STRATEC Stock

Good afternoon, good morning to everyone joining us today for our H1 2026 financial results conference call.

With me and the hosts of the presentation today are Marcus Wolfinger, CEO of STRATEC; as well as our CFO, Tanja Bucherl. Please be aware that this conference is being webcast live, and you can download the slides either from the webcast or from our website. Before we start, please allow me also to draw your attention to our safe harbor statement, which is on Page 2 of the presentation.

And now without further ado, it's my pleasure to hand over to Marcus.

Yes. Thanks, Jan, and good afternoon, good morning, everyone. Welcome to our presentation. Let me briefly walk you through the highlights, achievements and to a certain degree, the challenges for the remainder of the year.

As you've all seen, we have significantly improved performance in Q2, which actually helped us to narrow the year-to-year -- year-on-year gap on sales and earnings by the end of H1. However, I think the thing which is probably worth to mention at this point that although we had a super strong momentum on the system business and actually like this is planned for the remainder of the year to continue showing 2 things that, first of all, unexpectedly, consumables and here mainly maintenance parts and spares have been fairly weak. So one could actually say exceptionally weak.

Second thing is that it shows to a certain degree the resilience of our business model that we still kept the margin on the expected level, which shows the discipline we are showing here. I'll go into details what the weak consumables and like I said, particularly the weak business with maintenance parts and spares means. Then certainly, the profitability is nearly on the same level as in the prior. We had a super robust free cash flow development, slightly, and Tanja will dive into the details. Obviously, this comes from the very robust fourth quarter in 2025, where the money into the bank account only happened in the first month of the year, as we are expecting the same thing to happen this year, so a very, very back-end loaded year again.

Fourth quarter is expected to dominate the year. We are expecting similar developments in terms of free cash flow development, in terms of seasonality as we saw last year. Then we have an ongoing high demand for life cycle management projects. Literally, within all our customers, we see those activities. At this moment in time, we see that it's swapping away from the activities which are derived from keeping the products longer in the market. This was like the motivation a year or 2 ago to invest money into life cycle management. What we see now is that this is extremely dominated by 2 things.

One is regulatory. So we see that it gets more and more complicated to key legacy products in the market, particularly in considering the renewal of the software as from a tendency perspective, older software is no longer seen as cybersecure, and this is where the FDA is particularly looking into, like I said, cyber and FDA activities are driving investments of our customers into product life cycle management, and we see that the mood and appetite of going into newer products increases from that perspective because everyone sees that investing into product life cycle management is a means to an end.

We've confirmed our 2026 guidance. So based on the forecast and the plan and what our customers actually got in as orders, so we see that very back-end loaded again, a super strong year-end business. Over the last years, we -- the revenue contribution of the fourth quarter was between, say, 30% and 33% of the overall revenues of the year, and we are expecting the same thing to happen here, more likely at the top end of what I've just mentioned.

With this, let me hand over to Tanja.

Thanks, Marcus. Hello, everyone. Also from my side, a warm welcome to our half year earnings call. So I will start highlighting the key financial metrics and then provide an overview of the sales performance of our operating divisions, profitability and the cash flow.

So let me start with the overview of the most important developments. As you can see on that slide, for the first half of the year, the revenue stood at EUR 112.5 million. This actually represents a nominal decline of 5.1% or 3.3% on a constant currency basis. Overall, the earnings performance was actually more robust than the revenue performance. So our adjusted EBIT came in at EUR 15.7 million and the EBITDA margin even improved slightly to 13.9%.

The adjusted EBIT amounted to EUR 7.7 million compared to the EUR 8.5 million in the prior year. With the 6.9% in the adjusted EBIT margin was actually only slightly below the prior year figure of 7.2%, as you can see on that slide. The most significant positive difference compared to the prior year, Marcus has mentioned it already, we see in the cash flow. You see it at the bottom of that slide. So the free cash flow amounted to EUR 23.5 million compared to a negative free cash flow last year of EUR 14.7 million. So all in all, we were able to provide that the weak Q1 was not actually represented for the full year, and we performed a clear improvement in the Q2.

On the next slide, we will have a closer look into the different developments. As always, to provide a better comparison, we always present the adjusted key figures alongside the IFRS figures. As you know, the adjustments are related to amortization and depreciation from purchase price allocation as well as the nonrecurring effects like consulting, reorganization expenses. As already seen on the last page, you see on the top, the adjusted EBIT of EUR 7.7 million. Taking the adjustments into account, the reported EBIT stood at approximately EUR 5.5 million, which shows a slight improvement compared to the prior year.

On the right side of that chart, you see the net income. So the adjusted net income amounted to EUR 4.1 million or EUR 0.34 per share. The reported IFRS net income was at EUR 2.4 million or EUR 0.20 per share. But let's have a closer look into the top line. The decline that we see in the revenues in the first half of the year is actually mainly attributable to 2 factors. The first one is that several major customers actually optimize their inventories of service parts and consumables in a strategic manner to optimize their working capital. This actually led to a temporary decline in the demand in this area. The second is the development business, business which faced a year-on-year comparison on a high level.

On the other side, the system business, as Marcus already mentioned, performed very well. So the demand was particularly strong in the areas of immunoassay, molecular diagnostics and immunohematology. And this is for us very important that the decline on the revenue that you see in that chart should not be interpreted as a general weakness across all of our business segments. Rather, we see this positive momentum in our system business, while 2 other segments were impacted by only temporary or year-over-year comparison-related effects.

But let's have a closer look into the revenue development on the next slide. So as already explained, the revenue trend by our operating divisions are showing a very mixed picture. On the left side, you see that the revenue from the systems increased by 15.4% or on a constant currency basis to EUR 39.7 million. This is actually a very strong evidence of the growth momentum in our core business. We therefore see a solid foundation for further growth. But to be precise, for the timing it's depending on the customer's physicians and the production ramp-up.

The revenue in the second bar chart from service parts and consumables stood at EUR 46.1 million. The 11.9% decline on a constant currency basis is again mainly attributable to the already mentioned inventory optimization measures taken by individual customers. Again, we consider these effects to be temporary. However, the timing for a full return to a normal level depends here again on the reduction of customer inventories and individual order patterns.

On the right side, you see the development of services. Also here, we see a decline by 7.8% on a constant currency basis. But here, we need to take into account that the last year was really on a very high base already. So overall, on the right side, you see the already mentioned shift product in our product mix away from the service parts in the first half of the year, which has traditionally a higher margin.

And this leads me to our adjusted EBIT overview. So therefore, this product mix has an impact on our EBIT. You see that the adjusted EBIT for the first half of the year was at EUR 7.7 million. The adjusted EBIT margin was at 6.9% compared with 7.2% in the prior year. So the margin was mainly impacted by these negative scaling effects due to the lower revenue and the mentioned change in the product mix. The lower proportion of these high-margin service parts and consumables had a noticeable impact in our margin.

In the short term, the lower share of this high-margin business had a negative impact on our product mix. But nevertheless, in the long term, this segment remains an important growth driver due to the growing installed bases in there. On the other side, we are seeing that our cost discipline measures, structural adjustments and also exchange rate effects had a positive impact in the first half of the year. It is particularly important to look at the second quarter for me. The adjusted EBIT increased by more than 125% to EUR 7 million, and the margin improved from 5.4% to 11.9%.

Why is it so important for me? Because this is showing that the operational leverage is having a significant impact as revenue improves and that we will continue with our efficiency measures also in the second half of the year. Last but not least, the cash flow performance. Again, it was particularly strong in the first half of the year. As you can see, the operating cash flow amounted to EUR 29.7 million compared with a negative figure of EUR 5.8 million in the prior year.

The free cash flow reached EUR 23.5 million, which enabled us to invest, reduce our debt and pay the dividend all at the same time. This improvement is actually very encouraging for us and was driven in particular by a reduction in accounts receivable and also lower tax payments compared to prior year. But at the same time, the working capital management remains a key focus, particularly with regard to the inventories. We, therefore, make an internal differentiation between the strong current performance that we are seeing right now and the ongoing task of stabilizing this momentum in a sustainable manner.

On the right side, you see the net debt fell to EUR 96.7 million. The ratio actually net debt to LTM EBITDA improved to 2.9x from 3.3x at the end of 2025. The equity ratio also increased to 58.1%. Last but not least, you see as well that the investment ratio is slightly below our targeted corridor. We are sticking to our guidance for the full year, but we are actually closely monitoring the development of this very volatile business environment that we are currently in.

And with that, I would like to hand over back to Marcus.

Yes. Thanks, Tanja. And let me again walk you through our full year guidance before I come to the conclusions and et cetera. So we -- on a constant currency basis, we have given a sales guidance on a full year basis to grow in a medium to high single-digit percentage range. Still, and we have mentioned that now a couple of times, we have an extremely volatile general business environment, and I don't need to walk you through all those contributors.

At the end of the day, obviously, a lot of those things we have planned when we have given forecast unfortunately didn't materialize. Others materialized, which were unplanned and unpredictable. So at the end of the day, I think it comes to an environment where we are trying to be as agile as possible. Unfortunately, as we all know that if things don't materialize, they don't materialize at the moment when they don't materialize. And when things are coming in additionally, this means always that the organization has to be stretched to a certain extent.

I think we actually improved here in terms of agility very much. That's why we continue to confirm that guidance. We have to see that, and I mentioned that already, that the sales growth forecasted is expected to be generated almost exclusively from that strong year-end business. We generated about, and I said that already like between 30%, 33% of the overall sales volume in the last couple of years in the fourth quarter, and we are expecting the same thing to happen in the fourth quarter of 2026.

This gives you an indication of what we'd expect in Q3 here, and I think we mentioned that already to a certain degree, we are expecting to be in the same ballpark in absolute terms as shown in Q2. Adjusted EBIT margin is expected to be approximately on the previous year's level, which was 10% adjusted EBIT. And on the investment side, we believe at this point that we will still be at the lower edge as we have seen in the year 2025 at the lower edge of the investments as a percentage of sales area between 6.5% and 8.5%.

So the focus for the rest of the year is obviously to deliver. We want to maintain cost discipline throughout the company. There are a number of organizational measures ongoing as well as we are looking into BOM cost, et cetera. So a lot of measures. I think it's worth mentioning that over the past years, we have already harvested the low-hanging fruits. And in the meantime, we are looking into activities which are more like structural.

On the other hand, we have this very nice lineup of products which will be launched. So we want to find that middle ground of staying cost effective, but considering the growth which lies ahead of us as well. We want to -- and here, we actually made a sentence comprehensively and timely to transfer the new products. You probably know that when we are talking about launch, it doesn't necessarily mean that our customers are talking about launch at the same time. So this means ramping up series production at the foreseen quality comprehensively and in a timely manner. This is the important thing. This is actually driving the growth of the company.

Then we are mitigating the dilutive effect of certain parts of the Diatron business to drive the group profitability, then executing deal pipeline. We have talked about that in the past, we don't see a material change. Here, we see that the appetite of our customers is driven by innovation in the application and not really innovation in the methods used, which at the end means that the deal pipeline looks like particularly the leads are looking very promising. We need to transfer those leads into development in order to make sure that we can guarantee the growth of the company in 6, 7, 8 years from now. Those products, which will come to the market in the next 5 years are actually already contracted and are going by sequence through the different development departments of STRATEC Group. However, in order to fill that pipeline beyond 2032, we definitely need to look into filling that pipeline.

Then we obviously have limited -- limit profitability impact of additional input cost drivers, such as -- I don't want to walk you through all those facts everybody is walking you through. I think the point which is worth to mention, which is probably a little bit typical for us is that we see, again, the materially increasing lead times and prices for everything which is related to electronics. We have to tackle that. There are a number of measures ongoing. However, this is definitely a challenge for the entire industry, particularly in terms of life cycle management that regulatory is literally forcing us to make sure that the availability of the approved products is guaranteed, which often means that we have to buy legacy products, which tend to have a big focus in terms of pricing.

Then we intend to improve the cash flow dynamics with a strong focus on working capital efficiencies. Worth mentioning that we are still sitting on an elevated inventory level, and here, 3 factors are coming together. Most importantly, there is -- and there will continue to be a residual volume of inventory we are keeping for our customers where we had to perform last time buys in order to make sure that certain products will continue to be available for the next 4, 5, 6, 7 years, particularly if electronic components cannot be replaced, like cameras or lenses and things like that.

Then the second part is highly optimized for products which have turnover rates. Unfortunately, we have a number of products, particularly those ones which have been launched during COVID-19 or right after, where still the ramp-up is weaker than expected when we are sitting on inventory levels, we can only reduce those inventory levels to the extent where those products are starting to turn.

Targets for the margin and sales for 2028 and 2023, I think we mentioned already that we are expecting a certain step function. So for the period 2025 through 2028, a compound annual top line growth of 6% to 8%. Again, I think the point which is really worth mentioning that in our previous expectations, we foresaw a strong recovery of the MDx market. These expectations are actually seeing more flattish to slight development of the MDx market. It still continues to be saturated, and there are certain new players. The market continues to change in terms of deglobalization of local solutions, et cetera, of different market demands like more point-of-care dominated in the United States, more centralized dominated in the regions of the world.

Then for the period between 2028 and 2030 based on those products, which are then coming to the market in the, say, next 10 quarters, very strong acceleration of the top line growth, compound annual growth rate here, expected to be in the area of 10% to 12%. Like we mentioned before, the growth between now and 2028 is driven by products which are already on the market, certainly most of them early stage. And then the growth thereafter is expected to based on the products which will come to the market in roughly next 10 quarters.

On the margin side, very much driven by those measures we have established and will continue to establish. We have given a step function as well. And it's an adjusted EBIT margin of at least 13% by 2028 and adjusted EBIT margin of at least 15% by 2030.

This gets me to the end of the presentation. I would like to hand back to Moritz, who will explain us how to commence with Q&A. Thank you.

[Operator Instructions] And the first question comes from Jan Koch from Deutsche Bank.

