Soitec Stock

[Interpreted] It's being broadcast. I hereby declare open the combined ordinary and extraordinary general meeting of Soitec. This meeting is convened to go over the agenda set out in the notice of meeting, which was sent to registered shareholders and also published in the official voting. As the Chairman of the Board of Directors, I am chairing this general meeting, and I would now appoint the meeting's officers.

I hereby call upon the 2 members of the meeting which hold the largest number of votes, and they have agreed to fulfill this role to act as scrutineers. So the company, BPIfrance participation, hereby represented by Mr. Samuel Dalens and the company called CEA Investissemen presented by Ms. Julie Galand. And Samuel Dalens and Julie Galand are seated in front of me here in the first row. The Chair and the scrutineers for the presiding committee of the meeting, and they appoint a secretary Emmanuelle Bely, who's Secretary General of Soitec and also the Secretary to the Board of Directors and who is standing to my left. We now have the officers in place. Also present beside me are Laurent Remont, our new CEO since April 26, who is attending his first Soitec Annual General Meeting; and Albin Jacquemont, our Chief Financial Officer. The statutory auditors are also present in this room. One is Benjamin Malherbe for Ernst & Young Audit, and Laurent Genin for KPMG. And we also have with us the directors who were able to attend those who could make themselves available. And I would like to thank them for attending.

I would like to remind you that this general meeting is being video filmed and broadcast live on the company's website. The recording will remain available on the company's website after the broadcast.

Now I would like to ask Emmanuelle Bely to inform you of the provisional quorum as established at the beginning of the meeting as well as to provide some further information about our meeting.

Thank you, Frederic. Good morning, everybody. I would like to remind you that our general meeting is convening today on first call, and all of the preliminary formalities in compliance with the law have been duly completed. I have before me all the documents attesting to the validity of the notice convening the general meeting and the proceedings are for the deliberations of documents and information required by law have been available to all communicated to shareholders in accordance with the statutory conditions and time limits.

The agenda for the general meeting together with the draft resolutions were set out in the notice of the meeting, which also serves as a notice of convocation published in the [indiscernible] visibility on June 22, 2026. The notice of convocation was published in the Legal Gazette on the 10th of July 2026. I'd like to point out that following the publication of the notice of meeting, the company received no request to include items or draft resolutions on the agenda within the time limits and under the conditions laid down by the applicable regulations. Upon entering the meeting, the shareholders signed the attendant register both in their own names and also in their capacity as proxies. The attendance register drawn up by [indiscernible] , our securities custodian shows on a provisional basis that the shareholders represented or having cast their ballot post collectively hold 18,287 shareholders, representing 27,746,000 voices for a total of [indiscernible] shares carrying working rights. Therefore, a quorum of 50.99% of votes. The statutory quorum has therefore been reached for ordinary and extraordinary resolutions and other shareholders attended general meeting no later than the start of the presentation of the statutory auditor's report, the provisional quorum may be revised and the final quorum will be taken into account when we vote on the resolutions.

The meeting is duly constituted and may, therefore, validly deliberate. Thank you for your attention. I shall now hand back the floor to our Chairman.

Laurent Remont will be opening the meeting by reviewing the group's performance by the 2026 financial year before discussing our sustainability strategy. Albin Jacquemont will then take the floor to outline our financial results for the same period, and he will also go over our growth prospects. I will then myself outline Soitec's corporate governance. I will then hand over to Emmanuelle Bely, who will present the remuneration of the directors. Our statutory auditors will present the conclusions of their reports.

And before we move on to the vote of the resolutions, we will have the opportunity -- you will have the opportunity to ask questions. Finally, Emmanuelle Bely will briefly review the resolution submitted for approval by the Annual General Meeting.

I therefore proposed to the Annual General Meeting that the management report, the corporate governance report and the auditor's report and the text of the resolution are not read because all of these documents have been made available to shareholders in advance of the meeting. So we don't need to read them. Now I will give the floor to Laurent Remont. He is going to outline the group's activities in detail.

Thank you for the introduction, dear shareholders, members of the Board, dear colleagues. It is a great pleasure to be here with you today for my first Annual General Meeting as Chief Executive of Soitec. Since I took my post on April 1, I have devoted my time to getting to know the company from the inside and also meeting all the teams as well as our key partners. I am delighted to share with you the observations I have made what I believe to be Soitec's immediate priority. And also my assessment of our position within an industry in which I have -- I happen to have spent the last 30 years.

To begin with, I would like to share with you the 3 main lessons drawn from the 2025, 2026 financial year. I must say it was a challenging year for Soitec Inventory correction weighed a lot on volumes. Visibility remained low in some of our end markets. However, at the same time, and like the rest of the industry, really, we are seeing artificial intelligence picking up speed further and beginning to profound the change and transform the demand for semiconductors. Our performance for 2025, 2026, it really reflects the context. Revenue for 2025, 2026 is down 30% year-on-year. factory utilization is below normal, but that is a deliberate action decision, and it is weighing on margin. On the positive side, our balance sheet is solid, robust. Our liquidity is strong and free cash flow has returned to positive territory. Albin will go through the figures in detail a little later.

My second message, we are continuing to innovate, optimize, strengthen our portfolio so that we can capitalize on powerful megatrends, for instance, artificial intelligence. Photonics in data centers, FTSI in Edge, POI in advanced connectivity. We are currently consolidating what sets us apart from the competition, the very close relationship we have with our ecosystem, our unique R&D capabilities. And finally, an agile and scalable industrial footprint. Finally, my third key message. We started in 2025, 2026. We are going to continue in 2026, 2027 to position the company to make sure we return to profitable and sustainable growth. We have achieved this by supporting our customers in reducing their RFSOI specifically inventories by maintaining a very strong discipline on cost and by managing working capital requirements and capital expenditure to improve cash conversion.

With regard to the financial results for the financial year, I will give you the highlights before Albin goes over them in detail. Revenues stood at EUR 592 million, so down 30% year-on-year. This is mainly due to the ongoing adjustments of RF SOI stock levels among our customers, and this is still in progress. Now the decline was partially compensated for by the fact that there is a very strong momentum in the AI area. Gross margin is 16.3%. This is a temporary low, but it's a decision we made strategically to reduce factory utilization in order to give priority to stock level returning to normal and maintaining discipline regarding working capital requirements. And our efforts have begun to pay off. Free cash flow is back to positive territory at EUR 63 million, thanks to our control over working capital requirements and discipline regarding capital expenditure. Now restoring the free cash flow is the first step of the journey.

Before we can return to revenue growth and then deploy operational leverage, as Albin will explain a little later. Now with all that I just said in mind, let's look at the 2026, 2027 outlook for the financial year. Last week, ahead of schedule, we published our first quarter revenue. EUR 113 million, so up 23% year-on-year compared with the first quarter of 2026. And it's a like-for-like basis for exchange rates and perimeter, exceeding the previously announced target by about 15%. This growth mainly reflects the acceleration of Photonics SOI used for very high-speed optical transceivers, which are designed for AI data centers. the revenue of which has been doubling in 1 year. We have also reached an important milestone. We qualified our Singapore factory for mass production of Photonics SOI for our first customers. Now this is a key step for Soitec. It is going to enable us to meet the surge in demand, which we are currently witnessing. And we will progressively extend the qualification to other customers.

Finally, something also very important that led us to publish our first quarter results early in the interest of rigor and transparency towards the market. And I'm referring to our visibility in the photonics industry because it continues to improve and our capacity to deliver at scale is strengthening. Now bearing any major disruptions in the AI market, revenue from Photonics SOI could more than double year-on-year compared with 2025, 2026 financial year when it stood at just over $100 million. We have also confirmed our investments for the 2026, 2027 financial year in the region of EUR 100 million. Now this is the take-on message we are capitalizing on the fungibility of our assets and our past investments because we believe this is going to help us moderate cash outflows and capital expenditure will be brought down to EUR 100 million this year, EUR 900 million. And we are making sure that we maintain our capacity to capitalize on future growth opportunities.

In summary, after restoring positive free cash flow in 2025, 2026, our priority is to return to a growth trajectory and then to improve profitability. A major trend is driving the acceleration of our business. We are performing a major change in our industry, artificial intelligence. The trend can be observed on 2 levels. First, data centers, even investments made by hyperscalers is expected to double within the year, driven by the rise in inference and agent-based AI. Now this requires more GPUs, more processors. But it also requires GPUs that are more closely interconnected. And because we are facing a growing or even exponential demand for data, Optical connectivity is replacing copper. In such a way, it increases data rates and reduces energy consumption. Our Photonics SOI platform delivers superior performance for optical interconnects that makes us stand out. notably with optical losses in waveguides that are wavelengths that are very difficult to match at scale. Now with regarding edge, we have new battery-powered AI assistance, and we also have what we call physical artificial intelligence. A large proportion of the estimated 40 billion connected devices, which we expect to have by 2030 will still be running in the background. But this makes us very sensitive to energy consumption. And they also require a very high integration capacity between analogic, RF and digital components.

FD-SOI is very, very good in both dimensions, AI coprocessors, automotive microcontrollers, portable AI assistance, Internet of Things centers. They all share the same requires. Low intelligence, more capacity to compute less energy, greater integration. FD-SOI meets this challenge on all 3 levels. More broadly, we expect AI to generate new performance requirements, both on the level of the electronic components, but also on the level of the materials from which they are made. This is going to have an impact on the majority of our portfolios, but we are focusing on 3 main technological trends arising from the disruption caused by artificial intelligence. AI computing, connectivity and finally, energy efficiency. In practical terms, what does it mean? While we have 3 short-term priorities. First, accelerate the strong momentum that we are right now enjoying for AI. The opportunity is certainly there, but we must make sure that it is properly executed. Success will also depend on external factors. I believe we are well positioned to capitalize and leverage this opportunity with both ambition but also caution.

Second priority, refine our focus and resource allocation. A comprehensive review of portfolio priorities and capital allocation is currently underway. Our potential for technological differentiation remains but we want to improve our execution and the concentration, the focusing of our resources. Third priority, we need to adjust the size of the organization. The cost-cutting program launched in 2025, 2026 is continuing. The aim is to reduce in a structural way, the fixed cost base and improve operational leverage across the entire cycle. But at the same time, the R&D intensity and our strategic capabilities of being safeguarded. We are not going to sacrifice neither on our innovation or our strategic areas. Now this is my take on the Soitec situation and the orientation I would like to provide. We have a well-built portfolio on the right technological megatrends with a unique position in the AI value chain.

Secondly, we have talented teams and they have developed structural advantages, and they will continue to do so. Finally, I believe we have very -- applied a very disciplined approach to gradually translate all of this all we have done into financial performance. We have our work cut out for us, but I am confident we are doing the right thing in the right order with the right team. And let us now turn to a fundamental issue for Soitec, our sustainability strategy. Because sustainability is at the heart of our strategy, and it provides a competitive advantage that we are continuing to nurture. Our [indiscernible] debt reflects our conviction. We are the soil on which innovation will grow energy-efficient electronics are turned into sustainable life experiences. And this ambition is built on 3 pillars. Driving the transition to a sustainable economy through innovation and operations, execution, promoting inclusive culture, taking action to become a model for a better society.

When it comes to climate action, our decarbonization road map is still continuing to bear fruit. A quick reminder, our emissions reduction pathway was validated by the science-based targets initiative based on the most ambitious scenario, 1.5 degrees Celsius. We met our target for reducing Scope 1 and 2 emissions, 2 years ahead of schedule. And over the financial year, I must say our achievements have been tangible. Gas consumption at burning was halved, thanks to the first year of full operation of the newly installed heat pumps, 58% of the electrical power supplied to our Pasir site in Singapore is now renewable, which means an percentage, an 8-point percentage increase compared with 2024. And 41% of our shipments are now shipped by sea compared with 36% last year and air freight is down 23%.

A few words on this progress and this momentum. This year, MSCI upgraded our rating to AA. This is the fourth upgrade in 5 years. And therefore, Soitec is ranking among the sustainability leaders in our industry. This development reflects a series of measures taken to drive our sustainability strategy. And these measures include a road map for sourcing green processed gases with nitrogen and oxygen already qualified for burn-in. Over 40% of our customers are qualified for sea freight. And over 90% of our strategic suppliers share and drive their own carbon reduction road maps. Our low carbon energy supply is on track. Approximately 100% hydroelectricity in France, a target we already achieved in 2021, and approximately 60% green energy in Singapore. And this level has almost doubled since 2023.

With regard to water management, we are continuing to pursue our target of halving our water consumption per unit of production by the 2030 financial year compared with the 2021 financial year. I think -- I believe we are on track. Our water withdrawal intensity has fallen from 1.4 liters per square centimeter in 2021, 0.99 meters per square centimeter this year, a 30% reduction. The target is 0.7 liters by 2030. And the key driver for achieving this result consists in reusing the water in our industrial processes. We have reached 49% of water reuse, reuse compared with 16% in 2021 and the target is 50% by 2030. So as you can see, we are very close to achieving the target. Something else I would like to talk about with regard to sustainability, our workforce. We are aiming for gender parity. Women make up 36% of our workforce. The target is 40% by 2030. Women hold 27% of senior management positions and the target is at least 30%.

We are continuing to make Soitec an attractive employer to support our growth, 20% of internal promotions have been internal this year. We shared the results of our growth with of our employees. 100% of our coworkers are eligible for a free performance share scheme. Finally, safety. Our ambition is obviously 0 accidents, no industrial accidents were recorded this year compared with 2 last year. And the rate of lost time accidents has fallen significantly from 2.77 to 1.49, accident per million of worked hours. Finally, governance, responsibility for sustainability is deeply rooted in each of our governing bodies. Within the Board of Directors our Sustainability Committee works closely with all the specialists, all of the specialized committees. Furthermore, to lead our sustainability approach. We have set up a sustainability steering committee comprising the General Secretary, the Head of Human Resources; the Chief Financial Officer and the Deputy Chief Executive in charge of Operations and Quality. Together, we assess and analyze our sustainability objectives, results and action plans.

The decisions we take are then submitted to the Executive Committee, then shared with the Board of Directors the Sustainability Committee and the Audit and Risk Committee. And by doing this, we ensure seamless coordination and genuine strategic oversight at all levels of the organization. I will now give the floor to Albin Jacquemont, Chief Financial Officer. He is going to introduce the financial performance for 2025, 2026.

Thank you, Laurent. Ladies and gentlemen, the 2025, 2026 financial year was a decisive year of execution for Soitec. We took proactive and decisive measures to realign our operational base safeguard the balance sheet and position the company for the next phase of profitable growth. And despite a challenging demand environment, we delivered on all the commitments we set out at the start of the year. Key takeaways, decisive measures to correct supply and restore balance. This discipline was essential to streamline our working capital requirements and support a healthy rebalancing act to rebalance the distribution chain across the entire RF SOI ecosystem. Of course, this weighed on gross margin in the second half of the year due to temporary underabsorption effect costs. But it was a necessary step. It was necessary to restore structural balance.

Second lesson drawn, restoring free cash flow generation and strengthening financial flexibility. This was achieved, thanks to disciplined management of working capital requirements and a more moderate capital expenditure profile. Because this strengthened our financial flexibility and increase our capacity to deploy capital when we find attractive high-return growth opportunities and when we find them in the future. They are less on drawn executing a clear 3-step road map towards a sustainable and profitable growth. Stage 1 consisted in restoring a positive free cash flow. We have achieved that. Stage 2 focuses on generating cash while progressing towards returning to revenue growth while we continue to reduce excess RF SOI stock and inventories across the distribution network.

Finally, Stage 3. This will be the scaling up phase during which we will rely on our structurally efficient operating model because we know this will drive significant margin expansion and strong cash conversion as the demand of our end market improves and recovers. If we take them together, these 3 priorities reflect a clear sequence of discipline stabilization and value creation, and they position the company on the path of balanced and resilient growth. And I will now turn to the key figures, some of which have already been highlighted by Laurent, our CEO. Revenue stood at EUR 592 million, down 30% year-on-year compared with the 2024, 2025 financial year on an organic basis which reflects highly divergent end market dynamics. EBITDA margin stands at 25.4% and a 118 basis point decline year-on-year, driven mainly by lower volumes and our deliberate decision to reduce production in our plants. We call this plant deloading.

Despite this, operating cash flow remained resilient, EUR 202 million, broadly in line with last year's. And this highlights the strength of our cash-generating model. Consequently, we generated EUR 63 million free cash flow, a significant improvement on the cash consumption, EUR 23 million in 2025. And by way of consequence, our net debt improved. It is now worth EUR 56 million, reflecting a solid and comfortable leverage ratio of 0.4x the EBITDA. During the '25, '26 fiscal year, our revenue contracted by 30% year-over-year on an organic basis, reflecting highly contrasting end market dynamics within our portfolio. For mobile communications declined by 41% year-over-year compared to 24.25%, continuing to be impacted by SOI inventory adjustments among our direct customers. This said, we are seeing encouraging adoption momentum for POI highlighted by first and the first multiple-year contracts signed with Automotive and industrial remained weak, down 44% year-over-year due to the persistent slowdown in the global automotive sector and continuing soft demand for both power SOI and FD-SOI.

As to Edge and Cloud AI was once again the standout performer, up 8% year-over-year and up a strong 19% excluding merger SOI. Photonics SOI is now a platform generating over $100 million, posting growth of more than 30% year-over-year. This is in line with the continued expansion of our addressable market driven by accelerating demand for optical interconnects in AI dedicated data centers. since Laurent has already provided an overview of the operational context across all of our key product lines, I will move directly on to gross margin performance. Gross margin stood at 16.3% of revenue compared to 32.1% in fiscal year '24 '25. Beyond the decline in volume, 3 factors contributed to this drop. A lower capacity utilization rate around 50% compared to approximately 70% last year, which represents a headwind of about 800 basis points. an unfavorable price product mix resulting in a contraction of some 300 basis points. And lastly, the operational and subsidies provided a reline of approximately 180 basis points.

Going forward, as the utilization rate recoveries and volumes rebound, we should see a natural expansion of the gross margin driven by operating leverage. Now let's turn to our operating performance. We reported a current operating loss of EUR 8 million compared to a positive current operating income of EUR 136 million last year, driven by the compression of the gross margin. This was partially offset by disciplined cost management, achieved while maintaining our commitment to our investments in R&D. Net R&D expenditures decreased to EUR 45 million, reflecting the sale of Dolphin design, increased recognition of grants and lower use of materials, particularly in Smart SIC. Excluding these items, gross R&D expenses remained stable compared to last year. Selling, general and administrative expenses decreased by 10%, driven by lower share-based compensation expenses. The reversal of provisions for variable profit sharing and incentive plans and disciplined cost savings across the entire operational base.

On the next slide, we present the details of our nonrecurring items. The net loss amounted to EUR 220 million, heavily impacted by exceptional items, most of which stem from decisions made prior to '22. More specifically, we recognized EUR 123 million in other operating expenses, consisting mainly of an impairment charge of EUR 41 million related to Smart SIC assets. And then 9 million impairment charge on the as a risk expansion, which is currently unoccupied an impairment charge on the advanced payments made in 2022 under long-term raw material supplies agreement and imagine a loss on the earn-outs on less than EUR 10 million associated with the sale of Dolphin Design. These noncash charges reflects the rigorous management of our portfolio and a clear eye reassessment of market dynamics, particularly in light of the rapid expansion of low-cost Chinese while our crystalline silicon carbide capacity and the resulting pricing environment for smart SIC-related assets.

Below operating income. Net financial expenses totaled EUR 31 million, reflecting higher interest costs related to recent financing transactions and a noncash foreign exchange loss of EUR 17 million recognized in April and May '25. The group has since implemented enhanced hedging measures to reduce residual foreign exchange risk going forward. When we adjust our reported net income of minus EUR 220 million, for the exceptional nonrecurring and noncash items detailed above, we arrived at a net loss from continuing operations of EUR 14 million and an earnings per share from continuing operations of EUR 0.38. We have fully delivered on our commitment to restore positive free cash flow, which reached plus EUR 63 million for the '25, '26 fiscal year, marking a sharp turnaround from the minus EUR 23 million reported last year. I would add that this generation of free cash flow exceeds the consensus, which was EUR 8 million. So it's extremely appreciable.

The performance clearly demonstrates the quality of our execution rather than any support from market conditions, I would like to sincerely thank our teams for this achievement. This marks a structural turning point. Soitec is once again generating consistent free cash flow across the entire cycle, supported by a more selective and profitability-focused capital allocation framework. This turnaround is based on 2 key drivers: First of all, strict discipline maintained regarding working capital requirements, generating a positive contribution of EUR 49 million to cash flow year-over-year. This was primarily driven by a reduction of EUR 145 million in accounts receivable, reflecting lower business volumes and more rigorous collection management, as well as a EUR 24 million reduction in inventory resulting from deliberate actions aimed at reducing the workload of our plants and deliveries below the demand -- the underlying demand, in particular, in the second half of the year. This reflects a clear priority on cash generation. and strength of the balance sheet rather than short-term margin optimization which would have been a femoral.

To provide more context. This slide takes a closer look at these working capital dynamics from a balance sheet perspective. As you can see here, our optimization efforts have paid off, particularly in the second half of the year. That's where the plan was defined. Now let's turn to the second driver of our improved free cash for investment discipline. We have strengthened our capital allocation by reducing capital expenditures by 40% year-over-year to EUR 135 million, EUR 135 million. Our capital allocation framework has become significantly more selective with resources increasingly directed towards the more attractive long-term value creation opportunities, in particular, Photonics SOI and POI. Alongside proactive inventory optimization, this more targeted capital allocation has enabled Soitec to return to a generation of structurally positive free cash flow leveraging our significant past investments in capacity expansion, which allows us to improve and secure growth opportunities. This is a major turning point in strengthening our financial profits and we're entering into a new phase of our development.

Now as to the balance sheet, we ended the fiscal year with a solid and strengthened financial position. Net debt decreased by EUR 38 million to EUR 56 million, driven by continued strong cash generation and disciplined financial execution. This further strengthens our balance sheet and increases our financial flexibility for the future. To conclude on our performance for fiscal year '25, '26, we maintain a solid balance sheet, supported by strong liquidity and a moderate net debt position. At the same time, we are continuing to make progress in our commitment to greater transparency, improve consistency and high-quality financial reporting. So to summarize, we are very attached to our discipline in terms of managing capital with CapEx for fiscal '27, which should remain contained in EUR 100 million throughout the whole year. Now as to the exercise in 2027 will be a transition year. But the path to margin recovery is clear and linked to improved capacity utilization at our plants and the ramp-up of our high-growth platforms.

Fiscal year performance in '27 will reflect factory utilization rates that although improving, will remain well below their optimal levels. as well as the level of subsidies expected to decline significantly. Indeed, discussions are underway as the calendar year '25 marks the end of the EPCI 2 program, the head of the anticipated launch of a possible IPC EI3 framework. Finally, the strengthening of the euro against the U.S. dollar is expected to create an additional headwind for our financial performance under current operating conditions. Our net exposure to currency risk for fiscal year 2027 is now 95% hedged with an exchange rate of $1.19 per euro. In conclusion, the company is well positioned for the future, building on a significant diversification of its portfolio has achieved over the past few years. The execution of the plan presented last November remains fully on track.

As a reminder, this plan is structured around 3 distinct phases. Phase 1 restore cash generation by reducing working capital requirements and returning to positive free cash flow. The initial results are already evident, and we expect further progress in the future as a significant portion of our working capital requirements is set to be converted into cash over the next few years. Phase 2, return to growth. You know the results of the first quarter, which demonstrate that Soitec is already back in terms of growth. Phase 3, restoring a structurally higher level of profitability through operational leverage and cash conversion in line with our expected growth. Thank you.

Thank you, Albin for the presentation. I'd like to have a look at Soitec's governance reciting with the composition of the Board of Directors for the 36th fiscal year. As of today, the Board of Directors has 12 members, including 7 independent directors, representing 70% of the Board members, excluding directors representing employees. 6 women representing 60% of Board members, excluding directors representing employees and 2 directors representing employees. The governance structure is also characterized by its diversity with 4 nationalities, representing an average age of 53 years old. During '25, '26 of fiscal year, the director's commitment was reflected in an 88% attendance rate at Board and committee meetings.

Let us now examine the composition of various committees and the work they carried out during the '25, '26 fiscal year. As of March 31, '26, the Strategy Committee was composed of 64% independent members. They met 6x during the fiscal year with an attendance rate of 84%. The Audit and Risk Committee for its part consisted of 5 members, 80% of whom were independent. They met 7x during the fiscal year with an exemplary attendance rate of 100%. the Board's compensation Nomination and Governance Committee also consisted of 5 members, 75% of whom were independent. They met 7x with a consistent attendance rate of 97%. Lastly, the Sustainability Committee consisting of 5 members, all of whom were independent, met 5x during the fiscal year with an attendance rate of 76%.

