to disconnect at this time.

Today's call is designed to ensure all market participants have equal access to the latest publicly available information regarding AUMOVIO's performance. The key points we discuss are also available in our reference sheet, which has been published on the Investor Relations section of our website.

As we approach the publication of our second quarter results, I would like to highlight the continued progress AUMOVIO has made since becoming an independent listed company. Over recent quarters, we have advanced our transformation, strengthened execution discipline, improved operational efficiency and continued to sharpen our portfolio. We view the current phase as an important transition period that lays the foundation for sustainable value creation and future growth.

According to the latest S&P Global's mobility data that you all know, global light vehicle production declined by 1.8% year-over-year in the second quarter. Production was weaker across all major automotive regions, with Europe down 3.3%, China down 3.1% and North America 1.4%. The ongoing geopolitical tensions in the Middle East further contributed to an environment of elevated uncertainty for the global automotive industry.

As Europe continues to represent around half of our sales and North America close to 1/4, our business remains exposed to market developments in these regions. At the same time, China remains an increasingly important market for AUMOVIO. We have recently continued to gain market share and grow with our customers in the region while maintaining an attractive profitability profile. As a result, market developments in China remain relevant for our business.

Overall, second quarter market conditions, therefore, remained challenging and broadly in line with our assumptions for 2026.

Similar to previous quarters, our sales development continues to be influenced by regional production trends, portfolio measures, the phase out of lower-return business activities and foreign exchange movements. Foreign exchange effects remained a headwind in the second quarter, however, at a lower level than observed in the first quarter.

From a sales perspective, we currently expect second quarter revenues to be broadly in line with the sales level of the first quarter, which was at EUR 4.4 billion.

On the earnings side, our continued focus on self-help measures, operational improvements and restructuring execution continues to support profitability. As discussed previously, we continue to expect the second half of the year to be stronger than the first half. For the second quarter, we currently expect adjusted EBIT margin to show sequential improvement versus the first quarter of 2026, which stood at a margin of 2.4%. At the same time, profitability is expected to remain somewhat below the prior year second quarter margin of 3.5%. This development is primarily driven by the timing difference between cost increases and customer compensation mechanism.

During the second quarter, we experienced a larger spread between higher costs on the one hand and realization of compensating customer recoveries on the other hand. While these cost increases are already reflected in our results, the corresponding compensations will increasingly materialize over the coming quarters. As a result, we expect reimbursement levels and cost recovery effects to increase during the second half of the year and thereby, provide additional support to profitability. This is also in line with previous years where we achieved the necessary cost compensation in the outer quarters.

Additionally, let me also remind you of the typical seasonality pattern of our business. Usually, profitability improves sequentially throughout the year, with each quarter showing higher margins than the previous one, and the fourth quarter being by far the strongest quarter from a profitability perspective mainly based on R&D reimbursements. The year 2025, so the last year, represented an exception to this pattern as the second quarter profitability exceeded third quarter profitability due to an unusual high contribution from customer reimbursements during that period, which were predominantly coming from user experience. The underlying trajectory, therefore, remains fully consistent with our expectations of improving profitability over the course of the year.

Overall, business development in the second quarter is broadly in line with our expectations and is underpinning our current outlook for the financial year, which we reiterate.

On tariffs, the impact from tariffs remains limited due to our operational footprint and the high share of regionalized production. While the situation remains dynamic, we are continuously working on sustainable solutions with our customers and expect to recoup the tariff burden over time. Where applicable, we follow refund mechanisms with the relevant authorities.

Free cash flow generation remains one of the highest priority at AUMOVIO. While cash generation in '26 continues to be impacted by restructuring and transformation-related payments, the underlying cash-generating profile of the business continues to improve. During the second quarter, we continued to see encouraging trends in spending discipline across the organization. Both capital expenditures and overall cash spending remained under tight control, reflecting our continuous focus on efficient resource allocation and value creation. We have also continued to make progress in managing net working capital, which remains an important lever for cash generation and financial flexibility. At the same time, it is important to remember that the second quarter is seasonally affected by annual bonus payments, which represent a recurring cash outflow at this point in the year.

Overall, we remain focused on working capital discipline, portfolio optimization and improved earnings quality in order to further strengthen cash generation over time.

With regard to our transformation program, execution continues according to plan. We remain focused on reducing complexity, increasing productivity and bringing our cost structures to a competitive level. The successful sales of our German plants in Rheinböllen and Karben are further proof to our disciplined execution and continued focus on delivering the measures we have initiated.

Another key objective is the ongoing R&D transformation, where we remain on track to reduce our net R&D to sales ratio to below 10% by 2027.

We continue to focus our development resources on technologies with the highest value creation potential, intensified collaboration with ecosystem partners and implement additional efficiencies across our global R&D network.

While portions of the financial benefits will materialize gradually, we remain highly confident in the medium-term value creation potential of these actions.

Overall, we are taking decisive steps to improve the robustness of the company's profile. We continue to streamline our portfolio, improve competitiveness and position AUMOVIO for the sustainable profitability improvements. As a result, we have become a leaner, more agile and more performance-oriented company.

Now let me provide an update regarding raw materials and memory products. We continue to observe elevated volatility in a number of raw material markets. However, for most raw materials, we have sustainable solutions with our customers in place that help mitigate the impact of raw material market volatility over time.

Let me now turn to another topic that has remained in focus across the automotive chain over the recent months, memories. Memories remain an important part of products across the automotive industry, and therefore, naturally also for AUMOVIO. We are one of the key purchasers of semiconductors in our industry, and therefore, also of memory chips. At the same time, given our portfolio profile, we are not over-indexed in memory content relative to the broader market. We remain in very strong relationships with our suppliers and have secured our supply requirements for 2026. As it is customary in our industry, we are already discussing 2027 requirements in close coordination with both customers and suppliers.

We see additional challenges ahead. We remain confident in ability to navigate them successfully. We, therefore, as we have done during previous raw material and semiconductor cycles, continue to work with our customers on sustainable solutions to address current memory cost developments. With some customers, agreements have already been concluded, with others, discussions are ongoing, and we expect to make further progress over the coming months, as I highlighted in the beginning.

Before concluding, let me briefly address capital allocation. Over the past months, we have developed a comprehensive capital allocation framework, which is now subject to ongoing discussions with our Supervisory Board and other relevant stakeholders. We remain committed to implementing an attractive capital allocation framework that supports long-term value creation, preserves financial flexibility and provides a compelling framework for shareholder returns.

That concludes my remarks for today. And now I'm happy to go to the Q&A with you. Please, operator, take over for the moderation of the Q&A session.

[Operator Instructions] And we have the first question from Christoph Laskawi from Deutsche Bank.

The first one would be, was there any discussion more recently in conferences or roadshows that you've made on the potential impact of footprint reduction and active portfolio management on Q2 revenues? Have you sized that at any opportunity?

And then the second one would be on capital allocation. You mentioned that this is an ongoing process. Could we expect an announcement to be made with Q2 or potentially even before the Q2 results?

And then the last question will be, I'm not sure if this is really one for today or more for the final Q2 announcement, but we've seen Ford and GM partnering with Micron looking to direct source memory. Obviously, this would take out the sourcing risk that you have. Was there any comment of management on this potentially reducing the exposure in the future?

Thank you, Christoph, for your questions. Maybe first of all, on the phase out of projects, I think it's still in the assessment how much of projects we will phase out. But it's fair to say, if you look at the last year, in 2025, that it was EUR 0.5 billion roughly of projects that we stop or did not continue. In the fourth quarter, it was a bit lower. So maybe in second quarter, we will see slightly higher number of projects that we phase out, but we are still into, let's say, finally collecting the numbers, so difficult to give you a ballpark number here, but that remains part of our strategy to really phase out projects where we do not earn money on. So it's clearly the case that we prioritize margin over our volumes that do not contribute to our targets. That's the clear approach.

Then on capital allocation, it's the plan to do that with half year's reporting. I think we, since a while, are working on that, and I'm pretty convinced that it's a convincing framework that we can present. Nevertheless, it's important to have all stakeholders aligned to have them in -- yes, on our side, so to say. I think it's important to do that in an orderly manner. So this is why I cannot fully promise, but I think this is the plan to come up with that within the half year's reporting. Yes, this is the plan, but I cannot fully promise. I think that's important to say.

Then on the last one with regard to the GM-Micron announcement, difficult to say. I mean, generally speaking, this is what I wanted to point out earlier that, at the moment, it's not only about speaking to our suppliers and to our customers, I think it's about to speak to both parties to really find a solution for the price increases that we see. And this is overall the approach to bring all the people together on one table to find a solution. So if that's positive, I think neutral, maybe slightly positive, but let's see that. I would not overestimate that announcement and how far that affects us. One thing is clear that the more alliances you have, the better [ it probably is ].

[Operator Instructions] And we have 1 question from Jose Asumendi from JPMorgan.

I had a question. When you look at the comments, conferences and meetings you've done in the past weeks, were there any comments with regards to the profitability of AM or AMC, autonomous mobility? It's always difficult to -- honestly, to forecast this division. How should we think about were there any comments with regards to Q2 with regards to maybe a sequential improvement in losses Q2 versus Q1? Or do the losses remain still on a high level? Or were there also any one-offs in Q1 when we think about AMC that we should bear in mind when we're thinking about the progression into the second quarter?

Thanks, Jose, for the question. So on ACM, I think -- I mean, it's fair to say that you should see -- I have seen a slight improvement versus the last year, but we have to be clear that it's from a very low base. So that's not really -- they are not really moving the needle in terms of year-over-year progression. But I think at least there should have been a stabilization, which is positive. And as you all know, the large ramp-up is coming with end of next year when the Aurora contract is picking up. But for the time being, I think this is an okay-ish second quarter from then what we can see so far.

If you ask about one-offs, that's basically what I tried to say earlier. I think if I go through the business areas for the second quarter, there's only user experience. They had a slightly higher -- not slightly, they had a higher share of reimbursements in the second quarter of last year. And of course, this is a bit normalized in this second year's quarter (sic) [ year's second quarter. ] So this is why we see also margins for the group to be a touch light of last year. And yes, this is -- I mean, it's not a real one-off, but I think sometimes you really have to look into the reimbursements, how they are allocated to the quarters, and this was a bit of the case. So this is what I wanted to -- I would highlight in terms of one-off, although it's not the definition a one-off.

Got it. And were there any comments in the past week with regards to on a full year basis, whether we're tracking on the lower end or the midpoint or the high end of the margin guidance for '26?

You mean for AM, or you mean for the group?

For the group, just for the whole group whether we are...

I think there's no update to that. I think what I tried to illustrate is that the margin upside is clearly coming in the second half of the year. But with regard to our outlook, we can reiterate that what we said. So there's no change to that. I think it depends a bit on when the compensations will come, but we fully confirm that what we said always. So there's no change to the guidance that we have laid out neither for, yes, for basically all respective KPIs.

[Operator Instructions] At the moment, we have no further questions -- no, we have one more question from Ross MacDonald from Citi.

Obviously, with the caveat that Citi do not cover AUMOVIO at this time, just thought I would hop in given there's no further questions. Quick one, just looking at the consensus, going back to your earlier comments around the sequential EBIT margin expansion seasonally through the year that you would typically expect, it looks like consensus has margins slightly down in Q2 versus the Q1 number, I see 2% down from 2.4% in Q1. Can you maybe remind us what's driving that? And then obviously, if that assumption looks correct here, if you would expect that we should see a sequential improvement in Q2?

Yes, that's a fair question. I mean, when speaking about consensus, it's important that we do also compare consensus with Vara, which is disclosed on our home page. So this is where we at least look at. So you have to be cautious especially with regard to the quarters if you look into Bloomberg or whatever consensus data you have. So I mean I can only reiterate that what I said that we're going to improve in the second quarter versus the first quarter. And however, last year's quarter -- Q2 was at 3.5%, and I think we try to get there. We did not fully say that we will be above that number, but this is the corridor in which we are. And I also gave information why we are seeing the second quarter a bit of a stretch in terms of cost versus the compensation for those costs. Yes, but this is clearly that where we look at and, yes, I think you should rather look at your home page where we provide the consensus with Vara, I think this is reflecting a better number.

Clear. And then maybe 1 follow-up just in terms of call-off volatility from customers. Obviously, there's been a little bit of news flow around the German OEMs. But are you seeing anything sort of year-to-date in terms of customer activity changing? Or how should we think about the last 6 months versus the next 6 months in terms of call-offs? Should we just assume kind of the status quo into the second half as well? Are you maybe seeing some product delays this kind of thing?

I mean, it's not like that things would have changed so much, but I would clearly not confirm anything to the downside. It's rather trending in the right direction. And also, we discussed sales in the beginning. I think for the second half of the year, we should see a better development in sales for the third and fourth quarter versus the prior year. So I think this is what we should see and expect. So no downgrades here.

So we have no further questions.

If there are no further questions, I'm happy to conclude the call. So thank you for your participation. And you're going to see us or speak us on 6th of August when we have half year reporting. If there's anything in the meantime, let us know, and, yes, have a great day.

Good afternoon, ladies and gentlemen, and welcome to the Q1 2026 Aumovio SE Investor and Analyst Call. [Operator Instructions] Let me now turn the floor over to your host, Lutz Ackermann, Head of Investor Relations.

Yes. Thank you very much, and a very warm welcome to everyone joining us today for Aumovio's Q1 2026 Results Presentation. With me for today's presentation is our CFO, Jutta Donges. We will provide an overview of our financial performance and operational achievements in the first quarter of 2026. As always, both the press release and today's presentation are available for download on our IR website. Following our remarks, we will open the line for a Q&A session with our sell-side analysts.

With that, I will hand it over to Jutta to begin with an overview of Q1.

Thank you, Lutz, and good morning, everyone, and thanks for joining our call today. Let me start with a brief overview of our first quarter performance. Overall, Q1 2026 is on track to deliver our full year outlook despite a continued challenging market environment. While our top line continues to reflect this environment, our results clearly demonstrate ongoing transformation progress and disciplined execution on profitability and cash. Adjusted sales in the first quarter came in at EUR 4.4 billion.

On a year-on-year basis, Q1 adjusted sales declined by 7.8%, equivalent to around EUR 376 million. This decline reflects both continued market headwinds as well as ongoing portfolio and footprint measures in line with our strategy to prioritize profitability over volumes. Despite lower sales, we improved profitability. Adjusted EBIT increased by 14.3% year-on-year, reaching EUR 169 million, compared with EUR 93 million in the prior year. Overall, this is a strong adjusted EBIT performance in Q1, particularly given the lower sales base, clearly reflecting our tangible progress.

Cash generation was another highlight of the quarter. Normalized free cash flow increased by 35.2% year-on-year, primarily driven by our disciplined CapEx approach and continued efficiencies in net working capital management, both of which remain core priorities for us. Beyond financials, we achieved several strategically important milestones.

In Architecture Network Solutions, we won a contract for the [ Cosma ] digital vehicle key system, marking our first end-to-end delivery of a fully integrated digital vehicle access solution. In user experience, we secured a major order for an OLED display unit, featuring an invisibly integrated under-display camera, reinforcing our leadership in advanced display solutions. And in addition, we entered a joint development with Tesa on a dependable adhesive solution for displays, enabling faster corrections during production and more efficient repairs across the product life cycle.

All 3 examples reinforce Aumovio's strategic and innovative strength from component supplier to a system and solution partner with tangible order intake and near-term monetization. During the quarter, we also made further progress with footprint reduction, including closure of Shanza and the signing of the divestments of Reinbern in March and [indiscernible] in April '26. These actions are fully aligned with our objective to create a leaner, more competitive and more resilient operational setup.

Overall, Q1 confirms that we are executing well on what is within our control. We continue to strengthen our profitability, demonstrate improved cash generation and stay consistent in advancing our transformation even in a challenging external environment. In the first quarter, earnings and cash flow improved despite softer sales development. Sales development in the first quarter primarily reflected lower volumes and pricing effects, combined with foreign exchange headwinds of around EUR 150 million. This outcome is fully in line with the market backdrop and our continued selective value-focused approach to business.