Thanks for taking my 3 questions. I would like to take them one by one, if possible. The first one is on your supply chain situation. One of your competitors said this week that it is seeing supply chain issues involving several suppliers. Are you seeing similar trends? And could your elevated inventory levels help to mitigate that? And related to that, could you remind us of your exposure to semiconductor chips overall and what this could mean in terms of your lead times and cost inflation?

Yes. Thank you very much. Actually, we experienced similar situations in the last supply crisis. That's why we were very cautious in the way how we are designing things like layer design where things can be replaced, et cetera. So like particularly for the younger products, we are well prepared for that situation. Obviously, like there are challenges, and we have to see that -- let me get you a really stupid example. If power supplies where you have lead times in your SAP system of 10 weeks, you obviously plan for those 10 weeks and you're looking into the demand. And like from one day to the other, if the lead times are increased to 40 weeks, you definitely have an issue.

We are constantly monitoring that. We actually have put a special department into those activities. You cannot say yes or no. At the end, it comes down to like involving the customer, agility, looking into those products, then obviously, logistical measures particularly based on the way how our manufacturing approach works. So to have an almost 100% design depth and then handing over the assembly and manufacturing of components like modules to qualified suppliers. That's more or less the past.

The future is looking into each element separately, looking into those long lead time items and particularly taking care of the long lead time items, particularly if global supply chains are involved. So let me try to get you a certain optimistic level across, sorry, is that we cannot say that we are immune. On the other side, I think we are fairly well prepared. This is only about our possibility and ability to supply.

Pricing is another issue. So you -- and again, example, is we are obviously using built-in PCs, which are approved with the solution. So you cannot replace a built-in PC just with the one you get in getting MediaMarkt or the like. So we are actually looking into the forecast and are placing orders for next year and the year after, and we don't even get prices for that.

So in the past, we were able to buy kind of futures in order to continue to be supplied. What we see is that we no longer get prices. However, this means that we have to take advantage of the new contractual situation we have with the majority of our customers that this has to be perceived exceptional. So we can, to a certain degree, put that forward to our customers. I think what I wanted to get across is that we're trying to learn from the past. However, we are still not immune. I hope that helps.

Yes, it does. And my second question is on orders. You mentioned on the last call that you had made some changes to your forecasting system essentially to limit customers' ability to postpone orders. How is that working so far? And has it improved your visibility for H2? And in your prepared remarks and in the press release, you mentioned there's still high customer ordering volatility. And isn't the main aim of the new forecasting system to prevent or at least reduce that volatility?

That is right, Jan. I think, again, it is worth mentioning that what do we are actually comparing ourselves to. If we are looking into our real competitors, often way smaller than we are, we see that they have way more difficulties than we have. I would like to get across that if we wouldn't have established the measures like forecast to be spread longer or away from orders towards supplier more into forecasting systems, et cetera, then the situation like would be even more difficult to handle. So we are actually with all those measures, which are showing already efficiencies, we are working against the volatilities in the market. And without those measures, the situation would be even more demanding and even more challenging.

It doesn't help. However, I feel fairly comfortable. We managed to actually, particularly for those customers which showed higher volatilities in the past, switch from a forecasting system into an ordering system for those customers, which are on lower run rates and lower run rate is obviously always more demanding in terms of manufacturing planning than high continuous manufacturing, we switched into longer forecast cycles, et cetera. So let me put it that way. Obviously, we are self-criticizing ourselves every day that we are far away from being perfect, but I think we have significantly improved over the, let's say, over the past we saw after COVID-19. Yes, it helps, but it doesn't sort out the situation entirely.

Makes sense. And then lastly, on the 2026 guidance. I understand that the year is very back-end loaded again. But could you help us with the phasing between Q3 and Q4? Marcus, you mentioned, essentially, if I reflect your comment about Q4 accounting for 33% of full year sales in my model, that implies about 10% growth in Q3. Does that sound reasonable or too high?

It doesn't show our model. Actually, like I said, we are expecting Q2 be -- in absolute terms to be around the same ballpark as Q2. And then I was trying to really get that across is that like over the past years, we showed that the fourth quarter is getting stronger and stronger. The contribution of Q4 over the last couple of years was between 30% and 33%. If we are doing our math the same way how you are doing that, it gets us closer to 33% -- sorry, to 34% and 35%, and that's what should be expected.

If we are looking into our planning models. And again, this is based on orders which have from the very, very beginning, been already placed in Q4 or this is actually like milestone realization, which has been expected to happen in the fourth quarter. And this is all nicely lined up. But again, the devil's in the detail. Therefore, and again, we are optimistic on that, but we have to see that there are a lot of challenges and a lot of things we have to work on and track and monitor things very closely.

Great. Before I jump back into the queue, just one clarification on the currency translation effect in Q2. Could you confirm that this had a positive impact of around EUR 2.5 million on a year-on-year comparison basis?

Roughly in that range, yes.

And the next question comes from Oliver Reinberg from Kepler Cheuvreux.

Three questions from my side as well. Firstly, getting back to the kind of consumables situation. I mean, can you just talk to what kind of visibility do you have, what is really happening? I mean, is it just like an inventory issue that the clients also highlight to you? I mean, can you confirm with the utilization rate that there's something else going on? And how concentrated is this kind of situation? Is this mostly one client or across the board? That would be question number one.

And secondly, just on the demand for MDx, I'm not sure if I got that correctly. I mean in the press release, you talked about that there is actually a kind of improvement of the situation, which would be, I think, quite reassuring. In your prepared remarks, when you talked about the midterm guidance, you talked about more flattish saturated market for MDx. I'm not sure if that is the assumption on the midterm guidance or what you still see? That would be question number two.

And thirdly, just on life cycle management. Can you just give us a flavor like what magnitude of your sales is related to life cycle management? And what are the lead times looking at? I assume that there is a stronger or quicker conversion from order to sales just to get a flavor for that.

Absolutely. And Oliver, thank you so much for those questions. Consumables, and actually, I wanted to touch base on that. What we definitely see, so first of all, let me start from the tail end of the question regarding consumables. Obviously, particularly maintenance part is very much driven by the installed base of our customers. And here, we often have preventive maintenance kits, which are dominating the sales here. Then we have other parts, and I will touch base on the consumables, like the plastic consumables in a minute. What we see is that particularly those customers which have been facing M&A activities over the last year that they are clearly showing that M&A is extensive. So the new owners are obviously looking often into optimization of service inventories.

We all know that this means to an end. We just don't know if those customers already hit the bottom. So there is a moment when you're trying to save that you are not oversaving. Customers have to be serviced. Typically, the instruments are based on reagent rental contracts, which means our customers continue to be in charge for uptimes of the instrument. And that's why very cautious organizations tend to invest a lot of money into serviceability, availability of service resources and availability of materials.

Over saving may lead to problems. We just don't know. And actually, we expected that to happen already in Q2, it just didn't happen with the same effects were already very -- got popped to a surface in the second half of last year already, that although the utilization of the molecular equipment is significantly improving on immunoassays and immunohematology, they continue to be very high. In our industry, one could literally exclude that focused spare parts and maintenance parts are used due to regulatory reasons and risk assessments. So at the end, there is still a high utilization. At this moment in time, our sales is under expectation, which means that today, our customers are using their warehouses.

Like I said, this is a means to an end and affects mainly those customers where transactions happened over the past, say, 12 months. To the contrary as we are reporting consumables together with our maintenance part as to plastic consumables, plastic consumables and spares in the same group, we can report that the plastic consumables are actually outperforming certainly on an extremely low basis. And again, this is the proof that innovation comes back, again, application-driven, not system-driven. And it's very much driven by smaller customers rather than for the bigger customers as far as instrument is concerned.

Sorry, my MDx statement was probably misleading. I was actually talking about those instruments which are already in the field. You probably know that we have a lineup of products, which will hit the market. That's why our midterm guidance is expecting a slight recovery. We actually see that the run rates are going up, but we have to see that if we are comparing pre-COVID levels with COVID levels and today's level and say, if the run rate was 1 pre-COVID, it was between 3 and 4 during COVID, and it's still south of 1 with a slight growth rate. However, not the growth rates which were expected to happen in the MDx spot before COVID-19.

And Oliver, you're absolutely right. Product life cycle has shorter revenue cycle -- product life cycle management. Often software is related or replacing certain functional modules. And again, there are typically only 3 measures to take a product life cycle, particularly if the input side is shortening and the output side is getting longer and longer, which means last time buys, I already mentioned that we are trying to avoid that. In certain cases, it's unavoidable, particularly if products are at the tail end of their product life cycle, redesign, reverification, revalidation, reapproval do not make too much sense. In this case, our customers are allocating budgets into last time buys.

Then the second part is for newer products, layer design where things are easier to be replaced with then more modern products, which often are coming along with a better price point and better performance. But with the downside of revalidation, reapproval, again, a layered approach helps to cut those recycle short. And the third measure is actually redesign, particularly affecting legacy products, particularly affecting the software. That's why if we are looking into the allocation across our departments that software development and associated verification are running at or overcapacity levels, which actually shows the situation here.

Important point, and I made it already, but allow me to reiterate that the motivations for product life cycle management over -- after COVID-19 was the shortening of the input cycles and the fact that the output cycles are getting longer and longer. Our customers are trying to sell the products for a longer period of time. And some motivation now is more regulatory driven. We see that particularly FDA, cybersecurity, environmental rules, et cetera, are actually more and more driving the product life cycle. I hope that helps.

Then the next question comes from Michael Heider from Berenberg Bank.

I have -- there are also roughly 3 left. The first one would be again on maintenance and consumables. Could you give us maybe just an indication what the sales level would have looked like if we exclude this one customer that is having a new owner and is optimizing net working capital? And then maybe also, is there any risk that they would be replacing these maintenance parts with another supplier? Or is this contractually not possible? That would be my first question. Yes, maybe take them one by one. I don't know, it's probably easier.

Yes, thank you very much. Yes, maintenance part. So actually, this is not affecting one customer, I mentioned before, there is a number of customers which actually had M&A activities in the past. And I think it's only normal that if -- like a more common pattern that new owners are looking into the details and obviously looking into inventories level of working capital is a measure to show efficiency. And like I said, optimizing things here often means that there is a trade.

That's why, particularly looking into the fact that the utilization of the equipment, and we see that we are our IoT tools and based on reports generated by our customer that the utilization nicely increases. That in parallel, the quantum of those maintenance parts is going up in line with utilization. Unfortunately, we don't see that coming here. And again, obviously, we have this discussion about the third-party unapproved spare parts and maintenance parts, and we cannot exclude that this is not happening at all. However, and allow me to say that then with all the confidence, one could get to the table at this point.

From a regulatory perspective and particularly from a risk perspective, bogus spare parts are not used in maintenance part at the same time. So think about it like our customers or even the end users in the laboratory would knowingly use fake bogus parts, unapproved parts and this would get to a false negative result. What would happen from a risk perspective. So no one is actually do that willingly. So certainly, there are regions of the world where people might replace tubing also, but that's not the driver of our maintenance parts business.

So I can actually -- I guess that with all the confidence say that from a regulatory perspective, one could actually exclude that. Probably know about scandal, which happened in the '90s in the aircraft industry. I think the same methods have been applied as in the aircraft industry like was established then to avoid the use of bogus spare parts.

Yes, very clear. And then it's very small. I know but other activities were down quite significantly. What was going on there?

Let me postpone the answer to the question, and let's get to question number 3. We'll find that out.

Yes. Then also a little bit housekeeping here. On the -- it was already mentioned that the FX impact was roughly EUR 2.5 million. But also here, maybe some details on the other operating income and expenses. So the income was very high. I presume this was the FX impact and then the other operating expenses on the other hand were lower than usual. Maybe also there some more details, if possible. And then the last one, maybe we can take that together because all a little bit of housekeeping. Also, I read you capitalized borrowing costs and maybe you can also give some details on that.

So as we pointed out, we had the tailwind actually on the currency this year. On the other side, we received also some R&D grants, especially for our consumable business in Austria and here. So this gave us this positive momentum in the other operating income, other operating expenses in the first half of this year. That will be the answer for -- yes, for the first question, actually.

For the second, [indiscernible] other activities on the sales side. I mean we can also take it offline. It's very small. It was just out of interest. Hello?

Sorry?

Yes. Okay, sorry. I wasn't sure [ if you cut off. ]

Like the request here, and I don't know if this was due to the interrupted line. We have -- no. Actually, let's take that offline.

Yes, okay. No problem.

And if this is in the interest of other participants, please let us know and we'll get you the details in writing then. So all 3 questions answered.

Yes, capitalization of borrowing costs would have been the third one, but we can also take it offline. I guess it's also details.

And the next question comes from Jitisha Malhotra from AlphaValue.

Two from my side. Firstly, with H1 adjusted EBIT at just 6.9% versus the 10% full year margin target, can you give me more color on H2 phasing, please? How much of the expected step-up is already covered by firm orders versus forecast that you think are still sensitive to customer volatility?

And my second question would be on the CapEx phasing again on guidance. When you say as we saw that H1 CapEx came in at 5.5% of sales, and it's slightly below the guided corridor of 6.5% to 8.5%. So is this timing? Or is this a deliberate slowdown given the geopolitical situation? Or should we expect some catch-up in H2?

Yes. Thank you. Let me answer the first question first. So the margin step-up actually is mainly driven by 2 factors. One is actually to a certain degree product mix, but let me say the main factor here is definitely operational leverage. I think we have shown already in quarter 2, what kind of performance like in the company when we are getting to higher revenue and higher production numbers and higher output numbers, and that's exactly where we are coming from. And I think exactly what we are trying to get across for years now that as soon as growth comes back and we expect it to happen in a foreseen manner, then definitely margin will come back.

Okay. I will take the second question regarding the investments, the CapEx ratio. So we are still sticking to our guidance between 6.5% and 8.5%. But as I said, we are really watching very closely the current business development that we are not getting into any pre-investment phases. So therefore, we are monitoring it very closely during the next months.

[Operator Instructions] And we do have one follow-up question from Jan Koch from Deutsche Bank.