During the '25, '26 fiscal year, the Board of Directors and its committees addressed issues ranging from strategy, finance and sustainability to governance and compensation. The main points of these activities are summarized on the slide you have on the screen. Since these items are covered in full detail in the universal registration document and in the general meetings materials I will not go over them here in detail. I will now turn to the annual evaluation of our Board and its committees, conducted in December '25 in accordance with the recommendation of the MEDEF code. This evaluation was conducted internally via an individual anonymous questionnaire sent to all directors, with the exception of one Director representing employees who was appointed in November 14, '25. Its findings analyzed last March by the Board's compensation Nomination and Governance Committee and presented to the Board of Directors reflect a high level of overall satisfaction with a global functioning of the Board and its committees as well as a culture of continuous improvement.

The findings first highlight several major strengths: strong leadership underpinned by the excellent relationship between the Chairman, myself and the CEO, as well as strengthen ties with the Executive Committee. The exemplary quality of discussions is characterized by a freedom of expression and increased efficacy within our committees. Rigorous forward planning, particularly in succession planning, and the management of Board renewals. Highly praised involvement and training programs reflected by a high level of commitment and a near-unanimous agreement on the relevance of the training provided. Highly appreciated support from the Secretary or drives great visibility, strong responsiveness and the quality of the proposed work options, all of which were warmly praised. Looking ahead, the council has identified 4 areas for improvement to continue to incorporate new types of experts during the upcoming renewals to send documents earlier and prioritize more concise formats to offer new targeted training programs, particularly on AI and the availability of critical materials.

And lastly, maintain the Atmos vigilance regarding the confidentiality of discussions. Based on these guidelines, an action plan has already been established for the 2026 fiscal year reaffirming our commitment to a process of continuous improvement. I will now turn to the rigorous process that guided the selection of our new Chief Executive Officer. Following per Barnaby's decision to step down on the October 2025 from his position effective March 31, '26, the Board of Directors active immediately to organize and manage transition structured in 4 main phases. The first stage began with the establishment of a dedicated select committee and the precise definition of the die profile, which will be detailed on the next slide. Once the search was launched, we compiled a short list of internal and external candidates who will then approach a confidentially. During the second stage, all shortlisted candidates whether from outside the company or from within its ranks, underwent in-depth interviews designed to assess their skills and their alignment with our strategic priorities.

The third stage, finalize the selection. After a final round of interviews, the select committee submitted its recommendations to the Compensation Nominations and Governance Committee, which then presented its conclusions to the Board of Directors, which have been kept informed throughout the process. Finally, during the fourth and final stage, the Board of Directors unanimously decided to appoint Nora Rumo is the Chief Executive Officer, effective first of April 2026 and his remarkable career that industry giants such as Incheon and ST Microelectronics proved to be perfectly aligned with our group's ambitions. This slide outlines the target profile we define to guide our research. The Board of Directors established very clear criteria to identify the ideal leader for Cortec.

Regarding the profile and key competencies, initial preference was given to candidates who already had an experience as a CEO who are high-potential talents. The candidate was required to have in-depth technical expertise in semiconductors and cutting edge or cutting-edge technologies. We are looking for a strategic thinker with an international outlook and a strong commercial or go-to-market mindset. Finally, a strong preference was given to French or French-speaking European candidates. In summary, as noted in the box at the bottom of the screen, the Board's objective was to select a leader capable of maximizing the value of our diversified product portfolio, while seizing new growth opportunities, particularly those driven by artificial intelligence. This rigorous process and these demanding criteria led the Board of Directors to appoint Laurent Remont as CEO effective 1st April '26. His background meets all of the criteria of the profile we just described.

Laurent Remont brings world-class industrial and international expertise to SOTC. After starting his career at Philips, he spent more than 15 years at STS microelectronics, where we held senior management positions in the Connected Home division, R&D and Embedded Systems. He served as CTO as a member of the Executive Committee of Contra and followed by Senior Vice President, General Manager of MEMS division and Magnetic Sensors division at Incheon Technology. He is a graduate of reenable INP and has an in-depth understanding of our local innovation ecosystem. And so he brings the expertise and the technological vision needed to steer Soitec towards its next successes. Now let's turn towards the proposed changes in the composition of the Board of Directors for the coming fiscal year. As shown on the slide, the renewal of our directors' terms is spread out evenly over 3 years. Today, 3 terms are set to expire following our Annual General Meeting. Pierre Barnabé resigned from his position as a Director in core with the end of his tenure as CEO, effective at the close of business, March 31, 2026 in the evening. These are the terms of Mad Puliti, Mr. Forge and Devineur, Hale. I would like to know that Bad Pontegadea has chosen not to seek a reappointment as a director due to timing constraints linked to our other responsibilities. On behalf of the Board of Directors, I would like to thank and for her active contribution to the Board's work since 2022.

To ensure these upcoming renewals are carried out successfully, we are following a rigorous selection process structured around 4 key steps. First, we define the desired profiles based on the Board's annual assessments and our diversity policy. Next, a specialized recruitment firm identifies and preselects candidates. These candidates have been evaluated and interviewed, ensuring strict compliance with the rules regarding independence and the holding of multiple positions. Finally, the Board, upon the recommendation of the Board's compensation nomination and [indiscernible] committees approves the selected candidates before submitting the nomination to a vote at the Annual General Meeting. I will now turn to resolutions 4 to 7, which concerns the proposed appointments and reappointments submitted for your vote today. First, the reappointment of Delphine Segura Vaylet as an independent director. Her solid experience with governance and human capital issues will continue to enrich the Board's work. If you approve her reappointment, she will continue to chair the Board's compensation Nomination and Governance Committee while remaining an active member of the Strategy and Sustainability Committees.

Last, next, the reappointment of Christophe Gégout, also an Independent Director. His leading financial expertise and insight into industrial risks are key to safeguarding our strategic investments. Subject to your approval, he will continue to chair the Audit and Risk Committee through April 2027. Please note that in April 2027, having reached the term limit for independent directors set by Afep-Medef. We will hand over Chairmanship to an independent director. The Board's compensation, nomination and governance committee is working on this transition and on identifying a successor. The appointment of Laurent Remont, our CEO. His presence on the board is part of our commitment to creating seamless synergy between senior management and the directors. He will bring his key insight into markets and technological opportunities, particularly in the field of artificial intelligence. If it's a point that is approved, he will join the Strategy Committee.

Also, as part of Resolutions 4 through 7, we proposed the appointment of Didier Fontaine as an independent director. Didier brings more than 30 years of financial and strategic experience gained at major global industrial groups, such as edema, Plastic Omnium, now is called Pity, Constellium, Narela and Safran. His in-depth expertise in global financial strategy issue strategy in cybersecurity as well as experience in supporting companies listed on international markets will be valuable assets and supporting Soitec's performance and growth trajectory Resolutions 4 through 7, if they are approved, the composition of the Board of Directors will be as shown on the screen. The Board would thus consist of 13 members. The proportion of women on the Board will decrease from 60% to 45% the percentage of independent directors will decrease from 70% to 64%. Finally, all committees will continue to be chaired by an independent director. Mr. Jegou, for the Audit and Risk Committee, Laurence Delp for the Sustainability Committee; Define Segura, who chairs the Board's Compensation Nomination and Governance Committee; and myself for the Strategy Committee. I will now turn the floor over to Emmanuelle Bely to present the compensation of the corporate officers of the '25, '26 fiscal year in the 267 fiscal year. Thank you.

Thank you. [indiscernible] to me as capacity as Company Secretary to present the section relating to the remuneration of our corporate offices. I'd like to point out that all provisions that are here have been approved by the Board of Directors in accordance with the recommendations issued by the Board Remuneration apartments and Governance Committee. You will find all the details on this information in the 225.6 universal registration document, Chapter 4.2 in the notice of the Annual General Meeting and on our website.

Let us begin with the remuneration paid or awarded during the 2025, 2026 financial year to the company's directors, corporate officers. These, of course, fall within the framework of the policy approved by the Annual General Meeting in July 2025. These amounts are the subject of resolutions #8 through to 10 submitted today for your approval. This is an ex post vote. Resolution #8 regard the overall approval of information relating to the remuneration of corporate officers. This is known as the overall export to be distinguished from the individual ex post approval, which will be subject of Resolutions 9 and 10 Resolution #8 submits the remuneration of directors for the 2025, 2026 financial year for your approval. Total amount, EUR 691,710. And I would like to emphasize that as a jester of solidarity night of the partial furlough of our staff. The members of the Board then in office agreed on November 19, 2025 to a 5% reduction in their remuneration, applied on a basis equivalent to 2 months service.

The remuneration paid for this financial year reflects this measure. With the exception of Niseko whose term of office ended before the decision was taken. And with regard to the arrangements and in accordance with the remuneration policy you approved during the 2025 Annual General Meeting. The budget is allocated on a pro rata basis according to the director's actual attendance at Board and committee meetings. As is customary, participation via video conference or conference call is treated as physical attendance and travel expenses are reimbursed upon presentation of supporting documents. Finally, I would like to remind you that the Chairman and the Chief Executive Officer received separate remuneration, which is not drawn from this overall budget. Similarly, directors representing employees do not receive any remuneration in respect to their role as directors. Let's move to Resolution #9, which concerns the remuneration and wanted to further list in his capacity as Chairman of the Board of Directors. As a reminder, our Chairman's remuneration policy provides exclusively for the payment of a fixed annual remuneration. The Chairman of the Board of Directors receives no other remuneration or any other benefits in kind with the exception, of course, of reimbursement of expenses incurred in the performance of his duties, but this on presentation of supporting documents.

Accordingly, for the 2025, 2026 financial year for direct listed received a fixed annual amount of EUR 277,667 gross in euros, in accordance with the policy approved by you on the 2025 General Annual Meeting. As with the other members of the Board, I would like to point out that this amount into solidarity measure mentioned just now, namely 5% reduction implied on the basis equivalent to 2 months of service. We now come to Resolution #10, submitting for your approval of the remuneration awards to Pierre Barnabe in respect of his as Chief Executive Officer, which she held until March 1. 2026. For the 2025, 2026 financial year, his remuneration breaks down as follows: Fixed remuneration, EUR 525, 673 gross. This amount includes the 5% solidarity measure based on 2 months of service. short-term variable remuneration set at EUR 443,080, representing an overall target achievement rate of 83.6%. For the record, this variable component was based on the one hand on 3 financial criteria turnover, revenue, EBITDA and free cash flow. And on the other hand, on 4 strategic criteria, innovation, commercial performance, human resources and ESG.

In detail, with regard to financial criteria, only the free cash flow target was fully met, 30% the actual performance standing at 147% and the target was of the 100% target. Regarding strategic criteria, they achieved an overall fulfillment rate of 53.6%. Finally, the 10% bonus on the results achieved against the financial and strategic targets, payable in the event of increased diversification of the product lines currently marketed by the group. It was not triggered. As part of this long-term variable remuneration, Pierre Barnabe was granted 28,754 performance shares valued at EUR 1,218,56 but this allocation laps on March 31, 2026 following Pier Barnabe's departure from the company. Furthermore, he was granted 2029 shares during the financial year under the ONIX 2025 scheme. In addition, a noncompetition indemnity to EUR 162 million, EUR 837 was pervade representing 50% of its gross fixed remuneration for the previous 12 months. This provision was activated in November 2025 in order to fully protect Soitec's technological and strategic assets by prohibiting Pierre Barnabe during this period from taking up a position, accepting a direct ship or acting as an adviser for one of our direct competitors.

To complement this package, he benefited from a mandatory retirement savings scheme called PERO with contributions totaling at EUR 14,941. Finally, benefits in kind which include the provision of a company car and company accommodation as well as private GSE unemployment insurance totaled at EUR 36, 262. Having reviewed the remuneration paid or awarded to the directors during the 2025 and 2026 financial year. We will now turn to the remuneration policies applicable for 2026, 2027 financial year, which are subject of Resolutions #11, 12 and 13. We will start with remuneration policy for our Chairman of the Board of Directors, which submitted to your approval via Resolution #8 -- #11, sorry, as I mentioned a moment ago, the Chairman receives no variable component or benefits in any kind in respect of his directorship. This remuneration is exclusively fixed. For the 2026-2027 financial year, it is therefore proposed that this fixed annual remuneration be kept at its current level, EUR 280,000 gross. With regard to the remuneration policy for directors submitted for your approval via Resolution #12, no changes proposed to the total annual budget allocated to them, which remains fixed at EUR 820,000 gross since the 2022 Annual General Meeting. Now this policy is strictly in line with the one you approved last year.

The allocation will therefore continue to be made on a pro rata basis according to the actual attendance based on the grid that you see now with the scale detailed in the split calculated on basis of 100% attendance rate. We now come to the remuneration policy for the Chief Executive Officer for the 2026, 2027 financial year, submitted to the approval via Resolution #13, the Chief Executive's remuneration policy provides for remuneration comprising a fixed component of short-term variable component and a long-term variable component as well as certain commitments and benefits. On January 8, '26, following appointment of Laurent Remont as CEO of the company with effect from April 1, 2026. The Board of Directors on recommendation of the Board's remuneration of the Board's Remuneration Appointment and Governance Committee reviewed the remuneration components applicable to him from the date his term of office takes effect. In structuring this policy, the Board of Directors has paid its approach in 4 fundamental pillars. Strict compliance with the recommendations of the AP MDF code and the Board's guiding principles, direct alignment with the company's strategy, performance and long-term objectives, competitive positioning of the CEO's remuneration in relation to the 2 benchmark groups. A European benchmark group comprising 17 international companies and a French benchmark group comprising 21 listed companies.

These 2 benchmark groups were reviewed by a specialist independent consultancy firm and represent comparable companies in terms of market capitalization, total turnover area of activity and geographical location. The last does not have a working contract in alignment with the recommendations of Article 23 of the [indiscernible] code. Now to illustrate this principle, the slide compares to Barnabas remuneration structure with the new policy proposed for Laurent Remont for the 2026, 2027 financial year. The aim was to rebalance the composition of the remuneration so that it its consent to a breakdown of 1/3 fixed remuneration, 1/3 short-term variable remuneration and 1/3 long-term variable remuneration, which is in accordance with the benchmark I mentioned. Laurent Remont's target remuneration is the split between 28.5% fixed remuneration, 28.5% short-term variable remuneration and 42% long-term variable remuneration. Consequently, the total variable component short and long term represents approximately 2/3 of the total target remuneration. The proposed overall remuneration places achieved executives total target remuneration, i.e., 1,750,000 compared with EUR 2,285,000 for the former Chief Executive slightly above the median of French companies in the benchmark group and slightly below the median for European companies in the benchmark group. So here, you have the gross amounts and ceilings for the 2026, 2027 financial year. The gross annual fixed remuneration is EUR 500,000. Short-term variable remuneration is set at a target of 100% of the fixed component with a strict cap of 50% in the event of our performance.

Long-term variable remuneration is also capped and may reach a maximum of 150% of the fixed remuneration. With regard to pension and benefits, the policy includes membership of the PERO scheme, the provision of a company car, relocation allowance and private unemployment insurance. Finally, upon taking up space, Laurent Remont is granted 8,012 shares, free charge under the Onix 2028 scheme, representing the equivalent of 85% of his fixed remuneration. It should be noted in conclusion that should Laurent Remont see to hold a post of CEO, he might be eligible for a severance payment and a noncompetition allowance and would not receive in accordance with our corporate governance principles, any additional remuneration for his seat on the Board of Directors. Having looked at the overall figures, we will now examine in detail the specific performance criteria, which are simplified and aligned with the company's strategy and market standards, that determine these variable components for the 2026-2027 financial year.

Let us begin with short-term variable remuneration on the left. This strikes a balance between financial and nonfinancial goals. Financial targets account for 60% of the target and up to 90% in the event of outperformance. They are based equally 20% each on revenue from the Photonics business, current EBIT and free cash flow. Nonfinancial targets account for 40% of the target up to a maximum of 60% and are divided equally 10% each. They cover commercial strategy i.e., key agreements with the major accounts, customers and product portfolio management strategy, reducing the carbon footprint, scope 1 and 2 as well as talent redemption and organizational structure. With regard to long-term variable remuneration on the right, the assessment is based exclusively on quantitative indicators. Financial criteria account for 75% measuring on the one hand. Adjusted net current profit per share, 35%; and on the other hand, total shareholder return, TSR, 40% compared with the European sector benchmark index.

ESG criteria, they account for the remaining 25%, divided equally between specific water recycling targets and diversity indicators. And this set of specific indicators allows us to link the Chief Executive remuneration directly with Soitec's operational, financial and sustainable success.

Thank you, Emmanuelle. I shall now hand over to Benjamin Malherbe of Ernst & Young Audit and Laurent Genin of KPMG, and they will now present the conclusions of their report.

Ladies and gentlemen, in fulfillment of the mandate entrusted to us by our Annual General Meeting, we are pleased to present to you the reports we have prepared for the financial year ended March 31, 2026. These reports cover the annual accounts, the consolidated accounts, the regulated agreements, the sustainability statement included in the group's management and the capital transactions provided for in Resolutions 15, 16 and 17.

As is customary, we propose to summarize the key points and conclusions for you. With regard to our reports on the annual and consolidated financial statements which are the subject of the first and second resolutions. We hereby certify that the annual and consolidated financial statements for the financial year ended 31st of March 2026 are in order and true, and fair in accordance with their respective accounting standards and give a true and fair view of the results, financial position and assets of the group and the company at the end of the financial year ended March 31, 2026. The key areas of our audit focused on recognition of turnover in the annual consolidated accounts. tax compliance in the annual and consolidated accounts and valuation of financial fixed assets in the annual accounts.

As part of our mission task, we also verify the fairness and consistency of the information provided in the Board of Directors' management report with the annual and consolidated financial statements. This includes information relating to remuneration, benefits and commitments, paid or granted to corporate officers. Finally, we would like to point out that our work was carried out in accordance with the professional standards applicable in France, and that we conducted our audit in compliance with the rules on independents.

I'm now going to take the floor regarding the other reports, our report on regulated agreements. We inform you in this report that no agreement authorized -- was authorized by our Board and signed and in the second part of the report, we summarized the agreements which were previously approved and had an effect on the 2026 year. The memorandum understanding entered into with [indiscernible] microelectronics International NV, which now expired in which resulted in invoicing of USD 10.4 million for the financial year with the CEA. Also, there was a multiyear framework agreement for collaboration on research and development.

On the one hand, as well as the license agreement covering patents and the transfer of know-how for the manufacturing and sale of substrates. And finally, the third agreement was Shanghai [indiscernible] technology, an agreement to supply raw materials to that company to manufacture SOI wafers. And furthermore, under agreements relating to licensing and technology transfer as well as supply of SOE wafers. Now the purpose of these agreements is to enable Shanghai SIM technology as part of the expansion of its SOI wafer production capacity to manufacture these products in China and sell them exclusively to your company for the global market using Soitec smart cart technology. The next report regards the certification on sustainability information. This is the sustainability report. It's part of a report on the group's management. It is a limited assurance report that covers compliance with the ESS European Sustainability Reporting Standards and European regulations on the process implemented by Soitec to determine the information disclosed, which means the setting up of the [indiscernible] The second part of the report covers the sustainability information included in the report.

And finally, taxonomy on the sustainability indicators for each of these checks and based on the procedures we carried out, we did not identify any material errors emissions or inconsistencies regarding compliance with the SRS and European regulations. I will close with the last 3 reports in support of the extraordinary resolutions, which are recurrent every year. First of all, a report on Resolution 15 regarding authorization to issue ordinary shares or securities with the preemptive right being waived in favor -- the right in favor of categories of persons meeting specific criteria being waived. We confirm that, subject to a subsequent review of the terms and conditions of any issue that might be decided upon. We have no comments to make neither on the method used to determine the surprise, not on the user. And if we -- the Board decided to use this, we would include a supplementary report in the next general assembly.

As regards to 16 resolution, it concerns authorization to issue shares and/or securities reserved for members of the company savings scheme. Again, we have no comments to make regarding the method for determining the issue price of the equity securities to be issued. Again, if the board were to use this right, we will release a complementary support during the next general assembly. Finally, this will be the last for Resolution #17 relating to the authorization to reduce the share capital by canceling shares. We have no comments to make on the reasons for and the terms and conditions of the proposed capital reduction. Ladies and gentlemen, shareholders, thank you for your attention.

I would like to now open the question-and-answer session. Before we move to -- we proceed to the vote on the resolutions. We have received no written questions from the shareholders. And I would like to give the floor to Alexandre Petovari, who is in charge of Investor Relations to manage the Q&A session.

Thank you, Frederic. Ladies and gentlemen, if you would like to ask a question, please raise your hand, and you will be given a microphone. And before you ask your question, please introduce yourselves. And this is a Q&A session only for the company's shareholders.

The 4 individual shareholder -- it's the first time I attend the meeting. It's quite interesting, but I'm a little concerned regarding the 2026 2025, 6 results. obvious decrease in the profitability since 2025, even in comparison with the previous years when it was very high. But compared with the international competitors who still have sustainability that has now dropped in 2025 and 2026. So I am concerned about the inventories. You said you had inventories issues for your customers, yourselves, -- is there an issue with the provisioning on the constituted inventories? What is the age of the inventories? And how do we restore the loading charge of the factories, the usability is 50% currently. This is my first question.

Well, maybe we will answer the first question before you ask the second question because you already have some sub questions in the first question.

With regard to the strength of our company, the debt is very limited. The lever is limited. And then the -- really, the question is -- can we -- is the financial structure sustainable? And the answer is yes because the free cash flow is back in positive territory and the debt has decreased over the last financial year and the actions taken, starting in November and even last summer, have born their fruit, and we'll continue doing so for the next closing accounts closing. So there is no real issue and I would not worry about the company's strength.

Now the second part of your question, inventories. The inventories level and both for our company's balance sheet and our customers' balance sheet. Well, it is true that the inventories for the company quite high. But right now, the trend is that the inventories are decreasing rather quickly. I cannot tell you -- give you any figures, but I can tell you that the inventories are going down very quickly, and the trend will continue in the near future. Why? Why is that? Because last year, we wanted to improve on the basic rule. Adjust production to deliveries to the customers. We don't produce what we can deliver with -- so we adjust the production to the demand from the end users, the end customers, and we also adjust our raw material procurement to production. And by aligning our production in such a way, we have decreased our inventories. I'm not done with the inventories.

Obviously, this has a cost. The factories, as you rightly pointed out, being yes, utilized. And therefore, our workload is has decreased and the cost of under activity has increased. Obsolescence of the inventories, we don't really have enough [indiscernible] issue. Our products are not fungible. And we have many different products and maybe some product references are not being sold enough. And in that case, while we increase, we take the necessary provisions for impairment. And in 2026, we've conducted a rigorous analysis, and we did take consideration provisions for impairment. Regarding our customers' inventories downstream, Laurent Remont described the situation excessive inventories are specifically for RF SOI products. And I can tell you that our current turnover level, 50%, it accounts for Well, 50% of the final demand of the market means that the inventories are resolved every 6 months and by improving the logistics chain, we will bring this problem to an end sooner or later.

I think you had a second question?

Yes I did. I have 2 more questions actually. I was taking notes of your previous reply. So second question. Second question. You announced a tax agreement with the French government. You were actually reducing over a loss for EUR 3 million -- and the loss that would be postponed. And I find it difficult to understand how you could be happy to loss to be postponed. I mean the statutory auditors said that you underwent a tax control from the French government, but you never mentioned the agreement with the French state on this EUR 320 million loss of a deficit that can be postponed and the publication is recent. I mean I only read about it a few years ago -- a few days ago, sorry.

Well, we're not rejoicing, I mean we're simply not showing any motions. It doesn't -- but we're not happy. The CEO in his presentation talked about a fiscal tax check from the government for 2021, 2022 financial year. But it was really due to 2 things. The way in which the company was restructured and the fact that we limited solar activities. These operations were conducted in 2018, so it was even before 2020. And also the way -- the different interpretation of our assets value for the securities transfer in our company in Singapore that belongs to the group. But what is really the heart of the matter.

The company deducted in France losses that were incurred abroad. So it's not really black and white because we did not reach an agreement with the French tax administration. The sanctions actually were based on a much higher amounts. So it's not black and white. The initial amounts were much higher than the agreement we finally reached. And actually, we reached an agreement afternoon. Following the discussions that took place a few weeks ago, that was started a few weeks ago. And the final decision is protecting us from a significant risk that was bearing down on our company.

What, EUR 320 million, I mean, it's a big loss. It's almost a years worth of financial results for 2025 and 1 year in the previous years, considering that the previous years, the turnover was EUR 1 billion, and profitability was approximately 10%. That's precisely what I mean because the amounts were high, we disclosed the agreement in the hours following signature of the agreement.

Okay. I'm still concerned. I don't feel we are short. Third question that the Chinese are very good for open source, especially Kimi 3 the new Kimi 3 model that was just released like 10 days ago. I think it's going to created a real turnaround in the R&M industry, it's going to be a game changer. And is there anything you can think of in your own industry, how can you influence this on the markets you are currently developing for data centers, for afference and computation capacity because the model -- the new Chinese models, Kimi 3, more specifically, [indiscernible] is apparently as good as chat GPT and the Entropic table 5, although that is supposed to be the gold standard on the market at a very low price, they will cost 90% less.