In contrast to sales, profitability continued to move in the right direction. Adjusted EBIT and margin progressed year-on-year, driven by the ongoing impact of our transformation measures, strict cost discipline and further R&D efficiencies, confirming our ability to expand margins despite a lower revenue base. Both normalized free cash flow and adjusted free cash flow increased year-on-year, supported by operational improvements and lower investment levels, reflecting our disciplined CapEx approach and continuous focus on working capital optimization, demonstrating the underlying cash generation strength of our business even in a challenging market environment.

And we also continue to make visible progress in shaping our global footprint to support long-term competitiveness. Our ramp-down plan in advancing in a structured manner fully aligned with our clearly stated ambition to simplify the manufacturing network and reduce fixed costs. The previously announced closures of our sites in [ Changsha, Nogales and Babenhausen ] will become operationally effective in 2026. The closure of [ Kaunas and Linguang ] were announced at the beginning of 2026. And we also recently announced the planned investment of and [indiscernible].

With execution progressing as planned, we are fully on track to reach our target of fewer than 45 production locations. Now let's have a closer look at the key financial KPIs for the first quarter, and let's start with the development of our top line.

To put the quarterly performance into perspective, reported sales in Q1 2025 amounted to EUR 4.8 billion. Following divestments with a sales impact of around EUR 25 million, adjusted sales for Q1 '25 stood at EUR 4.78 billion. During the first quarter, adjusted sales were also impacted by our active portfolio management and footprint reduction measures. These included minus [ EUR 18 million ] of portfolio effects, driven mainly by the disposal of the display business and user experience amounting to minus EUR 41 million as well as the phaseout of contract manufacturing contributing minus EUR 39 million.

Excluding these portfolio effects, sales for the quarter came in at around EUR 4.7 billion. And looking at the remaining drivers, Q1 was characterized by 2 items. Sales were further reduced by EUR 296 million with roughly 1/2 attributable to foreign exchange effects and the other half to volume and pricing pressure. Accordingly, adjusted sales amounted to EUR 4.4 billion in Q1 2026.

From a regional perspective, our adjusted sales exposure in the quarter remained well balanced. Europe accounted for 51%, North America for 21%, China for 12% and the remaining 16% came from the Rest of the World, primarily Japan and Korea.

So next, I will turn to the key factors explaining the movements in adjusted EBIT on Slide 7. Starting from adjusted EBIT of EUR 93 million in Q1 '25 after accounting for deconsolidation effect of EUR 4 million from the reported figure, we delivered a clear year-on-year earnings improvement in Q1 '26 despite the lower sales base. While adjusted gross profit decreased by EUR 31 million in absolute terms year-on-year, we improved the adjusted gross profit margin by almost 1 percentage point year-on-year, reaching 19.9% in Q1 '26. This improvement reflects pricing discipline, material cost optimization, a better product and project mix with a clear focus on higher-margin products.

Adjusted net R&D expenses decreased by EUR 36 million, representing a 6% reduction year-on-year and reflecting the ongoing impact of our R&D efficiency initiatives. The adjusted net R&D to sales ratio, however, increased from 12.2% to 12.4% year-on-year in light of the top line decrease. Despite underlying strict cost discipline across group functions, adjusted S&D and SG&A expenses increased by EUR 18 million year-on-year, driven mainly by temporary post spin-off buildup costs for central functions.

Other items contributed EUR 26 million to the increase in adjusted EBIT, primarily driven by foreign exchange effects. Combining these effects, adjusted EBIT for Q1 2026 reached EUR 106 million, corresponding to an adjusted EBIT margin of 2.4%. This represents an improvement of 0.5 percentage points compared to Q1 2025.

Let me now turn to the performance of our business areas on Slide 8. In the first quarter, we recorded a mixed earnings development across our business areas with performance clearly differentiated by segments. User Experience and Architecture & Network Solutions delivered year-on-year improvements, while Architecture & Network Solutions and Safety and Motion contributed equally to overall adjusted EBIT of the group.

In Autonomous and Commercial Mobility, ACM, the adjusted sales declined by 13.1% year-on-year, mainly driven by foreign exchange effects and lower volumes. Q1 '25 benefited from exceptionally high EU Mobility Package 2 related volumes in the first half of the prior year. The termination of this package and the postponement of the third package resulted in lower volumes and a negative mix effect in the current quarter. Adjusted EBIT declined versus the prior year, reflecting the lower volume and less favorable product mix.

Autonomous and Commercial Mobility remains a development-focused business, continuing to invest in future technologies and execution on cost and efficiency measures helped mitigate part of the negative top line impact.

In Architecture & Network Solutions, adjusted sales decreased by 4.1% year-on-year, driven primarily by foreign exchange effects, while volumes remained broadly in line with the prior year. In contrast, adjusted EBIT increased by 61.2%, reflecting the continued effectiveness of our transformation program, disciplined cost management and structural efficiency improvements.

Our business area, Safety and Motion delivered solid operational performance in a challenging environment. Adjusted sales declined by 7.2% year-on-year, driven by foreign exchange headwinds and volume effects. Adjusted EBIT decreased by 22.2% year-on-year, primarily reflecting these effects.

Nevertheless, Safety and Motion continued to demonstrate strong underlying operational leverage, supported by its structurally robust cost base. And in user experience, adjusted sales declined by 4.1% year-on-year, mainly due to foreign exchange effects. At the same time, adjusted EBIT improved significantly driven by effective self-help measures, stronger operational execution and further improvements in the cost structure.

User Experience delivered the strongest earnings increase -- earnings improvement versus prior year, underlying the success of the turnaround measures implemented over the past quarters. Overall, the solid year-on-year earnings improvements confirm the healthy underlying earnings dynamics of our business even in a volatile market environment.

In the first quarter, we delivered strong cash conversion, further proving the cash-generating power of our business. Adjusted EBIT amounted to EUR 330 million. Adjusted EBITDA amounted to EUR 330 million and forms the starting point of our cash flow development in Q1. Net working capital increased in Q1, driven primarily by a strong buildup of receivables of EUR 131 million, which could only be partially offset by higher payables of EUR 57 million.

Inventories had a minor positive impact of EUR 3 million and were not a material driver in the quarter. Cash effective investments of EUR 87 million underline our strict CapEx discipline. Interest and tax payments amounted to EUR 77 million, reflecting an improvement in net interest payments, while income taxes paid remained largely unchanged year-on-year. After these effects, normalized free cash flow reached EUR 147 million, reflecting the underlying strength of our operating model and disciplined capital allocation.

Cash effect of restructuring and separation-related costs continued to weigh on free cash flow in the quarter. These amounted to EUR 150 million in total, including EUR 138 million of restructuring cash outflows and EUR 12 million related to spin-off and separation. After reflecting these special items, adjusted free cash flow for Q1 amounted to minus EUR 3 million. Overall, this performance underscores the resilience of our cash generating profile and confirms our ability to deliver strong operational and free cash flow.

Our net cash position remains a key strength and continues to underpin Aumovio's financial stability and strategic flexibility. At the end of 2025, net cash amounted to [ EUR 1.389 billion ]. During the first quarter, this position was supported by EUR 5 million of free cash flow, EUR 12 million of other cash movements and EUR 22 million related to changes in gross financial debt, including leasing obligations and changes in derivative cash. As a result, net cash increased to EUR 1.43 billion at the end of March '26, confirming our strong liquidity profile.

And at the same time, net pension liabilities further declined from EUR 1.065 billion at year-end '25 to EUR 998 million at the end of March '26. This reduction was primarily driven by the increase in the discount rate from 4.3% to 4.5% in Germany, which had a positive effect on the present value of our pension liabilities. Overall, our strong net cash position and disciplined financial management ensure that Aumovio remains well positioned to navigate market volatility while preserving the financial flexibility required to support ongoing transformation and future growth.

As outlined at our full year '25 results presentation in March, we will present our capital allocation strategy later this year, providing further transparency on how we intend to deploy capital in a disciplined and value-accretive manner. Operating in a changing and increasingly volatile market environment, we confirm the outlook for 2026 as presented with our full year '25 results. Our expectations for adjusted sales, profitability and cash generation remain unchanged.

Let me quickly repeat our outlook. For 2026 profitability, we expect an adjusted EBIT margin of 3.5% to 5%, supported by a more favorable project mix, continued R&D efficiency gains and further optimization of our global footprint, partially offset by temporary headwind from raw material and memory price developments. The first quarter of '26 adjusted EBIT is fully in line with our expectations and supports this outlook.

In terms of cash generation, we forecast normalized free cash flow of EUR 500 million to EUR 800 million, underpinned by strict capital expenditure discipline with CapEx below 5% of sales. Also, ongoing price pressure and supply chain volatility may limit further working capital improvements. That said, the external environment has become more uncertain. S&P Global Mobility's April light vehicle production forecast reflects a shift in geopolitical assumptions incorporating a prolonged conflict scenario in the Middle East. This has resulted in higher expected oil prices, increased market volatility and downward revision of global light vehicle production, particularly in the near term.

For 2026, global light vehicle production is now expected at 91.4 million units, around 750,000 units lower than the March forecast with reductions concentrated in Asia ex China and China. The '27 outlook has also been revised downward, reflecting continued geopolitical stress and emerging demand headwinds in key markets.

Against this backdrop, our focus remains firmly on what is within our control, disciplined execution, cost and cash flow management, portfolio focus and continued progress on our transformation. Given the current unpredictability of geopolitical developments, including the situation in Iran, no specific impacts related to these events have been factored into our assumptions at this stage. At the same time, we will actively manage external factors where possible, maintaining flexibility to respond to a dynamic environment.

With that, I conclude our presentation. Lutz, back to you.

Yes. Thank you, Jutta. Operator, please take over for the moderation of the Q&A session.

[Operator Instructions] And the first question comes from Christoph Laskawi from Deutsche Bank.

The first one would be on current trading. If you see any sort of deterioration in Q2 with regards to call-offs or any change in demand pattern of your customers? And also with regards to the cost headwinds that you've highlighted, could you comment a bit on the phasing of those headwinds and how the mitigation should face to, with regards to Q2? Then could you confirm or comment on the margin potentially being in the range?

And then the second question would be on the cash seasonality. You had a pretty strong start to the year. Is there any sort of guidance that you could give how we should think about the seasonality and how you would see the cash flow evolving throughout the quarters in the year? And obviously, you have a quite strong cash position, as you said, and you will introduce the capital allocation framework later in the year. Could you just initially comment potentially on what type of role M&A will play in that? I think currently, you're obviously rather looking to dispose assets. And I would think that cash distribution to shareholders would probably be further up than any sort of additions to your current portfolio?

And then sorry for a lot of questions, but the last block would be just on growth opportunities in the future. Aurora reported last night sounding quite optimistic on the projects that you have with them. Is this in line with what you're seeing? Is it or even potentially slightly better? And then lastly, the discussion came up a lot just on your project with Menti, if you could potentially comment on that, where you see it, how do you see it evolving?

Yes, a long list of questions. I noted 5 questions. And if I miss anything, just remind me. So let me start with the current trading, so Q1 and whether we see any call-offs or changing demand patterns from the customers. I would say -- what we currently see is similar to the first quarter where we also reported that demand was muted, and you see that in our top line. So there is no expectations on any change in this pattern.

Phasing of headwinds from raw materials in Q1, obviously, there has been some headwind mainly on the raw material and memory price to a lower extent. But as we say that Q1 is supporting our full year guidance and the full year guidance also contains some reflection on raw material and memory price increases.

Yes, we expect that there is more to come, more increases to be seen in our numbers. And I think what is important to put into perspective, in particular also for Q1, while we can pass on partially the price increases for our customers based on index clauses in the contracts, et cetera, and price negotiations, we need to take into consideration that there's obviously a time lag. So the costs will be earlier visible in our P&L and the compensation will come at a later point in time.

So let's say, 3, 6 months later. And therefore, I think as Q1 will be in line with the overall outlook, there will be some effects on the cost side. But we are very confident that this will be compensated later during the year, which will also mean that profitability in the second half of the year will improve overall, in line with our guidance, and I think also overall in line with our normal seasonal pattern that we see with Q1 being the weakest quarter in terms of adjusted margin and then a continuous improvement during the year. So that is on current trading.

Then cash flow seasonality. In terms of normalized free cash flow, I mean, this is -- as we just explained for Q1, this is driven by CapEx and CapEx has been rather low in the first quarter. So we should assume that this will pick up over the next couple of quarters, and that obviously then has an impact on cash flow. Overall, we confirm our guidance for the full year.

If you look at adjusted free cash flow, so after restructuring items, obviously, the phasing of restructuring cash outs will have an impact, and that is while for the overall year, we confirm what we have been guiding for, there may be timing effects in different developments quarter-on-quarter.

On cash distribution to shareholders, you have linked that to M&A and whether there's anything in the pipeline. On the disposal side, 2 main disposals we just announced in March and April. We are not looking into any other disposals as of today. With regard to cash distribution, we said that we will come with a capital allocation framework in the second half of this year.

And one item of this framework will obviously then also relate to M&A and whether we would reserve a pocket of war chest for M&A activities. So a further update only in the second half of this year. Growth opportunities, and you explicitly mentioned Aurora. Yes, I mean, Aurora remains a strategically strong and very encouraging partner. We also share the positive sentiment that has been expressed following the strong Q1 results and the overall optimistic outlook.

We see that Aurora is well positioned for the next phase of what they are doing. There has been recent customer commitments, also some progress on the regulatory front, notably in California, which is all very supporting. And we continue to state what we said before. Aurora is a very important strategic partner for us. And with the expectation that production will start then in '27, we also would see first sales and material sales then picking up in 2028.

So confirmation of what we said before, and we are very pleased on what we currently see how Aurora is making progress, and we in our partnership with Aurora are making progress. Last one was on [ Mobileye ] and so what we have is a signed MOU that dates back to end of last year, and this MOU covers an evaluation phase. So we are looking into how a business case, a business plan could look like. But there is nothing on production or commercial agreement. So this is really on MOU on the overall evaluation of a partnership going forward.

Just a brief follow-up, if I may, on the question, if Q2 could be within the guidance range on the margin or not. Can you comment on that or too early for now?

Q2 in the -- I think we can confirm our outlook. And as I said, there is a seasonal pattern for adjusted EBIT in the quarters. So yes, I mean, the soft -- the start into Q1 was a bit softer. But overall, we are confident that we can really expect what we guided before. There is no specific guidance on Q1 -- Q2 out there, as you know. But in the overall context, the overall picture is, as I said, confirmed.

And the next question comes from Jose Asumendi from JPMorgan.

Just a couple of questions, please. Can you please talk about the restructuring cash outflows you're expecting in 2026 and 2027? Second, when you look at your balance sheet from an overall maybe discussions with the rating agencies or overall balance sheet, how much cash do you think you need to have on your balance sheet? Are we looking at 10% to 15% of sales? Do you look at it on sales? Do you look at it on net cash or on absolute cash levels?

And then three, can you help us a bit more on [indiscernible]? Are there any of those assets still up for sale in this business? Is it still for sale or not? And final one, this is question 4, apologies. When we look at ACM, Autonomous Mobility, should we expect on a full year basis, this division to be slightly loss-making? Or do you think you have the right tools to bring this division to breakeven money making?

Thank you very much, and good to talk to you again. On the restructuring cash outflow, I just confirm what we said when we guided for '26. We expect overall restructuring-related and spin-off and listing-related cash outflow in the magnitude of low to mid-triple-digit million euros. A part of that comes from spinning and listing still, and that is in the double-digit range. There has been a recent better understanding of some tax-related payments that may come in 2026 already. So that's why we are guiding for a double-digit impact from spin-off and listing-related cash outflow.

And for the restructuring cash out that is unchanged to what we said before, yes, low mid triple digit. And that if you add that up, that brings you probably to, a mid-triple-digit number. You also asked '26 and beyond. I think what we can say, there will be additional -- not additional, but there will also be restructuring related cash outs in '27. As of today, given what we have announced, we would expect that by '28, this restructuring cash out will really come down.