Thanks for taking my two follow-up questions. The first one was -- is on the strong analyzer growth. Was some of the growth driven by stocking of customers ahead of new product launches? Or should this rather happen in H2? And then the second question, we haven't heard much about Natech for a while. So how is the integration progressing? And on top of the EUR 30 million purchasing price, have you paid any additional earn-outs over the last few years? Or has the business not developed in line with the initial plan?

Yes. Jan, thanks very much. Launches -- actually, you mentioned launches. I mean, very clear, no. So this is not like initial stockkeeping or anything the like. We would love to see that, but unfortunately, we don't. So this is very much driven by, let me say, growing run rates here and there and orders which are happening in -- or which is already initially being placed from quarter 4 on. And then sorry, I forgot the second half of the question.

Natech, the acquisition...

Natech, yes, actually a clear statement here. So there is no kind of further earn-out or anything the like is that the sales price was the price which is in our books. We are -- the business is showing nice progress in the meantime. We are definitely behind our initial plans, particularly in post-merger integration. We are behind. We had certain plans, which particularly driven by the, let me say, volatile market, particularly activities in the United States and the focus on other activities kept us a little bit away. But as Tanja mentioned before, we are definitely focusing into the activities in Natech and definitely, particularly the fact that this is our U.S. base, makes us believe that definitely, this is the side of the growth of the company. And we -- if investments are happening in this environment then definitely in the United States, helping to address the needs of the U.S. market.

There are no further questions at this time. So I would like to turn the conference back over to Jan Keppeler for any closing remarks.

Thank you, everyone, for joining us today. If there are any follow-up questions, do not hesitate to contact the Investor Relations team. Again, thank you, and goodbye.

And welcome, everyone, to our Q1 2026 financial results conference call. With me, as usual, are Marcus Wolfinger, CEO of STRATEC; as well as our CFO, Tanja Bucherl. As usual, following the presentation, we will have our question-and-answer session. Be aware that this conference is being webcast live, and you can download the presentation either from the webcast or from our website. And last but not least, please allow me to draw your attention to our safe harbor statement, which we have on Page 2 of that presentation. And with this, it's now my pleasure to hand over to Marcus.

Good morning, good afternoon, ladies and gentlemen. Welcome to our Q1 disclosure call. Let me briefly walk you through the quarter in a glance or at a glance. First of all, we had a soft start into the year. I hope we managed to not surprise you with that. We have mentioned that in a variety or during a variety of occasions. However, definitely worth discussing what happened here. First of all, we think this compares to strong comps in 2025 on the other hand side, we had a solid instrument business on the other side.

And that was like we actually saw that like for more than 3 months now that the start in the year is going to be soft as far as revenues with development activities as well as particularly our service parts and consumables business, which tends to become more and more back-end loaded over the year. The reason is that -- and actually, we are trying to work against that over the last 4, 5 years, and we were trying to pull things into the early months of the year. However, the observation is that over the past 3, 4 years, it could actually way worse.

And even this year, it gets worse "of worse" than it used to be the case in 2025 and 2024. We see that there are end-of-year budgets that our customers are actually planning for end-of-year business. On the positive side, we can disclose that we managed to put more customers away from a forecasting system giving us concrete orders, which makes the second half of the year and particularly the fourth quarter more plannable, which means that we have already initiated logistical and manufacturing measures in order to cover that.

And again, transparency is fairly high. This is no longer a phase where forecast can be materially changed or actual orders taken out of the system. Again, worth mentioning that the thing we have already guided for is starting to show traction is that our instrumentation business is getting better and better. We had a strong growth in the first quarter. Unfortunately, the product mix is not working for us at this moment in time. But again, if we are looking into the actual allocation of resources of the relevant products for the remainder of the year, in terms of margin, not just the product mix, but even the actual participation of the relevant revenue groups within this forecast and within that guidance given is showing good traction and is positively supporting the margin development over the year.

I mentioned that we had that negative scale effect, obviously. I think that's quite common. We see that there is a minimum threshold when the company can operate with scalability. We went south of that threshold in the first quarter. However, we see the momentum coming back. On the other side, and that's the swapover effect of the accounts receivable from 2025 and particularly the very strong December is that the cash flow dynamic improved significantly and again, as we see this year, fairly back-end loaded, we are expecting similar effects this year.

Let me briefly talk you through this phase where we see a lot of transition happening between development projects and serial production. We have given detailed information actually first time over the past 10 years about when will those products hit the market and what are the -- what is the mechanics to be applied in terms of how steep is the ramp-up going to be? Is there a kind of normalized ramp-up with assay menu development happening in parallel through our customers or if the products are concrete drop-in replacement. I think we have nicely shown that there is a lineup of products which are coming in the next couple of quarters into series manufacturing and the relevant role in terms of that particular -- the 2 most actual products are direct drop-in replacements with market extension, which will lead to that forecasted growth.

We confirmed our financial guidance for 2026 this morning. And obviously, in a time where the entire industry had a fairly soft start into the year. We obviously got even more cautious and have performed several reviews over the last weeks and actually days, went again through a solid bottom-up planning. So about likelihood is it and how solid is our guidance. We went through that and with the relevant diligence, we confirmed our guidance this year. However, it is going to be fairly back-end loaded. Q2 should slightly pick up, but Q4 will definitely be the strongest quarter in 2026. With that, for details, I would like to hand over to Tanja.

Thanks, Marcus. Also a warm welcome from my side. So as Marcus has mentioned, overall, Q1 2026 was a quarter that was largely in line with our expectations. So we had already indicated that 2026 will be a significantly second half year loaded year, and this is actually precisely the trend that we are seeing in our current business. The trends in revenue and profitability are also mirroring the market that we are seeing in the last weeks. When we look at the financial figures at a glance, we first see the expected decline in revenue and earnings compared to last year's quarter 1.

The revenue stood at EUR 53.4 million, means below prior year figures and both the adjusted EBITDA and the adjusted EBIT also declined. The main drivers behind this development are the already mentioned timing shift to the second half of the year and the unfavorable product mix, especially when we compare to the strong prior year quarter, the baseline is actually quite challenging. A very positive trend that we have actually already mentioned in our 2025 call 2 weeks ago is the cash development.

So the free cash flow has improved significantly to EUR 18.6 million due to the back-end loaded December 2025. So let's have a closer look into the EBIT. So this slide shows you, again, the reconciliation to adjusted earnings. This rather is very important from a transparency perspective because, as you know, the IFRS figures reflect PPA amortization and other nonoperating onetime items. So we see on the adjusted EBIT, EUR 700,000 positive, where PPA amortization and other nonoperating effects are deducted. This effect is actually similarly visible in the consolidated net income that you see on the right side of this page.

For our internal operational management and for our comparison across the period, we therefore continue to focus on these adjusted metrics. In our view, this best reflects the current business situation and the comparison and deviation analysis. So what is causing the drop in the adjusted EBIT? As mentioned, the main drivers are the volume mix effect. Therefore, I would like to go to the next slide where we have a deeper look into the sales figures. In terms of revenue, we see the decline of 8.8% at a constant currency rate and 11.5% on a nominal base in the first quarter.

And this trend is mainly driven by 2 factors. The first one is the decline in our high-margin service parts and consumables business. Here, we faced again, as we saw it already in Q4 last year, this temporary working capital optimization measures at our customers. Nevertheless, we see a stabilization in the second half of the year or we could call it more a coming back to the run rate of the first half year 2025 in that business segment area. The second main driver is a difficult, let's call it that way, year-over-year comparison in the Development and Service segment, which gives us a hit.

Nevertheless, despite these 2 factors, we see an ongoing positive trend in the systems. Here, we continue to see the double-digit growth, which is particularly important to us because this confirms that the overall demand remains stable in our business and that we are well positioned in the market with our system. And at the end, with that trend, we are securing our future service and parts and consumables business. All in all, as I mentioned, the revenue trend is a reflection of the expected annual top line development. And this year, it's helping us also to deal with that strong second half year in a much better way.

Coming now to the adjusted EBIT for the first quarter. As mentioned before, it stands at EUR 700,000, corresponding to a margin of 1.3%. And this, for sure, represents a significant decline compared to the prior year. Out of these lower revenues that I explained to you, especially with the high-margin service parts and consumables, we faced the lower capacity utilization, negative scaling effects and the smaller share, especially on the service parts consumables, but also on the development and services.

As we have informed you in our annual call 2025, we are actively working on our cost base and structure. Therefore, let's move to the cash flow and the balance sheet development. Again, the very positive effect in here is the cash flow performance. So the operating cash flow stood at EUR 21.5 million, resulting in a free cash flow of EUR 18.6 million. This represents a significant improvement over the same quarter last year. The key driver is the reduction in our accounts receivable balance that has built up by the end of 2025 due to the very back-end loaded, especially December loaded business development.

But you see it also reflected in the working capital on the right side of that chart. The trade receivables have declined. At the same time, the inventories and liabilities remained stable overall. We also see an improvement on the balance sheet side. So the net financial debt has decreased compared to the prior year and at the end of last year. And this is what you're seeing also in the leverage. Leverage means the ratio of the net debt to the EBITDA LTM stands at 3.1x. While at last year, at the end of 2025, we stood at 3.3x.

What you also see on that chart is our capital expenditure ratio, which stands at 5.4% of revenue. So it's slightly below the planned range, but also in line with our expectations. And I would call it more an aligned phasing into the upcoming quarters. So all in all, the message here is very clear. Despite the weaker earnings quarter, our cash generating is developing positively. And with that, we are strengthening actually our financial flexibility. And with that positive note, I would like to hand over back to Marcus.

Thanks, Tanja. We have given guidance, which is expected to be top line growth in a medium to high single-digit percentage range on a constant currency basis. Again, I mentioned a couple of times, very H2 heavy. On the EBIT side, we have guided to be at the level with 2025, which was at a 10% level. And for the investments intangible and intangible assets, combined, we expect it to be between 6.5% and 8.5%. And please allow me to say we are certainly deeply looking into our earnings improvement program still ongoing with high cost discipline, et cetera, and actually looking into the relevant sources of income, looking into price increases, et cetera, all that's still ongoing.

And definitely on the investment side, we work on the -- if in doubt, then on the side of cautiousness principle, which we did over the past couple -- of the past years and clearly showed how resilient we stayed during that time when like our peers took some hits. Again, I think the message I would like to give you here is that we were trying to assess how robust that guidance is over the past couple of weeks, particularly over the last week, and we managed to talk to a number of our customers, and we're trying to find out how robust they saw the orders given and the forecast placed.

In particular, this clearer order pattern versus forecast supports a more balanced H2 manufacturing, which means even if some revenues will be back-end loaded, I think from a manufacturing perspective, this may come out way better than it used to be the case in 2024 and 2025. Long term, we have given guidance to grow 6% to 8% in the period between 2025 as a basis year to 2028 with several assumptions. The assumptions were that the new product ramps up phase into the main revenue driver. We see this already. We see our customer confirming their market launches.

Then to the contrary of the past, we -- the past in terms of the last 3, 4 years, we are now only expecting a slight recovery of molecular systems for the demand post-pandemic disruptions. And if you are following the announcement of our customers, you probably saw that actually some customers are already showing nice traction here with MDX systems placed in the market. And then certainly, the -- doesn't have to be under expected is the initial revenue contribution from early-stage products like not only development revenues, but actually instrument sales for pre-series and pilots, which are typically coming at a higher price point.

Then from 2028, particularly when those products, which will be launched in the next quarters are becoming more mature, and we are going through that learning curve in manufacturing where volumes are showing nice scalability effects, we expect a further margin expansion through 2030 based on the growing installed base, as Tanja mentioned before, and as a derivative of that, the dynamics growth getting back to like not just pricing contribution, but even volume contribution for service parts and consumables.

The margin targets for the same period between -- by 2028 to get to at least 13% margin and by 2030 to get back to the pre-COVID level of 15%. Allow me to remind you that during COVID, certainly with the product mix, which was very favorable for us that we got to a 19%, 20% EBIT margin after that very much driven by negative scaling effects coming in parallel to higher input costs and the lacking ability to increase or put price increase on the input side forward to our customers that led to the margin pressure. We are maneuvering out of that our contractual structures as well as the product mix foreseen for the time between now and 2030 are actually supporting this EBIT margin development. With that, I would like to hand back to Moritz, who will explain us how to commence with the Q&A session.

[Operator Instructions] And the first question comes from Oliver Reinberg from Kepler Cheuvreux.

Three questions from my side, if I may. Marcus, you talked about the order forecasting system has been adjusted. Can you just provide some more clarity? So does it mean now all orders for Q4 already firm? Or can you provide any kind of color what percentage of your full year sales guidance is already backed by any kind of firm orders?

Secondly, just to get a feeling for the phasing, how should we think about Q2? Do you basically plan to at least move towards positive sales growth? Any color here would be appreciated. And then thirdly, just on this overall pressure from clients to produce more locally. Where do you stand on this? What can you contribute? And I think as part of that in the past, there was also M&A discussions. If there's any update would be great.

Yes. Thanks, Oliver. Let me start with your third question. At this moment in time, we are actually very cautiously trying to cover the Chinese markets, particularly as far as our customers do have exposure in China with local final assembly and final testing with certain materials to be sourced in China. We have plans to do something similar for a, let me call it, maintenance part in the United States, which at this moment in time, has a nice balance of complexity, sales volume and tariffing in the United States. We are very cautious about that.

I think it's worth mentioning that particularly in the consumable space, some of our contracts actually foresee that as soon as we are building a second or third liner that these liners would have to be localized. I think the discussion in instrument is slightly behind that as everyone sees that splitting up already and don't get me wrong in saying that low volumes, you see we are manufacturing in the hundreds, not in the thousands or 10,000 that splitting up that volume immediately comes along with a price tag.

At this moment in time, our customers see that the relevant end markets are not prepared to cover that. But certainly, the pressure is increasing more and more, particularly as we see that our customers in the United States have -- obviously see the tariffing and actually see that some activities have to happen. At this moment in time, I think quality and actual pricing coming out of Europe, particularly with strong support of low-level manufacturing in Europe at this moment in time has a positive contribution to pricing as well as to quality, but we believe that there is a threshold. That means that in each and every case, when we are discussing that we are offering that. But at this moment in time, our customers still see the advantages of maintaining the setup, but this may swap fairly fast.