So that kind of product will definitely be a game changer in the industry for data centers. And more specifically, for us as Western companies on this market because they're just changing the rules on the market. And I'm a user and the users will think, okay, we might as well adopt a new Kemit model and inserted in our data centers, in our new Shark PCs because the new Shack PCs allowed to host directly in our own premises in our own offices, a data center, which is directly allocated to AI for approximately EUR 10,000. So it is really a change in the industry. And I really would like to understand -- what do you think you can do? Are you thinking you can have an impact on your own production with regard to those markets?

There are several parts to the answer. Your question is, which is exact currently, in the AI industry. The race is to reduce the cost of tokens to ramp those up in scale. Now today, the value of is demonstrated in various use cases. The question is no longer that. The question is how do you ramp up and scale and ramping up in scale has a cost. So all of the industry now is orientated towards reducing the cost of a token to ramp up. And there are several levers to get there. One that you mentioned was the type of large language model in optimizing the model itself, that's one lever.

So yes, in China, they're working on that. everybody involved and not only the Chinese are working in that direction. That's one of the levers with not the only one. There are deliveries on processes. Having dedicated processes anagenic processors. That's another lever and the third lever, which is the one that we're interested in. is how can we connect the various processes. So there's is one area, and that's for reducing the cost for token. So what we're doing is going exactly in that direction and reducing the cost of tokens by reducing the energy consumption and making it possible to better use the various processors, whether they're waiting for data. The more you use to, the more you reduce the cost of the solution. So we are totally involved in that dynamic, whether it be with American players or European players or Asian players, we cover that whole pellet.

Thank you, Mr. Chair. Hi, everyone. Individual shareholder, 3 questions. What are the opportunities of SOI for AI, separating it out as it was just done, AI perception and generative AI and agent AI and physical AI?

Today, in AI, we observed mainly in data centers, this has started more with model training. And now it's moving more towards inference, using models in specific use cases for enterprises. So for us, the real opportunities for us are essentially in terms of data centers and connectivity between GPUs in other words, photonics. So today, SOI photonics and related technologies, which makes it possible to have better integration and to develop a road map based on that usage in data centers. So that covers model training. It involves insurance, inference and the genetics which you were speaking about.

However, the data centers we see today, that's what buoys up our growth in the short term. In middle term, there are opportunities there as well, more in edge AI. And as you said, physically, AI closer to users, basically and use cases today are mainly companies, but they will be increasingly migrating towards individual users. And we believe that this will draw forward a certain amount of growth for us because most of these physical AI use cases require very low consumption technologies, consumptions that will include analog and digital. And one of the technologies that we have is FD-SOI is very well positioned. There is no equivalent of that for this type of low consumption technology. So this will be one phase of growth for later that we're planning on when physical AI develops further.

The second question was about Photonics. Globally, -- this is broad optical interfaces. Could you give us a bit more indications of the SOI content for GPU or per CPU or XPU, [indiscernible] flow rate in terabits per second or something like that. Do you have -- do you have anything for at least for Cook? Are you in the NVIDIA blueprint?

Estimating the TAM, we work on that every day. I can guarantee you not only ourselves, but with all of the partners that we have. That's a very difficult exercise. So yes, we have an estimate of the TAM. Now do we want to share that now as long as we're not sure our figures, no. What's clear is that the trend to reduce the cost per token, there is a real strong motivation on product players to move over to copper -- from copper connectivity to optical connectivity. There's no doubt. The question is only how fast is this going to happen? What we observe, as we indicated in our quarterly results, is that transition is ramping up, no doubt about that.

Now as to what we call the scale-out which is more connectivity between racks in data centers. The scale-out part, which is simplified to exchanges within the racks, which is not exactly that. but what the rhythm is going to be, that's what we're trying to validate. So the TAM today, we're going to put that off to communicate that. And the last question about FDSOI, we talked about Edge OI. So congratulations because I think you're behind the wind designed for STI which is very interesting for you, I imagine. But I don't understand why you don't have the STM32, which is the NGI trip for ST. I'll let Est comment on their own product rather than making my own their portfolio. What I can confirm

that we also see a good traction around FDSOI, which is more continuous. It's not an acceleration like Photonics, which is brutal, but it's more continuous in nature with ST. But it's not only with ST in the automotive industry, radar solutions from automobiles, other in major market involvement. But in our partners and customers and GLOBAL FOUNDRY that you're referring to who also communicates on these topics and who attests to growth or an adoption of this technology in different markets

Hello. I want to get away from the technique, which is exceptional for Sanitec. Mr. General Director, you're anticipating strong acceleration in activity more than 30% growth in Q2 in CapEx, that would be around EUR 100 million compared to EUR 135 million and it was 250 a couple of years ago. However, in Mr. Jacquemont's slides, on Page 33, you indicated a profit -- a global profitability down for that year. that would be penalized by the underloading of factories. So my question is twofold. The first part is based on what quarter are you anticipating the positive point in current EBIT values in the [indiscernible] slide is the indicator, which is replaced EBITDA in your variable portion. So that's the first part.

And the second part is the strong dynamic of photonics SOI. Now would this make it possible to preserve positive free cash flow throughout the whole of the fiscal year despite the payment -- the tax payment of EUR 60 million that you announced last night after closure of the stock market, as Mr. Jacquemont indicated a few minutes ago. Thank you.

I'll start, and I'll let Albin add to my response about the transition with respect to EBIT and free cash flow as compared to taxes. So our CapEx has reduced in the last few years. At the same time, we have a strong acceleration. So the question arises, is that the right thing to do, reducing CapEx. But you have to bear in mind in the previous period the loading of factories was only 50%. So that acceleration has an effect of reloading our factories, an immediate effect on the gross margin. So that's very clear.

So both -- we have a dual effect on the gross margin with respect to the expenditures in factories, but there's also the product mix. These are high-margin products. And so these are 2 factors that have conjugal effect, a very positive nature on the gross margin. Now with respect to Albin and the transition in free cash flow, I'll let you take over.

So in about profitability, you've understood the progression in profitability is now to help you assimilate. You have to understand that in our manufacturing cost, it's roughly 30% fixed expenditures and the rest of noncash. So if you have any hypothesis for sales, you're well able to determine or simulate the increase in profitability, which is now. And in terms of free cash flow, we don't guide over a year. Why don't we? Because in industry, there are very few people that do guidance over a year. The industry is volatile the German does it over a year, but we do it quarter-by-quarter based on sales.

The next appointment with our investors and shareholders is in November. Without talking too much about it, you can observe that the free cash flow is continuing its trajectory that is positive. For the end of the year, I will not adventure to give indications for years in, there'll be -- but we're very confident.

No, I said it's now, the change is now I'm Kevin [indiscernible] I represented the staff at the CSC That's there are a lot -- a large part of the 2,500 staff. We represent since Grenoble, we've been waiting. So I have -- I'd like to respond to 3 questions. First of all, having to do with the compensation of General Director, who's left Mr. Barnabe, who had already been quite a concaves last year, who's calling us change our project. And this year, you're proposing several elements that we are questioning the well-founded nature of these.

So take we talked -- so reducing the salary and the publication was surprised at this payment than the recent article by [indiscernible] since February and as a system, who is not a competitor of Soitec. So this is at the discussion of the Board. Could you go into detail now the effective risk that they take is confronted with, according to you, which justifies of additional expenses of 370,000-plus social charges.

It's very simple. Our role is to protect the company. 19th of November, the Board decided to activate the noncompetition cause without knowing where he was going. And you should know that even Dassault system he could be a member of the Board of a competitor or consulting for our competitors. So our objective is these are clauses that are provided for in the statutories in the bylaws, and we just supply them, which makes it possible to protect us a former General Director that has any activity that would be to prevent and causing problem source, whatever the situation may be.

Concerning his conversation as well the same media at raised several questions of illegality. Our free cash flow corresponds 150% of overperformance. Whereas in your brochure, it's indicated that it's only partially reached. I noted, 69%. So the payment would be more EUR 85,000, can you explain your calculations here?

And the information that we published in the URD, the 69% corresponds to EUR 30 million. This correspond to reaching the 50%. So as I said previously, we reached EUR 63 million in free cash flow compared to the target that was EUR 43 million. So the EUR 30 million was that reaching -- the 30 million reached at 50%, 43% for 100%. So 63% was above the criteria for open performance, which was EUR 55 million. That EUR 55 million was much more than EUR 63 million. And that's why -- the application is 150% was done.

The third part, all of these advantages were attributed in a context where the staff has to tighten their belts, given the events. Management has run a survey about satisfaction that was judged by your counsel. Overperformance for the bonus of Mr. Barnabe. So the result of that survey, as the case for Yes, was the worst for several years. So the strong degradation in the feelings of staff and degradation of working conditions for the first time in 10 years are the main variable elements of pay 0.

The annual negotiations on salaries was put off the intention below inflation. And 10 jobs have been removed in a collective operation is ongoing, and there will be eventual departures that would not be replaced. We'd like to invite the shareholders to listen to vote against the resolution #10. If they do not really serve the interest of Soitec.

How about the third question, as indicated, Mr. Desert since it has to do with the proposal #7 to renew the mandate of Mr. Segura is easily. These events had negative consequences for the image and the functioning of the company. [indiscernible] take calling against that resolution to privilege a more adapted representative. Could you explain the reason that led the administration to renewing her presence. I hope that you measure the difficulties that the salary workers are faced with.

Delfine has an experience, which is known by everybody. We'll see the results of the votes. The renewal was natural. She makes a great contribution. It's very good at managing human capital. I have no other comments.

I'm an individual shareholder to continue with the response you gave about the tax audit tax difficulties were canceled. Now these were -- these -- so these tax amounts that can be carried over or are they applied against the stock that you have?

That's a good question. You're observant. It's a part of the deficit was activated at one point, and they're all deactivated as of the 31st of March 2026 for other reasons, such that as of the 31st of March, there is no longer -- any deferred tax active tax and the loss of that EUR 320 million of we'll have no incidents in the results of the future.

So after this purification as it were -- are there any tax debts that can be carried over and RD which was at -- which stood at 31st of March, my memory was in EUR 165 million. More than 7 -- are these --

well, they come from different jurisdictions. But in France, there's no -- 50% of deficit can be carried over up to $1 million, I think, the EUR 60 million that you're taking off that you're going to be paying or that you have paid corresponds to what -- is this about to cancel?

No, these are 2 different things. The EUR 60 million of the cash -- the cash agreement was signed by it's cumulative the $60 million cash and EUR 320 million are carried over deficit.

Janice, individual shareholder. I have a question about business and strategy. I wanted to know whether you would assess the possibility of getting into the segment again. In the luxury segment, I work in this area. I would say that in France, in Italy because I'm Franco Italian, we have -- still have the opportunity of having a luxury industry, which is quite strong and highly structured. Have you assessed the opportunity of penetrating the segment?

You could become ultimately a key player in this very important in augmented luxury. We are continually seeking companies that can provide us with solutions -- technical solutions to for increasing the perceived value of what we produce. Could you develop, I don't know, some kind of technology that could be integrated invisibly in materials which could possibly enhance the authenticity of the experience we are seeking to convey for our customers. And it couldn't make it also possible for us talk about sustainability that all brands are seeking to have. We kind of have a follow-up on the quality of our products and on quite a few things. So I was wondering about that, whether you're envisaging this type of developing solutions for the segment. Thank you.

As I explained, for '25, '26 is a difficult year, which pushes us to center on key activities that we already have to hand and have strong growth potential. Photonics, SOI and artificial intelligence. We've talked -- spoken about a lot. Today, the main issue for us is to focus primarily and to allocate our capital to areas with a promise to return, it's clearly and as quickly as possible. So the whole company is focused on that right now.

So I'll -- our discussion is closed. At onelast one. The interpreter doesn't hear the question. I'll get back to you.

I heard the question of my neighbor. There's a second question. Underlying question, which was the amount of tax debt, EUR 700 million that was mentioned at on-time understanding in the last years, '22 to '25, you were making money, overbill sales every year. net profitability of at least 10%, 12%, maybe even a bit more. So these are -- so this is profit tax. But you could perhaps clear your previous deficit to reduce your tact in these areas. The has at least 3 years to deal with the carryovers. But you got EUR 700 million left. So that's a considerable sum. It represents practically for years of profits from various years. Could you explain where that comes from?

If we have a tax risk and if part of that may be carried over through negotiation with the French government, as you did yesterday with the government that must be happy to get back EUR 60 million, of cash plus the debt that you had in terms of carryover year loss. So $300 million -- so that's EUR 1 billion in all. So that means 0 taxpayer that did a lot of losses in the past somewhere. That's my third point about which I'm worried. I hope it tag the fact that you're not worried. I think it's important that we take a position in new markets and develop new products and recreate value which apparently have been lost over the last few years because you had to carry over year after year with astronomical values.

Thank you for your comment. In fact, there's not EUR 1 billion. I repeat it, it's 320 million carryover and 16 in cash. That -- those are the figures. And secondly, about the origin, the disagreement with the tax authorities, I already gave you the whole picture.

We cannot hear the question. Could the gentleman please use a microphone? Can someone pass on the microphone, please.

The EUR 700 million, but now as we've taken off EUR 320 million. It's been amputated by 320. It was EUR 700 million. And the reasons for that I already gave to you.

Let's close our Q&A and move on to voting on our resolutions.

So I'm going to take the floor again to provide information in the final quarter. The quorum that was given at the beginning of the general meeting was a provisional quorum, the number of shares on the attendance form or the number of shares present or presented or having voted is EUR 18 million, 264 shares. So 51% of the shares were the voting right. the final quarter for the ordinary and the extraordinary general meeting. General Assembly is -- has been reached. And regarding the votes you have received a ballot paper with 2 options. Either you vote in accordance with the Board of Directors' recommendations name, you vote in favor of all the resolutions on the agenda or you can cast your vote resolution by resolution by ticking the box that corresponds to your choice.

Your ballot form will be signed and handed to the Activia representatives once we have voted on the resolution of 18 of the general meeting. and it's concluded. I will outline the purpose of interesolution, the types of which are displayed on the screen. We are not going to read the full text of each one during the meeting. The slides summarize the key points of each resolution. I should now put the resolutions on the agenda after general meeting to the vote. You may, therefore, stop casting your votes now.

[Voting]

Resolutions, #1, 2 and 3 to approval of the company and consolidated financial statements for the 2025, 2026 financial year and to appropriate the profit for the financial year 1 to 5 are appointing Laurent Remont directors. Resolutions 6 and 7 are seeking to renew, respectively, and also for a term of 3 years in terms of office of Cristinziano Segal for the reasons set out above. Resolutions 8, 9, 10 seek to approve the remuneration of the company's corporate officers paid during or allocated in respective 2025, 2026 financial year. Resolution #8, to approve the information related in the remuneration of the company's corporate referred to in article L22 1091 of the commercial sort of commerce. The resolution #6 to approve remuneration paid during or allocated in respect to the 20252026 financial year, Depends, the Chairman of the Board of Directors and resolution number 10 seeks to approve the remuneration paid during or awarded in respect to the 2025, 2026 financial year to Pierre Bernabe is capacity of Chief Executive Officer until March 31, 2026.

Resolutions 11 to 13 seeks to approve the remuneration policies applicable to corporate officers for the 2025 2026 financial year, that of the Chairman of the Board of Directors concerning Resolution #11 that of the members of the Board of Directors concerning Resolution #12 and that of the CEO concerning the resolution #13. Resolution #14, 6 authorized 146 authorized the Board of Directors to carry out transactions involving in company's shares. Now we move to the resolutions falling within the competence of the extraordinary general meeting, #15, seek to grant the delegation of authority to the Board of Directors to use shares and/or securities conferring immediately or in the future right to the company's share capital with the exclusion of shareholders' preemptive subscription rights in favor of categories of persons meeting specified criteria.

Resolution #16, to granted delegation of authority to the Board of Directors to carry out 1 or more increases in the share capital through the issue of shares and/or any securities giving access to the share capital reserve for members of company savings schemes with the preemptive subscription rights of shareholders being waived in favor of such numbers. Resolution 17, 6 authorized the Board of Directors to reduce the share capital by canceling shares acquired by the company pursuant to Article L 221062 of the credit commerce up to a maximum of 10%. Resolution #18 proposes to amend Article 21 of the Articles of Association concerning general meetings in order to allow shareholders to be convened by any means, subject to the conditions laid down by law and regulations. Voting is now closed.

Representatives from OPTIVIA will be circulating to collect the voting forms. The votes will be counted, and I will be in a position to announce the results in a moment.

I can confirm that all the resolutions have been adopted with more than 98% of the votes. The details of the votes will be published on our website by this evening. I would like to thank you for your attention, and I will now hand back to Frederic Lissalde.

Well, thank you very much for your attendance for having come here, and I would like to thank the shareholders who are watching online, and I will close the meeting, and I hope to see you very soon next year. Thank you very much.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Welcome to Soitec First Quarter Sales Presentation for Fiscal Year 2027. Today's conference will be hosted by Laurent Remont, Chief Executive Officer; and Albin Jacquemont, Chief Financial Officer.

[Operator Instructions] Now I will hand the conference over to Laurent Remont to begin today's conference. Please go ahead.

Hello, everyone, and thank you for joining us today for Soitec's First Quarter 2027 Sales Conference Call. I'm Laurent Remont, CEO of Soitec. With me on the call today, Albin Jacquemont, our CFO; and Alex Petovari, Head of Investor Relations, Financing and Treasury.

Before turning to the quarter, let me briefly explain why we decided to bring forward today's publication. Since the start of the second quarter, customer demand for Photonics-SOI has accelerated faster than expected. At the same time, the action plan I set out to increase our Photonics-SOI production output has started to deliver positive results. These developments gave us materially greater visibility on the pace of our Photonics-SOI ramp-up. Consistent with our commitment of transparency, rigor and timely communication, we choose to update you ahead of schedule.

With that, let me turn to the 3 key takeaways from the first quarter. First, we delivered a stronger-than-expected start of the financial year. Revenue reached EUR 113 million, up 23% year-on-year at constant currency and scope, well above our guidance of around 15%. This performance was primarily driven by the continued acceleration of AI-related activities with Photonics-SOI sales doubling year-on-year. Second, the momentum on Photonics-SOI is accelerating. Photonics-SOI demand remains supported by growing need for high-speed, high-bandwidth optical connectivity in data center infrastructure.

Our medium-term visibility in Photonics-SOI is also improving through multiyear commitment from a growing number of customers. These commitments extend beyond fiscal year '27. The group remains focused on scaling its Photonics-SOI production capacity to support accelerating demand. During the quarter, we achieved an important industrial milestone with the qualification of our Singapore 300-millimeter SOI fab for high-volume manufacturing of Photonics-SOI with first customers.

Finally, we continue to execute with discipline and remain committed to strategic direction we set out in May. we are tracking to the plan we set out with the company position on a cash generation path. Revenue is now back to growth, paving the way for improved profitability.

With that introduction, let me hand over to Albin, who will take you through the quarter in more details.

Thank you, Laurent. Good morning, everyone, and thank you for joining us on short notice. Laurent and I greatly appreciate your time and your participation today.

Let me now walk you through our first quarter performance, starting out with Mobile Communications. Mobile Communications generated EUR 39 million in revenue during the quarter, down 10% year-over-year on a constant currency and scope basis. Against the backdrop of a still challenging smartphone market, POI adoption continued to gain momentum, while RF-SOI customers made further progress in reducing inventory levels.

RF-SOI revenues were broadly stable year-over-year as higher 300-millimeter revenues offset lower 200-millimeter revenues. POI revenues were also broadly flat as higher volumes from continued technology adoption were offset by lower pricing. POI's position as a core substrate for next-generation filter edge architectures was further reinforced by the long-term agreement recently entered into with Skyworks, which gives the group greater medium-term visibility. FD-SOI revenues were lower year-over-year, mainly reflecting volume effects in the subdued mobile markets.

Turning now to Edge and Cloud AI. Revenues reached EUR 65 million in the quarter, up 47% year-over-year on a constant currency and scope basis. This strong performance was primarily driven by Photonics-SOI, where revenues doubled year-over-year.

Demand continues to be supported by the growing need for high-speed, high-bandwidth optical connectivity across AI data center infrastructure, including pluggable transceivers, Near-Package Optics and Co-Packaged Optics architectures. In addition to another strong quarter, we continue to strengthen our medium-term visibility through multiyear customer commitments and associated cash deposits with these commitments now extending beyond fiscal year 2027. This momentum continued into the second quarter, reinforcing our confidence in the pace of a ramp-up and our medium-term growth trajectory.

As Laurent noted previously, during the first quarter, we qualified our Singapore facility with the first customers for 300-millimeter Photonics-SOI production. This is an important milestone that gives us confidence in the ramp-up trajectory as we continue to advance additional customer qualifications. FD-SOI revenues in Edge and Cloud AI also grew year-over-year, benefiting from a modestly favorable price/mix contribution.

Let me now turn to Edge -- to Automotive and Industrial. Revenue reached EUR 10 million in the quarter, representing 108% year-over-year growth on a constant currency and constant scope basis, albeit off a low comparison base. Activity remained subdued as some customers continue to work through elevated inventory levels. Nevertheless, we continue to benefit from strong visibility into 2028, underpinned by a long-term agreement with a key customer.

Power SOI revenue grew year-over-year, driven by higher 200-millimeter volumes, complemented by the initial contribution from 300-millimeter products. Automotive FD-SOI wafers revenues also increased year-on-year, supported by larger volumes. The technology continued to gain traction in applications such as automotive radar, microcontrollers and other analog and mixed signal systems.

With that, let me hand back to Laurent for the outlook.

Thank you, Albin. So before opening the line for your questions, let me turn to our outlook indeed. Soitec expects Q2 '27 revenue to be up more than 30% year-on-year, notably sustained by acceleration in Photonics-SOI. Looking ahead, the momentum behind Photonics-SOI keeps building as AI architecture progressively adopt optical transceivers. Photonics-SOI technology has already demonstrated its ability to address different configuration such as pluggable transceiver, Near-Package Optics or NPO and Co-Packaged Optics, CPO.

As the industry is entering the scale-up era with mass production of AI interconnects, our visibility on Photonics-SOI end-demand and our ability to execute are both improving. Assuming no material disruption in the AI market, Photonics-SOI fiscal year '27 revenue is expected to more than double the revenue generated in fiscal year '26, which was slightly above $100 million. For fiscal year '27, we expect contrasting dynamics across our end markets.

In Mobile Communications, progress in POI should be offset by the ongoing customer inventory correction in RF-SOI, in a challenging smartphone market. In Automotive, the good visibility stemming from customer long-term agreement means that any early sign of end market recovery would not be expected to benefit the group this year. By contrast, Edge and Cloud AI momentum continues to improve, driven by accelerating demand for Photonics-SOI.

From an investment standpoint, we are addressing this growing demand for Photonics-SOI with agility as we leverage the fungibility of our industrial footprint. As a result, fiscal year '27 CapEx cash out is still expected around EUR 100 million.

Our priorities remain unchanged. We will continue to capture the opportunities created by AI while maintaining disciplined financial execution and selective investment approach. The acceleration we are seeing in Photonics-SOI reinforce our conviction that AI will remain a powerful growth driver for Soitec. Combined with the quality of our technology portfolio, our expanding industrial capabilities and improving customer visibility, we believe the group is well positioned to capture this opportunity while continuing to execute with discipline.

Thank you very much for joining us today, and we are now happy to take your questions.

[Operator Instructions] The next question comes from Emmanuel Matot from ODDO BHF.

Thank you for all the positive news on Photonics. What is your outlook for this key product line beyond this year, given the long-term agreements in place with your customers? Should we expect still further strong growth over the coming years? Or will we see things level off? Second, what is the current status of the Co-Packaged Optics qualification phase? When it is due to be completed?

And third, how will the increase in demand for Photonics affect your margin this year? The consensus forecast was for an EBITDA margin of 27% this year prior to last night's announcement. You should be comfortable with this estimate.

Thank you, Emmanuel. I will take the 2 first one, and Albin will reply on the margin. So outlook beyond fiscal year '27 for Photonics. Too early for us to comment. As we said, we see a good momentum accelerating. We have negotiated with most of our customers capacity reservation agreements that extend beyond fiscal year '27. However, that's a very dynamic market. So we are cautious, and we will communicate on that once we have more certainty and more visibility.

Regarding your second point on Co-Packaged Optics, -- so most of the revenue we see right now and most of our revenue for fiscal year '27 will be on pluggable and partly NPO as well probably starting. We still see Co-Packaged Optics ramping up at the end of the year on the scale-out. So especially on the racks, the switching racks for the scale-out. However, that's not the main driver of revenue right now. We expect medium term to be -- to have Co-Packaged Optics as a growth driver as we see 3 waves of growth in Photonics.