On the balance sheet and what the right composition of the balance sheet is also in terms of liquidity. Here, I would ask you for your patience. This is an important part of our capital allocation strategy that will come later this year. I think as of today, we are -- and I repeat myself that we are very happy that we are in this very good comfortable situation that we have plenty of liquidity on our balance sheet to do what we think is strategically the right thing and to continue on the transformation of the company.

There's no update on UX. You asked whether it is for sale or parts are for sale. We just need to reiterate what we said before. And this is part of a strategic review. We will do this and perform this review over the course of the next couple of weeks, and then there will be clarity on UX. However, I must say we are very pleased with the current progress, and we see the that the turnaround is working, that our measures are really effective, and we are quite confident on the overall guidance that we have given for 2026 that profitability will be increased further.

And then on the other business area, ACM, you asked whether that is -- whether we expect this business area to be breakeven. As of today, yes, this is our ambition to really also bring overall adjusted EBIT of ACM into positive territory. However, we have significant headwinds on the top line, as we have also seen in the first quarter. And we really focus on what is under our control, cost measures, discipline with regards to production, et cetera, all these things that we can really do.

And as I said before, ACM still will continue to be the business area, which is very innovative and where a lot of R&D spending is necessary, and this obviously has an impact on the overall profitability. But as I said, the ambition is to reach breakeven this year.

The next question comes from Stephen Benhamou from BofA.

I have 3 questions, please. The first one is on Europe. So there's a strong underperformance in the region. I was wondering if it's mainly driven by this portfolio management or in some divisions, you are experiencing some market share loss. This is my first question.

The second question is regarding your guidance. So I know that it's quite complex for you to precisely guide on what could be the impact of the current context. But I was wondering what's the magnitude of the adjustment that you've made on your underlying assumptions regarding the impact of this Middle East crisis as compared to the assumptions that you had mid-March for your results? And to what extent you're able to compensate those headwinds with customers compensation given the natural lag? This is my second question.

And the last question is more broadly question. If the oil price stays at a high level, I would expect to have a faster transition towards electrification and EVs. To what extent this is a tailwind or a headwind for you if this EV transition material...

Thank you very much. Let me start with the question on impact of Middle East crisis in our guidance. As we said in March, and we also repeat it now, we have not taken into account any impact from the Middle East crisis because it's really difficult to predict what is clear to nobody, I guess, is how long this will continue. However, I think it's important to note that the direct impact from the Middle East crisis is very, very limited. If at all, we talk about increased transportation cost, which is not reflected in our Q1 results as the increase in the transportation prices only started at end March.

And the other topic is on energy prices where we also don't see any impact for the first half of this year because we are covered by forward buys. So where we see some impact, but it's not really material and it does not have a really material financial impact is some supply chain difficulties. It takes a bit longer to get certain parts.

There's this discussion around helium and what it means for semiconductor, but this then is rather reflected in the overall semiconductor situation where we see significant price increases. And by the way, for 2026, this is something where we are not concerned in terms of the volumes. We have secured a very large part of the volumes in the memory -- for memories. And we have also, to a large extent, fixed the prices. So Iran is not considered in our guidance, in the confirmation of our guidance.

And as I said, there's only, as of today, limited impact. Oil price, whether that would be a tailwind for us, Well, actually, I don't think so. As I just said, the oil price, if at all has an impact on energy prices. And there, the exposure is limited as of today. And then on Europe, there was a question, did I get that right? -- underperformance in some regions driven by portfolio management. Well, the portfolio management decisions were mainly in Europe. So there is no other impact beyond Europe. Is that -- was that the question on Europe? And is that the answer? Is that okay?

Yes. But regarding the second question, it was more about the consequences of oil prices, not the direct impact. The consequences of the oil prices is potentially a faster EV transition. I was wondering if transition is a tailwind or a headwind for the business?

Okay. Thanks for repeating the question. I now I understand. I mean we are -- as we always say, we are agnostic. So we do not have a powertrain business, and we also do not depend on EV or combustion engine cars. So if there is a push to electric cars, I mean, that overall helps on the overall transition. But as I said, as we are powertrain agnostic, this is not something that we really take into our considerations.

Okay. And maybe if I may, a last question is regarding what you said for the DRAM prices. So you've covered most of your volumes and pricing for 2026. I would assume that the negotiations for 2027 will start, given that DRAM prices surged between 70% to 90% year-to-date. I was wondering to what extent what could be the impact for 2027 given the negotiation that will be based on the higher price?

Yes, you are right. 2027 is the focus. I think we explained that before in March that we are looking for volumes to secure the volumes, but we do that in very close alignment with our customers. And the focus is really on getting the volumes. And then we discuss with our customers how the share -- the increase in the prices can be shared. So that is part of the overall price negotiations or compensation negotiations with our customers.

But the focus is, first of all, on getting the volumes. And therefore, it's really important to understand what the volumes are that our customers are looking for. So that's a close cooperation that is taking place right now. And just to come back on 2026 to reiterate that I think I said it's a very large part of our volumes that we need is covered to be more precise on that 90% of 2026 memory requirements are covered in volumes.

Next question comes from Harry Martin from Bernstein.

The first question that I had, I just wanted to ask about China. So we're back to underperformance versus the LVP and Q1 order intake with the Chinese OEMs was somewhere around EUR 750 million in lifetime revenues. So is this underperformance and the slower order intake is transitory related to the weaker market? Or is there still some adaptations to the product portfolio you need with the local OEMs in China?

Well, actually, I would argue that China actually showed very positive momentum in Q1 '26 with regards to the order intake. We see ongoing customer engagement, and we have been quite successful in securing new and strategic awards. As we explained before, the business area that is doing well in China is SAM. And on top, I think that Q1 was, in particular, also strong with regards to our business area A&S, in particular, in China.

So I think that as our -- the split of the overall order intake also demonstrates we are doing fine. We're actually doing well in China and the share of order intake with Chinese OEMs stays at the same level as also reported for 2025, so with close to 60% with Chinese OEMs. So that is actually going in the right direction and is confirming our strategy to really focus on China.

Okay. And then I had a follow-up on the nonautomotive growth opportunities. It has become a real trend for Tier 1 suppliers to spend earnings calls talking a lot about the non-automotive use cases for the technology in the portfolio. It's notable to me that you haven't really focused on that, even though some do exist. Do you think it's counterproductive versus focusing on the core strategy? Or I mean, do you have any other thoughts about the long-term potential in some other end markets as well?

I would not say that we are not focusing on this. Actually, we are looking into this to expand our product range and also get into nonautomotive sectors. We are not at a point where we can talk about this in the public. But take for granted that we are looking into this. And when there is an update, we will communicate.

And the next question comes from Vanessa Jeffries from Jefferies.

Just firstly, on order intake. I understand there's a large one-off last year and lots of uncertainty. But even when we look at the first quarter versus, say, the fourth quarter of last year, I mean, is there anything else we should be aware of in that decline? And second, I was wondering if you could just talk a little bit about the medium-term targets that you set out last year and kind of your confidence in achieving those on a 3- and 5-year basis, just given what's changed? I mean, maybe which division you think the backdrop has changed the most in?

Yes. Thank you, Vanessa. On the first question, the overall order intake, as you rightly pointed out, when you look at ACM, it's hard to compare the numbers to the first quarter of 2025 because there was a major award and a significant amount. And if you would take that out, then the comparison to Q1 '26 would be different. I think overall, what we see is the timing is a timing effect.

So several OEMs have postponed their sourcing decisions, and we expect award decisions to be postponed. They are not off the table, but they basically only come later. And that is a temporary deferral of our order intake then obviously. We have seen, as we also show in our presentation, very good and strong order intake in SAM in UX, we have very good major wins also in A&S. And I think for UX, what you can see, and you probably remember when we talked about 2025 and the low order intake compared to the prior year in UX that has been now partially recovered. We said that the low order intake in '25 in the last quarter, in particular, that was because of a postponement of a sourcing decision, and this has now landed into the first quarter of '26.

So that also shows that our confidence in our strong pipeline is correct and that we are impacted by delayed decisions on the customer side. medium-term targets, we confirm them as of today. So nothing really to update and also with regards to the PAs, there is no change in the overall midterm to long-term outlook. That's all confirmed as of today.

There are currently no further questions. So that concludes the Q&A session, and I will hand back to Lutz Ackermann for some closing remarks.

Yes. Thank you so much, and thank you to all of you for participating in today's conference call. If there are any further questions, don't hesitate to reach out to us, and we will be happy to speak to you. The next conference call and the next reporting date is on August 6. We're looking forward to that. And with that, we would like to conclude today's call. You may now disconnect. Thank you very much, and goodbye.

Good afternoon, ladies and gentlemen, and welcome to the AUMOVIO SE Financial Year 2025 Investor and Analyst Call. [Operator Instructions]

Let me now turn the floor over to your host, Lutz Ackermann.

Yes. Good afternoon, everybody. Thank you very much, and a warm welcome from my side to everyone joining us today for AUMOVIO's Full Year 2025 Results Presentation. We appreciate your time and your continued engagement with us as we have -- review a year that was both transformative and operationally meaningful for AUMOVIO. Despite a complex environment, we met our initial guidance and narrowed our outlook after the 9 -- first 9 months, demonstrating consistent performance and strong operational control.

It was also the year in which our successful spin-off became a truly pivotal moment in shaping AUMOVIO into the focused independent company we are today. And today, we look forward to walking you through the results of that work.

Joining me for today's presentation are our CEO, Philipp von Hirschheydt; and our CFO, Jutta Donges. Together, we will provide an overview of our financial performance, operational achievements and priorities for 2026 as we enter the next phase of AUMOVIO's journey.

As always, all relevant documents are available for download on our Investor Relations website. Following our remarks, we will open the line for a Q&A session with our sell-side analysts.

With that, I'd like to hand over to Philipp. Philipp, please go ahead.

Yes. Thank you, Lutz, and also a warm welcome to all of you from my side. I'm actually very happy to be here with you today and to discuss our financial results for 2026 and the outlook for the next years. As you all know, '25 was a very defining year for AUMOVIO. We followed our -- following our successful spin-off, an essential milestone in establishing AUMOVIO as a focused independent company, we delivered solid performance despite a challenging market environment and continued to improve.

We stayed true to our strategic direction, executed with discipline and achieved the targets we set at the beginning of the year. And thanks to the strength of our global team and the ambition that drives us, we were able to demonstrate the resilience of our business model throughout the year.

Adjusted sales for the full year came in at EUR 18.5 billion, representing a 5% decline year-on-year. This development reflects the overall market headwinds as well as our disciplined and more selective approach to project acquisition.

Despite these dynamics on the top line, profitability improved significantly. Adjusted EBIT increased by 45% year-on-year to EUR 717 million, corresponding to a margin of 3.9%. This substantial step-up was driven by continued self-help measures, by improved project execution and a more favorable project mix, all of which underscore the structural earnings potential of our portfolio.

Adjusted free cash flow amounted to EUR 159 million, even after absorbing EUR 491 million of cash effective spin-off and restructuring costs. This demonstrates the underlying cash generation strength of our businesses. For reference, adjusted free cash flow is based on cash flow from operating and investing activities, adjusted for interest-bearing investments and M&A activity. Adjusted free cash flow came in at EUR 159 million, fully delivering on our ambition of returning to a positive free cash flow in 2025.

We also introduced normalized free cash flow as a new KPI, which provides an even clearer view of recurring cash generation. We start with cash flow from operating and investing activities and then exclude items that distort underlying performance such as interest-bearing investments, acquisitions and divestments and spin-off or restructuring effects. On this basis, we generated EUR 650 million in normalized free cash flow.

Overall we are very proud to have delivered on our guidance for the year, with adjusted sales of EUR 18 billion to EUR 19 billion and adjusted EBIT margin of 2.5% to 4%, both fully achieved.

Before we discuss our achievements and financials in detail, I want to give you a closer look at our transformation efforts and our different focus areas. Continuous transformation is part of AUMOVIO's DNA. In 2025, we made meaningful progress across all pillars that guide how we shape the company for long-term value creation.

First, active portfolio management. Our ambition remains clear: to focus on margin-accretive businesses and to ensure that every part of our portfolio contributes to profitable growth. We are systematically sharpening our market positioning, allocating capital with discipline and making targeted decisions on where to invest, where to scale and where to streamline.

Second, cost base improvement. Here, we are driving 3 major programs across the organization. Our footprint reduction efforts are well underway, and we continue to see a clear need to streamline both our production and R&D footprint globally. Our long-term ambition is to operate 45 production locations, creating a more efficient, competitive and more resilient setup that drives high plant utilization.

We achieved our SG&A ambition for 2025, delivering EUR 500 million in gross savings from '24 to the end of '25 by the execution of a focused head count reduction program. This reflects strict cost discipline, reduced complexity and leaner structures across all corporate and support functions. These are gross savings because part of the benefit was offset by salary increases in 2024 and 2025 and the spin-off related increase in headcount.

We are sharpening our engineering processes and resource allocation to further improve R&D efficiency. Our ambition is to reduce the R&D net to sales ratio to below 10% by '27. The actions we have taken in 2025 and already this year put us firmly on track to achieve this.

Finally, cash flow optimization. Strengthening free cash flow remains a top priority. We are continuously optimizing working capital, improving project execution discipline and sharpening investment decisions, all to ensure sustainable cash generation.

We are continuing the consolidation of our global footprint. At the end of 2025, AUMOVIO operated 84 locations across 24 countries. This includes 55 production sites and 47 R&D locations. While this global presence is a strength, we also recognize the need for a more focused, higher utilization network. The continued consolidation across production and R&D is a key driver of competitiveness, efficiency and resilience.

For 2026, we have already decided on further steps in both Europe and Asia to align our number of production sites with the level required for efficient and sustainable market coverage. These measures build on the progress already made toward our long-term ambition of operating 45 production locations. This morning, we announced consolidation measures affecting 4 production locations, 1 in Europe and 1 in Asia, as part of our shift towards a leaner, more resilient network. More actions will follow in line with our strategic mode roadmap.

As mentioned earlier, we delivered substantial cost improvements through our self-help measures. We are also seeing a consistent uplift in our sales to variable head count ratio. This is a strong indicator of improved productivity and operational efficiency across the organization. It shows that our teams are delivering more value per role, reflecting better resource allocation, stronger project execution and the impact of our ongoing efficiency measures.

One of the most visible indicators of our progress is head count development. Our global workforce reduced by more than 20,000 head counts between the end of 2023 and the end of 2025. This reflects our disciplined approach to building a leaner, more agile organization aligned with our transformation priorities.

A major component of this effort was our fixed cost reduction program, through which we successfully delivered gross EUR 500 million in fixed cost savings. The program combined targeted reductions affecting more than 5,000 roles and the simplification of organizational structures, resulting in the successful completion of the program as planned. In parallel, we made significant progress in R&D efficiency, a core pillar of competitiveness.

In financial year 2025, adjusted net R&D expenses improved by EUR 154 million year-on-year, resulting in an adjusted net R&D to sales ratio of 11.1%. This progress reflects the impact of our structured multiyear R&D efficiency program. In 2024, we consolidated engineering units to unlock infrastructure and process synergies.

In 2025, we optimized R&D workforce through natural attrition and internal redeployment. And in '26, we are continuing to sharpen our technology portfolio, align our resources with market needs and consolidate our operations accordingly. Together, these actions strengthen our cost base, sharpen our technology focus and significantly enhance our cost base, ensuring that AUMOVIO remains both competitive and resilient in increasingly demanding market environment.

We continued our active portfolio management strategy and to pursue disciplined and value-accretive order intake strategy in 2025, resulting in a total order intake of EUR 20.4 billion. Our disciplined approach is paying off. Order intake improved by EUR 1 billion year-on-year, rising from EUR 19.3 billion in 2024 to EUR 20.4 billion in 2025. More importantly, this is not just higher volume. It reflects a continuous focus on the quality and margin profile of the orders we secure.