Now getting to your first question, and please allow me to not provide you with any percentages. What I was trying to get across is that we obviously have a number of customers which are used to a fairly precise forecasting system, which rolls in the next 3 to 6 months as actually binding orders. The forecasting system within these customers is established. They are actually transferring their own forecast coming from their relevant country organizations into a centralized forecast and are providing that.

If we look into the statistics of the past, we have high forecasting realization and actually have an excellent cooperation in terms of what makes our customers positioned to actually fulfill their forecast. On the other hand, over the past years, we had issues that particularly smaller ones or actually customers which have an early-stage product tend to move their forecast. And in that case, it like the latter cases, we have switched away from a forecasting model, which can be adjusted over time into a real firm order system and particularly for customers with high volumes by the end of the year. But having that history of moving forecasts and orders, we have switched this forecasting system into an order system, which makes it like the end of year business way more transparent already at this moment in time as it used to be the case in the past.

Oliver, thanks for your question. So regarding Q2 for the expectations. So when we're looking into the top line, I think we can fairly assume that we are coming back to the revenue level of last year of the second quarter 2025. And we are even expecting a slight increase on the service parts and maintenance, which would help us also on the earnings side. So we will definitely see, for sure, an improvement compared to the Q1 and coming back to the level of Q2 last year, maybe even with a little upside.

Q2 margin will be up year-on-year is what you said, Tanja?

No. Q2 this year, you could imagine from the revenue side to come back to the level of Q2 2025. But with hopefully even a better participation of the service parts consumables business, which would give us also a little bit of an upside on the earnings side compared to last year's Q2.

And the next question comes from Michael Heider from Berenberg Bank.

I have one left. So in Q1, your gross margin dropped quite significantly, and I presume this is mainly mix. You explained this. And I would assume that this is more being driven by low consumables and spare parts sales rather than mix within the instrument sales, but maybe you can elaborate a little bit on this.

And then the related question to this is, well, I mean, you already mentioned that you expect service parts and maintenance coming back somewhat in the second quarter, but still how -- I mean, can you give a little bit more light here as well? How sure are you that it's just working capital optimization? Are we talking just about one larger customer? Or do you see this with several of your customers at the moment? And yes, what is your visibility here when this will be over?

Yes, Michael, thanks for the question. Actually, in terms of product mix, unfortunately, both is the case. It's -- let me say, the mix is unfavorable in terms of gross margin coming from the instrument and then the relevant contribution of instrument versus maintenance parts and spare parts. We were actually trying to analyze if this kind of correlates to Q4 last year, which is actually not the case.

So we don't see that our customers bought certain maintenance part, consumable service parts in Q4, which are now not bought. We just see that the volume is fairly volatile. We definitely have one customer predominantly trying -- so obviously, I think it's worth explaining how service actually works. In the case of consumables, we actually ship that we find a nice correlation of shipping volume and the correlating costs as to volume, which then have to be stored at customer side and obviously shelf life. So this is actually like a relatively short-term business.

In the case of maintenance parts, actually, we are offering certain minor discounts to our customers if they are ordering bulk. But typically, we are shipping like at least 2 to 3 bulk shipments per quarter. So this is not the case here as well. And then obviously, for -- particularly for spare parts, we are delivering based upon minimum inventory levels to our customers. And then they are typically shipping to their relevant country organizations or even to card trunk stock, which is then taken by the field service engineer directly to the customers. And in the relevant chain, we fill up again. And what we clearly saw here is that certain customers were acting on a minimum inventory level derived from actual run rate.

And driven by the acquisition of one of our customers, we definitely see a more cost cautious behavior, but this is a means to an end. And if we are looking particularly derived from the communication we have with our most important customers in terms of spare parts, maintenance parts that they have achieved a level which from now on makes it more like steady as we saw in Q1. Actually, I think we reported the same thing already in Q4 last year, particularly towards the end of the year. I hope that helps.

Can I -- may I ask, can you give a hint on your gross margin development, which was the main driver here or which had the biggest impact? Was it the mix within the Instruments division or between the divisions?

Largely between the divisions.

And the next question comes from Jan Koch from Deutsche Bank.

The first one is on your product launches. During the full year conference call, you presented several systems that you expect to be launched in the coming years. Which of those are anticipated to be launched this year? And are there any contributions reflected in your 2026 guidance? And then secondly, on input cost assumptions, your margin guidance includes an assumption of rising input costs. Could you quantify this assumption? And additionally, have you already observed an increase in cost due to adverse geopolitical failures effect?

Thanks, Jan, for the questions. Let me high-level answer those questions. Actually, the growth foreseen in 2026 is not driven by actual operational sales from any new product launch, particularly those ones happening in 2026, whereas we have a higher number of highly priced pre-series and pilots. The growth in 2026 is actually derived from the launches which happened over the past couple of years. And then from 2027 on, we will see new product launches. And definitely, we see some input cost increases as a result of the geopolitical situation. Some of them have actually already been factored into our guidance already from the beginning.

And obviously, we put some leeway in. However, again, this is a means to an end. At this moment in time, the input prices coming along with certain product shipments are covered by our guidance, and that's why one of the reasons actually in the review why we could confirm the guidance. We definitely -- and I hope I managed and Tanja actually mentioned that during her speech as well is that we are super cost cautious. And definitely, we have to make sure that we are establishing further cost saving methods in order to underline our guidance. However, at this moment in time, and based upon the things we know so far for the remainder of the year, like product mix, like orders placed, we were able to confirm our guidance.

Got it. And one follow-up, if I may. Could you provide an update on the expected compensation payment from the large German company, which you still anticipate?

Yes, I can do. But certainly, we are progressing but progressing in a way that things are not yet sorted out. So let me inform you that there is arbitration ongoing. The result of that settlement is not factored into anything, not in any KPI. At this moment in time, there is one further loop of statements to be made. We should not expect like managing expectations cautiously. We shouldn't expect settlement this year, but next year, if everything runs smoothly, we can expect settlement by the end of the year. However, nothing factored in so far.

[Operator Instructions] And the next question comes from Sven Kurten from DZ Bank.

First of all, I would like to know what do you think is the biggest risk for your guidance for 2026 and also for the quite positive midterm outlook, you guiding sustainable margin improvements for 2027 and 2028. And then secondly, on the inventory level, I remember that you mentioned you think it will come down, but not to the level of the pre-pandemic levels. What do you think is a sustainable inventory level in the midterm?

Yes, Sven, thanks for the question. Actually, we were trying to flag the risks which are related to our 2026 guidance and actually even further downstream, we were trying to mention those risks, and we have put it in the presentation as basic assumption. It's actually on Slide #11, but let me briefly walk you through that again. For 2026, it's definitely not instrument sales or consumable sales. It's more like service parts and maintenance parts, which to a certain degree or let me word it positively, which is only forecasted and ordered partly for the remainder of the year, which means it underlies basic assumptions, some forecast, some historical data, some statistics, some utilization rates, some derivatives from installed base, which is giving us good indications.

However, some of the orders are not yet in the book. So that's probably the biggest risk factor in our 2026 guidance. And again, allow me to mention that a product launch is not required to -- a meaningful product launch is not required to fulfill the 2026 guidance, whereas particularly for the guidance thereafter, there is a number of lineups. And again, allow me to refer to our full year presentation where we have put some light around the relevant stages of the product launches, particularly those ones for the short term are in the very last stage prior to launch, actually already some of the approvals already in the books, whereas those launches happening in '28 that certainly this means not just for us finalizing development.

And again, only the products which are contracted in those development and sales programs, which are contracted have been put in that guidance. However, there are milestones and approvals in between. We were trying to assess that with state-of-the-art methods and statistics, certainly contribution in terms of assay development from our customers. And again, we didn't put aggressive time lines, but certainly, there is a way to go in order to get there. I think we have gained enough experience after COVID how product launches and ramp-ups were elongated and particular ramp-up curves are flatter than they used to be before COVID-19, but that is all reflected. Help me out, what's the second part of the question?

And the second part was a sustainable inventory level. I think you mentioned that it will go down, but not to the same extent as it was pre-pandemic.

Yes. So let me get you like some explanation. First of all, we have extremely elevated inventory levels. However, we managed to get to significantly work down purchase obligations almost at the same level as we haven't had inventory levels. There are 2 factors which at this moment in time are a little bit the limiting factors. We have 2 products where -- which at least one of those programs is contracted where we build inventory level based upon data provided by the customer, where the minimum business guarantee is still to be taken.

And as this product has a very low run rate, we expect the run rate to go up already towards the end of the year, but mainly in the year 2027 and 2028, we are expecting higher run rate. And only then we will manage to work down inventory levels. And then on the other side, and that's probably a little bit more complex to explain that is that towards the end of COVID-19 and the beginning of the supply crisis, we saw that a certain number, particularly the bigger electronic components manufacturers took advantage of the situation and cleared out their product portfolio, which means the legacy products were and still are no longer available. They are trying to keep their margin heavy younger products up.

And at the same time, we saw that the expectations regarding product life cycles, particularly derived from regulatory and from investments made by our customers are pushed out, which means on the input side, the product life cycles are shortened, whereas on the output side, the product life cycles are getting longer and longer. There are like mainly 3 ways to mitigate that. One is a more modular development approach. Obviously, we are following that whenever possible.

Secondly is a redesign. You only do redesign, which often leads to reverification, revalidation, reapproval, so very costly. You only do that if the product life cycle of the actual product still has a certain spend. But let me say, as soon as products are getting mature or even beyond that in like the sunsetting phase, you do not do redesigns on those products. What you actually do is that you do last-time buys. And we have a volume of about EUR 10 million, which will not vanish. And we will work that down as long as those legacy products will be sold. So these products are of value, but we can very much derive from those 2 components.

One, that the product run rate for certain products is not where we expect it to be. And secondly, obsolescence management and last time buys, these are the 2 positions, which will be residual for the next 2 years for obsolescence management even longer. However, some of those costs are paid by our customers. And please let me assure you that particularly for the high runners, we have highly optimized turnover rates in our warehouse. However, that's not reflected if you are only looking into the accumulated volume.

But you won't give a target ratio for inventories of sales?

If you look into our P&O development over the last years, we stood at EUR 330 million, EUR 350 million roughly. So I think a short-term target is definitely to come down below to the EUR 330 million. And then we have also a long-term target. So the EUR 200 million, slightly below. But as Marcus mentioned, it's always also balancing out of our scaling effects with the suppliers and the customer call-offs, but this would be a short-term and a long-term target for us.

So there are no further questions at this time. So I would now like to turn the conference back over to Jan Keppeler for any closing remarks.

Thank you, Moritz, and thank you, everyone, for joining us today. If you have any follow-up questions, please do not hesitate to contact us and the Investor Relations team. And thank you again for joining us today. Goodbye.

Welcome, everyone, to our full year 2025 financial results conference call. With me today are Marcus Wolfinger, CEO of Stratec; as well as our CFO, Tanja Bucherl.

As usual, following the presentation, both will be happy to answer your questions during our question-and-answer session. Be aware that this conference is being webcast live, and you can download the presentation either from the webcast or from our website. Finally, please allow me to draw your attention to our safe harbor statement, which we have on Page 2 of that presentation. And with this, it's now my pleasure to hand over to Marcus.

Yes. Thank you, Jan. As Jan mentioned, we would like to give you an overview of our actual events in 2025, followed by the financial review and certainly the interesting outlook over this year 2026, but certainly looking a little bit further downstream about our funnel and pipeline and everything else we believe will drive the company's growth in the next couple of years. And after that, we would love to answer your questions.

2025 was certainly impacted by geopolitics and uncertainties in the global markets, creating challenges not exclusively in those reported fields like supply chain and sales, but also in like decision-making processes worldwide, particularly within our customers' development funnel and so on, et cetera. As a result, we have to perceive it as an above peer group achievement that the company's top line could be kept stable and with that, robust. Despite these difficulties and still lacking scalabilities and economies of scale, the overall performance in 2025 was satisfactory as the profit margin remained within the initially targeted range. This demonstrates the resilience of the business model and the effectiveness of cost and earning management measures. We made significant progress in the development partnerships and particularly the outlook after 2026 shows that the area where we brought in new partners or new programs over the past couple of years is now leading to that we really get the rubber on the road with new development programs and new programs which are coming to the market in the upcoming quarters. At the same time, we have to observe that particularly with the uncertainties in 2025, the development funnel is not as strong as it used to be. So the next couple of years will most likely be dominated by the programs coming to the market. Probably a lot of follow-up systems, a couple of new systems, but the growth, which is coming in the years between 2026 and the year 2030 will be driven by instrumentation sales. I think that's the positive sign. And with that, certainly returning economies of scale and an improved margin profile.

We have this positive outlook for 2026 and beyond. I will touch details later on. And one of the key highlights certainly is that despite those effects, we are keeping the dividend proposal stable with EUR 0.60 per share, which has to be confirmed by the AGM in June.

With that, I would like to hand over to Tanja. She'll give us the financial review of 2025.

Thanks, Marcus. Also welcome from my side to today's call. So let's take a look at the key financial figures for 2025. As Marcus has mentioned, we actually continue to operate in a very challenging environment that has also affected our customers' order behavior and has given us additional strains on our supply chain. Having said this, you see in that volatile market environment, we generated revenues of roughly EUR 251 million. This actually represents a decline of 2.6% compared to the prior year or 1.1% on a constant currency basis.

As expected, also the earnings level declined in 2025. So the adjusted EBIT is around EUR 40.6 million with a margin of 16.2%, down from 19.1% in the prior year. The adjusted EBIT amounts to around EUR 25.2 million with a margin of 10%, down from 13% in the prior year. So this decline in the profitability versus 2024 is actually mainly due to the higher earnings contribution from our development and service recorded in the prior year 2024, which was expected, forecasted that this will not will be repeated in 2025.

In addition to this contribution from the development and service high-margin portfolio, the product mix effect in other areas, increased input costs and currency exchange rate effects had actually a negative impact on our margin development. Nevertheless, very important for me is that at the end, we were at the lower end of our initial guidance for the adjusted EBIT margin of 10% to 12%, and we achieved that despite this lack of the planned revenue levels that we actually had. And this was mainly due to our ongoing cost management that had a positive impact in the year.