So there was a first wave I remind you, we are in Photonics for 10 years. So first wave was more telecom driven. There is right now the scale-out in the data center. And there will be the scale-up starting already. Scale-up is starting actually already with pluggable and will move forward with Co-Packaged Optics. And for all of that, we can address with pluggable, NPO and Co-Packaged Optics.

With that, I hand over to Albin regarding your margin question.

Yes, Emmanuel. Look, obviously, the gross margin will be impacted by a few drivers this year. So I would like to walk you through these key factors. First, obviously, we will benefit from a powerful mix effect driven by the continued increase in Photonics sales. The contribution of Photonics product is well above the average at the group. So the mix impact will be powerful.

Second, we will see a substantial fab reloading as we progress throughout the year at around 65% on average for the year compared with the approximately 60% level we indicated in May. Be aware this reloading impact did not materialize in Q1. It will ramp up in Q2, Q3, Q4.

These positive factors, the powerful positive factors will be offset to some extent by some elements. First, fundings embedded in the gross margin will be significantly lower compared to the prior year. To put things into perspective, we expect approximately EUR 30 million less funding embedded in the gross margin compared to the prior year because the IPCEI 2 is ending at the end of the year. And we don't know when the IPCEI 3 will kick in.

Second, price impact will still be negative as a consequence of POI ramping up and the company entering into long-term agreements, which gives it visibility. Third, we should see higher profit sharing and share-based compensation items compared to the previous year. And last, the dollar hedge is at 1.19 compared with an execution rate of 1.14 last year.

Now stepping back, I would remind you that we have consistently said that our recovery would be phased. The first phase was cash. We delivered on that commitment in Q4 2026 and the actions taken by our teams are expected to translate into a substantial improvement in cash generation in the first half of the year.

The second phase is a return to growth. The confidence we have expressed in our ability to return to growth is now beginning to translate into tangible results at the call of today. And the third phase is a return to a satisfactory level of profitability driven by gross margin, and we expect that recovery to be tangible and significant in 2027 and to fully materialize in 2028.

The next question comes from Aleksander Peterc from Bernstein.

So I'd just like to understand what exactly triggered the massive Photonics outlook upgrade. I think you previously indicated more than 30% CAGR. So obviously, 100% is more than 30%, but this is a step change here. Is it simply qualifying the Singapore line allowing for this surge this year? And how should we think about growth continuing from here? Can you add more capacity quickly given the strong demand patterns you see?

Secondly, I think you indicated with full year results that growth would not necessarily accelerate from the first quarter. We now get an acceleration already in Q1 and reaccelerating again in Q2. So should we think about the rest of the year as reflecting normal seasonal patterns rather than softer seasonal patterns, which you seem to indicate previously?

Good. So maybe on your first part, so what has changed is 3 things, I would say. First, we continue to see an acceleration in the demand since May. So the demand from our customers continue to grow. That's the first point. Second point is we are more capable with the action we set in place, and I will come back to that in a second, but we are more capable to qualify this demand to judge and understand if they are double booking, if they -- how committed are our customers on this demand. So that's as well this increase our confidence.

Third is our capability to execute. So really one of the first actions I took when I took the job was to set in the very few -- first weeks a steering group around Photonic to really mobilize the full company on this topic across the various organization, operation, business line, sales, finance. So this delivered results and increase our confidence to reply to this demand and execute.

So meaning, for example, ensuring we have all the supply that is needed on our side on material from our supplier, meaning we are adjusting our industrial footprint and the tools that we need to adjust to the new product mix, meaning that we are signing this capacity reservation agreement with customers to qualify the demand to have as well the capability to judge this demand and be sure they are committed. And as well, as you said, we made very good progress in the qualification of our Singapore site with first customers starting production already. So all of that explains the change in our tone between May and now.

Regarding the second part of your question on seasonality. So we are not guiding per quarter. So what we wish to do is to give you a better view on what is ongoing and that you can calibrate as well versus what you see yourself in the industry, but we are not guiding by quarter. As we told you in May, we are trying to reduce our seasonality. But yes, given the acceleration in Photonics, it will be difficult to do this year, but that's for the best, I would say.

Okay. Just to clarify, so the Singapore line was initially, I think, was due to come on stream by the calendar year-end. So this is a meaningful acceleration in the readiness of that plant. Is that correct?

Yes. So we were sampling. So we had first to sample, then we have our customers to qualify these new products. And so this accelerated. And yes, indeed, this was planned initially more end of the calendar year, and we accelerated that with first customers. Then all the rest of the customers, they still have to qualify as well this line because we pushed all our customers if they want to increase their capacity to qualify both our Bernin production site in France and our Singapore site. So that's ongoing for some of them. That's done for all that.

The next question comes from Nigel van Putten from Morgan Stanley.

Can I start with a clarification question just to get a better bearing on sort of the quarterly development in Photonics. Can you sort of confirm that it was not only up year-on-year or doubling year-on-year, but also up quite a bit from the first -- this first quarter from the fourth quarter last year?

And then if I look at the guide for the second quarter, obviously, that's also the Photonics. Can you then -- should we then expect another material sequential increase in Photonics SOI as well? I think it's in the press just confirming this because actually, maybe my real question is, given the commentary so far, I think there's more customers coming online. So should we see there is a limitation of what you can currently produce per quarter? Or will that continue to progress into the second half of the year as well? And that's my first question. I'll leave it there.

Yes. So I confirm that there was an increase between -- in Photonics between Q4 and Q1, and we expect that to continue through the year. We are exploiting the fungibility that we have between all the SOI products, and we are exploiting as well some empty space room. And so we are tuning our manufacturing to reply to the demand. So yes, you should expect this will continue to grow.

Not -- as I said in May, this is more for us to catch up quickly with the demand. So it's more a lead time topic than a bottleneck topic. Would this momentum continue even to accelerate big time, as we said a quarter ago, we have capabilities as well to expand further either in Singapore or we have a building that will need to be equipped at some point. So that's a big decision on us, and we are not at this stage at all right now, but this is something we could trigger and we are starting as well to expand in our before module in Bernin for Photonics. So yes, we are set up to continue to grow.

Perhaps just given time lines are moving around, the Bernin 4 expansion, when should we expect customers to start qualification out of there? Or maybe even better yet, when would they expect -- when would you expect to start shipping from there? And then maybe related to that, you're making multiyear commitments or getting those from customers. How should we think about pricing for Photonics given that your customers are committing for multiple years at the same time, there does seem to be some urgency. So how is the pricing environment currently?

So regarding V4, the good thing is V4 is a module that is connected to V2, meaning qualification of our customer, we should be able to do it usually in that case by similarity. So that's not a big qualification time for our customer. So for us, it's more equipping V4. So we are starting to move in that direction. But you should not expect this not before '28.

Regarding ASP, I'll let you comment maybe Albin.

No, we expect pricing, obviously, to remain strong all the more given even so with the high volumes that we are contemplating. So we express a message of confidence in pricing.

The next question comes from Jakob Bluestone from BNP Paribas.

I've got 2 questions, please. Firstly, on capacity utilization, I think you said you expect an average fab loading of 65% for the year. Could you maybe give us the Q1 number? And then secondly, on the Photonics side, I don't know how easy it is, but is there any way to sort of give any color on the sort of mix of the revenue or the orders you're seeing? How much is NPO versus CPO versus scale across?

Maybe Albin, you take the first part.

Yes sure. I referred to 65%. And the reason I did mention the number was that back at the end of May, I said 60%. So overall capacity utilization will be higher. It's not always easy to determine the numbers because it depends a lot of -- in the mix of the product that you manufacture in the factory because time utilization of the equipment is very different depending on the product. Nevertheless, 65% plus.

And then your -- on the first quarter, our average loading was 48%. And noticeably, that's down from 74% in the first quarter of last year. which gives you an idea of the magnitude of the efforts which was carried out by the teams to reduce inventories and drive working capital back at the right level. And with this number, you can infer what our loading should be over the next 3 quarters. So you see that the ramp-up will be very significant.

Now on the second part of your question regarding defined configuration and what part of our business is related to pluggables, CPO, NPO and so on. So first thing, the way -- a disclaimer. For us, that's not always straightforward to identify where our wafers end up? Is it a CPO? Is it a pluggable or an NPO? We have a good idea, but that's not always certain. However, our view currently is most of the business we do today is -- and the growth is coming from scale-out, mostly pluggable at this stage, starting -- so we expect NPO to take some share. And we expect CPO in the scale-out as well to ramp up end of the year.

Regarding the scale-up, Again, that's mostly pluggable. We expect here, there is a question mark on when CPO will really kick in for the scale-up. You know that one of the challenge of the CPO is more on the assembly side and as well on the testing to be sure to reach good yield on the overall assembly. So depending how these things progress, NPO could be an intermediate step or NPO could develop in parallel while CPO will mature as well.

For us, we do not see a big difference if this is NPO, pluggable or CPO there is roughly the same Photonics, so peak solution in all the systems, and we are working with all the customers that are serving these various architectures. So bottom line for us, all of them pluggable, NPO and CPO are great opportunities for us.

The next question comes from Craig Mcdowell from JPMorgan.

Just 2 for me. The first one, I realize that the agreements that you strike with customers will be different. But maybe you could just give us a flavor of the terms that you're trying to agree with customers on Photonics and what kind of terms you're looking for from your customers? The second one was on RF-SOI. Can you maybe give us an update on the inventory digestion? What are you -- what's the current inventory in the channel? And any change to your expectations on the digestion through the year?

So customer capacity reservation agreement on customers. So we have a good momentum. Obviously, we are not forcing all our customers to sign capacity reservation agreement. If they want to stay on a more transactional short-term view that's fine for us. And that's the purpose as well for the capacity reservation agreement is to judge a bit the demand and the level of commitment the various customers. Usually, what we are asking in this customer reservation agreement is we agree on a price, we ask for a down payment or a deposit and we ask a visibility on the customer inventory to be sure that we are not building inventory down in our value chain.

Regarding RF-SOI inventory, so if you recall what we said in Q4 due to seasonality, inventory was flat, but we were expecting inventory to go down again through the year, which materialized. So in March, we were at 2 million roughly 8-inch equivalent -- 2 million wafer 8-inch equivalent in March. Now we are estimating we are at 1.7 million wafers equivalent 8-inch. So that's in line with what we said previously. Bear in mind that we estimate the sellout for a year at about 1.5 million wafers equivalent 8-inch per year, so which means we still have some way to go to come back to a pre-COVID level. So we will continue to have action to reduce this inventory.

The next question comes from Oliver Wong from Bank of America.

So I understand that Photonics-SOI revenue grew sequentially from Q4 to Q1 and is expected to into Q2. Would you say at this point, you're seeing sequential growth throughout the rest of this fiscal year? And then I'm curious, is this sort of revenue timing more driven by capacity or by just sort of the availability of your capacity or by just customer timing? And is there scope for demand to further increase significantly even for this year?

Yes, yes and yes. So regarding sequential growth, yes, this will continue over the year. This is driven both by acceleration in demand from our customers, but as well our capability to execute. And third, yes, if needed, we can extend further our capacity to respond to bigger demand.

Got it. That's helpful. And just a quick follow-up. How much of the supply -- or how much of the Photonics revenue that you're seeing for this fiscal year, do you reckon is driven by customers sort of securing supply ahead of time for perhaps optical ramps for subsequent years, be it for pluggables or for NPO and CPO?

So not sure to get your question clearly. So how much is secured by new demand or how much was already in place? This is what you mean?

Yes. My question is, so currently, for this fiscal year, you see Photonics-SOI revenues more than doubling. I'm curious in terms of the timing of this. I understand that you have commitments for subsequent years as well. But how much of the demand purely for this year, do you think is also driven by sort of customer optical ramps for -- that they're planning to do for subsequent years for, let's say, next year and beyond?

So there is a bit of both. So part of the demand is to prepare for next year, but part of the demand is right now for this year and used really in the data center. This is your question. So how much is to prepare for our customer for next year ramp and how much is really used directly in data center right now, there is a mix of both. And that's why as well we are asking to have visibility on inventory to be sure that our customers are not piling inventory just for expectation for next year that would not materialize.

The next question comes from Nigel van Putten from Morgan Stanley.

A quick follow-up. Maybe just on that last point. I think I get that customers sort of need to prepare. So I mean, there is a way to interpret this as sort of prebuying, but would it be fair to say that customers are this year preparing for next year and next year, they will be preparing for the year thereafter. So yes, even though they might want to work with a certain inventory, there's no real sense of this being driven materially or at all by sort of prebuying. And I have another follow-up.

Yes. So a bit the same comment. That's a mix of both. They have to say already our customers, they have to say the demand they see on their side super short term. And yes, they would like, I believe, to create a bit of buffer in order to be able to not be in line down and as well be sure that they prepare a bit for next year. At this stage, with the inventory level we are requesting, we are not at all at this level, just to be clear. So we -- I got very often escalation of customers being in line down. So they are not ordering things that sit in a warehouse, just to be clear.

Yes. And maybe given you've actually given us quite a bit to work with in terms of how current stabilization looks, how you look at the full year, there's going to be sequential growth still in Photonics. And you said more than double in the press release, but maybe that can be interpreted in many ways. Would it be fair to say that there is going to be a quite material gap between, let's say, 100% and what you expect to deliver, maybe multiple teens at least based on sort of your current visibility? That's certainly the number I end up with more towards growth of maybe 150% or more given commentary, but I just wanted to make sure that I'm doing the math correct.

So currently, what we said more than double is what we see based on the end demand and the current one and our capability to execute. Then we will update you if this change over the year, but that's the best assessment that we have right now. And you can understand that's a very dynamic situation on this topic. You see that as well through the whole value chain on optical. So we give you the best view we have at this stage, keeping in mind as well that we have more than 10 customers. So that's where we are at this stage. And we will update you on that regularly.

Maybe to then ask it in a different way. I think what one number I'm kind of missing or I guess everybody on this call to improve the modeling is really the actual number you printed in this quarter -- in the last quarter, I should say, for Photonics. And then we can do our own math. I mean then we can take into account the guide, which points to a sequential acceleration as discussed. And I think you've also alluded to the second half not being flat from that level, but sequentially increasing as well. So maybe more straightforward, could you help us understand how we should think about the contribution ideally millions reported for Photonics in the first quarter.

So yes, what I can tell you on the Q1 on the EUR 65 million is Photonic is a strong contributor for the EUR 65 million in the Edge and Cloud AI. So that's the main driver.

Sorry, and within Cloud AI, could you maybe say it's more than half, less than half? Just trying again a different way.

More than half.

More than half. That's very clear.

The next question comes from Robert Sanders from Deutsche Bank.

Yes. Sorry, I joined the call late. But just to ask a bit -- I assume it haven't been asked, just around input costs. What have you seen from your Siltronic and Syniti partners, wafer partners in terms of potential price increases as you look out in terms of your input costs? And I have a follow-up.

So as I said earlier, one of the actions we took in order to get better visibility on our capability to execute was to focus as well on our supplier to be sure we have what is needed. So that's what we have done and we continue to do having good view currently on our suppliers. So yes, the situation stands, but is manageable.

Overall -- and sorry, if we look -- if we take only into consideration the price at which we sell our products and the raw material prices, the difference between the 2 being what we call the contribution, we see contribution improving slightly this year.

And we have a diversified base of supplier. So again, that's something we monitor carefully, but we consider that manageable.

And just on the GlobalWafers situation and the expiry of their license, how many of your foundries and foundries customers are absolutely insistent that you have a U.S. source because obviously, that's the thing that's really in favor of them. Even if they may not have the best wafer for Photonics, they do have a U.S. site. So how much of a strategic disadvantage do you think that is? And how do you think about GlobalWafers' revenue in Photonics tailing off?

So regarding footprint and the current market situation, we do not see that as a blocking point at this stage. The focus right now for the industry is to get parts out. So many photonic foundries are actually not in the U.S. There is one in the U.S. but most of the other actually are not in the U.S. And what we see is our customers are very eager to take products either from Bernin or Singapore at this stage.

And just on the patent -- the license, sorry, on the license expiry.

You mean licensing regarding GlobalWafers -- go ahead.

I just say how should we think about that impacting you guys and them? I mean, presumably more them.

Same story that what we said earlier and last quarter. The license that they have will end up next year. So then we will see what they do. So this will end summer '27.

This concludes the question-and-answer session. I'd like to hand the program back to Laurent Remont for closing comments.

So thank you for your interest and for all your questions. So the next date in our agenda will be our Annual General Meeting on July 29. We will publish our H1 '27 results on November 18, and this ends the call for today. Thanks a lot, everyone.

Hi, everyone, and welcome to Soitec Fiscal Year '26 Results Conference. I'm Alex Petovari, Head of Investor Relations. And on behalf of the team, thank you very much for joining us today. Before we begin, let me remind you that today's presentation contains forward-looking statements, so please read the disclaimer that's available in the presentation materials. So today's session will begin with our CEO, Laurent Remont, and you'll also hear from the executive team, Albin Jacquemont Finance; [indiscernible] on Strategy Christophe Maleville on Innovation and [indiscernible] on operations. After these prepared statements, we'll open the Q&A, and Laurent will end the session today with some remarks. Thank you again for being with us. And with that, Laurent, over to you.

Thank you, Alex. Hi, everyone. It's a real pleasure to be here with you for the first time. So since I took over this position on April 1, I have spent my time getting to know the company from the inside, meeting all the teams and the key customer. I look forward to sharing with you my observation so far, the immediate priorities for Soitec as I see it today. and my reading of our position within the broader industry in which I spent the last 30 years. so do beginning with, I want to take a step back and share with you what I think are the 3 main takeaway from our fiscal year '26 results. It has been a difficult year for Soitec with inventory correction impacting volume and low visibility in some of our end markets. However, like the rest of the industry, we can also see AI accelerating further and starting to drive a radical shift in semiconductor demand and requirements.

So my first message for today is our fiscal year '26 performance reflects that. Revenue is down. Our fab loading is below normal and deliberately so, and it is impacting our margin. On the positive side, our balance sheet is robust. Liquidity is strong and free cash flow has turned positive. Albin will take you through the numbers later on. Second, we continue to innovate, optimize and strengthen our portfolio to benefit for the strong gas trend, notably AI. So photonic in data center, FD-SOI at the edge power over insulator in advanced connectivity. We are strengthening what differentiates us strong ecosystem intimacy, unique R&D capability and an agile and scalable manufacturing footprint. Third, we have started '26 and we will continue in '27 to position the company for a return to profitable sustainable growth. And we have done that by reducing customer inventory, sustaining discipline on cost and moderating working capital and CapEx to improve cash conversion.

So regarding fiscal year '26 numbers, let me give you the headline before Albin talks about it. Revenue was down year-on-year at EUR 592 million, largely due again to ongoing inventory correction in RFSOI. This was partially offset by strong momentum in AI. Gross margin stood at 16%. This is a temporary low linked to the choice to reduce our fab bloating and prioritize inventory normalization and working capital discipline. And our efforts have started to pay off. So the free cash flow has turned positive at EUR 63 million, thanks to the focus on working capital and the discipline on CapEx expansion.

Free cash flow restoration is the first step of our trajectory ahead of revenue growth and operating leverage, as Albin will explain later. So let's now take a closer look at each of our end markets, starting with mobile communication. So we see very different dynamics at play in our mobile RF business. First, power on insulinsulator, so POI. POI is gaining market share over so filter technology. The adoption remains strong. We have now 13 customers in production and 9 in qualification. Proof point of this is a long-term agreement signed with Skyworks in March. At the same time, fiscal year '26 POI revenue, so a temporary softness in Asia after a very strong fiscal year '25.

Looking forward, we expect volume to increase partially compensated by ASP erosion, while the POI market matures and reached scale. We will manage this transition at scale with discipline and execution and investment. Then RFSOI, the second pillar. So customer inventory correction is ongoing. It is moving in the right direction, but there is still a lot to correct. Customers are still holding around 2 million RFSOI wafers. The correction in Q4 was limited in line with seasonality and impacted by memory shortage in the mobile market.

Looking ahead, under shipment will continue as customers reduce their inventory and the pace may also be influenced by other market dynamics. Finally, FD-SOI, our third technology used in mobile market, especially for 5G millimeter wave transceiver. Here, we secured key foundry design wins with leading flagship smartphone, including iPhone 17. We are also diversifying into satellite communication and ultra-wideband. Now moving on our second segment on Edge and Cloud AI. Here, performance was strong and is accelerating. The first is FD-SOI at the Edge. FD-SOI is uniquely positioned when it comes to RF as we have seen in our mobile segment, but also for ultra-low power consumption.

And this is what matters for Edge AI application and Personal AI assistant. The ecosystem continues to build up adoption by major foundries and IDMs are progressing. We are seeing new design wins for low-power microcontroller in smart glass and wearables. We are also diversifying beyond microcontrollers into image signal processor and cybersecurity application. On top of this, we see further potential moving forward with physical AI and battery powered AI assistant. The second story on Edge and cloud AI is photonic SOI in data center. I am sure you will be all years for this one.

As you know, we have been a leading supplier in photonic SOI for optical transceiver for more than 10 years. Here lately, we have witnessed very sharp acceleration of the demand, especially since March, fueled by scale out and scale up architecture evolution in data center. This applies to both pluggable optics, but also to the preparation of the ramp-up of co-package Optics. Shipments are progressing with more than 10 customers who are either already in full production or in qualification with their own product. Longer term agreements are being put in place both for 200-millimeter that will remain strong and 300-millimeter that is getting more widely adopted. We expect strong momentum to continue, but we remain aware that there will be challenge and uncertainty along the way. Customer product qualification cycles, data center architecture choices reliable interoperability between all the building blocks and timing of deployment, all of that can create volatility.

So our approach here is to be ambitious, but also to carefully check progress of all building blocks through the supply chain at the same time. So photonic is a clear focus for the company, responsiveness and execution excellence are key to leverage our unique, flexible manufacturing at scale and to continue to implement differentiated road map and features like LNOI for the next generation of modulator. So overall, agent cloud AI is a strong growth area for Soitec. Let's now move to Automotive and Industrial segment where our market dynamics are again quite different. Our Automotive demand remains weak, and there is still excess inventory at major analog players. Power SOI reflects the end market more generally.

The long-term agreement with a key customer gives us good visibility, but the volume remains low, mainly because of the overall market condition. We continue to prepare the transition to 300-millimeter, especially for battery management system, where we continue to see a solid long-term potential. FD-SOI is a different picture. Customer appetite here again remains strong. We have good visibility on the ramp trajectory supported by design wins in automotive microcontroller in RADAR ADAS, in wireless communication and ultra wide band or global navigation satellite system. That said, we know that automotive qualification cycles are long and [indiscernible] do not always move in a straight line. On Smart Seek the technology value for High Performance segment has been demonstrated. But the ramp-up is not taking the shape we initially expected because of radical market evolution in EV automotive market and very intense price competition from Mono Sec Chinese player.

As a result, we have recognized a EUR 41 million impairment. We remain focused on identifying the right path forward for Smart, but we will do so with a more selective approach. Now based on my experience in this industry and the 2 months in the job, let me spend a few minutes on what I believe makes Soitec unique. I see 3 main assets to leverage. Firstly, the depths and the intimacy with our ecosystem built over decades, so research institutes, foundry, IDM, fabless players, design house, technology providers and end customers. It helps us to drive our road map and gives us a track record in shaping new markets and transforming innovation into commercial success. The second asset is our innovation engine. This is built on more than 30 years of experience and know-how in engineered substrates, reinforced by strong partnership with leading research ecosystem around the world.

The third is our agile industrial footprint. We have state-of-the-art manufacturing capability in large-scale high-volume production, high quality, high yield. This gives us the speed today in photonics. We can reliably scale by reallocating fungible SOI capacity already installed without years of capacity ramp and qualification. So underlying all of this, the talent and the engagement of our people without them, none of this is possible. So these 3 differentiating pillar matter most when applied to where the industry needs them. And right now, this is AI. AI is not is not just accelerating growth in our industry. It is redefining it, both on the data center side and at the Edge. Both matter for Soitec. First, in data center. So hyperscaler investment is expected to quadruple in just 2 years with the rise of inference and agentic AI requiring not only more GPUs, but also to have these GPUs more closely connected together, so-called scale-up for those who heard about it.

So optical connectivity is replacing copper connection to increase transfer rates and reduce poor consumption. Pluggable optics are growing fast now. and the next-generation copacetic, CPO, is lined up. Our photonic SOI platform brings differentiated performance for optical interconnects with wave guide loss specification, difficult to match at scale and also features enabling next steps for system integration. Longer term, there might be even a third wave after pluggable and CPU with Optical IO and silicon photonics interposer. The second dimension is what is happening at the Edge with new battery powered AI assistant and physical AI. Many of the 5 billion AI device by 2030 will be always on and extremely sensitive to active and passive power consumption. They will require extremely good capability to integrate analog mixed signal, RF and digital together.