While order intake alone does not determine profitability, the mix and commercial terms of the new business we are winning clearly indicate that our stronger order intake is coming with improved profitability. At the same time, we are already seeing that several OEMs have postponed sourcing decisions into 2026, which will affect the timing but not the strategic relevance of future awards.

Regionally, our order intake remained well diversified. Europe accounted for 40%, followed by North America at 24%, while China contributed 21%. Within China, 43% come from international OEMs operating in the country and 57% from local Chinese OEMs, underscoring the increasing importance of Chinese brands in our global portfolio. The remaining share came from other regions, including and specifically Japan and Korea, which is reflecting our strong global footprint and one of the cornerstones of future expansion possibilities.

Across our business areas, we secured a broad range of strategically important awards. In our business area, Autonomous Mobility, we recorded substantial wins for Surround Radar, Long Range Radar, and Satellite Camera systems, including a notable Long Range Radar awards with a Chinese OEM worth EUR 0.6 billion in Q4. These awards confirm our competitive strengths in the component business. Meanwhile, the Aurora program continues to progress well and remains fully on track for start of production as indicated.

In Architecture and Network Solutions, we achieved a major success with a large telematics control unit award from a leading German OEM. In addition, we secured a significant zone controller project and important wins in body controllers, connectivity and smart access, further strengthening our position in vehicle architecture and software-defined platforms.

Our business area, Safety and Mobility -- Safety and Motion won multiple programs across key product groups, including MK C2 for several Chinese OEMs, Airbag Control Units, Electronic Parking Brake and Air Supply CAirS. These awards highlight our continued global leadership in braking and safety technologies.

In our User Experience business, we secured major awards for display solutions from Asian OEMs. These wins reinforce both our strong customer relationship in the region and our leadership in digital cockpit technologies, even as some sourcing decisions were postponed into 2026. What is important, postponement does not mean cancellation. UX has already captured roughly half of the order intake data between 2024 and 2025 within just first 2 months of '26. This clearly demonstrates that the underlying demand remains intact and the delayed awards are now flowing back into the pipeline.

Well, we need to get better there, that is very clear. And we need to ensure that the pipeline is going to be filled in the upcoming years.

Overall, our 2025 order intake demonstrates robustness of our technology portfolio, the diversification of our regional footprint and the strength of our customer relationships, all essential drivers of long-term profitable growth.

AUMOVIO is exceptionally well positioned to capitalize on the major structural megatrends reshaping the automotive industry, including the rise of AI. Our ability to combine deep technical expertise, strong ecosystem partnerships and the comprehensive hardware, software and services portfolio enables us to capture CPV expansion driven by software-defined vehicle penetration. AUMOVIO's core strengths align directly with the industry's most powerful technology shifts and our business is strategically weighted toward the most attractive, high-growth automotive domains.

AUMOVIO is developing next-generation solutions for the future of mobility across all business areas. And our product pipeline remains exceptionally strong, as the following examples show. One example is our night-capable camera system, which represents a major step forward in safety and driver assistance. The system provides significantly enhanced visibility in low light and night-time conditions, enabling more reliable detection of road hazards and vulnerable road users. It also reduces glare from incoming headlights, delivering a clearer and more comfortable driving experience.

In vehicle electronics or vehicle control, a high-performance computer now integrated with the latest chip technology provides the technological foundation for vehicle to seamlessly receive new and enhanced software functions throughout the entire lifestyle. Among our key innovations are, of course, our full-by-wire and fully redundant brake system, a critical enabler for autonomous driving in next-generation vehicle architectures. In addition, we are advancing dry brake systems that deliver high performance at a lower cost. These technologies strengthen our leadership in future brake solutions.

We are also advancing our surface projection technology, which uses cutting-edge projection to display visual content directly on the cockpit surface, enabling a new level of in-cabin interaction. Together, these innovations demonstrate how we continue to push the boundaries of safety, digitalization and software-defined mobility.

So before handing over to Jutta to walk us through our financials, I would like to highlight my priorities for '26. As we enter the next phase of our transformation, the focus of '26 is very clear. We need to drive sustainable value creation across the entire company. This means we are going to continue our self-help value creation story, building on a strong foundation we have established over the last years. And we ensure that structural improvements are going to translate into long-term and profitable developments.

The second priority is leveraging our robust innovation pipeline. We will continue to advance the next generation of technologies, from high-performance computing to safe systems, autonomous capabilities and digitalized vehicle architectures, ensuring that AUMOVIO remains at the forefront of the mobility transformation.

And what we do see day-by-day, that operational excellence and, specifically, resilience are equally critical. In 2026, we will further strengthen our execution discipline. We will focus on supply chain stability and quality performance to ensure that we are going to be a reliable partner for all our customers across regions.

We will also continue to optimize our production footprint, balancing efficiency, flexibility and competitiveness while maintaining the global reach required to support our customers. At the same time, China remains a strategic growth market for us, and we will pursue targeted initiatives to expand our position and deepen customer partnerships in the region. Finally, we are shaping a high-performance organization, one that is faster, more focused and more empowered.

It is important to acknowledge that the market environment will remain challenging in 2026, with more headwinds than tailwinds. Several customers have postponed sourcing decisions. Demand visibility has become more dynamic and many external factors remain outside of our control. Market cycles, geopolitical uncertainty, regulatory shifts and OEM timing decisions.

We have started the year already with encouraging business, confirming that demand of our -- and for our technologies remain intact. And this makes it even more important to stay focused on our side, to stay focused on what is within our control, strengthening our resilience, execution with discipline, driving operational excellence and steadily unlocking our value potential and create sustainable solutions and value for our shareholders, for our customers and employees.

And with that, I hand over to Jutta.

Thank you very much, Philipp, and a warm welcome to everyone joining us today. I'm very pleased to be here and present our first full year financial results as an independent listed company.

A closer look at our financial shows that adjusted sales for 2025 amounted to EUR 18.5 billion, a decline of 5% year-on-year. This development was driven primarily by negative foreign exchange effects as well as continued softness in the automotive [ market ]. In addition, our targeted portfolio adjustment also contributed to the lower top line. Organic sales declined by 2.5%, also reflecting our disciplined focus on selective margin-accretive business. This outcome is fully aligned with our strategy to prioritize profitability and value over volume.

Despite the softer revenue base, adjusted EBIT increased significantly, rising from EUR 493 million to EUR 717 million, an improvement of EUR 224 million or 45% year-on-year. This performance was driven by a higher gross margin, reduced net R&D in line with our targets and strict cost discipline across SG&A. These improvements demonstrate our ability to compensate for top line decline and enhanced profitability even in a demanding market environment. And we present meaningful progress toward our mid-term adjusted EBIT margin target of 4% to 6%.

In order to show free cash flow in line with adjusted EBIT, we now introduced a new KPI. In simple terms, normalized free cash flow is our existing KPI adjusted free cash flow excluding any cash relevant items of adjustments between the reported EBIT and adjusted EBIT line. Normalized free cash flow increased by 27% year-on-year. Adjusted free cash flow amounted to EUR 159 million in '25, compared to EUR 252 million in '24. The year-on-year decline in adjusted free cash flow is primarily driven by substantial cash effect of one-off costs related to the spin-off and restructuring measures executed in 2025.

Excluding these effects, normalized free cash flow improved materially, reaching EUR 650 million versus EUR 511 million in the prior year. This improvement was supported by higher adjusted EBIT, efficient working capital management and a disciplined investment approach. Overall, our self-help measures, cost controls, operational discipline have allowed us to more than offset the impact of lower sales to strengthen profitability and to maintain a solid cash generation profile despite a challenging macroeconomic backdrop. These results highlight the resilience of our business model and once again confirm our ability to deliver sequential earnings and margin improvements even in a volatile market environment.

If we take a closer look at our performance in the fourth quarter of 2025, we see that results were impacted by lower volumes and a weaker market environment. Despite the decline in top line, adjusted EBIT remained stable, demonstrating continued cost discipline and operational resilience. Adjusted sales in Q4 '25 declined by 8% to EUR 4.5 billion, compared to EUR 4.9 billion in Q4 '24. The majority of the decline is attributable to negative foreign exchange effects of approximately EUR 150 million. In addition, targeted portfolio adjustments reduced sales by around EUR 54 million.

Adjusted EBIT declined by 6% in the fourth quarter, coming in at EUR 308 million, compared to EUR 327 million in the prior year quarter. The decrease was mainly driven by lower revenues in the business area Autonomous Mobility, reflecting negative foreign exchange effects and reduced business volumes, particularly in North America. Despite the lower top line, the adjusted EBIT margin remained stable, quarter-on-quarter, at 6.8%, supported by the cost measures implemented as part of our ongoing transformation program.

Looking at normalized free cash flow, we recorded EUR 862 million in Q4 2024. In Q4 '25, normalized free cash flow amounted to EUR 448 million. Adjusted free cash flow declined from EUR 799 million in Q4 '24 to EUR 309 million in Q4 2025. This development is primarily driven by different working capital phasing throughout the years. In '24, the majority of the working capital reduction was achieved in the last quarter, while in 2025, reductions in working capital were evenly distributed across all quarters.

In addition, Q4 '25 adjusted free cash flow was impacted by higher restructuring and spin-off costs, the 3% one-off effects related to the separation from Continental. The adjustments include EUR 59 million of restructuring cash outflow, EUR 82 million of spin-off-related cash outflows and EUR 3 million of other cash inflows.

Let me give you a detailed overview of the transformation and one-off items that affected EBIT and net income. When comparing '24 to '25, several effects need to be considered. As mentioned earlier, adjusted EBIT increased significantly year-on-year, by EUR 224 million. On the adjustment side, special items in '25 totaled EUR 388 million for restructuring, EUR 218 million related to the spin-off, EUR 67 million from disposals and EUR 114 million from impairments, PPA amortization and other effects. As a result, reported EBIT was EUR 360 million lower year-on-year.

Interest expense decreased by EUR 187 million compared to '24, mainly due to the refinancing activities linked to the spin-off and the separation from Continental [indiscernible], the wind-down of leasing liabilities and interest effects related to long-term provisions.

Taxes were higher year-on-year, driven by temporarily elevated tax rate. This reflects non-creditable withholding taxes, valuation allowances, tax provisions for prior periods and non-deductible items. Net income after minorities declined by EUR 366 million year-on-year and amounted to minus EUR 655 million in 2025.

Now let's have a look at the key financial KPIs for full year '25, and start with our largely flat organic sales development year-over-year. To put the development into perspective, reported sales in '24 amounted to EUR 19.6 billion following the reclassification of certain activities including fleet management, Cairo Montenotte and other units, EUR 116 million were treated as divestments. Adjusted sales, therefore, stood at EUR 19.5 billion for '24.

In '25, adjusted sales were impacted by our active portfolio management and footprint reduction measures. These include the exit of a build-to-print project with a long-standing customer in ANS, the disposal of a display business in User Experience, and the previously communicated phaseout of contract manufacturing. In total, these actions reduced sales by EUR 489 million. These effects were intentional and are fully aligned with our transformation strategy.

Looking at the remaining drivers, '25 was characterized by one additional headwind, EUR 498 million effects mainly driven by currency movements in key markets. Taken together, these effects resulted in largely stable organic sales year-on-year with most of the decline coming from our strategic portfolio actions rather than underlying business performance, leading us to achieve EUR 18.5 billion of adjusted sales in '25.

Our adjusted sales exposure for the year remained well balanced across regions with 49% in Europe, 21% in North America, 14% in China. The remaining 16% came from the rest of the world, including key markets such as Korea and Japan.

Next, I will turn to the key factors explaining the movements from EBIT to adjusted EBIT on the following slide. Starting from an adjusted EBIT of EUR 493 million in full year '24, corresponding to a margin of 2.5%, we achieved meaningful improvements across all profitability levers in '25. Adjusted gross profit increased by EUR 212 million, supported by better project execution and a step-up in gross margin level to 19.9%. The improvement in gross margin from '23 to '25 reflects a series of structural drivers.

We implemented value-based pricing with customers. We achieved consistent improvements in material costs. We enhanced operational excellence with lower scrap rates, realized fixed cost reductions in the plant and benefits through targeted restructuring programs. We also successfully executed our redesign to cost measures. And we benefited from active portfolio management actions.

R&D efficiency also contributed significantly to the EBIT uplift. Adjusted net R&D expenses decreased to -- decreased by EUR 152 million reflecting the full impact of our R&D excellence programs, as explained by Philipp. This reduction is fully aligned with our mid-term ambition to bring the net R&D to sales ratio below 10%. In addition, we increasingly leverage AI as a powerful enabler to accelerate internal R&D processes and improve the efficiency of our engineering activities, supported by the ongoing consolidation of our R&D footprint.

Adjusted S&D and FG&A expenses improved by a further EUR 56 million, demonstrating strict cost discipline across all overhead functions and continued execution of our transformation initiatives. Other items reduced adjusted EBIT by EUR 198 million, driven by foreign exchange effects, movements in other operational income and expenses, non-income tax charges and a lower level of tooling reimbursements compared with the previous year.

Combining all of these effects, adjusted EBIT for the full year '25 reached EUR 717 million, corresponding to an adjusted EBIT margin of 3.9%. This significant improvement confirms the strong upward trend in our earnings statutory and demonstrates tangible progress towards achieving our mid-term margin ambition.

Let us now look at the performance of the business areas on the next slide. In '25, we recorded a mixed but overall very positive earnings development across all business areas, with strong EBIT improvements in SAM and UX driving overall EBIT improvement.

In Autonomous Mobility, adjusted EBIT improved by 10.5%, increasing from minus EUR 46 million in the prior year to minus EUR 41 million in '25, reflecting the benefits of cost reduction and efficiency measures which helped mitigate the impact of lower sales. Adjusted sales declined by 5.5%, driven by lower volumes in the United States, foreign exchange headwinds and continued market weakness in CSV during the fourth quarter. Autonomous Mobility remains a development-focused business, continuing to invest in future technologies such as Aurora. 2025 was therefore a year of sustained strategic investment.

In Architecture and Network Solutions, adjusted EBIT declined by 14.1%, moving from EUR 419 million to EUR 360 million in '25, primarily driven by anticipated lower top line. Adjusted sales decreased by 9.2%, reflecting negative currency effects, reduced demand in the U.S. and in Europe and the early termination of a build-to-print project as part of our active portfolio management. Strict cost discipline and improvement in the overall cost structure helped to stabilize profitability and partially offset reorganization impacts. However, does not fully compensate for the top line decline. Due to the reorganization measures, the '25 figures are not fully comparable with those of 2024.

And Safety and Motion delivered a particular strong performance with adjusted EBIT increasing by 42% from EUR 269 million in '24 to EUR 370 million (sic) [ EUR 262 million in '24 to EUR 372 million ] In '25. Sales increased by 1.1% when adjusted for consolidation and foreign exchange effects. Earnings momentum was driven by efficiency gains, lower material costs and reduced production expenses, demonstrating the strong operational leverage embedded in the segment.

We are also very pleased with the turnaround in User Experience. Adjusted EBIT improved substantially, rising from minus EUR 147 million in the prior year to a positive EUR 11 million in '25, while adjusted sales declined by 2.5% due to foreign exchange effects, the underlying operational performance was stable. The significant earnings improvement reflects the impact of structural measures, stronger operational execution and lower material costs across the portfolio. As targeted, UX has comfortably achieved breakeven.

Overall, strong adjusted EBIT growth in Safety and Motion and a successful turnaround in User Experience underline the healthy underlying earnings dynamics of our company.

On Slide 18, we show that we delivered strong cash conversion in '25, even in a year characterized by substantial cash effective restructuring and separation costs. Adjusted EBITDA amounted to EUR 1.67 billion and forms the starting point of our cash flow development. Net working capital reductions contributed EUR 274 million, while employee benefit provisions and other effects totaled minus EUR 227 million, resulting in operating cash flow before interest and taxes of EUR 1.72 billion.

Cash effective investments amounted to minus EUR 674 million and interest and tax payments combined totaled minus EUR 394 million. After these effects, normalized free cash flow reached EUR 650 million, reflecting the underlying strength of our operating model. Cash effective adjustments related to restructuring, listing and separation activities had a substantial impact in '25, totaling minus EUR 491 million. These included approximately EUR 367 million of restructuring cash outflows, EUR 132 million of listing and separation costs and EUR 8 million of other cash inflows.