On the next slide, we see now the transition from the adjusted to the reported earnings. Based on the adjusted EBIT of EUR 25.2 million, several onetime items occurred in 2025. The first one that you see on that page are the regular and planned PPA amortization of EUR 3.1 million. Second, there was the extraordinary inventory write-off of EUR 4.3 million. The third bucket are the impairments on intangible assets of EUR 6.1 million.

As you know, during the preparation of the consolidated financial statement 2025, the annual impairment test is required to be tested. And out of that, we recognized this impairment loss, which is actually not cash effective. This is also a very important note on that side. The impairment that we show here is mainly related to a delayed market launch and reduced sales potential for one product family of the DiaSorin brand. Adding to these 3 effects, we have another onetime effect such as consulting and reorganization costs of around EUR 2.5 million. That means in total, the result of the reported EBIT is EUR 9.1 million and a slight negative consolidated net income.

So we are showing you this reconciliation very transparently because the adjusted result is reflecting much better our operational profitability of our business, while these onetime costs, especially the impairments, are mainly addressed for the balance sheet cleanups and our ongoing focus on the future growth.

In terms of revenue, as we mentioned, we see the slight decline of this [ 1.1% ] on a constant currency basis. But there is also one positive note. So the demand for the MDx systems has continued to stabilize following the disruptions caused by the COVID-19 pandemic, as you all know. At the same time, we are seeing a growth in immunoassay systems. We also see that the performance, especially towards the end of the year, is particularly encouraging. In the fourth quarter, we achieved actually a double-digit growth in our system sales.

On the other hand, these ongoing uncertainties in the global trade, geopolitical tensions and the resulting effects on our customers' ordering behavior and the supply chain has had a negative impact. In addition to the prior year comparison, we see again this huge impact from the high-margin service parts consumables and the development in service segments, which were exceptionally high.

Overall, we could frame out for the picture as follows. So the environment remains very challenging for us. And based on our 2026 order forecast, we see that this trend or let's call it, this shift to the second half year of the year continues also in 2026.

Now we see on the slide the breakdown of our revenue by the business segment. So you see our systems business remains our most important revenue driver and is benefiting from the growth momentum mentioned earlier, particularly in the immunoassay segment.

On the second part, you see our service parts and consumables, so the recurring revenue, driven by our installed bases of systems, which is for sure also very important to our business model. In 2025, we actually see especially here the volatile ordering and -- ordering patterns of our customers, mainly attributable to logistics and cash flow optimization at our customers. Last but not least in the bucket, you see the development in service revenue. You see as well here the decline. As also mentioned earlier, this is particularly given by the strong year comparison to 2024. Overall, the revenue structure that you see on that chart confirms that we are building on a very diversified portfolio with a growing share of recurring revenue.

Let's have a look to the adjusted EBIT and the EBIT margin. So the adjusted EBIT declined by 24.8% to the EUR 25.2 million. The adjusted EBIT margin stands at 10%, down from the 13%, as mentioned also already. So this is a decrease of 300 basis points. The factors are contributing to this. First, we had this exceptional high earnings contribution from the development services and also from the service parts in 2024, which could not be replaced in 2025. Second, we faced the margin pressure due to the less favorable product mix, the higher input costs and the negative currency effects. On a positive note, our efficiency program that we have installed already several years ago and structural measures are having a noticeable impact on the cost base. And this is giving us the confidence that we will be able to increase the profitability again in the coming years as a growth and economy of scale, scale took fully place. Last but not least, we see now a very mixed picture in the cash flow for 2025. So you see the operating cash flow is in a minus of EUR 0.4 million. This is actually significantly below the 2024 figures. The main driver for that is our very strong back-end loaded business performance in 2025, especially into December 2025, which leads to a significant increase in the trade receivables with the related contribution later on now in the Q1 of 2026. At the same time, we have started to reduce our inventory levels, which remain elevated. So the inventories, as you see, stood at around EUR 113 million at year-end, already below the prior year figures of 2024.

Our investment ratio in property, plant and equipment and intangible assets at 6.5% of revenue was actually below the targeted range of 8% to 10%. Here, we were intentionally selective and focused without jeopardizing the strategic projects of Stratec for the upcoming years. The net financial debt has risen to approximately EUR 112 million. This is corresponding to a net financial debt-to-EBITDA ratio of 3.3 compared to 1.9 in the prior year. Despite this increase, our balance sheet remains solid. So the equity ratio stands at around 55.7%. In addition, as you know, we successfully completed the refinancing of the bridge loan in 2025 and negotiated and signed a new syndicated loan of EUR 125 million. These measures secures our financial flexibility while we are still working in parallel to improve our cash flow and the debt ratios again with a very strict working capital management program.

With that, I would like to hand over to Marcus again.

Thank you, Tanja. Let me walk you through our financial guidance for 2026 and beyond. Sales in 2026 is expected to grow in a medium to high single-digit percentage range on a constant currency basis. As always, the important information lies within the imprint. As already mentioned into our ad hoc announcement where we disclosed, among others, the prelims, we clearly mentioned that the sales growth will predominantly materialize in the second half of the year. I think this is something which was observed over the last couple of years that we were always trying to pull in the back-end loading of the year, and it got actually stronger and stronger. This year, we actually foresee that we move the customer forecast more towards like midyear in order to be able to supply the products then towards the end of the year. And as a result of that, the first quarter is expected to see a sharp reduction in sales, which comes along with a dip in profitability. We -- this should -- first of all, this is not happening as a surprise. And secondly, we have those measures in place. And if we are looking into our resource allocation and in those elements, like incoming goods, et cetera, that we are have well-established structures to satisfy the requirements of our customers and to satisfy the orders, which came in and are coming in these days, as mentioned, in some cases, we actually moved the forecasting system in order to be super safe in terms of abilities to supply more towards like an ordering system away from forecasting.

Regarding the EBIT margin guidance, we foresee a previous year level of 10%. Certainly, we see some further effects from our efficiency gains as well as from scalability. Unfortunately, those gains will be partly offset by a higher input cost contribution. And we actually foresee and actually already see the impact of the geopolitical conflict that certain raw materials are actually seeing further price increases.

On the investment side, the intangible and intangible assets combined, we see a range of 6.5% to 8.5% of sales. Long term, and again, even further important is here the imprint for the years between 2026 and 2028 on the basis of 2025, we have a nice ramp-up in certain products. I'll touch base on that in a minute. And the new products are certainly the growth driver. New products doesn't necessarily mean new products. Often, we have drop-in placements, which are then positioned in like slightly different markets, even those markets where higher throughput or worldwide distribution is happening for those products.

We see and foresee a slight recovery, not a material recovery. However, a slight recovery in the MDx system demand. I don't want to like stress the situation too much how many molecular instruments were placed during the pandemic. And after that, certainly the market was saturated for a certain period of time. And we definitely see that this is coming to an end. However, in our forecast for 2026 and then beyond between 2026 and the year 2030, the recovery doesn't play a meaningful role anymore.

Then certainly, we see an initial contribution from early-stage products as well as from those transitions of new product generations with partly higher selling prices or the fact that at the tail end of the positioning of those instruments, other instruments will accelerate as well. Then between 2026 -- sorry, then between 2028 and 2030 after the 6% to 8% growth in the period between '26 and '28, we foresee a 10% to 12% compound annual growth rate for those years. Again, continuously increasing revenue contribution from new products. And again, new products doesn't necessarily mean products which are launched then. These products are hitting the market between now and then and are then in their actual growth rate. And then we foresee dynamic growth with the service parts and consumables business as a result of the growing installed base. I think this is only a natural evolution that as the fact that we went sideways between literally 2022 and 2025, certainly, the installed base didn't grow anymore. And as a result of that, our service parts and consumables business didn't grow, particularly not those elements which are related to our installed base, the consumables -- consumables business certainly grew during that time.

I think, again, it is super important to highlight that if we are looking into the breakdown of revenues that we certainly saw 3 material changes over the past 5 years. So historically, we are coming from a development contribution of, say, 10% to 20% with the service parts contribution from 30% to 40% and then the remainder instrument business that certainly changed, twice during the pandemic and then the years after that with supply crisis, et cetera, that changed the budgets of our partners were allocated into more product life cycle management in order to keep the products young in order to overcome that situation that on the input material side, product life cycle shortened.

On the other hand, everybody was trying to prolong and push out the product life cycle on the sales side because of grandfather renewals and regulatory and because of like you can do that, that's a means to an end to push out product life cycle by 2 or 3 years. And we are coming to the end of that situation, which means development budgets are now reallocated into new product development. Downstream, that means that on an absolute like euro or dollar level, development and sales will continue to see nice growth rates and a robust, but it will be overtaken by instrument growth. So if we look into the review mirror in like [ 20 20 30 ] we will see that at least partly we are returning to the historic percentages of contribution of the relevant product classes like split into instruments, consumables, spare parts, maintenance parts and development. And the return of economies of scale and our cost efficiency improvements will then drive the margin going forward.

That's why our margin targets based on a real bottom-up calculation and a bottom-up approach. So we only took certain instruments into consideration. I'll touch base on that in a minute. The adjusted EBIT margin will be on an at least 13% level by 2028. And then followed by the 2 years between 2029 and '30, the EBIT margin will be at least on a 15% level by 2030. So back to historical EBIT margin strength, certainly coming along with the associated cash flow and all other KPIs to where we believe that we can return into historical areas.

However, I think it's worth mentioning that there is one KPI which we don't expect to return to historical levels, which is probably inventory level. I mentioned before that we see more obsolescences on the input side at a higher cadence and within shorter time frames as compared to historical data points on the same talking that our customers are pushing and continue to push our product life cycles in terms of longer sales of the same platform, which means that we will face last time buys. In most of the cases, these last time buys are then paid by our customers, but they are sitting in our inventory. So in the meantime, about 10% of the -- Tanja mentioned that elevated inventory levels are actually for those last-time buys. So inventory level has to be perceived like more specifically where are they coming from. This is not from products which have run rate. This is actually saving supplies in the future. And certainly, we have to see that there is a threshold. If a product is only like 5 or 7 years out to sunsetting, typically big interventions into development, which are then leading to reverification and revalidation and reapproval and [ re re re ] in such senses redevelopment or in such cases, redevelopment doesn't make too much sense. And in this case, we are more shooting for like last-time buy in order to tackle of the latter.

I think it is important to mention that our guidance does not include our full funnel and our full pipeline. The forecast does not take into account any revenues from analyzer systems in the OEM setup, so which means our classical business model where we use background technologies based on new developments and background technologies that we develop analyzer systems and consumables, which are then specific to the customer, but they are our technology, like this is what we call an OEM setup. And again, allow me to repeat what I started to say that this forecast does not take any -- into account any revenues from analyzer systems in an OEM setup where the product is already in development, but the development and supply agreement is not yet signed or finalized and the customer has not yet placed an order for that. And the sales growth is actually tackling sales growth rate at a constant currency level.

I mentioned the upcoming launches. And this is one of the first times where we have decided to try to put a little bit more meat around the bones what's actually coming up and why do we derive growth from that. Like in the discussions we had at the tail end of the pandemic, we believe that the launches, which -- the product launches, which happened through our customers during the pandemic and shortly thereafter could offset the dip in the molecular space as a result of the saturation of the market in molecular during the pandemic. The ramp-ups were slower than expected. They are only able to show traction these days and only in some of the cases. That's why I think it is important to talk about launches and what launches actually means for us and for our customers.

So we have given the product names. Please bear with me that these are actually random and a slide hints to the actual technology behind that or product names or foreseen product names of our customers. So please do not expect us to follow up on the project names. Internally, certainly the project numbers differ from that.

So we have here Project L on our list, which is a next-generation, fully automated immunoassay analyzer for an existing customer. The beauty here is that this instrument is a direct drop-in replacement, which means it is not foreseen to go through this growth phase from day 1 on in the mature markets and in the majority of the markets. It will replace the predecessor solution one by one. The menu is comprehensive. The menu provided by our customers, obviously, is comprehensive from the get-go. So we do not expect to go through a phase. On the beauty side here is that the product comes along at a higher throughput range and for a slightly elevated price. So this is not actually a volume driver. This is a price driver on the one hand side. And on the other hand side, the positioning of the instrument in a higher throughput environment is actually giving a chance to the smaller brother of that instrument, which is coming from us as well. And that segregation is actually leading to a demand effect on the lower platform as well. So I would actually consider this as a double strike.

So then Project M is a next-generation molecular instrument, again, a direct drop in replacement. Status as in the previous case for Project L is design transfer to series manufacturing. So no technical challenges anymore and a clear timetable and time line together with our customers. And the Product M is actually specifically made for decentralized testing in the molecular space. So again, derived from the market need for solutions like that to be positioned mainly in the United States and markets where decentralized molecular testing is playing a meaningful role.

Then we have Project R. By the way, this is assorted by when those products will hit the market. It's not assorted by size or how meaningful that is. That is actually like on the time scale. So Project R, again, is a product family for an existing customer. The predecessor solution consisted out of 2 solutions, out of 2 instruments. One came from us. The other instrument came from one of our competitors. We got a competitive win. So we have set a scalable solution for the high throughput markets and the lower throughput markets with the same -- we call that core modules. So the core of the instrument is comparable. This has huge advantages for our partners in terms of serviceability and service part supply. And at the end, it gives us a real scale because, like I said, it's not only replacing our solution, it's replacing the solution of one of our peers and therefore, will lead to aggregated growth here. The status is in -- the system is in system verification and validation on customer side. So again, minimal technical risk.

Then we have Project N, which is a multiplex molecular solution, again, particularly placed in the United States market is designed with the specific needs of highly decentralized testing environment. And again, instrument design is completed. Assay transfer is happening within our customer side. And you see this actually means that the launches are now not happening within the next few quarters, but downstream then. But again, nice supplement, nice allocation of those resources, which are ramping up manufacturing here at Stratec.