FDSOI excels in these 2 aspects. Always on AI coprocessor, automotive MCU, AI assistant, IoT, AI sensors, all are converging on these requirements, more intelligence with less power and higher level of integration. So more broadly speaking, we expect AI to drive new performance requirements that will play along most of our portfolio. First, as we said already on the computing side, this is photonic SOI in data center and FD-SOI at the Edge. But also, we expect AGI to drive new needs for connectivity with more data volume to be exchanged. Lower latency, higher band, lower power consumption and higher integration. This is where POI, FD-SOI and FSI come into play. Third is energy efficiency with cheese of utmost important in data center where we could seek for engineered material opportunities in power SOI or in wideband gap.

So what does that mean in practice? It means 3 short-term priorities for the company. First is to accelerate the strong momentum we have on AI. The opportunity is definitely here, but we need to properly execute. Success will also rely on some external factors architecture choices, customer qualification time line, competitive landscape at all the stage of the value chain. We are positioned to capture the opportunity with ambition and focus. The second priority is to sharpen focus and resource allocation. A full review of portfolio priorities and capital allocation is underway. The technology differentiation potential remains what changed is execution and concentration of resources. We will share findings publicly when conclusions are reached. The third priority is to rightsize the organization, so the cost reduction program initiated in fiscal year '26 will continue, including head count reduction with formal consultation of employee representatives in progress.

The objective is to structurally reduce the fixed cost base and improve operating leverage through the cycle. At the same time, R&D intensity and strategic capability are being protected. We are not cutting our way out of innovation nor in our strategic areas. And we do this for a very good reason, progressive returns to sustainable and profitable growth. This is underway. So that's my reading of where Soitec is and where I'm taking it. First, we have a portfolio built for the right megatrends with a unique position in AI value chain. Second, our talented team has developed structural advantages, and we will continue to do so.

And lastly, we have a disciplined approach to converting all of this progressively into financial performance. There is real work ahead but I'm confident we are doing the right thing in the right order with the right team. So finally, with these priorities in mind, let's turn to our outlook for fiscal year '27. Uncertainty remains high across several of our end markets. So we believe it is right to remain prudent on the guidance horizon. For Q1 '27, we expect revenue to be up 15% year-on-year at constant exchange rate and scope, factorizing in our effort to reduce seasonality. As we navigate in a challenging environment, we will continue to face margin headwinds. Some will progressively fade away as our fab loading patterns to normal.

Albin will give you more detail on the P&L and CapEx. But 1 element I want you to remember, we are leveraging our asset fungibility and the previous investment we have made to moderate the cash outflow. And we make sure that we secure our capability to capture growth opportunity. So to conclude, having restored positive free cash flow in fiscal year '26, our next priority is to get back to a growth trajectory. Thank you. This is in a nutshell what I wanted to share with you today. I will give -- hand over to Albin for more detail on the '26 number. And I will come back at the end of the Q&A for some concluding remarks. Thank you.

Thank you very much, Laurent. Good afternoon, ladies and gentlemen, and thank you for joining us today. Fiscal 2026 was a year of decisive execution for Soitec. We took bold proactive actions to reset our operating base protect our balance sheet and position the company for the next phase of profitable growth. Despite a challenging demand environment, we delivered on all the commitments we set out at the start of the year. We took decisive action to proactively manage our FSOI inventories and correct supply. This were the right call. This discipline was essential to streamline our working capital and support a healthy rebalancing of a channel across the RFSOI ecosystem. Yes, [indiscernible] on gross margin in the second half due to temporary underabsorption of fixed costs, but it was a necessary step to restore structural balance.

Second, we successfully restored positive free cash flow. This was achieved through disciplined working capital management and a more moderate CapEx profile, thereby strengthening our financial flexibility and enhancing our capacity to deploy capital into attractive high-return growth opportunities going forward. Third, we are executing a 3-staged road map to sustainable and profitable growth. Stage 1 was a restoration of positive free cash flow, which we have now achieved. Stage 2 focuses on cash generation while progressing towards revenue growth as we continue to work through excess RFSOI inventories across the channel.

Cash conversion has and market demand improves and recovers. Taken together, these 3 priorities reflect a clear sequencing of discipline, stabilization and value creation, positioning the company for a balanced and resilient growth trajectory. Let's now look into key numbers, some of which Laurent has already touched upon. Revenue came in at EUR 592 million, down 30% year-on-year on an organic basis, reflecting sharply divergent and market dynamics. EBITDA margin was 25.4%, an 810 basis points decline year-on-year, driven primarily by lower volumes and our deliberate fab deloading. Despite this, operating cash flow remained resilient at EUR 202 million, broadly in line with last year, underscoring the strength of our cash generation model.

As a result, we generated EUR 63 million of free cash flow, a significant improvement from the EUR 23 million outflow in fiscal year 2025. Consequently, our net debt position improved to EUR 56 million, resulting in a strong and comfortable leverage ratio of 0.4x EBITDA. In fiscal year 2026, our top line declined by 30% year-on-year on an organic basis, reflecting sharply contrasted and market dynamics across our portfolio. Mobile communication declined 41% year-on-year continuing to be impacted by our FSOI inventory corrections at direct customers. That said, we are seeing encouraging adoption momentum in POI highlighted by the first multiyear LTA signed with Skyworks.

Automotive and Industrial remained tepid, down 44% year-on-year as the ongoing global automotive downturn and softer demand in both power SOI and FDSOI persists. Edge and Cloud AI was once again the standout performer, up 8% year-on-year and up a strong 19% excluding major SOI. Photonics SOI is now a $100 million plus platform growing in excess of 30% year-on-year. This is consistent with the continued expansion of our addressable market as optical interconnect demand accelerates across AI data centers. As Laurent has already provided an overview of the operational context across our core product line, I will now turn directly to gross margin performance.

Gross margin came in at 16.3% of revenue, down from 32.1% last year. Beyond lower volumes, Three factors drove a decline. Lower utilization rate at circa 50% versus circa 70% last year, representing a circa 800 bps headwind. Unfavorable mix price driving a circa 300 bps contraction. Operational efficiencies and subsidies provided circa 180 bps of relief. Looking ahead, as utilization recovers and volumes ramp back up, we would expect gross margin to naturally expand through operating leverage. Turning now to our operating performance. We reported a current operating loss of EUR 8 million compared to a current operating profit of EUR 136 million last year, driven by gross margin compression. This was partially offset by disciplined cost management, which we achieved while maintaining our commitment to R&D investment.

Net R&D expenses decreased to EUR 45 million in the year, reflecting Dolphin design divestiture, higher recognized subsidies and lower material consumption, particularly within smart SIC development activities. Stripping out these items, gross R&D remained on par with last year. SG&A declined by 10%, driven by lower share-based compensation expense -- the rest of variable profit sharing accruals to 0 and disciplined cost savings across the operating base. On Vin's next slide, we set out the breakdown of our nonrecurring items. Net loss amounted to EUR 220 million. significantly impacted by nonreg items, most of which result from decisions taken many years ago. More specifically, we recorded EUR 123 million of operating expenses, primarily comprising a EUR 41 million impairment charge related to smart SIC assets. a EUR 29 million impairment on the currently unequipped series extension, an impairment charge on advanced payments made in 2022 and the long-term raw material supply agreements, and a single-digit earnout loss associated with the disposal of Dolphin design.

These noncash charges reflect disciplined portfolio management and a clear right reassessment of market dynamics, particularly in light of the rapid expansion of lower-cost Chinese monocrystalline silicon carbide capacity and the resulting pricing environment impacting smart SIC-related assets. Moving below the line. Net financial expense amounted to EUR 31 million reflecting higher interest costs associated with recent financing activity and EUR 17 million noncash ForEx loss recorded in April and May 2025. The group has since implemented an enhanced hedging framework to mitigate residual currency risk going forward.

If we can turn to the next slide. Adjusting our reported net income of EUR 220 million for the exceptional nonrecurring noncash items previously outlined, results in a current net loss of EUR 14 million and current EPS of negative EUR 0.48, We fully delivered on our commitment to restore positive free cash flow generation, which reached a positive EUR 63 million in fiscal year 2026, marking a strong improvement compared to the negative EUR 23 million recorded last year. This performance clearly demonstrates the strength of our execution rather than reflecting any support from market conditions. I would like to sincerely thank our teams for this achievement. This marks a structural inflection point. Soitec is now back to generating consistent free cash flow over the cycle with a more selective and returns-driven capital allocation framework.

This improvement is underpinned by 2 key drivers. First, we maintain strict discipline on working capital, resulting in a positive EUR 49 million contribution to cash year-on-year. This was mainly driven by a EUR 145 million reduction in trade receivables, reflecting lower activity levels and tighter collection management, as well as EUR 24 million reduction in inventories, driven by deliberate actions to reduce fab loading and operate below underlying and demand, particularly in the second half of the year. This reflects a clear prioritization of cash generation and balance sheet strength of short-term margin optimization.

To give you more context, this slide offers a closer look at these working capital dynamics from a balance sheet perspective. As you can see here, our optimization efforts paid off, particularly in the second half of the year. Turning now to the second driver of our free cash flow improvement, capital discipline. We further reinforced capital discipline reducing capital expenditures by 40% year-on-year to EUR 135 million. Our capital allocation framework has become decisively more selective with resources increasingly directed towards some of the most attractive long-term value creation opportunities in particular, photonics SOI and POI.

In parallel with proactive inventory optimization, this sharper capital allocation has enabled Soitec to return to structurally positive free cash flow generation. Leveraging significant past investments in capacity expansion, allows us to secure growth opportunities at the same time. This is a key inflection point. It strengthens our financial profile significantly enhances earnings quality and increases our strategic flexibility as we enter the next phase of development. Beyond performance, we are further strengthening the quality and consistency of our financial reporting framework. As part of this ongoing effort, we have updated free cash flow definition to reflect prevailing market conventions. The revised definition consistently includes capital expenditures irrespective of funding structure as well as the net impact of interest paid and received.

This enhancement materially improves comparability across reporting periods and provides a clearer view of the group's underlying cash generation capacity. It reflects our continued focus on strengthening the credibility, transparency and investor relevance of our financial disclosure framework. Turning to the balance sheet. We ended the year with a strong and further reinforced financial position. Net debt decreased by EUR 38 million to EUR 56 million, driven by continued strong cash generation and disciplined financial execution. This further strengthens our balance sheet and enhances our financial flexibility going forward. Liquidity remains very strong with EUR 562 million of gross cash and EUR 270 million of fully undrawn committed facilities, providing substantial financial flexibility to support both operations and future growth initiatives.

A major achievement this year was the successful repayment of our October 2025 OCEAN maturity, partially refinanced through EUR 222 million full fine issuance with an average maturity of approximately 4 years. This refinancing significantly enhances the quality of our balance sheet by extending debt maturities, diversifying funding sources and substantially reducing near-term refinancing risk. To conclude on our fiscal year 2026 performance we continue to maintain a solid balance sheet, underpinned by strong liquidity and a moderate debt position. In parallel, we are further progressing on our commitment to greater transparency consistency and higher quality financial reporting. So bringing all this together and moving to the outlook, we expect Q1 revenue to be up around 15% at constant currency and scope year-on-year.

Mobile communications is likely to remain challenged reflecting the ongoing RF SOI inventory collection as well as softer smartphone demand made current memory supply constraints. In stark contrast, Edge and Cloud AI should continue to deliver robust growth momentum underpinned by the accelerating ramp-up of photonics SOI solutions for optical interconnects in AI data centers, automotive and industrial demand is likely to remain muted in the near term, pending a more meaningful recovery in demand trends. In parallel, we remain firmly committed to our disciplined capital allocation framework with fiscal year 2027 cash CapEx expected to remain contained at around EUR 100 million for the full year.

Fiscal year 2027 will be a transition year. but the path to margin recovery is clear and tied to fab utilization improvement and the scaling of our high-growth platforms. Fiscal year '27 will be reflecting fab utilization rates, which while improving will remain materially below optimum levels as well as the level of subsidies expected to be significantly lower Indeed, discussions are ongoing as calendar year 2026 marks the conclusion of the IPCEI program ahead of the anticipated launch of a potential IPCEI framework. Finally, the strengthening of euro against the U.S. dollar is expecting to create an additional headwind for our financial performance under the current operating conditions.

Our net ForEx exposure for fiscal year 2027 is now 95% hedged at EUR 1.19 per U.S. dollar. In closing, the company is well positioned for the future, supported by the significant diversification of its portfolio achieved over the past several years. Execution of the plan articulated back in November remains firmly on track. As a reminder, the plan is structured around 3 distinct phases. Phase 1 restoring cash generation through a reduction in working capital and a return to positive free cash flow. Initial results are already tangible, and we expect further progress ahead with a meaningful portion of working capital, expecting to be monetized over the coming years.

Phase 2, returning to growth, For the first quarter, we are guiding to approximately 15% organic revenue growth, reflecting the improving momentum across the business and some efforts to reduce seasonality. Phase 3 restoring a structurally higher level of profitability with operating leverage and cash conversion as growth resumes. This phase is expected to follow the sustained recovery in top line growth. At this point, let me pass you on to Steve to take you to our strategic priorities.

Thank you very much, Albin. Hello, everyone. Great pleasure to catch up with you today. Of course, in this brief section, I will talk about AI, and I will double-click on a few messages that Laurent conveyed earlier today. First, AI deployment continues to accelerate through overlapping waves. From GenAI that was introduced a few years ago. We're now moving towards agentic and eventually physical AI towards the end of the decade. Second, each AI wave requires system-level optimization across compute, memory, connectivity, interconnect and power efficiency. Engineered substrates are enabling this transition with more connected and more efficient semiconductor systems. Third, AI deployment impacts our end markets with different timing, different intensity progressively expanding Soitec's opportunities and footprint across data center infrastructure, Edge AI and connectivity ecosystems.

So let's start with the applications. AI is moving fast, both for consumer and enterprise use cases. The first important phase started with deep learning last decade, systems enabled with perception, classification and optimization. Then GenAI introduced content creation across text, images, code and video. Today, we are entering the agenting AI phase where systems plan, decide and execute multistep tasks autonomously. Looking forward, physical AI will progressively embed AI into robots vehicles and intelligent systems, interacting directly and dynamically within the physical world.

So these AI waves overlap, reinforce each other, continuously expanding semiconductor and infrastructure requirements. AI deployment is globally driving a massive infrastructure scaling. We're shifting from traditional hyperscale data centers towards multi-gigawatt AI campuses. For each of these gigantic campus, which could cost roughly $50 billion. Power consumption is expected to reach around 1 gigawatt, which is literally what is needed to power a major metropolitan area. At this scale, the main challenge becomes system orchestration, energy, networking and integration. Scaling token generation exponentially requires a fundamental shift in the architecture to handle high bandwidth, networking speed must rise by an order of magnitude compared to current data centers.

We need to shift away from copper and move towards optical interconnect which enabled both ultra-high speed and much better energy efficiency, so what does it mean for us? What does it mean for engineered substrates? In the cloud first, traditional compute system architectures reach physical, thermal and somehow economic limits. The transition towards optical interconnect creates significant opportunities for Photonics SOI and LNOI platforms supporting the next-generation optical architectures. When it comes to power management, AI infrastructure also requires much higher conversion efficiency and thermal performance. which is a great support to the adoption of silicon carbide and gallium nitride technologies.

Moving to the Edge. Connectivity evolves from 5G and towards 5G Advance and eventually 6G, increasing RF complexity and integration requirements. FD-SOI technology stands out as the premier architecture capable of delivering the ultra low power efficiency, which is required by Edge AI for various applications such as wearables or smart glasses. So in conclusion, for both infrastructure and edge applications, we are targeting every layer of the AI stack with our expanding portfolio of engineered substrates. Working side-by-side with our fabless and foundries customers, as well as the entire AI ecosystem. We believe Soitec is extremely well positioned to play an increasing and strategic role in the buildup of the global AI backbone.

In order to power that backbone, we need to push constantly the boundaries of physics and material science. This is my transition to introduce our Chief Technology Officer, Christophe Maleville, our next speaker, Christophe?

Thank you, Steve, and hello, everyone. Steve just walked you through where we play and why? My objective today is to show you why what we do is hard to replicate and getting harder. I'm really happy to cover this year again a more and more exciting story about our technology and our innovation. I have 3 messages for this section. First, we keep expanding our moat and winning at scale. 4,800 patents, an extensive smart cut toolbox 30-plus years of LTO partnerships all actively renewed. This is a strong combination of experience and dynamism. Second, we are a unique innovation powerhouse. We keep strengthening the market mode at the core. We build a complementary technology toolbox around it, and we leverage a strong position across the entire ecosystem.

Third, we keep expanding where value is created. Performance starts with the hardware, 5 platforms delivering value at device level. And of course, we are extending that logic to AI optical infrastructure with photonics SOI, LNOI and new materials in development. We apply the same discipline across all 3 pillars. We invest where value is created, and we work with the leaders of each segment. Let me show you how. I want to start with the foundation Four pillars built over 30-plus years reinforced every year. First, our innovation is different by design. We designed pilot products for manufacturing that address specific customer needs. We filed 470 new patents this year alone, all anchored in industrial relevance. Second, we go from lab to fab faster than anyone because we leverage models, we keep updating for each new material in each new structure. Know-how compounds. Patents becomes public after 20 years, know-how does not. And more than 30 years of smart cut development sit behind every new product we launch.

Third, we protect our freedom to operate at each step of the product life cycle. 15 R&D partners worldwide keep us codeveloping next-gen architectures ahead of public road maps. Finally, we have learned to balance our innovation efforts. 30 plus years of cycles taught us when to push and when to consolidate. Our 70-30 split between incremental and disruptive R&D is what sustains the model. and our RTO ecosystem now stretches from lab to fab application lab. This foundation is what makes everything else possible. Let me now show you the toolbox we have built on top of it. So this toolbox is the operational translation of the foundation I just described. You have to understand that Smart Cut is not only bonding and splitting. We have extended it into a full toolbox, interface engineering, crystal engineering, advanced processing, refresh and repolish, each brick is a competence we have built, qualified and industrialize.

On top of this, we have developed a deep expertise on new materials. Each new material we develop leverages the know-how built across 3 decades. This is what makes our road map incremental by design. Reducing time-to-market and capital intensity for every new product. But this is the technical core, but a toolbox is only as strong as the ecosystem and the experience around it. Let me detail the second layer. Around this technical call, we have built an ecosystem and that ecosystem is itself a moat. First, we work hand-in-hand with the leaders of our supply chain. We have built an ecosystem and our privileged relationships with material suppliers and toolmakers are another differentiating factor. We codesigned with them from day 1 that is how we secure both performance and industrial readiness on every new material.

Second, our reach extends all the way downstream to the users of our substrates. Foundries, fabless players, design house, IDMs, OEMs are part of the same ecosystem. Being embedded with them is how we anticipate their needs and shape the next generation of products together. Third, our partnership stretch across the entire value chain. From CLAT on the upstream pilot line to LTOs and research partners, this is what gives us our lab to fab speed and what raises the entry barriers around us. Combined with the toolbox, this ecosystem is what makes Smart Cut hard to replicate. Let me show you what it delivers with 1 example, 1 platform that captures it all photonics. Photonics is where the structure of our engineered substrates matters the most.

So let me show you what makes our Photonics SOI unique. First, the substrate quality is what sets us apart, and we cover the full road map. Such engineered substrate brings atomic level control of the top layer uniformity, very low roughness at surface and interface, extremely low defectivity and all of this over engineered silicon-based substrates. This is what enables low optical losses, better modulator performance and the mechanical stability needed for reliable, high-volume manufacturing at our customers. And we do not bet on a single architecture. With Photonics SOI and LNOI today and new materials in development tomorrow, we have a holistic product road map that addresses the different architecture choices our customers may take across the value chain.

Second, this is not only a lab result. Our product is mature and our infrastructure is ready to scale. We have built it on more than a decade of expertise industrialization and ecosystem partnerships. And we have accelerated customer prototype deliveries by 11x over the past 3 years, the clearest signal on the ramp ahead. Today's prototypes are tomorrow's volumes. Third, we keep extending the platform to secure our customers' road maps. We work -- we now work with more than 10 customers on this platform. We have seen a strong demand acceleration, especially over the past couple of months. And again, a key message. Customers come to us for these prototypes and they move from prototype to qualification faster and faster. This is where engineered substrates become the cornerstone of a AI infrastructure. And with that, let me hand over to Cyril who will take you into how we operate this innovation engine at scale. Thank you.

Thank you, Christophe, and hi, everyone. You've just seen what makes us unique. My job and the job of operations is to turn that uniqueness into volume, on time and at the right cost. A large part of that is our ability to scale rapidly, which is critical right now with photonics. This year, more than any other. It is key to strike the right balance between optimizing capital allocation and securing growth opportunities. So what do we do? First, we manage the cycle. Demand in some part of the business is still soft. So we deliberately run our fabs below capacity, and we optimize where we can to absorb this cycle.

And because we have already built our footprint we can capitalize on past investment to moderate our CapEx while making sure we are able to deliver on the growing demand for specific products. Second, at the very same time, we address the growth that is already in front of us. Photonics SOI and POI need capacity now. and we are putting it in place. The high degree of fungibility of our assets allow us to accommodate more demand than anticipated on a given product and to scale rapidly. And third, we do all of this on a foundation that makes us more resilient our ESG discipline is not a cytopic here. It lowers our cost and protects our supply chain. So how do we all that balance in practice? It runs on 2 sides at once.

On one side, we optimize how we allocate capital and that is twofold. First, we deliberately run our fabs below capacity to correct our inventories. This contribute to reducing our working cap and to restore positive free cash flow this year. Second, because the footprint is already built, we lean on past investment to moderate our CapEx while still being able to deliver on-demand wide growth. On the other side, we invest where it counts to capture growth in a targeted way, where segment accelerates like Photonics SOI and POI, we can marginally invest and scale fast. And we keep strengthening our core SOI technology across the board. So we stay ahead where they're already growing like FDSOI and ready where the market still has to turn.

The 2 sides connect through fab fungibility. It lets us moderate CapEx by investing selectively only in the specific process steps that matters and by optimizing our workflow to increase throughput.. The same agility absorbs the cycle on 1 product and redeploy capacity towards another that is taking off. Let me show how that works on the ground. You've heard us about -- talk about asset utilization for years now. Agility is not something we improvise in a downturn. We engineer it. Our SOI fab are built to be fungible, which means a Line 7-1 product can serve another with very little new CapEx and very little time. POI is a great illustration. We can turn, idle SOI 200 MM capacity in 2 POI capacity for a very limited incremental investment.

The same agility is now being tested by photonics. And this is where it matters most. Demand has been accelerating this year. And our ambition is to deliver on all of it. We can accommodate the demand by activating 4 levers at our disposal. First, we can leverage existing capacity in [indiscernible] by reallocating underutilized SOI lines to Photonics SOI, optimizing both 200 and 300-millimeter footprint. Second, we are actively qualifying [indiscernible] facilities in Singapore and have already shifted prototype production to mitigate the need for future qualification. Third, we are tooling a new capacity in Bernard 4, specifically for 300 MM photonic SOI.

Finally, if demand surged even further, remember that we have built the extension in Singapore. So with this multilayer approach, we have room to follow demand right across the group. This is what sets us apart. We can scale from day 1. We built the footprint in several years of significant investment. Today, that base is what let us scale on demand, not on new spend. One last important point for us. ESG is operational discipline. Our efforts make the business more resilient, our operations more sustainable and our cost structure linear. Let me give you 3 concrete proofs.

First, we are running ahead of our own road map. On Carbon, we reached our 2026 emission target 2 years early, which gave us the confidence to commit to a tougher one, we lower our 2030 absolute emission selling by more than 20%. On water, the same discipline shows. We have already cut our withdrawal intensity by 30% since fiscal year '31 and triple our reuse rate to nearly half of all the water we use, putting us well on track for our fiscal study target. Second, we anticipate risk rather than absorb it. We hedge energy and lock in low carbon sourcing, and we do source the critical materials and utilities we depend on from helium to process gases.

We did this ahead of the market, which protect us from price spike from shortages and ultimately keeps our fab running through any disruptions. Third, this discipline is recognized externally. Our MSCI rating was upgraded to AA this year, our fourth rating upgrade in 5 years. So the way we run operation is consistent end-to-end discipline in the cycle, ready for the growth and resilient by design. With that, I will hand back to Alex for the Q&A.

Thank you, Cyril. So we will now open the Q&A session. Gentlemen, if you want to sit on the stage. We have microphones in the room. So if you'd like to ask a question, please raise your hand. For those of you online, you can ask and type your question via the platform, please try to limit yourself to 2 questions, but happy to take one.

Yes, it works. Emmanuel Matot from Oddo BHF. So 2 questions. First, you have different scenarios for photonics this year, if I understand well. Can you detail those scenarios, maybe you can focus on the most optimistic and the one that is the most cautious. And are those scenarios mostly related to your capacity to answer demand? Because if I'm right, you are facing production bottleneck for those solutions. .

And second how do you see the RF business over the next few years? Did you reach the bottom last year according to you, is it premature to be so optimistic given the negative trend in the smartphone market which could lead to an acceleration of destocking by your customers, meaning foundries.