After reflecting these extraordinary items, adjusted free cash flow for the full year came in at EUR 159 million. This outcome underscores the resilience of our cash generating profile even during a major transformation year and confirms our ability to maintain strong operation and cash discipline despite extraordinary charges.

Our liquidity position remains a key strength of AUMOVIO and provides both stability and strategic flexibility. Supported by strong cash flow generation, total liquidity amounted to EUR 1.7 billion at the end of '25, complemented by an undrawn credit facility of EUR 2.5 billion. Gross financial debt, including leasing obligations, stood at EUR 340 million and derivative assets were EUR 11 million. Taken together, this results in a full year '25 liquidity position of around EUR 1.4 billion, underscoring our solid financial footing as we enter the next phase of our transformation.

And at the same time, net pension liabilities decreased noticeably, moving from EUR 1.3 billion in '24 to around EUR 1 billion in '25. This reduction was driven by the increase in the German discount rate from 3.5% to 4.3%, which had a meaningful positive effect on the present value of our pension obligations and contributed to greater balance sheet resilience. Overall, our strong liquidity base, lower pension obligations and available credit capacity ensure that AUMOVIO remains well positioned to navigate market portability while maintaining the financial flexibility required to support continued growth and transformation.

Now looking ahead, the global production outlook for passenger cars and light trucks as projected by S&P points to a subdued year in '26, with recovery expected to begin in '27. Important to note, S&P's forecast sits at the higher end of our own expectations. For global light vehicle production, '26 is projected to decline by 0.4% to 92.6 million vehicles, reflecting continued trade pressure, supply chain frictions and geopolitical uncertainties. From '27 onwards, projection is expected to gradually recover reaching around 94.1 million vehicles.

Regionally, Europe is forecasted to produce 16.3 million vehicles in '26, a 0.7% decrease driven largely by rising imports from China and adverse trade flows. The stabilization and gradual recovery is only expected from 2027. In North America, production is projected at 15 million vehicles in '26, down 2.2%, primarily due to the higher tariffs and increasing cost pressures. Growth is expected to resume from '27 as OEMs continue to focus on high-margin segments.

And in China, the world's largest market, production is expected to reach 32.5 million vehicles in '26, representing a 1.4% decline following reduced government incentives. Export momentum, particularly in NEV, is set to soften, adding to a temporary dip in domestic demand before conditions improve from '27.

In summary, '26 is shaping up to be a softer year across all major regions with moderate declines expected. However, the broader '27, '28 trajectory indicates a return to growth as supply stabilizes and markets normalize.

Now let me tell you this translates into our '26 guidance. Operating in a changing and challenging market environment, we view '26 as a transition year towards our mid-term targets. For adjusted sales, we expect a range of EUR 17 billion to EUR 18.5 billion at constant foreign exchange rates. This outlook reflects the continued impact of excess portfolio management, delayed project ramp-ups at several customers and assumes a foreign exchange environment as of December 31, 2025.

For profitability, we expect an adjusted EBIT margin of 3.5% to 5%. A year-over-year improvement would be supported by a more favorable project mix, lower R&D expenses as efficiency measures are expected to continue to take effect, and ongoing progress in optimizing our global footprint.

At the same time, we expect temporary headwinds from raw material and memory price developments, which we currently estimate in the low triple-digit million euro range.

With respect to cash generation, we forecast normalized free cash flow in the range of EUR 500 million to EUR 800 million. We maintain strict discipline around capital expenditures, keeping CapEx below 5% of sales. However, we also anticipate that price increases and supply chain volatility may limit the potential for additional net working capital improvements.

The guidance for normalized free cash flow excludes any potential tax payments related to prior years. Cash-out effects for spin-off and restructuring activities are expected to be in the low to mid-3-digit million euro range. Spin-off related cash outflows will be in the low double-digit million range, while restructuring costs will be driven primarily by ongoing R&D and footprint-related measures.

For net income after minorities and earnings per share, we expect a significant improvement compared to prior year '25. This outlook assumes a lower level of special items and improved financial results and a more normalized tax rate. Overall, the guidance reflects both the headwinds we anticipate in '26 and the substantial progress we target to achieve as we continue our path towards our mid-term financial ambitions.

Our start into the year reflects the trends we saw in the first quarter, with FX headwinds and cautious demand continuing to weigh on sales. Also, our project pipeline remains healthy. From an earnings perspective, our cost measures continue to support performance. And based on the early indicators, we expect the first quarter to set us on a path toward year-over-year earnings growth.

Across all business areas, '26 will reflect the continued impact of our strategic transformation, while sales in all segments are expected to be moderately lower due to foreign exchange developments and market conditions, our focus remains firmly on driving profitability through operational improvements, portfolio discipline and cost efficiency measures.

In Autonomous Mobility, we expect moderately lower adjusted sales, driven primarily by currency effects, lower volumes in ADAS and continued weakness in the U.S. commercial vehicle market. At the same time, we anticipate lower R&D costs compared to '25. The business area Autonomous Mobility is expected to deliver a stable adjusted EBIT supported by cost savings across R&D, production, sales and admin functions.

In Architecture and Network Solutions, adjusted sales are also expected to be moderately lower due to foreign exchange effects. Also project ramp-ups will help compensate for ongoing phaseouts. Profitability is expected to remain stable, supported by cost reduction initiatives, redesign to cost measures and continued improved in R&D efficiency.

In Safety and Motion, we foresee moderately lower adjusted sales mainly driven by foreign exchange effects and the challenging automotive environment. Nevertheless, we expect a moderate improvement in the adjusted EBIT margin as this segment continues to benefit from R&D cost efficiencies, footprint optimization and operational excellence measures.

Finally, in User Experience, we anticipate moderately lower adjusted sales, mainly as a result again of foreign exchange movements. However, the adjusted EBIT margin is expected to continue improving, supported by structural measures such as plant consolidations, operational excellence initiatives and material cost efficiencies.

Overall, while '26 will reflect moderately lower sales across all business areas due to planning effects and selective portfolio decisions, we remain fully committed to enhancing profitability and reach our mid-term adjusted EBIT margin target of 4% to 6%.

So let me come to an end and close with my priorities as CFO as we look ahead to '26 and beyond. My priorities are centered on ensuring that AUMOVIO continues its trajectory of disciplined execution and sustainable value creation.

First, capital allocation strategy. Later this year, we will present a transparent capital allocation framework, ensuring that investments remain aligned with strategic priorities, support profitable growth and reflect our commitment to disciplined spending and return-focused decision-making.

Second, disciplined cost management and efficiency programs. We will continue to drive strict cost discipline across SG&A, R&D and operations, ensuring that our efficiency programs deliver sustainable structural improvements to our cost base and support our mid-term margin ambition.

Third, cash flow performance. Strengthening cash generation is a core priority. We will continue to drive improvements in working capital efficiency, maintain strict return-focused CapEx discipline and ensure that operational improvements translate into higher free cash flow.

Fourth, financial risk management. Given the continued volatility in global markets, we will reinforce our risk management capabilities, ensuring robust liquidity, active FX management and protection against interest rate and supply chain-related exposures.

Fifth, strengthening the financial steering model. This includes sharpening our performance-oriented framework and steering across all functions and areas to ensure that financial insights translate directly into operational actions.

And finally, we will further modernize our finance functions with streamlined processes, enhanced data centricity, digital tools and the use of AI to become a true value driving strategist. Together, these priorities will strengthen our financial foundation, support profitable growth and ensure that AUMOVIO remains on track to deliver sustainable value.

Now this concludes our presentation. Lutz, back to you.

Yes. Thank you, Jutta. Thank you, Philipp. Operator, please take over for the moderation of the Q&A session.

Thank you very much, Mr. Ackermann. [Operator Instructions] The first questions have already been submitted. The first question is from Christoph Laskawi, Deutsche Bank.

I've got a couple. The first would be on the revenue guidance. How much of the guided decline is actually related to plant closures or portfolio measures? If you could quantify that. Is it fair to assume that around 1% or 1.5% negative impact in the year-over-year growth would be related to that?

And then the second one on a specific part of your EBIT outlook. You're guiding to a triple-digit million headwind from raw materials and memory. Could you elaborate on that a bit further? Is it a part where you don't expect any pass-through opportunities? Or could you still see a certain portion of that being passed on to the OEMs?

And then third one, just on the Q1 trading comment. Thanks for already indicating top line down, but earnings actually up because of the cost measures. Could you comment also on the rough margin? Would it be fair to assume that you are below the full year target range still in Q1? Any color there would be appreciated.

And last question, sorry, these are a few, just on UX. With book-bill below 1, quite meaningfully at only 0.5, but it's not profitable. Historically, you said you are not necessarily the best owner. At what point could you review that asset again and come to another strategic decision?

Can I start with the first one and maybe you on UX?

I can answer on the memories, I can answer...

Christoph, thanks for your questions. On the revenue guidance, actually, this is taking into account FX. And as we explained, we have anchored our guidance towards the -- or at the FX exchange rates at the end of last year, beginning of this year. And the other major driver is really the overall volumes that we are expecting. As I said, we are a bit more cautious than what we hear from S&P. And this is the explanation for the revenue guidance that we gave, maybe to the upside of that guidance, if everything goes into the right direction, we actually think that we can achieve the level that we have seen in 2025. But that would also require some opposite FX movements than what we have seen in the past. But what we have actually also seen from already just recently.

On the EBIT impact of raw materials and memories, I give it a try, and then maybe, Philipp, if you can. What we are saying is that we see overall cost impact, a low triple-digit number. This does not mean that a low triple-digit number at the end of the day will end up in our P&L, but this is actually the exposure that we currently see when we take all of this together, raw materials and memories.

And we are obviously working to pass through those price increases to our customers. We have contracts with index clauses that allow us to immediately pass through the costs and in other areas, we are depending on the outcome of negotiations with our customers. Maybe Philipp, do you want to add...

Yes, let me quickly add to that. Christoph, we have meanwhile experience with these sudden cost spikes, so we are in constant discussions with our customers about how to secure volume and how to ensure that pricing is accordingly, as we did so for tariffs, as we did so for silicon crisis. So we -- as Jutta said, we cautiously and conservatively, we take this guidance into consideration. But the task now is to mitigate on: a, on the pricing side, and b, also on the technical side.

So there are many times opportunities to replace one with the other, that's what we always calls as redesign to cost measures. And that's what now is -- the machine is now starting to run. And so we are quite confident that we have good chances to compensate for the cost.

Then maybe I'll take the third question on Q1 current trading. You asked whether it's fair to assume that the margin that we expect for the first quarter is below the full year margin. I think that's a fair assumption. We have in the back of our slide deck where we show margin development quarter-by-quarter for '24 and '25. And obviously, there's certain seasonality in our profitability and, therefore, we expect the EBIT margin -- adjusted EBIT margin for Q1 below the targeted range for the full year.

What we can say is that we are very confident that what we are seeing in January and February, and now also the last couple of weeks, is really supporting our full year guidance.

Yes. I mean that's already because of Chinese New Year, first quarter is always below the other quarters. So that's not a surprise. But let me take over the book-to-bill of User Experience. You're absolutely right, the book-to-bill is significantly below 1.0 in User Experience. And by that, not satisfying. So we have always said we focus on turning businesses around and ensure that we are creating value before we start growing again.

You might remember that also, for example, Architecture and Network Solutions in 2022 were highly loss-making and then we turned it around in 1.5, 2 years, and now we do have a very profitable business. And that's why we have been also at that time more focusing on managing the bottom line and costs instead of targeting and hunting for additional volume. That's why also Architecture and Network Solutions is not going to grow so fast as one could assume because, at that time, we were more focusing on getting the business up and viable against.

Same we apply now as project towards User Experience. We have had our challenges in 2024. We have seen great achievements in 2025. We always said this is a case where we need to get operational excellence into the plants. That's what we see now, that we are going to get there. And now we can also comfortably reach out again and acquire business.

And we -- as we always said, we did -- we are doing strategic alignments and evaluations over the course of the first half. And then we see also how User Experience is doing. And then we decide on how to move forward.

The next question is from Horst Schneider, Bank of America.

The first one that I have that relates to revenue growth because, it's obvious, I mean, to me, the story is that you are successfully cutting the costs, but also the top line is shrinking, for good reasons because you do this active portfolio management. So when I look at your Slide 4 and listen to your comments, my understanding is in 2027, you said it's basically finished, or by end of '26, it's going to be finished. In '27, it's going to be a more normal business environment for you. In this context, could you maybe outline your underperformance versus light vehicle production in Q4 '25?

And then also what we should expect in terms of regional underperformance in 2026? And then for '27, with which rate of outperformance we should work then again? So is it the kind of plus 2% standard that it used to be? Or is it more a gradual ramp-up that we should expect from that? And in that context, I remember that when I look at your long-term targets, large part of the growth should come from Autonomous Mobility where you have got the ramp-up of the Aurora contract.

And I'm not sure where we stand there, you haven't talked about it for a while. So maybe you could give a an update on where you stand in this segment on this very important contract. Is it still leading to the high growth that you expect? Or has the growth prospects shifted maybe towards other segments, and where?

Okay. I can start with the question on the fourth quarter of '25. Thank you for your question, Horst, good to hear you. I think the -- what we have seen in Q4, the decline, 8%, compared to previous year quarter is to a very large extent driven by our business area Autonomous Mobility where we have seen really a difficult market environment, in particular in the U.S. truck market. We are expecting that to continue at least for the first half of 2026. Also answering the question in terms of regional performance, where we -- yes, as I said, only expecting an improvement, if at all, in the second half of this year in the U.S. truck market.

Does that answer your question on the Q4 '25...

Yes, largely. If not, I would get back to you again. But then maybe on the outlook also then for '27, the outperformance we should work with, that would be useful?

Well, I think overall, what we always said also at the Capital Market Day back last year is that we are expecting the market and the production volumes to grow by on average 1% a year. But this is not the main driver for our top line, but this is really the content per vehicle where we are expecting over the entire period 4% to 5% sales increase.

Means what outperformance then? I don't know. It's -- can you -- you cannot give this guidance yet, of course. But any tendency when we think about ramp-up and the magnitude of increase, I could imagine it's getting more '28 going to be higher than '27. So back of my question is to '27 is also more flattish year, still a kind of year transition of, if we should expect some stronger outperformance already in '27?

I mean, as we said before, we are also expecting a significant contribution in the later years, '28, '29, '30 from Aurora, and that is probably the bridge to your other question, what the status is. And the question is when is this coming into growth. I think we said it in our presentation that we are expecting production to start in '27, the earliest. So any meaningful sales, we will only see in '28 or even later.

Okay. Yes, Philipp.

I mean we do see -- I mean, you do see, if you follow Aurora, significant improvements. They add additional lines. They are driving now in all weather conditions. So the program is starting to run. However, to get it done into an operational and scalable outcome, it still needs some time. So we assume that end of 2027, we are going to start production and then it's going to ramp up in 2028 and it's going to take full-fledged then in the years thereafter.

Okay. All right. Okay. If I could maybe sneak in one last one that is on reimbursements, because we have seen from quite a few OEMs, especially in the U.S. all these significant provisions and termination of some EV programs. That was not yet an issue for you in Q4, I guess, that you got any reimbursement there already. I think it's more a matter for '26. Can you give any indication on that?

Right. Absolutely right. We have not seen any additional -- I mean, we do have our normal reimbursement for R&D costs. That has been running through in fourth quarter, as always, there's a seasonality trend. But we haven't seen any big reimbursements for whatever canceled EV platform. I strike through big, I think we haven't seen any reimbursement for canceled EV platform. But yes, of course, I mean, that's something where what needs to be discussed.

Just to add, I think in Q4, we actually have seen reimbursements as expected also driving cash flow, obviously, in the last quarter, in line with the overall I would say, good payment discipline by our customers.