Then we have Program H, which is a product we won at the beginning of this decade. Status is prototype design is completed and assay development at customer side is ongoing. High-sensitive immunoassay, one of those market niches where everybody expects huge growth rates. So high-sensitive immunoassays are particularly used like in neuro or oncology. So those areas where like the aging population and the demand in the Western world is leading to further treatments where at this moment in time, a couple of hundred of different kinds of treatments are in development or in their approval phases. What we typically see in diagnostics is that new treatment leads to new diagnostics and new diagnostics demand particularly for neuro, high-sensitive immunoassay will play a meaningful role in the future. This is where we already have a good footprint. We have a number of instruments and consumables in the high-sensitive immunoassay market. So one of the growth drivers we see.

And then certainly, we call it -- it sounds a bit boring module business, but it's definitely important for us and growing is that still there is a number of customers which are doing in-house developments. They do not reinvent the wheel. We are providing customer-specific setups where we are not selling modules in terms of we sell a pump and everybody could use or build such pump, which is commoditized. We are developing specific modules, which are then fulfilling and only fulfilling the requirements of the customers, which has huge advantages from a pricing perspective, but also from approval perspective.

Let me briefly walk you through the market trends in our different -- typically, we call it franchises, application segments. We call it franchises in order to take a different throughput classes and technologies alongside with applications. So there is no good work for that. We internally call it, therefore, franchises.

If we are looking into the surveys provided, the growth of the IVD space is not as high as it used to be before the pandemic or even during the pandemic. However, still very solid growth rates. So low to mid-single-digit growth rate is expected to happen during those forecast periods we have given.

In the immunoassay space, everybody expects a strong growth rate. Certainly, this is no longer ELISA or those, let me say, very old technologies, certainly, high sensitivity or the transfer of single molecular [ non-plaque ] technologies into immunoassays is playing a role. Certainly, like for applications like in the neuro space where no DNA or RNA is concerned, but enzymes are concerned. Certainly, the immunoassay choice is the method of choice. So we have a number of applications within proteomics and therefore, certainly, immunoassay is accelerating faster than everything else.

Then in the molecular space, definitely the ongoing trend so far only happening in the main markets in the United States, not that much in Europe or Asia. The ongoing trend to decentralization in molecular. But certainly, as in most of the cases in this world, the United States has a leading role. So the decentralization is actually in the United States is actually mainly coming from the reimbursement system. The reimbursement system in Europe and Asia does not yet support a higher degree of decentralization in the molecular space. But for us, we believe that Europe will come at the tail end of the development.

Then certainly, the molecular space will see certain recoveries as particularly those instruments, which were placed prior to the pandemic or during the pandemic saw some extraordinary high wear and tear. The field service organizations of our customers and therefore, our supply with spares and replacement parts certainly showed that, again, this is a means to an end. You can only keep a product so and so long in the field with service measures. And then there is a point where the placement of a new instrument is making an economical sense. And we see that some of our customers are in accelerating cadence moving towards that trend.

Then certainly, what we see our franchise of complex sample prep, we see that the breakthrough discoveries in genomics and cell therapy are driving a way, way, way higher demand in sample prep than that used to be the case. If we were talking sample prep 20 years ago, this actually meant pipetting from a donation vessel into a microplate. In the meantime, often the complex sample prep is actually more complex than the full analytical process used to be the case 20 years ago. That's definitely one of the drivers here.

Then hematology and other routine testing. Certainly, the area sees material pricing pressure and a lot of competition coming out of China. Highly commoditized market. We still see opportunities here and there, but only like in markets where specialization plays a role and where differentiation from the commoditized suppliers are playing a meaningful role. This market, like in the Western world, is almost entirely in the hands of Sysmex and Beckman Coulter. There is a number of smaller players like us, but probably only like 5 to 10. The majority of them highly specializing like we do, so like in those areas where instruments are put into the big track systems, the players I've named before are playing a role and only special markets, players like us are playing a role.

And then certainly, immune hematology overall market which is not growing that much. There is only like only a few players, not even a handful of meaningful players as we have an active cooperation with one of the market leaders, particularly high throughput, the cost efficiency requirements and workflow optimization is calling for new instruments and innovation, and that's actually what we do here.

Let me hand over to Tanja now. She will walk us again through the bridge, how we believe that the historical profitability will return in the years to come. And then we would love to answer your questions.

Thanks, Marcus. So despite these market trends that we heard now and our internal launch pipeline, we are introducing also our business excellence initiatives, means different pricing measures, targeted portfolio optimization, operational excellence and therefore, also higher capacity utilization in our location. And those are building up actually the key drivers of our planned margin expansion.

So when we start on the left side on that chart, you actually see the starting point of the adjusted EBIT margin 2025, 10% in 2025. The next blue bar is showing you our target for 2028, where we want to achieve a margin of at least 13%; and by 2030, at least the 15% on the right side of that chart.

So how do we will achieve those figures? Between 2025 and 2028, we expect actually headwinds together of around 260 basis points due to exchange rate effects, mainly driven by our U.S. dollar exposure as well as a less favorable sales mix. But we are countering these headwinds with targeted measures with our business excellence initiatives. So the commercial initiatives and the portfolio optimization will contribute positive 100 basis points. And the biggest ticket and lever in that will be the operational excellence and improved capacity utilization. This will deliver roughly 460 basis points.

In the period from 2028 to 2030, we anticipate another mix effect as we expect our system business to grow more strongly than the service parts. At the same time, we plan additional improvements in pricing and portfolio as well as further efficiency and economy of scale. Together, this lever will enable us to increase the adjusted EBIT margin to this 15% by 2030, as already mentioned.

With that, we would end our today's session, and we would like to hand over back to Sandra to open the Q&A session.

[Operator Instructions] Our first question comes from Michael Heider from Berenberg Bank.

Yes, thank you very much for the presentation and for giving the details on your future sales growth and margin expansions. I have 4 questions, 2 are related to the future plans and 2 other ones.

So the first one maybe on the DiaSorin write-down that you had. Can you maybe be a little bit more specific on the projects that you are talking about?

Then secondly, you're expecting a sharp decline in the first quarter in revenues. So sharp decline. Is this something around minus 15%? Or how would you phrase this?

And then on your targets, midterm targets, you also talked about new customer wins of some of these projects. Can you give a little bit more insight here to what kind of customers are we talking about? So these are be bracket customers in what area are they active? And how did you get these new customers?

Then on the margin expansion, as just explained by Tanja, so the main margin expansion is coming from the CE and OE excellence programs. Can you also be here a little bit more specific? I mean if we look at the time frame '25 to '28, if I'm not mistaken, this should mean something like EUR 10 million cost savings? Or where is this exactly coming from? And that's it for the moment.

I will start actually with the first question on the DiaSorin write-offs. So as we have also communicated in our talk announcement, it's actually one product family of the DiaSorin business that we have needed to impair. It's attributable to not of our -- one of our core businesses, actually one of the niche businesses where we wanted to enter. It's the veterinary business. So this is the project that we are talking about. And as we said, this is mainly due to the cost increases that we have faced due to the delay of the project start and the revenue drop that we have seen in the forecast for the upcoming year for this project.

Then, Michael, you brought up the Q1 again. Again, we want to be super careful in trying to comment that we probably saw that Q1 was not one of the best quarters of this industry with the profit warnings we saw like with bioMériux, Qiagen and others.

Again, like let me try to set the stage. This has absolutely nothing to do with the strong quarter 4, at least not as far as we are concerned. So we didn't pull in 2026 Q1 activities into the last quarter in order to meet our goals there. We definitely see that the demand coming from the markets are tremendously shifting to the second half of the year and even there towards the last quarter. And we see -- definitely see that in our forecast in [indiscernible] where we see that.

So Q1, and again, it will not be super good. We flagged that already in the -- announcement. I mentioned that before, where we covered Q1 and covered our prelims as well. So I think if you would expect sales in the area where we used to be in Q1 of 2024, this would be a rough guidance as far as top line is concerned.

Then certainly talking about new customer wins. And allow me like I'm typically saying everything in Stratec as a story. We have to see that the growth which we foresee to happen between let me say, 2026 in particular, but then in the quarters thereafter with those platforms I walked you through, this has nothing to do with new customer wins. These were the new customer wins we saw between -- to give it a widespread between 2019 and say, 2023. What we definitely see these days is that particularly in 2026, that the funnel became thinner and more technological driven. I think like those crisis do not make it our customers easier to take decisions. We have to see that over the next instrument platforms will be driven by a higher degree of local for local. So we expect that the Indian market, the Chinese market, the U.S. market will see derivatives as compared to those markets which will be addressed in Europe and the regions of the world.

Back in the days, an instrument was developed under, say, a global umbrella and then only in really small areas customized for the local market. We believe that these times are over. At this moment in time, nobody wants to pay the extra cost for the local-for-local approach, but everybody needs it, and that's actually leading to a certain paralysis in terms of decision-making processes. Our development pipeline, particularly towards market launches like with software development verification is super strong. The area where we have to catch up is actually early stage to bring in new development pipelines. We see a lot of opportunities, have more leads than ever. However, we have to put this through the funnel in order to make it real development programs. We see huge demand like in proteomics, I mentioned that before. We see huge demand in like cell and gene therapy. We see huge demand and obviously, the associated diagnostics with that. And what we definitely see is that there is a transfer from the traditional detection methods more towards optics and high-precision optics, and this is where we are really very well positioned.

Your last question was about margin expansion. So at this moment in time, we had to set up a plan. We set up a plan in a way that we know which instruments will come to the market. We have already dedicated plans with our customers, particularly for -- on that pipeline slide, those elements on the left-hand side, they are already set on a time scale. So we know when those instruments will come to the market. Margin expansion during that time will not come from product mix. Actually, product mix will provide a certain headwind. Therefore, we have set up margin expansion. Margin expansion here means, and Tanja mentioned that already. It means that we have and are looking into manufacturing there. It means that we have to look that we are doing the right products at the right side of Stratec and probably pull in back development depth and probably outsource the right part. So there is a number of programs ongoing, certainly supplier management and other areas. So there is -- this is not just that we set up a plan and set up a goal. There are actually already concrete measures.

Here, we have to see that our supplier network is a very robust one. And we have to see that changes to such a supplier network means a lot of work in terms of qualification, in terms of regulatory, in terms of incoming goods and so on. And then certainly, we are working in an environment where we have to ensure supply, which means we have a certain lineup of contracts with existing partners. And that's why all those measures will take some time, but they are already lined up. I hope that helps.

It seems that there are no further questions. Back over to you, Mr. Keppeler, for any closing remarks.

Yes. Thank you, everyone. This concludes the conference call. If there are any follow-up questions, please do not hesitate to contact us and the entire Investor Relations team. Thank you, and goodbye.

Thank you, Sandra, and welcome, everyone, to our 9 months 2025 financial results conference call. With me today are, as always, Marcus Wolfinger, CEO of Stratec as well as our new CFO, Tanja Bucherl. Be aware that this conference is being webcast live, and you can download this presentation either from the webcast or from our website.

And of course, following the presentation, we will have a question-and-answer session as usual. Finally, please allow me to draw your attention to the safe harbor statement, which we have on Page 3 of that presentation. And with this, it's now my pleasure to hand over to Marcus.

Yes. Thanks, Jan. Good morning in the United States, and good afternoon in Europe. Before we start, ladies and gentlemen, I'm truly excited to welcome Tanja Bucherl, our new CFO. From minute 1 on, it was clear that she brings not only a super strong financial background, but also the energy and team spirit that defines who we are. With her expertise, she will play a key role in future strengthening our financial stability and setting the course for future growth.

We are thrilled to have her on board. Welcome, Tanja. A big thank you goes out to Oliver Albrecht, our Interim CFO until last week, who very professionally bridged the gap until Tanja joins the senior management team. So with no further ado, let's dive into the agenda. I'll try to walk you through the first 9 months at a glance.

Then Tanja will give you the financial review and some further financial details, followed by the outlook and focus and the two of us then will try to answer your questions thereafter. We had a positive sales growth despite supply chain interruptions, which already kicked in, in Q3, not material, but already very visible. What we definitely see is a stabilization in the market.

Like during the past two or three crisis, we had, say, the dot-com crisis after -- financial crisis and after that COVID, certainly, only a few months after this kind of hits we took in this industry, it was very visible that the end of the crisis is in sight. In this very case, I would like to remind you that after COVID, we had the supply crisis and then certainly geopolitics and war and the tail end of COVID.

So as a matter of fact, I think it's a well-accepted fact that this crisis took longer. If we are looking into those signals between the lines sent by end customer by our customers, I think we really dipped out at this moment in time, and I think the worst is over. I only returned back from the United States, where we met key customers.

And I already mentioned that a couple of times that particularly after Q4 last year, they started to grow again. And please allow me to remind you that in our industry, us as an enabler. We build infrastructure from the perspective of our customer. This is CapEx. They place the instruments. They use the consumables as soon as they, let's say, bring new tests on instruments, they can actually grow with the fleet, they already placed years and months ago, whereas we are coming at the very tail end of things, which means only if the market grows to the extent that our customers are investing into their own growth, into their own future, growth for Stratec comes in.

And I think this is actually the inflection point where this is coming back. So we see that the testing volume stabilizes. It was already very stable. And if you look into the statements made by the quarter reports of our customers, you definitely see that they are very positive in terms of testing volume despite geopolitics. And some of them, particularly in immunoassay and some other areas like in complex sample prep, the growth already came back, but it actually could not yet offset the declined volume after COVID-19 with molecular tests where the saturation took place during COVID-19.

And after that, everybody took advantage of those instruments, which were launched and placed during COVID-19 and haven't been forced to buy new ones. We see that the discussion started into the investment of new platforms, into keeping those platforms young. But on the other side, even for those instruments, which are, in the meantime, worn down after COVID-19 and the years thereafter, that our customers are openly starting to discuss that even those instruments will have to be replaced.

So I think we are really through to growth. We had a fairly good margin development. However, the margin development held back by the product mix. So at this moment in time, a little bit unfavorable. Our products with high gross margin are still weaker. Those ones with the weaker gross margin are stronger, as always [indiscernible].