Thank you. So maybe I start. So regarding your question on silicon photonics. So as we said, we see definitely an acceleration on silicon photonic demands, especially past couple of months. this obviously put our organization at stretch because this demand is coming rapidly. and we are putting everything together in the organization to respond to this demand. So as Cyril was explaining, we have the capacity. So the question is more the speed to response to this surge of demand, the lead time. So that's what we are focusing on right now, optimizing our production flow, enabling [indiscernible] qualification. So all of this, okay? So that's the first part.

Now we remain aware that that's a full ecosystem that is moving regarding second photonics. It's not only us. It's a complex ecosystem in the data center moving from copper to silicon photonics. This means packaging technology, fiber attached data center architecture choices. So there are multiple factors influencing the end demand. So we see clearly, compared to what we said in the past, we said 20% to 30% CAGR. We see something above 30%, now giving a number exactly we have to be humble in this industry. So we track that carefully. We ask as well our customer to take commitment on the long term, but I will not give you a firm number definitely regarding that. So that's the first part.

The second part on RFSOI. RFSOI, I have done products on RFSOI for the mobile market. So I know this market quite well. That's a market that is definitely in a different cycle compared to Photonic. That's a market that is mature, and that's a market where we have still inventory correction to happen, that's a market as well, having currently some memory shortage impacting some of the mobile phone maker. So definitely not the same dynamic. This will take time to correct. We plan this market still to grow moderately that's a mature market, but that's still an important market for us.

Sebastian from Kepler Cheuvreux. I've got 1 follow-up question on photonic. How do you see the competition in that market? Do you see more competitors coming to this big market opportunity and with LNOI technology ramping up later towards the end of the decade, do you see other players coming to this photonic market, and the second question is on the margin side. You are currently for Alba on a breakeven margin. You had in the past an ambition to have mid-20s operating margin. What are the building blocks to move from today's breakeven margins to mid-20s? And what is -- what could be the timing towards this kind of margin level.

So maybe I'll start with the first part and then Albin, you reply to the second one. So regarding competition, I have been in the semiconductor industry for 30 years. I know that everything is very competitive in semiconductor. So I always -- my approach to that is to consider there is always a strong competitor in the market. So I do not expect photonic to be different if this turns are to be different very well, but my assumption will be there will be competition. So the way out of that is to be excellent in what we do. So that's what we are focusing on, with all the team here. So innovation and being sure what we learned over the past 10 years. We use that. We continue to develop the road map. We continue to develop differentiated features like LNOI or others in operation, being sure that also what we learned ramping up with customers and every customer here is a different solution.

That's not 1 size fits all. So we are sure that all this learning will leverage it. But my assumption is there will be competition. Maybe I hand over to you.

Thanks for the great question, especially in light of a significant decline of our gross margin this year. I think it is a bit premature for us to provide specific guidance into fiscal year 2027. That being said, the main levers for margin improvement are expected to be the reduction of underabsorption costs. I'll come into the detail of that in a minute as utilization recovers and also normalization of price mix environment like we loaded 2 offsetting these factors. However, we'll see lower subsidy levels, and that will weigh on next year and before a recovery in 2028. I think your question leads us to how to estimate operating leverage, and that's the way I will answer your question, I will not give you the year where we will reach 20% EBIT, although the executive committee has an idea on this.

Operating leverage, so we benefit from operating leverage at 2 distinct levels within our cost structure. First, it's gross margin; and second EBIT, so first, at the manufacturing level, a meaningful portion of process cost is fixed, creating absorption effect as volume increase. and second, at the corporate level, both R&D and SG&A expenses remain -- should remain -- will remain largely fixed in the short term. allowing incremental revenue growth to translate into a stronger margin profile over time. Specifically, with respect to process cost and to help you support the modeling assumptions, you should consider that approximately 70% of process costs are variable and cash in nature, while the remaining 30% remaining largely fixed and noncash.

So in the very short term, incremental revenue carries a contribution margin of approximately 60%. And as revenue growth becomes more meaningful and capacity utilization progressively normalizes a more appropriate assumption according to us would be for a job through rate closer to 50%. And to close on this very relevant question. you can consider that an additional EUR 100 million of revenue would be expected to generate approximately EUR 50 million of incremental gross profit and EBIT. So you have all ingredients to do the math.

Aleksander Peterc from Bernstein. I just have 2 questions. So 1 is again on Photonics, sorry about that, but it's bit of a hot topic at the moment. So I'd just like to understand, you're spending a bit more on CapEx this year. It's not a big number, but it's a little bit more than you saw a few months ago, and that is primarily attributable to Photonics. So could you maybe quantify for us by how much by what factor you are increasing? Are you basically doubling your Photonics SOI capacity? I understand you're now qualifying [indiscernible]. So once that's qualified, will you have basically double the capacity. That will be the number one. And the second 1 is very simple for Albin. On the planks dispute with French authorities. Could you tell us if you heard back from the tax man.

Cyril, do you want to take the first one?

Yes. Obviously, speed matters, and how we deploy the capacity matters a lot, and we adapt our capacity for the photonics ramp-up is 1 of the cornerstone of this discussion. As you have seen, we don't have only 1 avenue to improve our capacity, qualification of [indiscernible] comes for free in a way. We don't have to invest. We have already the asset over there. So it's very important as well to understand that we have already initiated this qualification for all our customers in Singapore in the last month and this does accelerate right now in order to support the growing demand of photonics. So this is 1 item, which makes sense in term of capacity availability.

In terms of return on capital employed, because obviously, the assets are already there. And we have to ensure that the consistency of the products that we deliver from Singapore is 100% similar to the ones that we deliver from Bernard, and we focus a lot on this topic, which is quality related, and we are able to demonstrate that this is the case. Second item once again, which is not requiring any CapEx. is to start from scratch from Singapore with all with new customers, and we have new customers starting prototype from scratch, from Singapore, and we have more and more in the last month and this does accelerate for sure the growth of the Photonics ramp-up. And third, when it is necessary, for instance, in Bernard, we deploy CapEx. We have seen that our CapEx this year is going to be EUR 100 million. a part of it, less than half of it, but still a part of it is to adapt our assets to the need to adjust some assets, to add some assets in order to increase capacity in Bernard.

And on that one, we are quite lucky in a way to have -- or it has been anticipated to have Bernard 4, which is able to run smart [indiscernible] 300 LMM in the same factory. This is about agility once again. You know that this plant has been qualified with refresh in the past. The time to cash is very short because we use the same utilities, so we don't need to requal at the customer level, and this is a good way to scale up easily without adding additional clean room and additional fixed cost in our model.

Albin, on the tax .

Yes. On the tax reassessment -- so for reference, you all know that Soitec received a tax reassessment notice in January 2025 relating to, first, the allege abuse of low characterization associated with the dividends of the solar activities as well as a challenge regarding the valuation of the Singapore activity shares in the context of a restructuring of a transaction, which took place before 2020. In March 2026, we received the tax authorities response to our formal observations, and the French tax authorities accepted part of our claims. In summary, the proposed reassessment could have a twofold impact. First, and in the case, we don't agree on a settlement with the tax authorities, maximum impact. First, it could reduce our tax loss carryforward by EUR 384 million out of a total of EUR 765 million tax losses carried forward. And second, and in addition to what I said, it could result in a maximum cash exposure of EUR 205 million.

Discussion with the French tax authorities are scheduled to commence next week. And Emmanuel and I have a meeting scheduled in Romaville next Friday, and they will continue thereafter in July. Importantly, the advisers assisting the company continued to view Soitec's position as robust on the merits and to be very comprehensive should an amicable resolution not be achieved, which is not our scenario, the company would pursue litigation proceedings, which are expected to be lengthy and would require the provision of a payment guarantee in favor of French tax authorities in the amount of EUR 128 million, so that's as much as I can say, and I would hate to comment on what I don't know.

Nigel van Putten, Morgan Stanley. I'll take a breather on Photonics for a bit, 2 questions on the Mobile Communications business. First off, on RF SOI, do you still target a reduction of about 1 million wafers as per the end of the year as previously commented on. And then on POI, I think, Albin, you've mentioned POI headwinds. But why is that? Can you provide a little bit more color? I think it's typical as part of the LTA, but should there also be an offset in your ability to plan and thus, gross profit would actually be beneficiary? That's it for me.

Yes. So I'll leave the second question to Albin. But before I will give a little bit of color I wasn't really sure what your question was about RF SOI, but I think it's about inventory digestion. And I think we come from a place about a year ago where we had a very excessive amount of inventory, as Laurent already shared in the beginning, we have been burning that down. And the plan is to further bring this down to a level which is -- and it's a bit a loose term, but acceptable. That level of acceptance is not determined by us. This is determined by our customers where they feel comfortable. So the expectation is that moving forward, we will be further burning down the inventory that should restore also already indicated by Laurent, there are other dynamics playing.

I mean, right now, we see that the smartphone market is under pressure. memory shortage is 1 of those modulators. So it is a little bit more difficult to really pinpoint when this is going to happen. But in that horizon, I do believe things will normalize. I think that was the part on the RFSOI. There is another part which has, I think, 2 elements. I will color a little bit more about what's happening in the POI space. I think there was also a more technical question, Albin, can probably answer that as well. So we already talked about what's happening in POI. There's a lot of adoption. There is growth. There is a clear need for POI because it's simply a better product for the RF demands in the future.

Now what we have seen is 2 things. We see things outside of China, and we see things inside China. So inside China, there was a lot of momentum, let's say, 1.5, 2 years ago, a lot of inventory was built up. So there, we see a little bit of softness. What we also see, and I think that's exciting because we also signed an LTA and probably you all have seen that. that is outside of China. And I think that's very exciting. So at the moment you start talking about LTAs, this is doing 2 things. First of all, it gives you a lot of certainty as in you know what kind of volumes you're talking about. But as a consequence, there is a possibility that your pricing is something you need to give in. So that is specific for POI. Albin, anything you want to add?

No, that's exactly the point. We are very happy. Nothing wrong with a product all the contrary and Laurent explained pretty well the good prospects of the products actually minimal check waves and so on. So we are very excited. We refer to POI pricing in the context exactly like you're explaining LCA, which gives visibility and volume. And it is normal that as we ramp up the volumes and to get more visibility, pricing is going down to a reasonable extent. So that was the only message we wanted to carry today. .

Thank you, and welcome to the team, Laurent. I guess a couple of questions on Photonics. First question. I just wanted to understand a bit more about your -- the conversations that you're having with your customers and your visibility, would you say that the lead times are fairly lengthy right now? Would you say you have pretty good visibility on, let's say, photonics growth for this fiscal year? How should we kind of understand that? And the second question is on CPOs, perhaps ramping in calendar '27 and onwards. My understanding is that, that is incremental to the growth that we're seeing in pluggables right now. So would you -- would it be fair to characterize it as potentially accelerating your Photonics revenue growth as CPO ramps? .

So regarding visibility on Photonics. So again, that's a very dynamic environment. So visibility, we had -- 2 months ago is not the visibility we have today, just to be clear. But yes, we have visibility even on the long term from the customer. Now what is important is to have some skin in the game, I would say, from a customer as well on this topic on the long term because right now, this is a market where everybody wants to grab market share. We are cautious as well that there might be some double accounting overall. So we are trying to assess as well what is the end demand and being sure that somehow our customer have some skin in the game as well on the long term. So that's what we are trying to do right now. So that was the first part of your question.

And I'm sorry, I forgot the second part -- CPO incremental if you -- I can answer or if you like.

It's my favorite topic. Yes. So this question I get a lot. So I think it's important to understand that where does a pluggables play because that's the current business and where does the CPO play. So what we see is that CPO will play a key role in the scale-up in the data center. It will not let's say, jeopardize or even cannibalize the silicon photonics that we see today, which is all about the datacom, it's about connecting the data centers, the AI clusters, which is happening with the pluggables, so for the foreseeable future, that market is still growing, which is the interconnected datacom. So CPO is really on top of that. It has a slightly different application. So it is -- and maybe that's the shortest answer. It's not cannibalizing. It's really on top of what we currently see as the main application for silicon photonics, which is the pluggable transceivers.

I'll be a bit inclusive and ask a question in line for those who couldn't come with us today. A question from Craig McDowell from JPMorgan. On the Q1 guide and fiscal '27 phasing, the press release refers to less pronounced seasonality, has there been broad-based changes to supply contracts or customer ordering practices to make this possible?

So Q1, we are still trying to reduce the seasonality and as well to reduce inventory that we have at our customers. So that has to be factored in, yes, in our guidance for Q1. So which means you cannot extrapolate from Q1, basically the full year behavior because you should expect less seasonality within the year.

Thanks, Lauren. Maybe a second 1 from the platform from [indiscernible] from HSBC. GlobalWafers is talking about ramping photonic SOI wafers using their own technology and ongoing customer qualifications. How do you see competition from global wafers within photonics SOI.

Do you want to take that or -- so we are working closely with a global wafer. And so for sure, on this topic, like other customers as well. As I said, on competition, I do not understand estimate competition at all. So I'm paranoid on this topic. And I expect there will be competition.

Yes. So maybe a few words to add to that. tying back to what Christophe has shared before, for Soitec to get at a level where we are and Photonics is extremely sensitive to details. It takes a lot of know-how. So it will take any competitor that is starting and wants to enter right now a lot of time to get to the level, which is required for the most advanced products we are talking about. CPO very, very demanding. Photonics in general, is very demanding. So yes, competition is stepping up. And I can only copy what Laurent saying that's a good thing. But I think it will take them a lot more time also to really develop their products to the level which is demanded right now by the leading customers. .

And Christophe, do you want to spend a bit of time on talking about the differentiation we bring?

On Photonics, you mean? Well, I describe it a little bit today, but in photonics, everything counts. More than any other products. All the levels of roughness are so important. The thickness uniformity is pushed to the extreme. To give you a number, 0.2% I mean there's main industry where you've got 0.2% uniformity control. And we have also to combine it with some additional levels of crystal engineering. It's been -- it's the results today of working 10 years on the topic. We started since public, we started 2015 with Intel on the photonics and we learned a lot, and these learnings we can apply today to the platforms that we are providing to our customers.

Alexander Plaud from CM-CIC. A quick question very simply. If we were to see Sotac achieving $500 million in Photonics, I don't know what would be the time by then you would be able to reach that. How many wafers would that be to be honest? .

So you noticed we are not guiding on the full year. So I'm not going to give you a guidance for multiple year. So what I can tell you, as Cyril was mentioning, we have capacity to grow on Photonics. So we have the chance to have capacity available. We can as well work on our product mix. So the -- at some point, some of you mentioned that the company was built or was targeting a path to EUR 2 billion revenue. So that does not mean we have capacity to achieve EUR 2 billion revenue installed at this stage. But if needed, we will adjust. But that's not a topic for today.

Sebastein, Kepler Cheuvreux coming back. On the RF inventory adjustment, the previous management was talking about some inventory depletion of 2,000 wafers to 300,000 wafer per quarter, maybe 4, 5 quarters to go to normal level of inventories. Q4, we have not seen any change in the inventories at your big foundry customers, how do you see the inventory depletion from the coming quarters? Are you still on this kind of cadence, or?

So you have the right number, indeed. So 200 million to 300 million kilo wafer per quarter. This is what happened in the previous 2 quarters. Indeed, this quarter, this was not the case because of seasonality, but as well, probably the mobile market dynamics overall with memory shortage. So that's a difficult part to assess right now. So yes, I expect this inventory correction to restart at this stage. -- but this is dependent as well on topics like memory shortage that are not so easy to forecast. So this will take several quarters for sure.

And one follow-up on photonic FI. Could you comment a little bit on the price dynamic in this very hot market? How do you see prices trending? And how do you see the profitability of this business as you pose it is highly profitable, but can you comment on that? .

Do you want to take that one or shall I?

I can start, and you will correct obviously, we're not going to break down our profitability by product line, but what we can safely say is that profitability on the photonics line is good. And every time we shift the mix towards photonics, we improve the bottom line and the quality of the business that's very clear. I'm still relatively new or very new in the industry. But it strikes me that how fast things can change. We had a detrimental pricing impact in fiscal year 2026. It was not always easy to negotiate prices with clients, even in absence of LTAs. And here, the landscape is completely different.

And the priority for the client is to get the products in time, secure the capacity. We can even discuss measures to improve the cash profile of the company. so yes, Soitec has firmer hand on the pricing in photonics.

I guess here what is important is we focus on delivering to our customers. So that -- it starts always that. So being sure we do what we say .

[indiscernible] from BNP Pariba. Just a question on fungibility. How much time does it take to switch a fab to 300 MMSI photonics? .

Cyril, sure you will be happy to answer this one.

Actually, for -- we have some assets already there. and we can use that asset, which is, for instance, we're talking a lot about 300 mm, but we have a demand as well on 200 mm. And we know that we had some idle asset had cost. -- and I'm more than happy to start overnight this asset on to supply our customers. This is the same on 300 mm in Singapore. So basically, it's just a matter of qualifying our product with -- with our customers. and we have more and more ongoing right now.

Last item for sure is how we can deploy capacity. Deploy capacity typically in our industry when we have a new asset to introduce. This takes 9 to 12 months. We are used to prepare that ahead of time by having a kind of what we call a letter of intention in order to log the slot and to reduce this amount of time, minimizing the risk at the same time without any commitment from the company. And sometimes, we have to find smart ways to minimize even further this type of timing. For instance, case by case in the last 2 weeks, we have decided to transfer specific critical assets from Singapore to Bernard because Bernard is qualified. But is not fully qualified yet even if all the customers are qualifying Singapore in order to benefit of the asset now I mean, every day is important now and to buy a new asset for Singapore for the future.

So we are even able to cope with this type of, let's say, [indiscernible] in several days, transferring Rio King in France. We don't do that like Seltos, but when we have to do it, do it on critical tools. We do it because what matters is to deliver the wafer to the customer.

2 questions, please. Firstly, on the mobile side. You mentioned it a couple of times in your presentation with the satellite and LEO. Could you maybe just help us understand how material an opportunity do you think this is, particularly in terms of, I guess, working through some of these inventory issues on the mobile side? And then secondly, just to sort of reconcile your comments on the phasing kind of basically slowing post Q1, but at the same time, also your guidance that Photonics is accelerating. Can you maybe just help us understand how these 2 sort of square. Is it just that the photonics acceleration takes maybe a little bit longer, so we don't see the full effect this year? Is it too small? Just to sort of help us understand why is it 1 bit is accelerating very sharply, but at the same time, you're guiding for what sounds like a deceleration of growth through the year.

So regarding Leo, so this is mostly linked to the BIM farmer in FD-SOI. So the number of players on the LEO is not very huge. So you can draw your own conclusion on that. So that's the first part, the second part was -- so yes, how photonic is evolving? So as I was saying earlier, that will be progressive. So that's something, yes, we see acceleration of the demand. This acceleration is pretty recent. So it was growing steadily. Now the shape of the curve has changed. So this means we will adjust progressively to this new shape. So you should expect this.

Maybe adding up a little comment on the guide itself and the comment on reducing seasonality. Over the past couple of years, in a high inventory environment, we've been navigating a little bit less visibility, but probably led to a bit more seasonality Q-on-Q and thinking about the last 2 years maybe. So we've started to normalize that as well and seeing RFS inventory correction going in the right direction, although we still have work to do, have a lot in that regard.

So these 2 things will compensate.

Maybe switching to the online questions, if I may. Do you expect AI data center CapEx spending to persist at such high level as in today? Steve, if you want to double click on the change in scale or in the industry, you alluded to.

So on the overall global CapEx, I think we're reaching about $700 million this year for the top 5 U.S. hyperscalers alone. That's a huge increase from previous years. You need to add also all the neo cloud service providers in Europe, you need to add all the CapEx in China. We don't have yet an outlook to share on this global CapEx, but Clearly, the demand should continue to be very strong given the different waves of applications ahead of us. More importantly for us or equally important for us is what's happening within those data centers with technology transitions that we have talked multiple times today, and that benefit for [indiscernible] . And later on, of course, the impact on the Edge AI ecosystem. So no crystal ball. But as far as we can see the strong momentum in this overall CapEx spending should continue.

Rob Sanders, Deutsche Bank. Two questions. On the Photonics side, can you just discuss a bit the ex-fabLegentic partnership on TFLN? How does this play into your LNOI business? And is it complementary? And how does it affect your foundry customers, and the second question would just be, if CPO has a huge takeoff, would that mean then that your customer set would transition quite rapidly from the large 2 foundries, specialty foundries to TSMC. And how would that affect your bargaining power? .

I'll try to answer your first question, even though not sure I know exactly what you're mentioning, but TFLN is another name of LNOI. The people from the photonics call it, infinitum niobate when we call it more from a material sample lithium lead an insulator, but well, that's the same thing. The point is right now what we -- until now, what we deliver, the modulation of the signal is done on the top silicon layer of the silicon photonics wafer we deliver. This works up to about 1.6 terabyte per second then the modulation has to be faster and the silicon is running out of steam so the people are doing it on lithium niobate. So this TFLN chips are done on lithium niobate in lithium niobate and then reported on top of the silicon photonics platform. So whenever we play on LNOI, I'm not saying what you mentioned, but our play in LNOI is complementary complementing what we're doing in silicon [indiscernible]. So it's not replacing. It's on top. -- and then we can gain share into the modulation part. Okay.

Yes. On the CPO, I will get back actually to the first question that was related actually pluggable and CPO are not replacing each other. So that's in complement that the scale-out is more the pluggable. The scale-up is more the CPO. So the actors might be different, but it's not replacing the other.

Well, it's going to be 2 last, sorry. One is very quick. So is Smart SIC definitely dead? Or is there a second life for this product line? We've seen quite a lot of renewal of interest in silicon carbon in these days with some a little bit, I would say, less price-sensitive customers in data centers that are interested in this product for power. So do you think there is a possibility that Smartek comes back?

And the second, just also very quick. When you say CPO comes on top of the pluggables, so I say pluggables are they going to stay at this, whatever, 25% to 30% growth, and then once we get the CPO into the mix that will accelerate that growth on topics that we're implying.

So I can start with the smart SiC and then maybe you take the second one, [indiscernible]. So Smart SIC, as you know, so first, value proposition for high performance second carbide for Smartek is demonstrated. So yes, there is a benefit for high performance. There are some applications requiring performance. the difficulty in silicon carbide, as you know, is the market landscape changed radically the past 2 years, 3 years with vertically integrated players and as well with some Chinese supplier, monosek Chinese supplier very aggressive in price.

So the question really is to reassess based on this new context, what is the best option and best play for Soitec in this area. So I was mentioning before that we are reviewing our full portfolio overall. So not only for Smart SIC, but overall, to be sure we allocate our resources, our energy on the most promising topics. So that's something underway, and we will share. So a conclusion when we reach them.

So let me take the other part, which is about whether or not CPO is cannibalizing, let's say, pluggables. The short answer is no, but let me elaborate a little bit more. So what is the trend with CPO is that we are replacing, displacing copper -- so there is more photonics. So in that sense, it is always incremental. Now the use case for CPO is mostly scale-up in a rack. The use case for pluggables is mostly to connect [indiscernible] 1 on each other, and to connect data centers. So the short answer to your question is no, it's not cannibalizing because the amount of data is growing. So it means that we need even more pluggable transceivers to do that data connectivity, and on top of that, we see more and more photonics in the data or in the rack itself in the scale up. So that's an additional it's incremental.

Okay. I think that marks the end of our Q&A session. Lauren, if you want to have a few remarks before we...

No. First of all, thanks a lot to all of you for supporting us and being present today. So I guess you got our main message. So fiscal year '26 has been a difficult year where we made, however, significant progress, thanks to our discipline. So we made progress regarding free cash flow. We made progress on working capital. So this gives us a strong foundation to be able to prepare a progressive growth. Obviously, so this brings me to the second message. Yes, we see definitely AI as a growth engine for the company.

So we are all focused on that to be able to deliver. So that's the key. We have to execute. We have to deliver, we have to stay disciplined. So all the team here is focused on that. So that's the second key message. Obviously, beyond AI, we continue to develop our core SOI and POI technology. more on the personal note. So I can tell you I'm enthusiastic to join this team. So the onboarding has been quite efficient. And so thanks to all the guys and ladies of the team here. So I'm confident. So yes, we have challenges. We have opportunities as well, but I'm confident we can address that. Thanks a lot.

Thank you very much. And a quick date important to note, July 29 will be hosting our AGM and releasing the results of Q1 27. Thank you very much.

Welcome to Soitec's Third Quarter Sales Presentation for Fiscal Year 2025-2026. Today's conference will be hosted by Pierre Barnabe, Chief Executive Officer; Albin Jacquemont, Chief Financial Officer; Steve Babureck, EVP, Chief Strategy Officer; and Alexandre Petovari, Head of Investor Relations. [Operator Instructions]

Now I will hand the conference over to Pierre Barnabe to begin today's conference. Please go ahead.