That's great. But it's not yet included in your guidance. These reimbursements coming from U.S. OEMs potentially is not in your guidance or is in your guidance?

I mean we don't see also -- I mean we have been always working with our customers in order to have a risk-based approach towards these EV platforms. So there is also not huge reimbursements foreseeable.

Okay. Yes. All right. That's great.

We are powertrain agnostic. So whatever we do is always capable to be transferred also to any ICE platform.

Yes, that's true.

And in that regards to manage it's tough properly, then he has sourced us on both platforms.

At the moment, there are no further questions in the queue. [Operator Instructions]. All right, there's a follow-up from Horst Schneider again.

It's great that I can ask all the questions. So I love it. Then I had another one on my list that I was unable to ask. And that is, number one, if you see already any impact from the Middle East crisis. And is this Middle East crisis already -- if it has got an impact already considered in your guidance, number one.

And number two, regarding guidance again for 2026. You mentioned better financial results, lower special items and significantly improved rate. It would be great if you could quantify a little bit and the scrub numbers to that. To what extent the various items are moving?

Let me take the first one, yes, Middle East crisis. We -- I mean we are not an energy-intense company. Of course, what we do see is you see higher transportation costs. You also see also that there are some time-wise increases in delivery, meaning it takes a bit longer that stuff is going to get and to go to our premises.

We are also not so much raw material based company. So we do have -- of course, we have copper, we have gold, we have aluminum, but not as others are affected. So I mean, I think it's very difficult to foresee what's going to happen in the Middle East and to say, is everything what might come there in the future in the -- in our guidance. But we do see in other areas a bigger exposure, of course. I mean we discussed the memories, which is an exposure. But in general, we do have this -- we have this crisis, as much as it's disturbing global trade, well under control from a supply chain point of view.

We have not taken into account anything from the Middle East conflict into our guidance. But I mean, if there is, you can think about those scenarios also affecting on energy prices but then inflation going up, and that may have an impact on interest rates, which is not a big topic for us given our strong balance sheet. But overall, if there's negative implications for the overall macroeconomic environment, that obviously would also have an impact. But we have not specifically taken that into account in our guidance.

On your other question with regards to what is happening basically below the adjusted EBIT line or the EBIT line in our P&L, I mean, we have deliberately not given any guidance for those items. But that we give a bit more information and provide you with some of your assumptions, as we are not going to really guide these items.

Our further assumptions as we put them need to be seen in relation to the significant and particularly on the tax side, significant tax expenses. And therefore, the guidance is that we are really expecting that to be different, so much better in 2026. And then below the line, that should -- all other items equal or as guided, should lead to a positive net income for the full year.

A very last question from [ Michael Puzet ], [ DZ Bank ].

Yes, I have one question with regard to the field of autonomous driving. Can you give us any kind of an overview of what you see as a trend in the different regions like the U.S., Europe and China? And what is your expectations for the upcoming growth? Is that related to Level 2++? Or do you expect that we will see introductions of Level 3, Level 4 systems, which will then drive your business unit forward?

Yes. What we do see as trends is that the development in China is much more stormy than we do see it in the rest of the world now, so there is a significant [ investment, ] there are a lot of companies working. And you do see already a significant progress in Level 2++, Level 3 in China. So this is -- and this is based on a different scale and a different system. That's why we have also decided to partner in China with Horizon Robotics and have built up a joint venture where we market our -- the solutions which we have together in that respective area.

What we do see today is a significant expansion on Level 2++ systems. And we do see also, of course, in the robo-taxi area, and there specifically in the U.S., quite some improvements and movements. But I mean, as a general and a mass-market solution, we mainly see these Level 2++.

As there are no more questions, I am closing the Q&A session now and handing the floor back over to host.

Yes. Thank you very much. We have come to the end of today's Q&A session. Thank you for your participation. If there are any questions open, don't hesitate to contact the IR department.

Our next earnings call is already on May 7. We look forward to sharing some updates with you on Q1 then.

And with that, I would like to conclude today's call. Thank you very much, and goodbye.

Good afternoon, ladies and gentlemen, and welcome to the Aumovio SE Pre-Close Call Fiscal Year 2025. [Operator Instructions].

Let me now turn the floor over to your host, Lutz Ackermann.

Yes. Thank you, operator, and good evening to all of you. This is Lutz Ackermann speaking. On behalf of Aumovio, I wish you a very warm welcome to today's pre-close call ahead of our fiscal year reporting 2025 and on 18th of March and the quiet period, which begins on February 16.

This call is intended for sell-side and buy-side participants. If you do not belong to either group, we kindly ask you to disconnect now. Today's call is designed to ensure all market participants have equal access to the latest publicly available information regarding Aumovio's performance. The key points we discussed are also available in our reference sheet, which we just published on the IR section of our home page.

As we are closing the fiscal year 2025, I'd like to highlight the achievements that Aumovio has made since the successful listing in September. We made progress in advancing our transformation strengthening the performance culture and increasing the agility of the company. The inclusion in the MDEX marked an important milestone end of December. We take this progress as a starting point and look ahead of confidence as we continue to develop Aumovio with the aim of realizing the company's value creation potential.

Starting with the market environment. According to our latest market intelligence and external data providers, global light vehicle production saw a slight increase by 1% in the fourth quarter. However, there are differences from a regional perspective. While Europe and North America declined by 1.4% and 0.5%, respectively, China continued to grow by over 3%. As Europe still represents close to 50% and North America, close to 1/4 of our group sales, sales development was impacted by the regional trend of each region. Additionally, we remain committed to pursuing only those projects that contribute positively to our midterm profitability targets.

We already mentioned at our 9 months reporting that the build-to-print business in A&S, which we wound down and that had a negative sales effect in 2025 versus the prior year. Contract manufacturing, which we will largely phase out in 2026, also had a negative sales effect in 2025. Portfolio effects as reported before, were the divestments of Cairo Montenotte and Zonar, which also had a negative impact on sales year-over-year.

Currency effects were largely dominated by a stronger euro and had a negative impact on the sales development year-over-year as well. Overall, the sales development in the fourth quarter is well reflected by our current guidance for sales in fiscal year 2025 from EUR 18 billion to EUR 19 billion.. On the earnings side, our continued focus on self-help measures to which I will come back later, again, contributed also positively to the earnings development in the fourth quarter.

As a reminder, the year-end quarter is always the strongest from a seasonality perspective, and it includes the majority of customer reimbursement. After standing at 2.9% adjusted EBIT margin for the first 9 months of 2025, the current outlook is to reach the upper end of the guidance range from 2.5% to 4%. Implicitly, that means the year-end quarter was again seasonally the strongest. The impact of tariffs remains limited due to our high share of USMCA compliant imports. We're continuously working on sustainable solutions with our customers and expect to recoup the tariff burden over time. We do not expect a major impact on our business results.

Free cash flow generation is a high priority Aumovio, and we consistently stated out our ambition to achieve positive adjusted free cash flow in 2025. In this context, let me remind you of the roughly mid 3-digit million amount in cash effective one-off costs for restructuring and spin-off that we had to absorb in 2025. Excluding these onetime effects, we can already see the underlying cash generation potential of Aumovio at this stage of the transformation phase. With regards to this, I would like to draw your attention to the latest update on our transformation process from January 27, in which we announced additional measures to strengthen the competitiveness of our global research and development activities. These measures include a reduction of up to 4,000 headcount worldwide which is expected to be largely completed by the end of 2026, subject to negotiations with works councils.

By focusing our R&D spending on value-creating technologies, expanding development partnerships and implementing further efficiency measures we are reaffirming our goal of reducing the R&D to sales ratio to below 10% by 2027. The measures will primarily affect Aumovio locations in India, Singapore, Romania, Serbia, Germany and Mexico. For our site in Germany, we anticipate a need to reduce positions in the high triple-digit range.

I would also like you -- like to remind you of our announcement from February 18, 2025. So pretty much a year ago regarding our transformation program. At that time, we communicated a reduction of around 3,000 R&D positions worldwide to be completed by the end of 2026, with less than half of these reductions taking place in Germany to put both announcements into perspective, there is no overlap between the 2 measures.

From the 84,500 employees at the end of the third quarter, it is a fair assumption that the reduction of roughly 800 employees per month which has been announced at our Capital Markets Day last year, has continued until the end of 2025. For the new R&D announcement, we have not yet disclosed the financial impact as we are only entering negotiations with the employee representatives. The cost savings expected for 2026 will depend on how quickly the programs will be executed. As a result, we will not yet see the full effect of savings in 2026. Most of the savings will materialize in the following years.

The fact that part of the reduction was employees in best cost countries also affects both the level of achievable savings and associated cash outflow. Overall, we are taking strong and decisive steps to improve the robustness of the company's profile. We are bringing R&D spending down to a competitive level and further streamlining our global footprint. We are gradually shifting production to best cost countries in building a financially resilient company. As a result, we are becoming a leaner, more efficient and performance-oriented company.

Now let me please give you an update on how we see the current trading conditions regarding price increases in raw materials and memory products. We have observed significant price increases in raw materials relevant for Aumovio, including steel, aluminum, copper and silver. However, for most of these materials, we have sustainable solutions with our customers to cover such increases. For example, by indexation agreements. We are confident that these mechanisms will allow a fair cost sharing. While we were able to realize efficiency gains across a significant portion of the procurement portfolio, prices for memories, including DRAM and AMD, particularly have risen sharply.

Importantly, we have already secured volumes and to a large extent, also prices for 2026, and we continue to address these effects, amongst others, by adjusting our pricing structure to reflect market conditions. Overall, we consider the situation manageable. Looking ahead into 2026, we have already indicated that the earnings momentum is expected to come more from cost efficiencies and margin improvement potential and from top line growth. That concludes my prepared remarks for today. And now I'm happy to take your questions. Please limit yourself to 2 questions so that we can ensure everyone has a chance to participate.

[Operator Instructions]. The first question comes from Christoph Laskawi of Deutsche Bank. Over to you, please.

The first one would be just on the communication of the guidance on the high end of the range. Would that mean basically at the high end or towards the higher end and the latter being sort of like a 3.7% to 4% range? And the second question would be just in terms of building blocks for '26, what you've shared so far in the meetings more recently? And also, would it be fair to assume that you need to take a provision of, call it, EUR 150 million for the 4,000 people that you look to restructure and roughly a similar amount just spread over a couple of years in terms of cash out for that program?

Yes. Thank you so much, Christoph. So with regard to guidance, it's clearly that we stated to come out at the upper end of the guidance range. And I think pretty much that what we have seen in the fourth quarter should be in line with that. So I think nothing more to say about that. So it's basically in line with the expectations. And if it comes down to the restructuring cash outs that we have, for sure, we announced so far for the old program, so to say, that we see a restructuring cash out of EUR 150 million in 2026.

I mean with the additional measures that we have announced now, it's clear that there would yes, some more restructuring cash out comes on top. We have not yet laid out how much that will be. But of course, that amount will be a bit higher. Will it be higher than the restructuring cash out we have seen in 2025? That has to be seen. But yes, it will be probably a bit higher than the number we disclosed so far.

Then we are moving on to the next question. The next question is from Jos� Asumendi of JPMorgan.

Just a couple of questions. The first one, Have you provided any additional comments in the past week with regards to the cost-cutting actions that could be implemented in the medium term to improve the profitability of UAX and AM? And then second, out of the, I think, 3,000 workers, I think you mentioned by the end of 2026 in R&D, how much of those 3,000 workers have been already been laid off? And how much is left?

Yes. Maybe starting with the last question that you have. So I mean, to be very clear, both announced programs that we have, I mean, last year, we announced a program pretty much a year ago and now as well. So these are 2 programs which are independently from each other. I think with regard to the reduction, the only thing that I can say is basically that we had -- if you take an average, you had per month roughly a reduction of 800 headcount. And I think that gives a good idea of how this rate has developed into the end of 2025.

And also, if you look into 2026 and beyond, I think that gives you some kind of an indication. It's always a question of how quickly we ramp up. This is why it's difficult to give you an exact timing and an exact number of reduction per month per year. But I think the run rate I just spoke about is basically the best thing you can think of. If it comes to the reduction that we announced, it's basically across all units that we have. For sure, you have some areas where you have per se or by definition, a higher share of R&D people allocated, but it's basically across all of the units.

[Operator Instructions]. The next question is from Horst Schneider, Bank of America.

I want to get back what you said on the chip prices, DRAM prices and that you have got pass-through clauses and you can pass it on partially, you said, I think. So that means that you need to carry part of the costs? Or is there really an automatic pass-through or basically every, I don't know, contract needs to be negotiated. That's what we know from the years '23, '24 which meant in the end that you could pass on a large part of the cost. But of course, then we had a very weak H1 versus a strong H2. Is that something we should expect also then for 2026? So some more color on that would be great.

Yes. So basically, I mean, what I said is that we have covered all the volumes and prices to a very high extent. I mean the question is always what time of -- what point in time do you take? I mean, what are we talking about? I mean, is it like -- to which point in the year we have fixed those prices, and that's always a question. So I think, first of all, on the volume side, that's very positive for us, and we are aiming for everything of it. I mean -- but that's the normal course of the business. If it comes to compensation of those costs of those higher costs that you face, you always go for the whole increase, yes.

So that's the normal course of the business. I mean we have seen that also over the last years, and that's always something that you have to negotiate with. So you're looking to approach your customers and try to compensate as much as you can. And I think we have been quite successful in that. It may have a timing effect. But overall, we have been quite successful in doing so, and this is the same as we expected this time.

I don't know if that goes far my question, but nevertheless, I try. If you could maybe quantify your chip purchase volumes per annum, what part of that is DRAM? And to what extent you see market prices moving up? I just try.

I mean one reference that I can give you, I think you all are aware of, let's say, the top 10 purchases of DRAM. If you look into the S&P study that they basically -- which you are aware, you can see that Aumovio is not amongst the top 10 purchases of DRAM. So I think that's basically what you can see. For sure, there's a certain exposure. But again, the impact that we may face is also depending on what time you are looking at. I mean it's like the status quo or the pricing from a point in time, which it was earlier. It's a little bit depending on that. So this is why I'm shy of giving quantify that effect.

Yes. Okay. Then more housekeeping item. That's the last one from my side. You talked about special items. I think you only talked about full year. I don't know, some guidance on Q4. I'm not sure if I missed that and you mentioned that if yes, sorry, but if you have further more details.

Yes. I mean what I wanted to make clear is that we are streamlining the portfolio on a daily basis, and we are very much focused on only continuing projects on which we earn money and where the margins are in that regard where we want to see them. So this is always a bit difficult to announce that in advance. It's more also of the cases that you look -- afterwards can say, okay, these are the projects that we have stopped or these are the projects that we have wound down. And when we have the reporting, we will give you some clearer picture on that, how much of the projects we have stopped and not continued.

At the moment, there are no more questions in the queue. [Operator Instructions]. All right. A question from Vanessa Jeffriess from Jefferies.

I was just wondering on the fourth quarter, was all the compensation you received just normal R&D in the normal course of business? Or was there any kind of compensation for canceled programs in the U.S.

I think what I can say is that overall, if you look into reimbursements, you know that the fourth quarter is always the quarter where you see most of them. And this determines also the seasonality that you have throughout the year. And I think I made earlier also the statement that in 2025, it should not have been different compared to years before. So the pattern is basically as it was in the year before.

Okay. So you're not expecting any of that compensation in [indiscernible]?

Yes. I would only refer to reimbursement as a whole, not specifically on cancer projects.

Okay. And then just wondering if you could talk a bit about order intake in the fourth quarter and if you still saw that kind of postponement to '26?

Yes. That should have been an okay-ish quarter. So a bit of a continuation of that what we have seen in the third quarter. So it was overall an okay-ish quarter. For sure, there are some regions where it was a bit better, it was a bit weaker. But overall, there was an okay-ish close of the year. For sure, within certain areas, we see that some of the projects are postponed or let's say that the final award of projects is a bit postponed. But overall, it's clearly that we see a very healthy project pipeline, and this is unchanged.

There is also a follow-up from Horst Schneider from Bank of America.