And then certainly, particularly towards the year end, we have a number of development activities, which will be accounted, which will then drive the margin. That's factored in -- into our guidance and into our financial guidance, and I'll touch base on that. On the other side, I think like everyone, the headwinds we experienced in H1 got a little bit better, but are still material. All that is leading to the margin as is. We have confirmed our margin guidance, but I think it's important to again reiterate that as last year, 2024, we could make the statement at this point that we will probably end up at the upper edge of the guidance given.

And actually last year, we even exceeded this. I think this year has to be understood that this is closer to the lower end of the guidance. We made material progress in the development of partnerships. Actually, we got a new customer in with finalizing development work, which was actually done mostly in-house and the transfer is ongoing. So we got a new partner. We see a significant upturn in development activities and in talks. Still highly fragmented. I think it's unrealistic to expect that -- such development work where the partner commits from the very get-go to a $40 million development investment and a $200 million downstream procurement commitment.

I think this is some limitations at this point. Things are getting more fragmented. However, our business model fits that very well. And we definitely see that the demand not only in system development goes up, this affects product life cycle management, which is very margin heavy and certainly, instrumentation picks up as well. I think it is worth mentioning that in the budget round, we are finalizing these days, we see a development resource allocation of 105% across the group.

And I think this nicely mimics what's going on. I think demand for development activities coming back and development activities is the leading indicator for downstream manufacturing activities, and this is where we make the money. So as already mentioned, lower end of 2025 margin guidance confirmed despite a lower sales outlook. I think it's a good signal that we had these issues with the magnet. I don't want to go too deep into details. We have almost sorted out the supply issue.

So we just need to catch up. We'll certainly not catch up entirely by the end of the year, but I think we are showing good trajectories with the measures established. Talking about efficiencies and measures established, I think the fact that we had to slightly cut the top end of our top line guidance and still can maintain margin.

I think this shows the efficiency measures are really tangible, are really showing efficiency. And I think this is a good point to start from growth here again. And I think we'll talk about growth as soon as we show our guidance for 2026, which will not happen here. That only happens when we talk about full year's results. So that gets me to the point where I would like to hand over to Tanja.

Thank you very much, Marcus. Good day, everyone. Also from my side, a warm welcome. My name is Tanja Bucherl. As you have heard, as of November 1, I joined Stratec as the new Group CFO. And I can tell you already after my first week that this is a company with a really great potential and a remarkable team spirit. So I'm really looking forward to actively shaping our continued development and supporting the next steps on our path of a sustainable growth.

But with that, let me now take you through our financial performance for the first 9 months of 2025. As you can see on the chart, the sales increased by 2.5% at a constant exchange rate. It's reaching to EUR 175.6 million versus EUR 173 million in the prior year period. As you also know, we had a very positive momentum in the first half year. The sales in the third quarter declined by 3.4% at a constant exchange rate.

It was mainly impacted by the already mentioned supply chain disruptions as well as, let's call it, a softer momentum in the Service parts and Consumable business. But more to that later on in my presentation. Let's have a look to the adjusted EBIT margin. So for the first 9 months, we stand at 7.3% versus the 8.8% in the prior year. Also, as a consequence and driven by the temporarily increased tax rate in the third quarter and despite an improved financial result, our adjusted net income for the first 9 months decreased by 15.8% year-over-year to the EUR 7.1 million that you can see also on that chart.

This leads also to a corresponding adjusted earnings per share of EUR 0.58. But maybe let me take also a note here regarding the outlook. So we expect a significantly improved earnings dynamic in the fourth quarter. And given the implied regional mix, a notable better tax rate in the final quarter of the year 2025. And as a result, the full year tax rate should be significantly below the 26.5% that we showed in our report for the first 9 months.

Coming now to the adjustments with a closer look in our adjusted EBIT and adjusted net profit. There is not too much to say on that slide because nothing unusual in the adjustments for the first 9 months happened. For the period, we adjusted EUR 2.3 million in the PPA amortization as well as EUR 1.7 million in other adjustments.

They are mainly attributable to the so-called one-off, and its advisory expenses that we have already recognized in the first half year of 2025. Therefore, we are going straight to the next page, the sales. We will have now a bit more deep dive on our sales development. In the first 9 months, the sales increased by 2.5% year-over-year at a constant currency to the already mentioned EUR 175.6 million.

This was mainly driven by a double-digit increase in the development and in the service sales. And thanks to the ongoing high development activities and large numbers of active customer projects we are having. The system sales was more or less flat year-over-year. The ramp-up curves of the newly launched systems continued to be flatter than actually expected. Already mentioned supply chain disruptions, they impacted us negatively already in Q3, causing especially some delivery shortfalls in the immunoassay franchise, and this was hitting us actually a lot in the Q3, but we are looking for coming back in the next quarters or in the Q1 next year 2026.

In Molecular Systems, we observed a promising and actually ongoing stabilization in customer orders following demand disruptions that the industry faced after the post pandemic. The service parts and consumables, last but not least, for the 9 months of 2025, they were slightly down year-over-year as volatile global trade restrictions, as you all know, led to some logistics optimizations at our customers.

And therefore, we actually have seen order volatility, especially in Q3 2025. Coming from the sales now to the earnings. Closer look now to the adjusted EBIT and our EBIT margin on that slide. you see that the adjusted EBIT margin declined by 150 basis points year-over-year to 7.3%. I told you already, this is mainly due to the decrease in the gross margin from 27.4% last year to 25.8% in the first 9 months.

Yes, the decline results from the still, let me call it, less unfavorable product mix in the System business, and a reduced share of our high-margin service parts and consumable sales in Q3 as well for sure also the unfavorable FX rate environment that we are in compared to last year. However, a good sign also here, the progress was made in the functional cost areas. So we have done, we have started early our homework.

So we are confirming the strict cost discipline and also initiated efficiency measures to have the countermeasures in place for all of these negative environments that we are facing currently. Coming now to the cash flow and our net debt development. So the operating cash flow remained negative for the first 9 months, mainly due to high tax cash out that we have recognized in the first half year and as well reduced trade payables compared to last year.

However, the operating cash flow improved in Q3 and amounted to positive EUR 4.4 million. As of September 30, also the investment ratio continues to be slightly below our initial budget. And for the full year, we expect a total investment in tangible and intangible assets to remain slightly below the predicted range of 8% to 10% of sales.

Our leverage, you see as well here on that chart, means the ratio of net debt at the EBITDA LTM is currently at 2.4, up from 1.9 at the end of the fiscal year 2024, but it is still on a very solid level. Last but not least, I would like to highlight the successful closing of a EUR 125 million syndicated loan during the third quarter. This facility replaces the bridge financing related to the Natech Plastics acquisition back in 2023.

And I'm really, really happy with that move because with that transaction, we were able to further optimize our financing structure. And at the same time, it is providing us the sufficient flexibility to support our future development. And therefore, I really would like to take the opportunity to thank all of the Stratec colleagues that were involved in that process and especially also my predecessor, Oliver Albrecht. This brings us also to the end of my part of the presentation. For the full year outlook 2025, I will hand over back to my colleague, Marc.

Thank you. Financial guidance, we already touched base several times already during the presentation. So as mentioned, we confirm to go flat top line. So we are expecting approximately to match previous year's top line figures on a constant currency basis. Adjusted EBIT margin, we have forecasted at the beginning of the year financial guidance between 10% and 12% after 13% last year. We confirm that we will match the guidance, but clearly mentioned that we'll most likely end up towards the lower end of this guidance.

In order to achieve that, we are certainly tracking a number of KPIs very closely, as Tanja already mentioned. So there is a high earnings contribution of high-margin development and service sales expected in the fourth quarter in order to achieve it and certainly better scaling effects by the utilization under the System business and upcoming supply chain interruptions is really that we are keeping a very close monitor on that.

Again, as Tanja, already mentioned, we will most likely end up a little bit south of the investments intangible and intangible assets, so even better than expected, which was already good after last year's 7.1% most likely end up like in between the 7.1% and the 8%, so better than expected. Let me try to walk you through our activities over, let's say, the next 3 quarters and give you an outlook.

So as already mentioned, we are maintaining cost discipline. I think we found the ideal balance over the past 2.5, 3 years to, on the one hand side, make sure that everybody understands that we are really looking into the details and are trying to be super disciplined, but still not saving costs for the sake of saving costs, but still being very potential oriented, invest where investment makes sense and still be disciplined.

And I think that's the right thing to do. We didn't oversave. We see a lot of companies who oversave and now are really struggling. We didn't do that. Let me remind you that just one example, looking into development activities, it doesn't make too much sense to cut into activities, which will lead to growth and earnings in 2, 3, 4 years from now, particularly considering that we have existing agreements with our customers. So we want to make sure that we are delivering on milestones.

So we continued a nice investment policy into future, into our colleagues, into the education and training of our colleagues. So we are very proud that we didn't only try hardly to find this very narrow balance. I think we managed that fairly well. Then we want to execute on the deal pipeline. That was actually an area where we focused a lot over the past 6 months. A lot of things are ongoing. We mentioned that from a couple of times though. From here and then, we did new feasibility work.

We brought a couple of new things on board, which a couple of them will replace our own instruments in -- after the development, like just as an example, we do the LIAISON XL 2.0 for DiaSorin, where we do the predecessor. We do the successor instrument for other instruments we have in the field. So we are very proud that our customers are coming back. And on the other hand side, we really managed to bring new customers or new programs within existing customers on board. So this is not just saving legacy. This is actually investing into growth and the likelihood that growth returns is getting closer and closer.

And again, allow me to remind you that during the discussions at the tail end of COVID-19, we were very keen on the fact that during COVID-19 and right after, we launched a number of new platforms, and we thought that we could offset the dip. I think it was everyone very clear that particularly the molecular market will dip after COVID-19. And we said we can most likely offset this dip with the three instruments which were launched during COVID-19 or thereafter.

Unfortunately, the growth rate and the ramp-up curve is and used to be slightly flatter than expected. We can report that one of those instruments is starting to show nice traction, and we are expecting the same thing to happen with the other two instruments. Then certainly, we continue to grow our footprint in selected markets like in areas where we believe that we find this, again, narrow balance between not doing the Spearhead, Spearhead Technology, but being the second one.

So when markets are starting to get more mature, like in high-sensitivity immunoassays, where we were together with our partners, the first one here where we have nice development programs ongoing. Same applies for advanced imaging and cell & gene therapy where we have started to try to build our footprint as well. Then certainly, we want to manage our well-filled M&A pipeline, as always. And allow me to remind you, this is very binary. We continue to look into opportunities.

At this moment in time, we have a handful of opportunities, nothing super concrete. It's the full spread. We are typically looking into technologies. We are looking into markets, and we are looking into geographies. Again, it has to be understood that probably the next decade in this industry will be dominated by local-for-local. So we'll definitely have to do more in the United States. We'll definitely have to do more in China and continue to have high investment in activities in Europe.

Local-for-local is probably the thing in order to overcome geopolitics and other activities, which are limiting abilities to do business with goods across the continent these days. Then I already mentioned the localization, very important, certainly cash flow in order to make sure that we can do investments.

We want to continue to improve our cash flow dynamics. Here, we already achieved good results over the last quarters and over the last years. However, there is still room for improvement and getting closer from a cash flow perspective, more closer to the earnings situation. I think that's the actual goal here. And definitely, we have to put a strong focus on inventory management for you who continue to have these discussions with us at this moment in time, still our inventory levels is too high. We still have a number of products where the products are very young.

We have high inventories, low run rates. So -- although we nicely work down inventory levels already in 2025, we continue to sit on an elevated level of inventories. For those products which have high turnover rates, obviously, the inventory levels are highly optimized. So without a solid recovery of the market in those areas where we are really sitting on a high inventory level, it will definitely continue to be a challenge to materially reduce the inventory levels.

But if we think about where we used to be in the past and offset that by last time buys we had to do on the procurement side, I think there is still a room of EUR 20 million to EUR 30 million on inventory level, which could be reduced over the next couple of years, and that will certainly lead to the equivalent cash release. So this gets me to the end of the focus.

And now I would like to hand back the word to Sandra, who will explain us how to do Q&A. Thank you so far.

[Operator Instructions]. Our first question comes from Jan Koch from Deutsche Bank.

I would like to take them one by one. The first one is on your guidance for 2025. Is there any risk that development sales that you plan to recognize in Q4 will only be booked in Q1 2026?

Yes, thank you for the question. As always, this is forward-looking. So there is always a certain risk associated, but I would really see this as minor. So obviously, we know that in this tight situation that we have to monitor things very closely and that we are in continuous communication, not only with the project -- with the internal project teams and the internal project management, but they certainly keep communication up with their counterparts within the customers if approvals are required.

So we are definitely very confident that this is not going to get an issue. However, this is forward-looking. Things can happen, although we don't expect. And again, allow me to remind you that certainly things continue to be extremely back-end loaded. So I think you see what has to be achieved top line and bottom line-wise in the third quarter. We have already asked the teams, the manufacturing teams and the associated development teams to work like between Christmas and New Year. So allow me to, first of all, thank them again and secondly, make that very clear that this is super back-end loaded, therefore, inherently risky, although I don't see any risk to fail.

Okay. Great. And then secondly, your largest customer is in the process of being acquired by private equity. Do you believe that this could have any kind of implications on your business?

No, Jan, thank you for bringing that up. So we shouldn't get that into a situation where we are talking about gut feeling and things like that. I think on a professional level.

And actually, I only returned back from this very customer on a -- I was there on a scheduled trip, but certainly this was one of the topics we discussed. So they made it very clear that their communication with private equity is about growth. We have ongoing programs where we are a supplier, a key supplier supplying with our products, our products, which bear our own IP.

So the risk of walking away is very, very small. We have ongoing development programs where we are not only a contributor in terms of development work, we are a contributor in terms of know-how and finalizing things and getting things done and getting things done right.

So I think the level of contribution we have within this customer is key. And I think that private equity invested in this company to return the company into higher growth rates to take advantage of the synergy, which exists here and there in order to focus on what makes them strong.