Thank you for joining us today for Soitec's Third Quarter 2026 Sales Conference Call. I'm Pierre Barnabe, Chief Executive Officer of Soitec.

I'm joined today by Albin Jacquemont, our Chief Financial Officer; Steve Babureck, our EVP Strategy; and Alexandre Petovari, Head of Investor Relations. But first, I would like to step back and reflect for a moment on where the company stands today.

As you all know, I'm preparing to step down in just under 2 months when my successor, Laurent Remont takes over as the Chief Executive Officer. This leadership handover come at a time when Soitec is stabilized, successfully diversified into new growth areas and well prepared for the new phase of development ahead. The acceleration of our diversification has been enabled by our sustained yet targeted investment in R&D.

Today, Soitec is focused on operational excellence and cash generation, supported by a very healthy balance sheet. This gives the company the resilience to navigate diverse end market dynamics and the flexibility to be well positioned for the next growth cycle.

In light of this, the third quarter reflects a high level of rigor in execution in a challenging market environment. It should be seen as confirmation that Soitec is operating with discipline using the strategic and operational levers at its disposal.

In this context, our priorities are very clear. We are focused on execution, operational excellence, disciplined cost and cash management and on aligning capacity with actual demand. At the same time, we continue to invest selectively in areas that are critical to our long-term technology road map without compromising financial rigor. The overall picture remains broadly in line with our expectations.

At a business level, this translated into the following trends: sustained activity in artificial intelligence for Edge and cloud, where demand remains supported across data centers and Edge environments. At the same time, other parts of the business are still adjusting.

In Mobile Communications, customer engagement remains active around advanced RF solutions and next-generation platforms despite constrained volumes with RF-SOI demand still impacted by customer inventory correction. In automotive and industrial, while the environment remains challenging, our technologies are well positioned to support future applications once demand recovers.

I will now walk you through the third quarter sales figures and our outlook in more detail. Starting with the headline numbers. Third quarter revenue reached EUR 160 million. On a year-on-year basis, revenue remains down, reflecting a 22% decline at constant scope and foreign exchange and a negative currency impact of 7%.

This top line performance is driven by different dynamics, strong trend in artificial intelligence, offset by ongoing RF customers' inventory correction in an uncertain smartphone market and weak automotive demand.

Sequentially, revenue increased 18% organically compared with the second quarter, coming in above our guidance. This improvement reflects the strong commitment of our teams.

Looking at revenue dynamics by end market. Mobile Communications generated revenue at EUR 90 million in the third quarter, down 36% year-on-year organically. As expected, RF-SOI volumes remain impacted by customer inventory correction, which is improving, but not yet complete.

UI activity was slightly down year-on-year, while showing an improvement from Q2. Higher demand from Tier 1 U.S. fabless was offset by softer activity in Asia.

FD-SOI adoption in 5G millimeter wave is still ongoing with a major recent design win for U.S. flagship smartphone. Edge and cloud AI revenue amounted to EUR 54 million, showing 27% organic growth year-on-year and improving from Q2 '26.

Activity continues to be supported by AI-related demand across edge and cloud environments with contributions from both Photonics-SOI and FD-SOI.

Specifically, Photonics-SOI remains very dynamic as the technology continues to enable a growing number of high-speed, high-bandwidth optical interconnect applications, including pluggable transceivers and co-packaged optic CPUs. And we continue to strengthen our differentiation with new materials, addressing growing interest for LNOI, lithium niobate OI for ultraband data communication. This product will complement our silicon photonics offering to cover optical transceivers beyond 1.6 terabytes.

Automotive & Industrial revenue reached EUR 16 million, improving sequentially versus the second quarter, but remaining down 32% organically year-on-year. Market conditions are still weak.

Power-SOI volumes remained low during the quarter, reflecting both market weakness and delivery phasing that is skewed towards Q4 under a long-term agreement with a key customer.

Looking at the first 9 months of fiscal year '26, revenue reached EUR 390 million, down 26% year-on-year organically. Performance over this period reflects significant RF-SOI under-shipment, prolonged inventory corrections and contrasted end market dynamics.

Edge and cloud AI showed strong resilience, especially excluding the anticipated phaseout of Imager-SOI, bringing the performance of this segment up 29% year-on-year. Mobile Communications and Automotive & Industrial remain more exposed to market adjustment as expected.

For the last quarter of the year, we expect around 20% organic revenue growth versus Q3. We maintain our cautious stance on the market environment and are closely monitoring the evolution of the smartphone market outlook and its potential impact on the ongoing customer inventory correction.

Mobile Communications should improve sequentially. Edge and cloud AI should continue to show strong momentum, driven by demand for Photonics-SOI and FD-SOI. Automotive & Industrial is expected to remain soft overall, but Q4 will benefit from seasonal deliveries for a specific customer.

In this still challenging environment, we remain focused on disciplined cost management and cash generation while continuing to execute our strategy through targeted R&D, technology leadership and product diversification.

This concludes my comment on our Q3 '26 performance and Q4 '26 outlook. Then after more than 4 years, this is my last call with you.

When I joined, Soitec was in a very fragile situation, an unprecedented governance crisis, dependence on a single product, more than 2 years of RF-SOI inventories concentrated with a few customers with deeply damaged relationship and a heavy cost structure.

Year after year, we managed the depletion carefully while giving ourselves the time and the resources to accelerate 4 new product lines, which have all reached critical mass. We have doubled R&D investment and restore the balance sheet.

Today, the company is getting ready to turn a corner, driven by a successful diversification of products aligned with AI and energy efficiency megatrends. RF and Power-SOI demand will resume as customers clear their inventories.

Our innovation remains dynamic with increased investment to strengthen our positioning in our current SOI market and to prepare our expansion into new markets. Our innovation capabilities will be critical to meet the industry's most promising developments with key players now exploring SOI for advanced computing applications and memory.

Our relationships with customers and partners has been rebuilt and strengthened from the U.S. to China, where we executed a new strategic reset with an SAG. Looking back at these last 4 years, what I am most proud of is having recruited, developed and retained outstanding professionals and teams.

We have made Soitec stronger and ready for a solid and sustainable rebound because my extended team and the Board of Directors trusted me, understood the plan and executed it with discipline. I'm deeply grateful.

I now hand over a solid platform to Laurent. I would like to pay a tribute to the ExCo members, to our diverse leaders across the organization and to all employees for this successful journey.

With that, we are now happy with the team to answer any questions you may have. Thank you very much.

[Operator Instructions] The next question comes from Aleksander Peterc from Bernstein.

All the best wishes for your future endeavors. Can you give us a little bit of color on how you're doing with progress on the rationalization of working capital? What kind of levers you have in place to drive a positive free cash flow into next year? And if you could give us an idea of how we should think about CapEx going into fiscal '27 as well.

Thank you, Alex. Thank you very much. Then I propose for everything regarding cash discipline and working capital containment to leave the mic to Albin, who could comment on the progresses made so far and what the trends for end of the year and some colors for the next year to come.

Sure. Alex, look, we said in Q2 that we're working towards free cash flow positive in fiscal year 2026 and that remains true today. We are making progress on that front.

What we have been doing is managing costs in a stringent manner while maintaining selective and strategic investment in R&D. As for inventory reduction, which is another priority, we're aligning production with actual demand. Of course, the downside of this is that it brings a temporary hit on margins and on profitability.

On the receivables front, we have renegotiated or we are in process of renegotiating some contracts to lower receivables that will bring -- that will yield results in this year and in fiscal year 2027. And the way to think about our capital expenditure is moderation, I would say.

We are guiding towards CapEx of EUR 114 million cash this year. And there is a little bit of flexibility built into this number. And capital expenditure will be much lower in fiscal year 2027.

And that we have already invested a lot to build capacity for the company. So there is no need to expand our facilities.

Remember that we changed the free cash flow definition in Q2 this year and this was to align with market practice. And now our free cash flow mirrors the debt variance in absence of buybacks, dividends and M&A. Yes. So we are making progress on working capital and free cash flow.

That's great. That's very clear. Can I just have a quick follow-up on your mobile business? I have a couple of questions. The first one is, are you concerned about the health of the mobile phone market?

We've seen some forecasts now pointing to a decline in calendar '26 given the tensions we see in memory prices in particular? And the second part of the question is, could you give us an idea by how much you're under-shipping into the channel? What's the kind of order of magnitude there in your RF-SOI product line?

Okay, Alex. On the smartphone market, we are observing, listening like you and reading like you that there are some tensions coming from memories, memories prices and availability that could weight on the dynamic of this market.

Then we're going to revise or not our forecast during the Mobile World Congress. We were expecting a growth around 2% of this market in volumes for this calendar '26 year. We might revise maybe this trend looking at the different analyst view.

That said, what is weighting the most, of course, for us is the inventory depletion that is going in the right direction. Then we continue to under-ship and we are accelerating this under-shipment over the last quarters.

Then from -- you remember the 2.5 million estimated inventories in 8 inches equivalent RF-SOI by our customers on September, we moved to 2.3 million. End of December, we were around 2 million.

Then if we continue to under-ship between 200,000 to 300,000 wafers per quarter, we could imagine that by end of this year, calendar '26, we're going to be in the range of 1 million.

We don't know if this 1 million is the right momentum and turning point, but it does correspond to the volumes of our customers' inventories before the COVID event then 5, 6 years ago. That's what we see.

Then we under-shipped quite significantly since the last quarter and for the next 4 quarters to come to be sure that we're going to reach a level that is close to what we were observing 5, 6 years ago before the COVID. That's what we can tell you.

The next question comes from Emmanuel Matot from ODDO BHF.

Of course, Pierre, all the best for the future. I have 3 questions, 3 questions. First, Pierre, so this is your last publication and your last call with us. Do you think you are leaving Soitec at the low point of the cycle?

Second, are you able to keep up with the strong demand for Photonics-SOI? Or are you facing any constraints in terms of industrial capacities, your suppliers? And my last question, maybe for Albin, to what extent are you hedged on the euro-dollar for the next financial year?

Then Soitec obviously is reaching step-by-step an inflection point. What is clear is that we are building a platform that is ready to rebound in the near future.

It's too early to tell you exactly when it's going to come. But it's clear that the growth machine has been totally reinforced with these 5 new products today, 4 new products on top of the RF-SOI that are critical masses and many of them are growing.

And for the -- for namely Photonics, I will come back on it, of course, FD-SOI and POI. And the 2 others, RF and Power are in inventory depletion mode. And of course, as we said, by end of this calendar year, we're going to have reached the pre-COVID level of inventories by our customers.

And you can imagine that step by step, we're going to reach this inflection point to growing again. And what is also very important to my point of view, and we need also to think on the future beyond the quarters for which we give guidance is that we have doubled the R&D investment from around EUR 60 million to EUR 120 million today, also to prepare the future and to add new products on top of the 5 I was mentioning.

And to underline what you said and what you asked on Photonics, today, Photonics is in a very dynamic momentum. We have no specific limitation. But to be sure, we organize properly our factories because, of course, we are sharing the same factories for the 200 and particularly the 300 millimeters.

Then it's a matter of anticipation. But we have access to the right level of bulks. As you know, we diversified also our sources of silicon bulk in terms of quality and particularly the one able to correspond to Photonics requirements and demands.

We have today more and more customers asking for Photonics and more and more in volumes, 200 and 300 millimeters. We are working on enhancing, thanks to the LNOI technology, the capabilities of our Photonics portfolio by extending the bandwidth and the capacity to reduce latency.

Then now it's really a question of anticipation. It's a question of signing LTAs with some of these customers to better anticipate what's going on and to manage the allocation. But today, there is no specific limits to take the ride and to accompany a market that is growing by around 25% to 30% per year.

Albin, do you have any point on the third question, please?

Yes, absolutely. It's clear that foreign exchange continues to be a significant external headwind for Soitec. And the reason for that is that we have a significant U.S. dollar exposure on our top line. So this makes us sensitive to exchange rate fluctuations.

The one thing I would like to point out is that we guided for fiscal year 2026 on the EUR 1.14 per dollar and we have -- and this number has remained constant throughout the year. So we have hedged quite effectively our transactional exposure in fiscal year 2026 or fiscal year 2027, we will give you the number you should factor at the next call.

Nevertheless, what I can tell you at this point is that we have hedged 70% of our exposure at 1.19 at this time. And so there is 30%, which remains to be hedged.

The next question comes from Robert Sanders from Deutsche Bank.

Most of my questions have been asked, but maybe you could just talk a bit more about the quantum of computing opportunity. It seems like a lot of the initial quantum is using a PIC and EIC. How much of those PICs are using SOI today? Look, interested that recent SkyWater deal, for example, or are you at a sort of nascent stage?

Then on quantum, of course, and this part of some press release we issued recently. It's a market we are, of course, working on. We are observing very cautiously.

And SOI is bringing some capabilities very interesting for COVID generations, including, of course, low power consumption. It remains exploratory. We are working R&D mode in these areas. And for the moment, the volumes expected even midterm are quite limited as long as, of course, this technology is not spreading out massively and becoming a mass market application. We are not yet at that stage.

But there are some hypothesis. It could become, of course, in gradation with binary calculation, the mass market features and the mass market application. Then we are in SOI is presenting some technological interest.

We are working cooperations with some labs and a few emerging companies. But still not in our, let's say, radar screen for in a midterm point. But in the long term, we're going to see step by step. And of course, we're going to update you on the different progresses made.

Got it. And just a quick question on the loading. Maybe you said this already, but I couldn't hear it. But what is the plan for fiscal '27 from a loading point of view?

Are you just going to take the hit on the profit, run down inventory on hand, which is very high still and basically in a year's time, start with a clean slate? Is that the goal? And what loading percentage are you targeting?

Then, Albin, perhaps you can maybe complement.

Yes. So as for the loading is concerned, I think one of the key action for us is to really match procurement with manufacturing with delivery with end market needs. So that's a priority for us.

We've -- we're not guiding on fiscal year 2027 revenue. You understood from Pierre that we see a lot of tailwind for some of our products. You also understand from Pierre that there is still some inventories on the RF market.

So from that, you can infer that our loading will remain at a level which is below normal level in fiscal year 2027 and the impact on the profitability will be pretty much the same as to what we indicated at the end of Q2.

But again, what is important for us is to act sequentially. Now we are concentrating on free cash flow, working cap, our own inventories.

Then at some point, we'll see revenue stabilization and before a rebound. And when we see a rebound, the loading will go up. And obviously, hopefully, where we will be in this place, profitability will go up, but in a context where we have lower G&A and the working capital, which will be closer to what we should have on our balance sheet.

The next question comes from Daniel Schafei from Citi.

Pierre, wish you also all the best in your future endeavors. I would have 2 questions or maybe I'll just start off with RF-SOI.

So on the inventory digestion that you mentioned through 2027, is it fair to assume that the first half would be more on the higher end of this 200,000 to 300,000 range? Or will it be more even throughout the year?

And then also just on overall goal levels, you mentioned the 1 billion -- sorry, the 1 million level that would be aspirable. Just factoring in, let's say, the midpoint, 250,000 per quarter, that puts us at 12-month high inventory levels as basically expectation. Pre-COVID, the levels at customers were roughly 6 to 9 months.

I'm just wondering, was there any -- is there any reason why the aspirable goal is now higher than the previous level? Or -- yes, that would be just great to understand.

It's difficult to say. We give you points of comparisons compared to what we are experiencing and what we experienced in the past. Then the 200,000 to 300,000 per quarter is an average.

Then of course, it can -- it depends on quarter after quarter. But over 1 year, we can say that deflation is around 800,000 to 1.2 million within the course of 12 months, it's an average. And that's the reason why from 2 million end of December '26 with the under-shipment we are doing right now, we should be in the range of 1 million by end of this year.

The 1 million correspond to what was in the inventories customers in RF-SOI before COVID. Is it the right, let's say, turning point to see customers let's say, investing again, buying again and to see the RF-SOI business for us growing again?

We don't know. It's, of course, an assumption we share with you. Will it be before? Will it be later? That's really an observation and assumptions and comparisons. We're going to see within the course of 1 year, the need for, of course, our customers.

We're going to see if some also breakthrough innovation might accelerate some, let's say, investment and some requirements and ask for RF-SOI specific volumes. That's point of comparisons we give you and a trajectory.

That's very important and to give you figures that are as reliable as possible. And -- but of course, we can imagine that calendar '27 should be a year of growth for RF-SOI, but we don't know exactly when.

Okay. Perfect. And then just quickly also on Edge and cloud AI. Just given now throughout the last quarter, there were a few Photonics players mentioning different targets in terms of growth, which, yes, fairly from a lower base sound more aggressive.

And so I just wanted to ask, are you still comfortable with the 20% to 30% CAGR range for this business? Are you slightly more bullish? And is there a potential to come even more above this range? Or are you, let's say, comfortable with the midpoint for right now?

The term comfortable doesn't exist in our world. But are we confident? And are we, let's say, working hard to beat the growth of this market? Of course. And today, we have positioned our silicon photonic solutions everywhere we can. We have more than 5 customers today engaged in our silicon photonic solutions and more and more are coming. And each of these customers are asking for more and more volumes. Then clearly, there is a dynamic.

I'm confident that this dynamic should last because the need for AI are very important. I mean, the demand for AI is higher than what the industry today can provide.

And of course, we are a part of the components of this industry because the silicon photonics is today the only solution, viable solutions that is allowing, first of all, next-generation AI data centers transfer control, transform electrons into photons for high bandwidth, particularly if you move up to 1.6 giga, not only for the data centers, but tomorrow to interconnect the GPU and particularly with the co-packaged optic solutions.

And on top of it, we are enhancing our photonics layers with lithium niobate, let's say, add-on that is helping the industry to move beyond the 1.6 giga -- terra. That means that we have today a plan, a clear plan and the industry have a clear plan to fuel the silicon photonics growth for the coming 4, 5 years without any doubt. And our market shares, positioning, relationships with our customers is making us confident.

Now we need to, as I said to Emmanuel, to anticipate this development, this growth to prepare the industry to have enough rooms for delivering on time, on quality and even to beat the growth of this market that, as I said, is around 25% to 30% per year.

The next question comes from Sebastien Sztabowicz from Kepler Cheuvreux.

One on the competition in the SOI market. Have you seen any kind of change in the competitive landscape with new players [indiscernible] position being a little bit more aggressive? I'm thinking about the global wafer plant that is building up in the U.S. Do you see them gaining a little bit more market share in your key market?

The second question is coming back to Photonics-SOI. Can you remind us a little bit the difference in terms of content between pluggable optics and Co-Packaged Optics? Is this a big step-up when we are moving to CPOs going forward?

On the overall SOI market, of course, there is -- we always say that there is competition, starting with our only licensee today with SEH. But we don't see big changes in the segment shares we are observing and particularly for us regarding the 200 and the 300 millimeters.

Of course, players are claiming to have SOI solution. And some SOI solutions are not using our technology like Smart Cut. You can have also other ways to do SOI, silicon insulator, namely P-SOI that is quite well adapted for power application in the cars. But even in that domain, competition and our positioning is quite strong.

Then today, we don't see segment shares significant evolution and the competition is far away from what we are doing. All the more that we continue to invest in our SOI technology.

As I said, we have doubled our gross R&D investment from EUR 60 million to EUR 120 million over the last 4 years. And of course, it is fueling our advance from an innovation point of view. We are filing more and more patents every year, more and more. This year, we're going to even beat what we did last year that was quite exceptional.

Then we continue to run ahead. And talking about GlobalWafer, as I just said, we have only today one licensee, only SEH because as you know, we have decided in '24 to terminate the license contract with GlobalWafer.

And of course, that means that GlobalWafer is no longer authorized to use any Soitec IP in any form. And they have 2 years kind of transition time till July '27 to adapt themselves because at this time, we will be in a position, of course, to infringe them for any copy or any use of our patents and IP.

Of course, it is coming years and years after they decided to build a factory in '21. And then of course, they will have to manage these huge changes for us.

That's, of course, the name of the game. Then that's really the situation. If we look at the Photonics-SOI content, then if you look at the transceivers today that are used to interconnect servers to servers in the data centers are using a classical architecture that is the first architecture that is allowing to use 400, 800 up to 1.2 terra.

Now the industry is looking for more bandwidth and also to reduce latency. If you want to reduce latency, you need to insert your, let's say, interconnections at the substrate level.

And this is a co-package optic in some of the architectures that's going to help the boards, the graphical and processing unit boards to interconnect each other. Then the Co-Packaged Optics is really a new architecture for which we see some pull forward because it was expecting to come in '28, then '27.

Then today, we have heard that some first, let's say, design going to be commercially available by end of this year, then there is a clear acceleration. And on top of it, we are developing and accelerating the development of LNOI that's going to enhance the capability of data throughput and data bandwidth.

And we clearly see a very strong evolution in the architecture of the photonics, let's say, capabilities. And the transceivers are really at the beginning and we are selling a lot of wafers, particularly to serve these needs.

But the next waves that are going to come will serve the Co-Packaged Optics first wave and then we're going to have some evolutions, particularly with miniaturization and concentration of this signal plus LNOI.

Then of course, it is part of the 25% to 30% growth we will observe in this market for the coming 5 years. Then, of course, the volumes of wafers asked by the market going to grow more and more, but it is also part and it is translation of the Co-Packaged Optic adoption, then the evolution and the LNOI adoption at the same time. Then it's really correlated with what we see volumes versus technological evolution and new design wins.

In terms of content in millimeter square, do you have some data for pluggable than Co-Packaged Optics or this is not something that you have in mind?

We have, of course, some data, but we prefer to speak in volumes of wafers because, of course, millimeter square evolution is changing, particularly with new packaging, new 3D packaging that is also modifying a bit the way to see the, let's say, the footprint in a planner way. And of course, things are changing. It's better to think wafers volumes and type of wafers volumes. That's more accurate.

The next question comes from Oliver Wong from Bank of America.

And wishing you all the very best for your future endeavors. A couple of questions from me. First question is, I believe you said by the end of calendar '26, we'll reach -- customers will reach about 1 million wafers in inventories.

I was wondering what kind of -- in terms of the smartphone growth assumptions, what are you assuming for this? Are you assuming closer to your existing sort of plus 2% smartphone unit growth? Or are you assuming closer to what some analysts are now baking in terms of a decline for this year? That will be my first question.

Yes, the impact of the growth rate is not significant. 1% correspond to a few 10,000, a few thousands of wafer. Again, talking 8 inches equivalent to be sure that it's very clear.

Then the impact is quite limited. What we are really working on is to continue under-shipping to reach this 1 million that correspond to what was the case, what was the level of inventories before the COVID. Then the growth rate, whatever it is, positive or negative in, of course, a single-digit mode will have a limited impact in terms of volumes effect for us and might change for some weeks this inflection point if 1 million is an inflection point.

Got it. And then also just wondering how margins are trending for the second half of this fiscal year. You guys did around 34% EBITDA margins in the first half. Just wondering from both the gross margins and OpEx how things are trending and what we should be aware of for the second half?

Well, we don't communicate, of course, precisely on the margin evolution, but maybe Albin can give you some, let's say, trends and colors.

Absolutely. So just on gross margin, the thing to keep in mind is that there are several drivers. There is currency, there is a mix, the price and there is the loading of the fab. And the loading of the fab is by far the most potent driver of margins.

So we don't guide on gross margin, but think of the fab loading as a drag on the gross margin of somewhere around 600 bps. I hope that's helpful. In addition to that, there is the foreign exchange, which should be a drag of approximately 300 bps.

And this is half-on-half?

And of course, it works both ways. When the reloading -- when fab will reload, we will see operational gearing.

Yes, particularly after the effort we made.

This concludes the question-and-answer session. I'd like to hand the program back to Pierre Barnabe for closing comments.

And thank you very much for your interest in Soitec and for the depth and quality of your questions. The next date in our agenda will be the release of our fiscal year '26 results on May 27 with Laurent after market close and a presentation held in Paris on May the 28th.

In the meantime, we will be very happy to meet with you on the road and at the Mobile World Congress in Barcelona very soon. This ends our call for today. Thank you.

This concludes today's call. You may now disconnect.

Welcome to the Soitec Half Year Results 2025, 2026 Presentation. Today's conference will be hosted by Pierre Barnabe, Chief Executive Officer; Albin Jacquemont, Chief Financial Officer; Steve Babureck, EVP, Chief Strategy Officer; and Alexandre Petovari, Head of Investor Relations.

[Operator Instructions]

Now I will hand the conference over to Pierre Barnabe to begin today's conference. Please go ahead.

Hi, everyone, and welcome to Soitec H1 '26 Results Conference. I'm Pierre Barnabe, Soitec's CEO, and I'm very pleased to be with you today as well as with Albin Jacquemont, our Chief Financial Officer; Steve Babureck, Chief Strategy Officer; and Alexandre Petovari, Head of Investor Relations.

Before we begin, please take a moment to read the disclaimer included in this presentation. We have a lot to cover today. But before we start the formal presentation, let me share a few words about the current fiscal year.