I was just getting enthusiastic about the R&D cut number that you were saying. So 7,000 people, I don't know, I would say, I should assume EUR 100,000 salary per R&D worker. Or is that a too high number? So it sounds like a terrific saving you were getting in, in the next 2 years.

Yes. I think on the savings side, up to you what kind of calculations you make, but I think it's fair to say that this time, if you look into the cost cutting, it's fair to assume that the salary per worker is maybe a bit lower than that as there has been a higher share of people that are leaving the company in best cost crunches. So I think compared to former programs, maybe the salary is a bit lower than the number you are taking.

Okay. But that materialize over 2 years, you said, right? So it's not just straight, of course, in 1 year. So it materializes over time. So we should pencil in a part '26 and it's going to be finished in 2027, correct?

I mean it's always a ramp-up. And I think it's important to understand that the negotiations with the unions are pretty much starting. So we, for sure, try to achieve as much as we can in this year. So I would rather say it depends on the ramp-up of the program execution. I think it's also fair to say that the majority of the effect is coming beyond 2026 as then the full impact will take place.

I guess it's the first program, I think, was 3,000, that's probably 260 and the 4,000, that's a higher shares than in '27, right?

I mean for the current program we just announced, we are striving for getting that executed as much as we can in this year. But the effect, I mean, you always have to look into the point in time when people are leaving. So the effect on the numbers is rather beyond this year, but we try to execute that as much as we can in 2026.

All right. Thank you.

Since there are no questions in the queue, I am closing the Q&A session now and handing the floor back over to the host.

Yes. Thank you, operator, and thank you for everyone participating in today's call. Just as a reminder, the quiet period stops next week on 16th of February. Over the next days, you will be approached by [Vara] with our external service provider for compiling our consensus, and we highly value your input and your contribution to that. With that, I'd like to conclude today's call. Thank you, and have a nice day.

A very warm welcome to everyone joining us today for our Q3 results presentation and Aumovio's very first quarterly earnings call. Before we begin, let me briefly introduce myself. My name is Lutz Ackermann, and I'm the Head of Investor Relations of Aumovio. I joined Aumovio in October, and I'm truly excited to be part of this team, especially at such a pivotal moment following the company's successful stock exchange debut. With more than 10 years of experience in Investor Relations across various industries, I'm confident that Aumovio is exceptionally well positioned for the future. I see significant untapped potential to create long-term value for our shareholders and I look forward to engaging in a constructive dialogue with you about the opportunities ahead.

We are very pleased to have our CEO, Philipp von Hirschheydt, with us today as well as our new CFO, Dr. Jutta Dönges. Jutta, we are thrilled to have you on board. Welcome. Jutta will take a moment to introduce herself. Both the interim report and the presentation of today's call are available for download on our Investor Relations website. Following the presentation, we will conduct a Q&A session for sell-side analysts. And with that, I'd like to hand over to Jutta. Jutta, please go ahead.

Thank you, Lutz. And also from my side, a very warm welcome. And thanks to all of you for joining today. I am very happy to be here today and to have joined Aumovio just a few days ago as the Chief Financial Officer. It's a great honor to be part of this exciting journey as Aumovio as its path as an independent listed technology company. Let me quickly introduce myself. Over the past years, I have held various leadership positions in both the public and the private sector, most recently as the CFO of Uniper SE, a listed German energy company. During my tenure at Uniper, we have successfully executed a financial turnaround and repositioned the company in the banking and capital markets as well as the rating agencies. And prior to that, I have served on the Executive Board of the German Finance Agency and I chaired the Executive Board of the Federal Financial Markets Stabilization Agency. In these roles, I was responsible for finance and governance functions and had a particular focus on stabilization measures during the pandemic and the reprivatization of government shareholdings mainly via the capital markets.

Earlier in my career, I spent more than 15 years in investment banking, most of the time at Goldman Sachs in Frankfurt, advising clients across industries on M&A, financing and capital market transactions. Finally, I hold a joint master's degree in mechanical engineering and economics from the Technical University in Darmstadt and a Doctorate in Economics from Goethe University here in. I have also had the privilege of serving in several nonexecutive roles, for example, in the Supervisory Board of Commerzbank, and I'm currently a member of the Supervisory Board of TUI. And with that background, I look very much forward to contributing to Aumovio's strategic growth and financial resilience. I am excited to work with my colleagues to implement our value-enhancing strategy to lead the finance organization and to shape the future of mobility. Today, Philipp will be guiding us through the presentation as I only joined at the beginning of this week. I'm very much looking forward to getting to know all of you and entering into a constructive framework. And with that, over to you, Philipp.

Yes. Jutta, thank you so much. And also from my side, a very good afternoon and good morning. And before I start, let me also welcome our new CFO, Jutta, who started beginning of this week, and we had already several Board meetings, and we are more than happy and pleased to have Jutta as a significant enhancement into our executive Board. Also, as Lutz said, he joined 1st of October. It's his birthday, by the way, today. So what can we have better than as a President to have the first investor call with all of you. So we are very much looking forward to the additions these 2 are going to bring to the Automotive SE team. Yes. And it's a great pleasure to be here today and to discuss with you our 9 months results. As we said we are -- the third quarter is going to be a challenging one. And -- but I think we have exactly achieved what we promised, we came in even a bit better than what we thought. And by that, we are progressing towards our targets for 2025, and we made again significant steps forward in our transformation strategy.

So as you can see, not only for us, but for the automotive world, we are all working and operating in a difficult and uncertain environment. And we are very mindful that the economic impact of supply chain complexities, regulatory uncertainty and muted demand continues to weigh on most players in the automotive industry. However, despite these challenges, our first stand-alone results clearly demonstrate our strength, our resilience and as I said, the progress which we have made in our transformation. So if we're looking at the performance in the first 9 months, you see that the positive trends we have all been mentioning in the first half of the year is continuing into the third one.

Adjusted sales came in at EUR 14.1 billion, down by 4.2%. And they are basically because of 3 trends, a bit softer than what we have seen last year. First, the foreign exchange has extended its results. We have and are working, as we always said, on our project and product portfolio, where we have been given back already in the beginning of the year, build-to-print business to the customer, and we extended that to a second project, a bigger one, which we stopped in the third quarter of this year.

And thirdly, yes, we are also part of a softening European market. As you all know, the biggest region in terms of sales in our business portfolio. We have significantly increased our adjusted EBIT over the last 9 months compared to 2024 and with EUR 409 million and 2.9%, we have, through our successful execution of self-help measures as well as the project mix and product mix as I was mentioning, managed to get our EBIT up, adjusted EBIT by close to 150%. Adjusted free cash flow before spin-off and restructuring costs was positive, totaling EUR 190 million, as you can see here. After accounting for these onetime expenses, the spin-off and restructuring costs, free cash flow amounted to negative EUR 150 million. Just as a quick reminder on how we define adjusted free cash flow, we calculate it as the sum of our operating and investing cash flow with specific adjustments made for interest-related cash movements and for any acquisitions or disposals of businesses. Now regarding this period, there was only one notable cash inflow, which came from the dissolution of the cash pool with Continental.

It is important to highlight that this is a one-off event for this year and not something we expect to repeat. So as we already were mentioning via our several communications, investor calls and alignments which we have had over the course of this year, our goal is and remains to achieve a positive adjusted free cash flow by year-end. And in addition to that, we decided to narrow our previous sales guidance of EUR 18 billion to EUR 20 billion to EUR 18 billion to EUR 19 billion. So a slight reduction, but we now expect that our adjusted EBIT margin is going to trend towards the upper end of our guidance range of 2.5% to 4%. So our strong improvement in this 9 months and also in the third quarter was primarily driven by enhanced profitability, as I said, the active portfolio management and very disciplined cost management, and I'm going to come to that. As you all know, on September 18, we debuted at the Frankfurt Stock Exchange and are listed in Prime Standard of Frankfurt Stock Exchange in the form of a Societas Europaea.

And we are expecting and gearing up towards then the MDAX inclusion by December 2025. Yes, I need to say once again, as we have managed that in a very short period of time, a big thank you to all our employees and to our advisers as well as to our former sisters and brothers at Continental who managed to get this project done on a very -- in a very, very short time period. For us, this means this is only the beginning. As an independent company, we now have the opportunity, and we have responsibility to prove ourselves by delivering the best products for our clients and creating lasting value for our shareholders. To achieve this, we remain firmly committed to what we cannot say often enough to sustainable value creation and the consistent execution of our 3-pillar strategy, which is in leading products. We are transforming our organization into a high-performance organization and what we commit we are going to deliver in the future. So all that, I think, is something which we have been showing in the third quarter of this year.

Turning now to the adjusted EBIT growth and the sales results of the 9 months, you can see, as I already was mentioning, a 4.2% reduction compared to last year's result, basically half of it due to negative FX effects and then the other half reflecting our portfolio measures as well as the overall automotive environment and macroeconomic uncertainty. What were the main reasons of why we have significantly increased our adjusted EBIT. It has been on the one hand side, and we will come to that in more detail, an increase in our gross margin and a very distinct -- we are working on that for quite some time now, very distinct fixed cost measurement.

We have managed to deploy R&D expenses even more efficiently, and we have continued our fixed cost program, which we call Accelerate, which targets the sales and general administration expenses as well as the fixed cost in plant management. And so that's how we managed to sequentially improve our margin, and it shows that we are capable of executing what we commit and that we have a very tight control on costs and are in the process of step-by-step improving our operational efficiency.

Yes. Let's -- if we look at the next page showing the transition from the reported to the adjusted EBIT, you can see that we have had in the first 9 months, a quite significant array of special items. By far, the major part, the restructuring and termination. We are a company in transformation, something which we do very diligently. And we have had out of our solution from Continental and the spin-off of our Aumovio company, EUR 154 million spinoff costs. And as, for example, the divestiture of our Italian drum brake plant, we have EUR 63 million booked for adjusting our plant footprint as well as to optimize our portfolio and with EUR 34 million, we also do have some parts in others. So I think what you can see here is the clear commitment of the management team to work on our fixed cost base to improve our overall efficiency and to make Aumovio a performance company. If we go more into details to compare 2024 to 2026, you can see that we have been managing to increase in that 9-month period, comparable 9-month period, our gross margin by close to 2.5 percent points.

This is on the one hand side, due to the fixed cost management in our plants as well as a significant improvement on scrap and rework. And additionally, we have -- and as you know, our clear target is to be at R&D net to sales at a single percentage in 2027. So we are still working on deploying our R&D resources in a much more efficient way, which leads then to a reduction of net R&D means net of customer reimbursements of EUR 136 million. The EUR 82 million SG&A costs are altogether then an improvement, which we were able to significantly overcome the others. So a lot of different topics like operational FX topics, lower reimbursements for tooling or less income from invested companies to reach then 2.9% in 2025 year-to-date. Now let's look at the development across our business areas on Slide #8. So you can see that our diversified and complementary business mix continues to support revenue performance despite a challenging market environment. Operational discipline remains a key focus for us.

While overall sales across business areas remained subdued in the first 9 months of the year, we can see that Autonomous Mobility had a slight sales decline, mainly due to exchange rates and specifically in North America. Here, you can see the significant improvement after 9 months from negative EUR 87 million to negative EUR 10 million, very short of becoming breakeven or only short of becoming breakeven of EUR 10 million, and that is mainly due to significant fixed cost savings and here in research and development. The Architecture and Network Solutions organization has in sales been short of last year, mainly due to the fact that we have terminated the build-to-print business. I reported out in the last quarter results already about that. And then we have seen a volume reduction in that business and the cost savings has not yet been able to compensate for the sales decline.

Very positively have developed our Safety and Motion business area, the biggest one with sales only slightly lower than last year and the EBIT increased significantly close to EUR 100 million. Also here due to a very tight fixed cost control and measurements now rolling into the operational results as well as a significant improvement on quality costs led to an EBIT margin of 4.5%. And the biggest turnaround, we can see on the user experience side, I mean, we already reported in the first half that we are on the brink of being breakeven -- another quarter being breakeven. So great results by the user experience team. Sales on prior year level, although we have added back in the third quarter, one business to customer. And you see that the strong improvement in EBIT, we already explained at the Capital Market Day, it's about operations excellence. It's about getting the plants and the projects being ramped up, and to see our management works, and we are making big steps forward towards the mid-digits return on sales level, which we want to reach in user experience in the long run.

Yes, Contract Manufacturing one of the last times we are going to report that. I mean, next year, we are going to run out. I think sales with EUR 100 million, not very decisive and slightly negative because of the contracts which we have concluded already some time ago. Now let's look into the future. Let's look into order intake, where we continue to see substantial order intake across various customers and regions in the first 9 months of the year with EUR 14.7 million. What we have seen in the third quarter a slight reduction in order intake compared to the first half. However, the important part is that what you can see here now, we do diversify. Our clear target is to grow in Asia, in China and specifically also North America. And where we are a bit shy of what our targets have been is in Europe, which accounted only for 41% of our order intake. But we have seen a significant uptick on the, for example, Chinese OEMs where we have -- in China, meanwhile, representing 22% of our total order intake, significantly above our sales share today.

And we also see that we are in a very competitive market capable of getting more and more business from Chinese OEMs, which are meanwhile even higher order intake than the international ones. So that is running quite nicely. And we also expect that in the fourth quarter, we are going to see a decent order intake. However, we also see that the security and uncertainty in Europe lead to the fact that many customers are postponing their orders into next year, done already, which creates then some shortfalls, as you can see already in the European order intake.

But we are proud, as you can see, we have EUR 5 billion order intake with radars and satellite, cameras for autonomous mobility, I think shows the future of that business area. We have won again a big telematic control unit order from a German OEM. And as you can see here, the MK C2, not only a very favorable brake -- integrated brake system for European customers, but also more in China, we collect orders. And second, and user experience this year has also managed to get -- this period has managed to get a significant increase in orders, specifically in Asia and specifically with Chinese OEMs.

So if we look into comparison of our sales towards the market, for us, we are focusing on value creation. We are focusing on bottom line improvement. Top line is only of a second measure. I mean we know that growth helps, but growth only helps once you turn it into profitability, once you are capable of achieving your capital cost once you're doing better in return on capital employed for the entire company. That's something which we always stress. So all that in Q3, Aumovio faced persistently challenging regional performance regarding vehicle production across all our major markets.

And these headwinds were also driven by, as I said, our active portfolio management, which contributed to a lower sales baseline compared to the prior year. And if we are looking at the results, our the global vehicle production increased by an estimated 4.4%, whereas our sales declined by 3.7% adjusted for foreign exchange efforts and effects. Specifically, we were shy in Europe, where our sales declined by 7.9%, and that was primarily driven by the termination of the projects I were mentioning, the one in Architecture Network Solutions as well as the one in user experience.

In North America, we grew by 3.5%, trending a bit behind to 4.7% production uptick. But I guess for North America, and you can see that remains a very solid contributor to our overall growth. In China, we did grow, but I mean, the market is very dynamic, and we were not able to cope up with the overall market development. However, we do see that we are getting more and more grip. We transfer more and more responsibility into the Chinese market. We are capable of managing time to market of our customers. They are reflecting in the order intake of our Chinese OEMs. So I think all the right steps have been taken in order to make us successful in the future. If we now turn to our transformation agenda on Page 11, you can see that over the last 21 months, actually, that we have managed to significantly reduce our workforce and trying to adjust to the necessary needs in the markets and to become a much more effective and efficient company, 20,000 employees reduction. And specifically, also our fixed cost measures have been running as predicted.

And we are also proud to say we are now able also to increase the total savings, the forecast of our project scope of all fixed costs, which we are targeting since Q3 2023. We always said we are going to save EUR 200 million in 2024. We saved EUR 200 million in addition in 2025. And we assume we are going to make this year now, not EUR 200 million, but EUR 300 million. On the R&D efficiency side, we are, as I said already in net absolute amounts, EUR 133 million better than last year, which now leads to a net to sales ratio at 11.9%. This is compared to 12.3% in 2024, an improvement, but also shows we still need to do something, and we do see also good chances to be even more effective in the future and to see of how are we going to be able to reach our target of single digit in 2027. The next steps still need to be taken. And one major step of making us more efficient is our footprint. So we have made consistent progress in executing our ramp-down strategy. You can see here the R&D locations and production locations we have already closed or are going to be closed over the course of the next months.