And I think if we see the position of, in this very case, the Panther instrument, although an instrument being in the market for a couple of years, still the gold standard, still the instrument, which provides the benchmarking for every competitor to Hologic and on the other side, with a quality which is unprecedented. So if we put that all together, I think our position within this company is very, very strong. I think they understand our contribution to their future success. So I'm not worried about that.

Understood. And then finally, you mentioned in the press release that you recently initiated a partnership for well-established high throughput product in the molecular diagnostics area. What does that exactly mean? Are you going to produce in that system for the customer or develop the next generation? And how big is the installed base is? And when do you expect to receive the first revenue? And what is the potential for you here going forward?

Yes. Please forgive me, it's way too early to talk about that, particularly those elements where you are trying to get your hands around is actually something which is still under discussion. So definitely, it requires a lot of development work.

The tail end manufacturing is very lucrative. It's one of the bigger ones. It's most likely one of the biggest programs, which has been outsourced over the past years. So we are very proud to get in touch with this partner. But I think it's important to understand that this is just the initiation. This is everything else, but in a status where we can disclose details about duration of development work, when this extension will go to the market and how big the manufacturing volume might be.

So I think it is important to -- for us, it was important to show internally and externally that the momentum comes back on the one hand side, but definitely with the activities ongoing, the big chunk of manufacturing will only be 3, 4, 5 years downstream.

And next question comes from Oliver Reinberg from Kepler Cheuvreux.

Three questions also from my side. First, I just wanted to come back also to Jan's question on Q4. I mean you need basically EUR 20 million incremental sales. So can you just unpack that a bit in terms of providing some kind of color how much of that is development, how much is equipment just to get a better feeling for that? And along these kind of lines, when you have this kind of volatility now in terms of consumables, in terms of timing disruptions from tariffs, I mean is it not also a risk factor when there's now the kind of Supreme Court challenging the kind of whole tariff setup that people just say like we're going to pause and see if there will be chances to order excluding any kind of tariffs? That would be question number one, please.

Tanja, can you answer the first part, like breakdown of revenues expected for Q4 because I don't have it in front of me.

So -- yes, sure. The biggest chunk comes from the systems actually followed with the development service, yes. So those are the two main pillars for the increase in Q4.

And Oliver, obviously, we were trying to kind of look into the relevant -- risk exposure of the relevant positions. So actually, when we updated the guidance certainly -- this was only after when we looked several times and went through each business, each program, each contributor and we're actually trying to find out if there is any residual risk, and that was actually already factored in. So I think the answer should be no.

With those supply chain interruptions, as mentioned before, we cannot say it's all over, but those elements, which are affected in the meantime, we have access to those products, respectively, they are in transfer. Obviously, it needs some time to get them through the supply chain and to get them in. So there is a likelihood that we can slightly recover.

Please don't expect that to happen and please don't factor it in, leave it as we gave the guidance. However, I think the message should be that this was a temporary interruption and that we have sorted out the issue. And kindly allow me to remind you that this actually happened entirely unexpected. So obviously, we saw with the discussion about rare earth that some of our products are affected and we found alternative sources of workarounds.

This very magnet we are now talking about is actually a magnet where the specification actually don't foresee the usage of rare earth in the magnet. They got -- contamination got in. And the contamination is exactly of the threshold when the export rules are kicking in for rare earth. So the contamination is 0.1%. And that actually led to the fact that we couldn't get those magnets out of China. That was really kind of a surprise to us. We reacted immediately.

So people from procurement, our Head of Procurement was actually in China during that time, and a big thank you to her. She sorted that out very nicely. And I think we are back on track. However, things like that can always come up, and I think these kind of issues are here to stay for the next couple of years. We have to deal with them. We have to factor those things in when talking about supply chains and lead times and guidance.

So certainly, we have to learn from that, but particularly talking about Q4, Oliver, even with the Supreme Court activities regarding tariffs, we -- those things which have to be supplied by the end of the year, we already have our hands on or they are in Europe and our suppliers have their hands on. So I don't expect anything from this side.

Okay. Understood. And second question, obviously, there's a lot of weakness in the industry from China. Can you just remind us what exposure you have to China? I mean I guess it's all indirectly, but how much is that? And do you see that the demand for the systems that are being used in China is also further incrementally deteriorating?

I think it's extremely complicated to describe that. I think if you talk to our customers, they are definitely trying to maneuver around statements regarding China. Our exposure, so first of all, we don't have any material substantial customer in China. We have a couple of important customers in Asia, but definitely our top 10 customers are sitting either in Europe or the United States.

Then we can see literally only two behavior pattern within our customers. Some of them are actively trying to reduce their exposure in China. Some of them are actually trying to see this as a chance and are trying to certainly on an as high as possible risk-free approach to take advantage of that there is demand for certain products of our customers, and we are supporting exactly that. So if they need products made in China, we definitely help them to manufacture, in our case, assemble those products in China. So do assembly, final assembly and final testing according to Chinese rules in order to support their activities. However, we are trying to reduce our exposure. So top line exposure is neglectable.

Looking into our customers, we see a couple of our customers, which entertain nice sales in China. I think with this indirect exposure, we are south of 5% of revenues. When I say indirect, we are selling to our customers and our customers are selling products into China. There are limitations. So if, say, Chinese suppliers -- sorry, Chinese customers want to include our customers into tenders, that's a huge effort for them. That's why that doesn't happen that often anymore. So there are secondary markets, which are served by some of our customers. That's why their exposure is fairly minor.

We have to see that particularly with our Hematology business, we are seeing strong competition out of China, particularly in those areas where commodities are concerned, systems of lower complexities are concerned, definitely, the competition out of China is getting stronger and stronger, particularly when pricing plays a material role. However, that actually shows how important our strategy, and execution in our strategy is that, as mentioned before, we definitely want to develop and supply spearhead technologies, not spearhead, spearhead. This has to be handled by the research organization. But as soon as this initial dust settles, we want to be there. We want to be the immediate follow. We have nice technologies.

These days, we have huge investments into things which are concerning workflow, things which are concerning safety and security in providing the results, development in IoT, cybersecurity. So everything which concerns haptics, ease of use, safety of the instrument. This is where investments in the Western world and in Europe are actually taking place. And here, we feel it's excellently positioned.

Super. And last question, if I may, just on the molecular diagnostic market. I mean what kind of signs of recovery do you see? And can you just remind us where are you in terms of equipment sales compared to, let's say, the kind of pre-pandemic baseline?

Yes, Oliver. Let me answer the second question first. We have -- we are in a very special situation. The main contributor to our molecular franchise are mainly three instruments. With DiaSorin, we are in a generation change. With BD, we are in a ramp-up situation. And only with Hologic, we have something where we really have comparable pre-COVID data.

And I think I'm not telling you any secret here because the data points are disclosed that Hologic is about on a run rate, which represents between 1/2 and 2/3 depends on the relevant instrument between half and 2/3 of pre-COVID level, but picking up, and that's a nice thing.

What we definitely see as a behavior pattern across all our customers is that they are trying to [ prelaunch ] the product life cycle. And I don't -- do not necessarily mean that we develop an instrument in year 1 through 5 and then launch it and then we sell it from year 5 through year 20. What I mean is that when an instrument gets sold to the end customer or placed in an end customer lab, and it runs there for 4 years, 5 years, 6 years and so on, there is a moment in time where the instrument gets worn down and typically gets replaced.

And during the last 2 years, we definitely saw that our customers were trying to [ prelaunch ] those life cycles in the laboratory with the relevant instrument to the extent possible. But as mentioned, this is a means to an end. You can only do that so and so long, and we definitely see that these discussions, which are actually reflecting the fact that typically an instrument of a certain age causes higher service costs and that probably the amortization of a newly placed instrument is actually positively offsetting the service costs.

So I think that the decision-making processes and the ongoing discussions are actually showing that our customers are at this point where they say, okay, we take this instrument out and we place a new one and that's exactly when the growth comes back. So I'm actually particularly within some customers expecting even a catch-up effect here.

[Operator Instructions] The next question comes from Michael Heider from Berenberg Bank.

I have a couple of questions, less detailed questions here. So when I start with the sales development in your Systems business in the third quarter. You actually said -- I mean there obviously were supply issues, and I believe that was on the immunoassay side. I think you have said that. And yet your sales were flat versus previous year. So is my assumption correct that this shortfall then was made up by the molecular systems side? Or is there something else that has been growing?

Affirmative, molecular and to a certain degree, immunohematology as well. So affirmative.

Okay. And then on the margin side, yes, we have seen a lower margin in the third quarter versus the previous year due to a negative mix and also due to the negative mix in the instruments business, but also due to the lower share of consumable sales. Yet again, here, your quarter-on-quarter margin has improved. And I would assume now because you're only talking about the Lower Consumer business now in the third quarter that the mix overall in the second quarter must have been better, the product mix, yet your margin is higher in the third quarter. So is this all a result of your cost-saving measures? Or what is the story behind that here?

Yes, efficiency measures are coming in nicely. So certainly, this is a lot about product mix and scalability. And Michael allow me to say that the forecasting our Consumables and particularly Maintenance parts and Spare parts business is way more complicated than complicating Instrumentation business. So certainly, on the instrumentation and high-volume consumables, certainly, we have established forecast systems, and we should know where we end up over the next 3 months, 6 months, 9 months.

On the consumables and maintenance part side, that's a little bit different. What we definitely saw with tariffs kicking in that there was a change in behavior pattern of our customers. Actually, we had a deep analysis about the behavior and some of the business was actually already pulled in, in the first 6 months, which led to fairly well-established results then.

We actually -- at this moment in time, we typically got the last orders of the year, particularly for consumables and spare parts, and that was actually weaker than we forecasted initially. It's factored in our amended guidance, but it was weaker than expected. So not only that the business is more short term and therefore, doesn't allow for high predictabilities and high transparency, even the change in behavior patterns came on top here.

So deriving something from the past doesn't make too much sense. Like margin drivers in Q3, definitely slight recovery in the Molecular business, some development programs ongoing. So it's actually across the border. And certainly, in some areas, the better economies of scale are helping us very much as well, and so we have performed price increases. We are trying to apply discipline in terms of procurement activities. So all-in-all, I think things are lining up nicely. However, we are not really satisfied.

I think as soon as scalability and the right product mix comes back, we can easily get closer to our historical margin. However, I want to make sure that even when I say that I believe the market comes back and the momentum comes back, that all sounds very bullish. I want to make sure that you understand that particularly timing is super unpredictable.

So I think that if we finalize our budget cycle and if we are coming out with our new guidance that we will already show this slightly positive momentum, but definitely, 2026 will not be this year of the great relief. What I wanted to get across is that I think there is a chain of things, which have to happen. So the positive mood of our customers, the return of the number of their sales when they get new tests on the instruments when they are actually continue to grow. I think in immunoassay, they grew all the time. But in molecular growth comes back, in sample prep growth comes back, in proteomics growth comes back. So all-in-all, a super nice lineup here.

However, this has to go through this pipelines of development activities, market launch, regulatory will take some time. I wanted to get across that we believe that we are through the worst. That's the thing we want to get across.

Okay. And then another question on the supply issue. Do you think that there will be a structural change to your supply situation? I mean are you considering maybe in more times to have a dual supply or supply that is more diversified? And this then, in turn, will maybe result in a more costly supply side for you? Or what is the reaction to the situation? And also in that context, how did your customer react to this? I mean are they obviously not thinking about cancellations, you're expecting to just deliver the instruments then a little bit later. But I mean, what was the reaction on that side?

Yes, Michael, thanks for bringing it up. Actually, a complex question requiring a complex answer. So first of all -- and please allow me to get to that point first. So definitely, whenever possible, we already have dual sources for suppliers. But there are certain things where either economically dual sourcing makes no sense at all or where it actually provides risk.

So that certainly, there are some key suppliers which have their own IP, which would mean trying to find a second source would actually mean that most likely the source material would not be compatible, which means you would have to branch from day 1, which is extremely risky from a regulatory perspective and should be avoided from our customers.

So I think, obviously, trying to derisk supply chain is one of the core challenges, which means when, where and how to source. So definitely -- and that's something we are trying to get our customers on board is that in some areas, we can only address that properly by going into high inventory levels by highly risky and single source parts. We already reacted over the past 15 years towards that, that we are trying to particularly develop the complex materials ourselves, so which means that we can easily move manufacturing from A to B to C if we don't get our hands on things and that we control those suppliers at the very tail end, which have their own IP. However, there will be materials, just think about microcontrollers.

You cannot just walk away from a microcontroller supply and you see the issues [ VW ] has these days. I think this is certainly something no one actually expected. But I think we will have to accept that we are living in a world that supply chain interruptions like this can happen that in a globalized world where raw materials are sent 10x back and forth between Asia and only -- if one step gets interrupted, the entire supply chain gets interrupted. I think this is something -- these are problems which came to stay and probably in a deglobalized world, they will still stay for longer than everyone expects.

And the result of that, like particularly sourcing more locally and manufacturing local-for-local will definitely have an impact on pricing. So I think this is an assessment each of our customers have to take either to accept that they will have to live with supply chain interruptions on the one hand side or something we can handle for them, but they definitely will find its input to the price tag attached to the instruments and attached to spare parts. However, I think we are not the only one facing that problem. I think this will actually pop through the surface in a couple of industries over the next years. I hope that helps.

Okay. And then last question here really on your inventory situation and operating cash flow for the full year. What do you think you can achieve in the full year on the operating cash flow side?

And a detailed question here on the inventory because you mentioned that you have higher inventories in one particular area where it requires an upturn in the end demand -- end market demand. Are we talking about molecular here? Or is this something else?

It's allocated in our Molecular business, right? And it's particularly affected by the lower-than-expected or flatter than expected ramp-up curve. Definitely, that is our biggest [indiscernible] as mentioned, and we stick to that guidance at the very beginning of the year said that we will most likely manage to reduce our inventories by the end of the year in the area of EUR 5 million to EUR 10 million. And I think we are on a good track here. And that actually leads to the equivalent cash release coming from inventory levels.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Jan Keppeler for any closing remarks.

Thank you all. That concludes the conference call. Thank you, and goodbye.