And we always said we are going to focus on mega factories, and we need to be in the market for the market. That is specifically important and necessary and also looking at recent developments for sourcing, purchasing or procurement for development as well as for production. So in 2024, we had 56 plants. And if you were following us on the capital market, you might remember that our vision is to come to less than 45 plants. If you add up here all what has been already done and what is going to be done, you see that we are going to get to 49 plants going forward. And what you also see is something which we mentioned in the Capital Markets 2023 that we need to look at the amount of the number of R&D locations, which we have, you can see that we have also managed to create a significant reduction of complexity also there.

In parallel, we have announced that we are going to invest USD 110 million in new brownfields Texas, supporting our ADAS component production for the local market, which also shows that on the one hand side, we are capable of managing and decomplex our organization as well as growing where it's necessary and building up mega factories going forward. One other key highlight is how we have managed to close as we promised and committed to reduce -- to sell our plant, our drum brake plant in Karben, Montenotte, everything according to plan. And this is going to -- this plant is going to go out then or has been gone out in the last quarter. So with all that, let me now turn to our adjusted free cash flow calculation on Page 13. The free cash flow remains and will always remain one of our most important financial metrics. So we have started -- if you look here on the slide, on the left-hand side, we start from adjusted EBIT. And by adding back depreciation and amortization, we arrive at an adjusted EBITDA of around EUR 1.1 billion.

This is after 9 months, I would guess so a strong level, especially considering we are currently in a transition phase. However, bridging from EBITDA to free cash flow involves several deductions. Firstly, we are investing into our company, but with a clear focus on high return areas. And something which I explained already several times, we do have a well-invested infrastructure. So our investments in the first 9 months represent 3.1% of sales only, and that again demonstrated our disciplined approach. Net working capital, employee benefits and interest payments are relatively smaller buckets, but also still relevant. Despite not being income positive at the group level, we incurred tax payments totaling EUR 261 million. This was primarily driven by noncreditable withholding taxes such as those on intergroup dividends and the fact that no cross-border profit and loss offsetting is possible. Going forward, we will evaluate measures to improve the efficiency of our cash tax outflows.

That's something which we now being a stand-alone company, something which we will -- which we are able or focus much more. Others include various positions such, for example, prepaid expenses. And the largest -- if you look at it, the largest one-off item in our 9 months adjusted free cash flow is a combination of cash effective restructuring charges for the rightsizing of our company as well as spin-off costs, which together amounted to around EUR 340 million. These all were necessary steps to rightsize the company and prepare for future growth. If we adjust for these one-offs, our underlying adjusted free cash flow, as I already explained in the beginning, before restructuring and spin-off costs stand at a positive EUR 190 million. And this is a solid result and a clear signal of the company's underlying cash generating strength. So let's look quickly on the component of CapEx as well as on working capital. As I said in all our meetings during Capital Markets Day as well, we are an invested company.

So it means that we have done our major invest in new best cost country plant as well as in the necessary technological changes. We discussed about user experience just recently, where we have had to invest in mega plants, where we have needed to invest into the technological and product turnaround, something which we now see in the 9 months result, we make big progress. And you can see here then that the elevated levels from 2020 to 2024 -- or 2023, are now over, and we will return to normalized CapEx levels post completion of these mega factories. So we are committed to a disciplined CapEx management. You can see that in the results of 3.5% or EUR 490 million after 9 months. I think that is something we manage quite well. The operational excellence programs run all as planned. You see that on scrap levels. You see that on gross margin programs. You see that here on the CapEx level. That's something we are quite satisfied with where we still need to make some improvements is on the working capital side.

Our composition, if you compare that to 2023 is getting better, but there is still some chances of becoming better in terms of overall structure and efficiency. But you can imagine that the geopolitical crisis, which we are currently experiencing are not helping to significantly improve inventory levels going forward. So before, let's say, turning into the last pages, I think you can see with the next page that we are remaining with a very strong liquidity position, which provides us stability and financial flexibility. We have one of the most and strongest or, let's say, strongest balance sheet in the industry with a total liquidity of nearly EUR 4 billion, comprised of EUR 1.5 billion in cash and cash equivalents and EUR 2.5 billion credit facility. And even after accounting for gross financial debt of EUR 335 million, which includes all leasing liabilities, we maintain a net cash position of EUR 1.1 billion, giving us significant financial flexibility.

Additionally, the net pension liabilities have been reduced from around EUR 1.7 billion to EUR 1.3 billion over the last 9 months, primarily due to an increase in the German discount rate from 3.5% points to 4.1% points. So we deem our balance sheet is very healthy, and it helps us and position us perfectly for future growth as well as for resilience. Now very shortly, we expect the fiscal year 2025 to unfold in a generally stable yet challenging market environment, particularly in Europe, where light vehicle production volumes are projected to decline. And I mean, we discussed that we have a major stand in the European market that we are working on diversifying that. North America is expected to see a contraction with production down 2% year-over-year. Now maybe that's going to be even a bit better. But by contrast, China is the one who is showing the overall growth in the market. And with 6.6%, we do see strong growth, and that all leads to 2% points on a worldwide basis. So if we then come to the end or before we go into Q&A, we have said we have narrowed our guidance for 2025.

We are -- despite the subdued sales in some regions, our total sales will remain within our guidance, but now narrowed to EUR 18 billion to EUR 19 billion. The operational discipline and the transformation efforts are driving our performance and adjusted our EBIT margin is expected to close at the upper end of the previously communicated range of 2.5% to 4%. As I said already, we strive to achieve a positive adjusted free cash flow by year-end, and this outlook reflects foreseeable impact from trade conflicts, exchange rate shifts and material and logistic costs, while excluding potential disruptions from new regulations or macroeconomic shocks such as semiconductor supply issues. So we remain firmly on track to achieve our full year 2025 targets. Our year-to-date performance provides a strong foundation with revenue and expense goals well supported.

Despite a challenging macroeconomic environment, our diversified business model continues to demonstrate resilience, keeping us aligned with our growth ambitions. Maintaining cost discipline is the key priority of Aumovio. We are committed to rigorous expense management while continuing to focus on operational excellence and innovation. Our cost efficiency and transformation initiatives are delivering tangible results, and we expect these benefits to continue throughout the year. But what you also see is that our order intake is specifically in regions outside of Europe growing. So our innovations are also showing its improvement and order intake is at a level where outside of the, it should have been. Looking ahead, we remain somewhat clearly focused on enhancing profitability, progressing towards our midterm objectives and delivering long-term value for our shareholders. So with that, I come to the end. Lutz?

Okay. Thank you, Philipp. Thank you, Jutta. Now we come to the Q&A session. And operator, please take over for the moderation of the Q&A.

Yes, coming to the first questioner. It is Christoph Laskawi from Deutsche Bank.

The first one would be on the quarterly performance of some of the divisions. If we start with UX, the margin obviously deteriorated Q3 over Q2. I assume the Q2 margin, which was quite positive, is also linked to the onetime pricing effect that you had during the quarter. Should we expect a sizable improvement into Q4? Or what's really the reason of going from 5.4% to a negative margin again? And then linked to that, looking ahead, do you think you need the UX business in your portfolio? Or could you think about carving it out again as it was previously planned? And then in contrast to that, obviously, with the strong decline in top line, A&S actually performed quite well sequentially, increasing margin to 5.8% over 5% in Q2.

Is this basically cost measure related? Or was the business that you gave back loss-making and really margin accretive now just to hand it back? The second point would be on cash. Thanks for providing a lot of detail already for this year. Thinking about '26, is it fair to assume that restructuring should be an outflow of around EUR 150 million and there is only a slight portion still to come in terms of spin-off cost? And then last question I would have is on Nexperia. Following headlines on Bloomberg today, it seems that you have first exports approvals from China. Could you just comment on that? What's the situation currently? Where is the inventory? Are you at risk to stop production somewhere?

Yes. Thank you for the question. So good. Let's see whether we covered everything, what you were asking. And I will -- let me start with user experience. You're absolutely right. The second quarter was exactly elevated because of a onetime investment or let's say, a onetime customer reimbursement, which we expect. So our clear target is to remain breakeven for the entire year. You see that the loss -- or you have seen that the negative adjusted EBIT margin has significantly reduced. And if you compare that to the sales, which we have seen before, you can imagine we made really considerable steps forward. So that's why we are convinced we are going to make also a, let's say, black zero on the user experience side going forward. All our portfolio measures, we have been doing over the course of the last months, and last quarters, we always say we look at the business. First of all, we bring it towards the top 3 position in the respective market.

We see of how do we get it performing. Does it fit into our strategic focus -- and if we say no, we need to review of whether it's going to -- whether we are going to be the best partner. That's something we have now the time after the spin-off to look at, and that's something which we are going to do then over the course of the next months and strategic cycles, and we will get back to you once we have reviewed all that. I mean you missed your last question, you mentioned already something which did not have to now the great strategic discussions. We are since beginning of October, working in a big task force team to manage down the Nexperia impact towards our company. As you have seen rightly, we have received also yesterday after a verbal communication that during the course of this week, we have also received written approval to be exempted from the export control of Nexperia China exports out of China.

So we are again delivering into the rest of our plants worldwide. So we assume that at least short term, we are not going to have any interruption of our processes and production. Let's jump back to the A&S as you are absolutely right. I mean, where do we focus on if we hand back businesses, if we stop businesses, that's definitely projects which are not supporting our value creation. So the business we have been handing back was not, in a way, contributing to what we expected to do so. And also the team is heavily working on adjusting the cost base. So it's twofold in everything what we do. Let's say, gross margin improvements via portfolio measures and then also fixed cost measures in order to improve the total bottom line. So what is missing cash -- the cash burden for 2026 out of the restructuring in -- which we have had in -- so in -- for restructuring, we expect cash out until year-end still of somewhat EUR 100 million to EUR 120 million. And then for the next year, it's going to be seen next year.

The next question comes from Horst Schneider from the Bank of America.

The first one that I have that relates to the outlook for the fourth quarter, alone by the R&D reimbursements, of course, Q4 is going to be strong. So I just want to check if my assumption is right on R&D reimbursement. I think it was last year something like EUR 120 million Q3 over Q4. So is that going to be the same again, roughly in this ballpark range also this year? And then what are the building blocks for Q4? Because I think you mentioned, Philipp, that clients are postponing a little bit. So I'm hearing that maybe the revenues could be down quarter-on-quarter. What is else happening quarter-on-quarter? So the R&D reimbursements go up, how are the other things developing? So price costs, this stuff that influences the margin? That would be great if you could comment on that. Then I think we never discussed for Aumovio really the dividend. I know your dividend payout ratio.

If I strip out the special items basically from net income, you have got a positive net income. When I look at your cash also, you could pay a dividend. So how should we think about this dividend topic for 2025? In general, what do you intend to do with your net cash? Because it's unusual for a supplier that a supplier has got so much net cash. I know some of your peers have got the problem they've got too much debt. So you have the comfort you have got too much cash. So therefore -- but nevertheless, what do you want to do long term with this cash? You want to be a company that accumulates cash or at some point, you either want to buy back shares or maybe also consider maybe M&A? And the last one that I have relates to CapEx and R&D because CapEx was very low in the third quarter, you highlighted that. Is this trend now something like 3%, 3.5% CapEx something we should also consider going forward? Or you think that CapEx should go up, not just in Q4, also in 2026?

Yes. Thank you very much for your questions. Let me try to answer them step by step. So fourth quarter, you're absolutely right. It always in Aumovio, we have had significant increase of R&D reimbursements in the fourth quarter. That's always the best quarter in this regard. And we have also -- and that leads then to the fact that our net R&D is going to get better always also in the fourth quarter. Our cost measures are still running. We expect now -- I mean, we expect -- we know that our Italian plan is going to go out. We know you have seen that on a very constant base, we also work down the amount of headcount which we have in our organization. But we are still cautious in terms of sales and do not see a significant increase to the third quarter. And that's why we also to see that we have narrowed our sales forecast.

The positive impact from this plant in Italy that you are mentioning, how many employees come off the payroll?

Some of 350, 300, 350 can come off.

All right. Great.

So with regards to dividend and net cash, I mean, first of all, we're happy to have the opposite problem towards in comparison to our competitors.

I agree.

As you see, I mean, our industry is facing significant transformation. And everything what we did while spinning off and the cash position was exactly in the light of that because we were seeing that's going to be difficult. So what we always said is we first need to get through the woods with our organization and reorganization and restructuring. And then we are looking into how and where -- how do we ensure that shareholders are also participating not only by the intended increase of share price, but also by other capital allocation measures. R&D and CapEx, R&D, there's a very clear target. We are convinced that while being a competitive company in what we do, you need to be able to manage your business with a single-digit R&D to sales, net R&D to sales.

That's a very clear commitment, and you will see that we are going to work on that going forward, and that's what's in our plans for 2027 and will also not change. Capital expenditure, as we always said, we are convinced that we are going to be below 5% going forward also in the long run. And that we deem not to be -- that we think we are going to achieve without any -- without the greatest challenges. Is there more possible to be even more efficient? That significantly depends on the order intake and our growth trajectory. But what we always can commit is that even if we are going to grow faster than what currently foresee or we should be able to leverage our existing invested plants in West Coast countries. So is the upper end, whether we are going to be able to keep 3.5% for long, I doubt, but somewhere in between, we are going to land.

But the assumption would be right that R&D comes off just in 2027 significantly when this Aurora business basically gets ramped up and the development work is done and the CapEx should also go up in '26 just because you need to ramp up this Aurora business. And you have not really replied my dividend question. So dividend for 2025 is not on the agenda, you can rule that out or it's -- you look into that just at year-end?

Yes. I mean 2 things. I mean, if you look at all what we do, a dividend in 2025 is very unlikely to be distributed. And with regards to R&D, we are step forward in 2026. I mean it's not only Aurora. I mean we are working in many different areas to be more efficient. But you are right, in 2027, we should see an even bigger step. And the capital expenditure for Aurora is not going to be affecting our overall targets with regards to 5%. I mean that's all in, that's all planned. And it's already under execution.

And the next question is José Asumendi from JPMorgan.

A couple of questions, please. I wanted to come back to maybe the implied fourth quarter margins. Can you maybe discuss whether you see margin improvement across all the divisions? Or are there any negative one-offs across the 4 divisions that would maybe not allow that sequential margin improvement when we think about the fourth quarter versus the third quarter? And then thinking about '26, obviously, it's too early to give guidance for '26. But as we stand right now, do you see room for further margin improvement across the company with the visibility you have in the business model and already the cost-cutting plans you mentioned for 2026?

Okay. I mean year-to-date, today, I don't see any specific one-offs for any business area which might appear. And I don't see also any counter effects. I mean, we stand to our margin commitment to come to the upper end of our range. And we also see, as I said, we have received the exemption from export control from China. So at least on our side, we don't see any significant impact on that part -- on that side. So I am not aware of any specific impact going forward. And do we see room for margin improvement? Yes, of course. That's where we work on day-to-day. And I mean, we always said we want to reach 4% to 6% in the midterm. And the faster we come to the upper end of that margin range, the better it is, yes. I mean many of the measures we do today, we do during the course of this year, and that needs to roll over then also into the next year. And you can imagine that we are already working on additional measures for 2026 because we are convinced specifically in Europe, the market is not going to significantly improve. Contrarily, we assume it's going to be stable, if at all.

At the moment, there are no further questions. [Operator Instructions] There are no further questions.

Okay. Thank you so much. Operator, if there are no further questions, we have come to the end of today's conference call. I'd like to say thank you for the participation. If there are questions left, don't hesitate to contact the Investor Relations department. Our next earnings presentation will cover our full year results and that is scheduled for March next year. We look forward to sharing more updates with you then. So -- and with that, I would like to conclude today's call. Thank you very much, and you may now disconnect.