Fiscal year '26 is a special year for Soitec. As you know, I have decided to leave the company at the end of March after 4 years, and I personally recruited Albin as our new CFO, giving him a clear mandate to strengthen our financial discipline and clean up our balance sheet. This job has already been done and done very well.

H1 '26 reflects that discipline and the priorities we set back in May, meaning focus on what we can control, give absolute priority to cash and take deliberate sometimes tough, actions to correct inventories and improve cash conversion.

These actions have been fully launched, but the impact has just started to materialize. We are being methodical and sequential, managing our own inventories, optimizing working capital and adjusting our cost structure accordingly, while maintaining selective investments in strategic areas.

At the same time, we are progressing on multiple fronts, expanding our product portfolio, preparing for new end markets and rolling out our new client and product-centric organization, which positions us to capture the next phase of growth. Our incubators introduced last May are also delivering promising results.

We are identifying significant opportunities as key players explore SOI for advanced computing applications and memory. This is a large and fast-growing market, and we are at the forefront of materials innovation, combining cutting-edge R&D capabilities with the ability to industrialize rapidly and produce at scale, a unique differentiator for Soitec.

These initiatives comes with a high risk reward profile. So we will remain prudent in our commitments until we see clear customer engagement. That said, recent developments confirm that our efforts are well targeted and aligned with where the market is heading.

As you will see, I have asked the teams to continue executing this disciplined plan, combining financial rigor and strategic focus, so that Soitec emerges stronger and ready for its rebound.

Let's begin with the main highlights of our first half -- first year -- first half year. Our H1 '26 performance reflects the actions we have taken to strengthen cash generation with lower production volumes to support the reductions of inventories.

Revenue reached EUR 231 million, down 29% organic, compared with last year. Our 34.1% EBITDA margin mainly reflects the smaller revenue base and a temporary increase in inventories supported by continued volume production.

Initial cost measures have had a limited impact so far, as expected, given their recent implementation. Their benefits will start to materialize in the coming quarters.

Finally, our EUR 26 million operating cash flow reflects our effort to reduce production volumes to correct inventories and a temporary increase in working capital as inventories rose in H1 to support our H2 deliveries, partly offset by lower CapEx.

Looking at revenue by quarter. Q2 confirms the expected rebound from our low Q1 '26 with a 47% sequential organic increase. Our first half revenue reflects different dynamics across divisions, strong growth from AI-related products with the Edge and Cloud AI division, up 34% organic year-on-year, excluding the impact of the anticipated major SOI phaseout, offset by continued weakness in mobile and automotive.

Let's start with Mobile Communications. H1 revenue reflects the continued inventory correction at certain foundry customers as anticipated. RF-SOI inventories remain high, but they are going in the right direction. We expect further correction in H2 '26 and fiscal year '27.

We also continue to expand beyond RF-SOI. POI remains a major growth driver with 11 customers in production and 12 in qualification. While we saw a temporary slowdown in Asia after a very strong initial ramp last year, adoptions continue to expand among leading fabless companies, supported by new design wins for flagship smartphones.

Beyond RF-SOI, we continue to make solid progress in next-generation communication product with FD-SOI adoption advancing in Wi-Fi 7 SoCs for premium smartphones, confirming our position in future communication architectures. We are also progressing in our 18-nanometer FD-SOI road map as shown by the announcement on Tuesday of a design win from a key customer.

FD-SOI technology brings advanced low-power computing with high level of reliability, which is critical for satellite communications applications. Our Edge and Cloud AI divisions continue to show strong momentum.

In the first half, revenue reached EUR 96 million, flattish organic year-on-year, but up 34% when excluding the anticipated Imager-SOI phase-out, reflecting robust demand for AI-related products.

The increase was mainly driven by higher Photonics-SOI sales, benefiting from AI-driven investment in data center infrastructures and by strong demand for FD-SOI across both edge and cloud applications.

On Photonics-SOI, we are leveraging the AI acceleration across the industry, supported by large-scale CapEx investment. The technology stands out as the most efficient solution for high-speed optical interconnects, including co-package optics, which enable faster, more energy-efficiency and cost-effective data center architectures.

Photonics-SOI continues on its fast growth trajectory from a very low point in fiscal year '22 to approaching $100 million in revenue for fiscal year '26.

On FD-SOI, our product portfolio continues to expand, supporting new generations of AI computing devices and edge applications with strong customer engagement and committed capacity investments.

On Imager-SOI, we completed the phaseout of first-generation product in H1 '26, which represented an impact of around $32 million.

Residual purchase order in Q2 '26 generated a few million euro revenue.

Let's move to Automotive & Industrial, where market weakness continues to weigh on activity. In a challenging automotive context, we continue to see increasing adoption of our products and rising content per vehicle, driven by infotainment, autonomous driving, functional safety and electrification trends.

Power-SOI sales were impacted by inventory adjustment at customers following a strong restocking at the end of last year. We are preparing the transition to 300-millimeter to meet growing demand for battery management systems and vehicle electrification applications.

FD-SOI adoption continues to progress, supported by leading foundries and IDMs, developing automotive solutions for ADAS and edge computing in radars, microcontrollers and wireless connectivity.

On SmartSiC, we have revised downwards the market perspective set. When Soitec launched the program in 2021, reflecting intensified competition from Chinese monoSiC players.

We are continuing to qualify 5 customers. While we are seeing growing interest in SmartSiC's efficiency benefits for next-generation power supply and data center applications, these opportunities are unlikely to materialize in the near term.

Let me now say a few words about our new organization, which the entire Executive Committee has been working on for several months. This new client and product-centric structure strengthens Soitec's readiness to expand into new SOI and beyond SOI end markets and applications.

It is built around 4 key pillars: one, the acceleration of our product portfolio expansion and diversification, structured around 5 established product lines, already industry standard or on their way to becoming SoCs, FD-SOI, Photonics-SOI, RF-SOI, POI and Power-SOI.

Recent progress on the product development front supports our strategy to enter new markets and new applications with SOI and beyond SOI. Two, a more balanced customer, supplier and geographic base, expanding our ecosystem influence. Three, an innovation powerhouse driven by more targeted R&D investments focused on future growth opportunities; and four, agile industrial capacity management, ensuring optimized utilization of our state-of-the-art production tools and greater asset fungibility across sites.

Let me now leave the floor to Albin for the financial review. Thank you, Albin.

Thank you, Pierre, and good morning, everyone. Let me begin with the key financial highlights for the first half, some of which Pierre has already touched upon before taking you through the details of our financial performance.

As Pierre mentioned, we have mandated teams across the organization to reinforce financial discipline and accelerate the cleanup of our balance sheet.

I will update you on the progress we have made on this front. Our first half results reflect the deliberate actions we have taken to initiate a reduction in inventories in the second half of the year and to strengthen cash generation, all while maintaining close oversight of customer demand and inventory levels.

We delivered revenue in line with our first half guidance, although organic revenue declined 29% year-on-year, reflecting continued complexity of the market environment. Our EBITDA margin improvement is largely attributable to a lower revenue base and should be viewed in conjunction with a temporary increase in inventories, supported by ongoing production volumes.

Our net result was minus EUR 67 million, primarily reflecting nonrecurring items including the SmartSiC impairment and the one-off noncash foreign exchange conversion loss, recorded in the first quarter.

Excluding these nonrecurring effects, current net income was broadly stable at minus EUR 2 million. Free cash flow was minus EUR 31 million, reflecting seasonality, lower revenue and a temporary increase in inventories ahead of second half deliveries, partly offset by lower capital expenditures.

Turning to the balance sheet. Our position remains solid. We closed the half year with EUR 483 million in cash and investment, pro forma the repayment of the OCEANE, which took place on October 1 -- October 2025 and with EUR 145 million in net debt.

This maintains a robust financial profile with 0.5x EBITDA leverage, including leases recorded under IFRS 16 and provides us with ample flexibility to support our strategic and financial priorities. Pierre already addressed the revenue performance, so let me move directly to the P&L.

As you heard from Pierre, reducing working capital and reinforcing cash generation are top priorities, and we have advanced on these fronts.

First, we actively managed fab utilization to better align production with planned deliveries, thereby paving the way for a reduction of our own inventories in the coming months.

Second, we launched a comprehensive cost reduction program, addressing our major cost drivers.

Third, we scaled back capital expenditures. These actions are all aligned with our objective to enhance cash generation, improve operational efficiency and secure lasting savings across the company while preserving our technological capabilities.

The key message I would like to leave you with is that while these actions will take a few months to translate into meaningful results, we will remain relentless, systematic and disciplined in the execution.

Gross margin declined 490 bps year-on-year, driven by 3 factors: the disposal of Dolphin Design, representing 120 basis points; lower fab loading as an initial step towards reducing inventories and an unfavorable mix price effect.

Going into H2 2026, do expect a significantly lower loading of our fabs and that will weigh obviously on our gross profit. Net R&D expenses decreased by EUR 23 million year-on-year, reflecting the disposal of Dolphin Design, a favorable phasing of public funding and lower material purchases linked to reduced use of pilot lines.

Excluding the effects of the Dolphin Design disposal and the timing of public funding, gross R&D spend was broadly stable year-on-year, underscoring our continued commitment to technology leadership.

SG&A expenses declined by EUR 6 million compared with the prior year, driven by lower compensation-related expenses, tighter control of discretionary spending and the disposal of Dolphin Design.

Other operating expenses totaled EUR 46 million and include a EUR 41 million impairment loss on SmartSiC, noncurrent assets following a downwards revision of business prospects as a result of increasing competition from Chinese players and EUR 3 million downward adjustment to the earn-outs related to the disposal of Dolphin Design.

As a reminder, the SmartSiC program was launched well before 2022 at a time when prices for alternative competing products were significantly higher than they are today. For context, Dolphin Design acquired in 2018 generated EUR 40 million of operating losses over the period since its acquisition.

We also incurred a EUR 17 million one-off noncash foreign exchange conversion loss in Q1 of our financial year. This loss results from the reevaluation of balance sheet, foreign exchange exposures following the depreciation of the U.S. dollar against the euro with the euro-USD moving from 1.08 at the end of March 2025 to 1.18 at the end of June 2025.

As background, in 2021, the company began contracting euro-denominated loans at the level of our affiliate in Singapore, whose accounts are kept in U.S. dollars. Converting euro-denominated debt into U.S. dollars had been beneficial to our financial results as long as the U.S. dollar was appreciating against the euro, and we repeatedly recorded foreign exchange gains.

However, in Q1 of our 2026 fiscal year, the situation reversed, leading to the foreign exchange loss recorded this quarter. Because experiencing significant foreign exchange volatility on our results is clearly not in line with our standards, we took action. As a first step, we implemented appropriate hedging instruments to prevent foreign exchange movements from impacting our financial results.

This is now in place. In addition to that, we engaged external advisers to conduct a comprehensive review of our foreign exchange risk management framework, and this review is now well advanced.

Now moving to the free cash flow. First, let me note that we have aligned our definition of free cash flow with prevailing market practices. The updated definition incorporates 3 key changes. First, all tangible and intangible capital expenditures are included in the free cash flow calculation regardless of how they are financed. Capital expenditures that were previously funded through finance leases and therefore, excluded from the CapEx base are now fully taken into account.

Second, free cash flow now includes both interest received and interest paid as well as other financial expenses. Previously, only interest received was taken into account in the free cash flow calculation.

Lastly, the free cash flow definition now excludes inorganic CapEx, which incidentally was nil over the period. Operating cash flow was EUR 26 million for the period, down EUR 103 million year-on-year mainly, reflecting lower EBITDA and an increase in working capital driven by higher inventories built ahead of deliveries scheduled in the second half of the year.

Working capital resulted in a cash outflow of EUR 57 million compared with an inflow in the prior year. This primarily reflects the seasonal buildup of inventories to support second half deliveries and the reduction in trade payables, partly offset by a decrease in trade receivables following the strong fourth quarter 2025 activity.

Capital expenditures were largely directed towards industrial investments, including manufacturing tools for SOI and POI products in Bernin and Singapore, upgrades to our industrial facilities and targeted IT investments to enhance operational efficiency.

This results in minus EUR 31 million of free cash flow under the new definition. We maintained a moderate leverage ratio with net debt to EBITDA at 0.5x EBITDA at the end of H1 2026. Let me conclude my remarks with a few comments on the balance sheet.

As part of the financial discipline mandate issued by Pierre to the teams, we have carried out a restatement of the prior year account. In accordance with IAS 8, we have retrospectively restated consigned raw materials as inventories with a corresponding amount recorded as trade payables to reflect the transfer of control upon receipts at our sites.

This restatement has no impact on the group consolidated income, EBITDA, working capital, free cash flow or equity. As a result, EUR 37 million of additional inventories and trade payables were recognized as of March 2025.

For context, this compares with EUR 31 million of consigned inventories as of September 30, 2025. As of September 30, 2025, cash stood at EUR 808 million, reflecting a temporarily high level of liquidity ahead of the repayment of the EUR 325 million OCEANE 2025 bonds, which took place on October 1, 2025.

Post OCEANE repayment, net cash was EUR 483 million at closing. As of September 30, 2025, we are undrawn on the maximum EUR 150 million use of proceeds loans secured from EIB.

Our available liquidity post OCEANE repayment, including our undrawn confirmed revolvers was EUR 603 million.

Financial debt totaled EUR 953 million, up from EUR 782 million at the end of March 2025, reflecting the new EUR 200 million Schuldschein loans and prior to the OCEANE repayment.

This brings my prepared remarks to a close. As you can see, we did not shy away from making tough decisions. As I mentioned, our first half performance reflects the mandate to take decisive actions on inventories, strengthen balance sheet discipline, reduce costs and improve cash conversion.

While the initial measures were implemented in the first half, we will accelerate and amplify these actions in the second half and expect to see inventory improvement by year-end.

Our focus remains laser sharp on generating positive free cash flow under the new definition by the end of the fiscal year. At this point, let me pass you on to Pierre to take you through our strategic priorities and guidance.

Thank you, Albin. That's very clear. Let's now have a word on our guidance. On revenue, we expect Q3 '26 organic growth in the mid- to high single-digit range sequentially.

For the end of this year -- fiscal year, we expect continued undershipment in RF-SOI as we pursue the inventory correction, persistent weakness in automotive and a strong momentum in Edge and Cloud AI, supported by sustained demand for Photonics-SOI and FD-SOI.

On capital allocation, we remain fully committed to a disciplined and agile investment strategy. We now expect fiscal year '26 CapEx of around EUR 140 million, down from the EUR 150 million previously indicated and well below the EUR 230 million spent in fiscal year '25, reflecting our selective approach and focus on cash generation.

We continue to leverage the fungibility of our industrial footprint to optimize asset utilization. On financing, we redeemed those EUR 325 million OCEANE 2025 convertible bonds on October 1 and successfully secured new funding.

Finally, on profitability, our H2 gross margin will reflect fab unloading with headwinds from mix price, FX and lower volumes. Some important data points for profitability, a 10% decline in fab loading resulted in a 300 bps negative impact on gross margin. The 5% -- $0.05 removed in the euro-dollar rates represent roughly 150 basis points impact on EBITDA and EBIT margin.

And our net exposure is about 95% hedged at around 1.10; as well deliberately reducing production to bring inventories down year-on-year by the end of fiscal year '26, while moderating our CapEx profile.

All actions remain focused on securing a positive free cash flow for the full year.

To conclude, H1 '26 was in line with our expectations. We are focusing on what we can control, taking deliberate actions to reduce inventories and applying strict financial discipline to improve our cash generation. Our new client and product-centric organization ensures tighter alignment between innovation, product road maps and customer needs, reinforcing Soitec's readiness to expand into new SOI and beyond SOI markets and applications.

We are also progressing on our incubators with strong traction in advanced computing and memory. A large and fast-growing market, where Soitec materials innovation and ability to industrialize rapidly give us a unique position.

I have decided to leave the company at the end of March, but I remain fully committed until then to deploying our new organization, accelerating the company's shift towards AI-driven markets and application and preparing Soitec for its rebound.

We are strengthening the foundation of the company. Our growth potential remains intact in an addressable market set to expand at a double-digit pace. I have full confidence in Soitec's ability to deliver meaningful value.

This concludes our remarks. Thank you for your attention. Now let's please move to the Q&A.

[Operator Instructions]

The next question comes from Aleksander Peterc from Bernstein.

I have 3 to start with. So the first one is, if you could explain what drove the relative resilience of your gross margin and your EBIT margin in the first half?

And how we should think about margins sequentially. You do cite headwinds into the second half on unloading charges. Could you quantify them? And when you say you have headwinds, is that implying a sequential decline in EBITDA margins in the second half?

Second question is on your investment in SmartSiC. Is that now a total write-off? Or do you still keep assets on your balance sheet that are attached to SmartSiC? And can you also tell us what you're going to do now with Bernin 4. Is it going to be repurposed? What are you going to do aboutit?

And then final question on your situation with your former licensee GlobalWafers. Now your press release suggests that the cross-licensing agreement between you and them has been terminated.

But it seems to me that they continue to manufacture SOI wafers, they have a big fab being built in Missouri in the U.S., 12-inch fab that they described in their third quarter results as an SOI facility. So does this mean that they have a work around your patents? And if they do it, will others follow?

Thank you, Alex. What I propose is the question one regarding the EBITDA H1 and H2 to be treated by Albin as well as the first part of your second question of SmartSiC, I will take over the B4 fulfillment as well as your third question on GlobalWafers, then Albin, please.

Yes, sure. Alex, of course, what we are doing will have a meaningful impact sequentially and on the full year on the profitability very clearly. Like Pierre said, the priority for us is to reduce our inventories.

In a context -- in market context where revenue is under pressure, it is probably not very easy. And what we are doing to achieve our objective is to significantly reduce the loading of our fabs.

It's quite mechanical. When revenue is stable or under pressure, if you don't reduce the loading of our fabs, then inventories do not decline, and that wouldn't be consistent with our objectives.

Now when you look at our profitability and our gross profit, I think that the 2 main key drivers of our gross profit are: first, fab loading, which is very important; and second, the mix and price.

So what we will see in H2 is significantly lower fab loading, whereas typically, the loading of the fab would be higher in the second half of the year for the company. That will not be the case this year.

We will see lower process costs, and we will see a much lower absorption of these process costs in the inventories.

To put things -- to take -- answer your question with a different angle, idle costs or underutilization costs will be significant in H2. And that will weigh on the profitability. So yes, you should expect a sequential decline of gross profit, EBIT and EBITDA in H2.

As for your second question, Pierre said that we review downwards prospects on SiC, but still, the product is -- has great technical capabilities, and we are in the process of qualifying with some customers.

So we do expect some business, and the impairment that we took against our assets reflects our expectations. And overall, what we are doing is maximize the fungibility of our assets to minimize the financial consequences of these prospects being revised downwards.

Then I will take over, if you don't mind, Albin, on the Bernin 4 capacity. First of all, we need to keep -- we need to keep in mind that we're going to continue and we'll have to continue to produce SmartSiC.

First of all, because we have 5 customers today under qualification and pre-advanced qualification, and that is progressing on automotive applications.

Second, we are working on new prospects for new applications in the data centers areas and the lower efficiency, let's say, management.

And third, SmartSiC as a road map going to evolve and going to improve because this product is recognized and has an excellent product. That's the reason why we believe that despite the postponement in the business plan, this product is going to find several market applications in the future.

And we need to keep Bernin 4 product line for SmartSiC. That said, as you know already, B4 is busy with other applications in our process because close to 1/3 of the footprint of B4 is dedicated for refresh, SOI refresh that is, as you know, a very important piece in our process, a very important milestone in our process. B4 is already partially used for refresh SOI.

And talking about rebounds, B4 going to be used for the rest of the footprint for any other application, particularly around SOI, if necessary, to produce more of the product, we will have to deliver to our customers in the coming years.

And we are not concerned by the ability to use as it is already the case, B4 for SmartSiC, refresh-SOI and other SOI production in the near future.

Regarding your third question on GlobalWafers, then it has been said that we terminated our license agreement with GlobalWafers. We are today in a transition period of this application.

Of course, you can't make SOI without using SmartCut and our dedicated and patented processes. Then we're going to observe in the future, in the near future the way GlobalWafers going to produce SOI product in their brand-new U.S. factories. And we are today in transition and in observation.

The next question comes from Sébastien Sztabowicz from Kepler Cheuvreux.

One on the inventory situation, both on RF-SOI at your large foundry customers, and also, on the other hand, on auto and industrial market. Where are you standing right now in terms of level of inventory in mobile?

Are you still in RF-SOI, are you still expecting to go back to 11 months of inventory in December or you are a little bit trending behind this target?

And the second question is on -- a follow-up on the first one on fab loading. What was the fab loading in H1 exactly? And where do you see the loading trending in H2 based on the Q3 guide and what you can expect for Q4?

And the last one is on the OpEx trend for H2 because in H1, you had big subsidies impact or tax credit, I don't really know, but the OpEx were quite low. How do you see OpEx moving to the back half of the year?

Hello Seb, then I propose to take the first question, and I will ask Albin to relay me on the fab loading and the OpEx evolution.

Then regarding inventories, what we said in July is that the equivalent 8 inches, 200-millimeter wafers in our customers' inventories, Soitec's inventories by our customers, were around 2.5 million wafers units.

What we are measuring today, what we are observing is around 2.3 million, then we are clearly in a trend of depletion, that's a fact. And we want to focus on what we can measure, and this one is measurable.

Then what we see is a continuous depletion of these inventories, meaning that some of the customers going to go for a minimum level of inventories.

We can translate it in the fact and this is what we already said in July, and we repeat it right now is that H2 is going to be another semester of depletion to reduce the level of 8 inches wafers inventories equivalent by our customers.

But we think also that the year 2026 going to see even further depletion to reach a level that's going to be pre-COVID. But what we believe is really to give you a maximum of information on what we can measure. And what we can measure is the evolution of the overall inventories by our customers. And 2.5 million equivalent 8 inches July, 2.3 million equivalent 8 inches September, and we're going to give you another point for the next call in February. Albin, for fab loading.

Sébastien, yes.

In automotive, Pierre, where do you see the inventory?

Sorry, I missed the automotive. For the automotive, of course, we are not a major player with Power-SOI, but we see what is observed everywhere in the automotive world, meaning that there are quite big inventories still, then Power-SOI is experiencing a big drop this year.

We don't see, let's say, a clear rebound for the year after for calendar '26. It seems that what we have today engaged with some customers going to be sufficient for this year and next year, provided the execution of the existing LTAs.

And we don't see, let's say, a clear rebound in automotive before 2027 so far on Power-SOI, linked to, of course, a low level of electrification volumes in units of cars that is not very high.

The good news is that we see a shift with more and more qualification by new customers on 300-millimeter platforms that's going to give another [ double ] of oxygen to develop Power-SOI beyond 200 millimeter. Albin?

On fab loading, Sébastien, look, traditionally, our loading is much higher in H2 than what it is in H1. For instance, last year, in H1, our loading was slightly below 60% in H1, and it was in excess of 80% in H2, that was for fiscal year 2025.

In the current year, in H1, our loading was a little bit lower than what it was in H1 2025. And that was because the actions -- the decision, the actions Pierre, referred to have been taken in July.

And there is a time line for us to -- a time lag, sorry, to adjust the production planning. So the decision we have taken will take full effect in H2.

And for H2, I'm not going to give you -- I'm not going to share our forecast fab loading. But think of it as being slightly lower than what it was in H1 of the current fiscal year.

So you see that compared to the fab loading in H2 2026 compared to the fab loading in H2 2025, it is much, much lower, and that's a very significant shift, which, like I said, we will have significant impact, temporary impact on our gross profit in H2 2026 fiscal year. Very atypical for Soitec.

As for the OpEx, the first thing to say is that while we are telling you that our profitability will be will be lower, we do not stay idle, and we have engaged a comprehensive program to reduce our cost drivers.

Our OpEx line is not very easy to comprehend in our net income because it is OpEx, what you see is a net of our gross OpEx, net of what has been charged to the process cost. So of course, what we are doing on the production has an impact on the OpEx level that you are seeing.

On H1, as you could see, OpEx are down EUR 5 million. And for the full year, OpEx will be down as well. And in fact, the financial impact of what we are doing on our SG&A is higher than the EUR 5 million that you are seeing, but not fully visible on the P&L because of this charge-out framework that you see -- that we have in place.

The next question comes from Francois Bouvignies from UBS.

I have a couple of quick questions. So Albin, maybe on this cost saving program that you are also delivering on top. Can you quantify a bit the cost saving program that benefit you could bring maybe for '27 once it's fully implemented or a bit more time line and details around this cost savings at the group level?

And then the gross margin, I mean, what kind of gross margin do you target in terms of range post all these adjustments and inventory correction. How should we think about Soitec's gross margin in the medium term?

And then my last question, if I may, is on POI. I mean it seems that you have good prospects and the penetration is increasing, but we feel like now your revenues are under pressure because of Asian customers. How should we think about POI trajectory from here? Is it going to recover like in the second half of the year? Or would that take longer?

Yes. On cost savings, we did tell you that we did not shy away from transactions. To give a little bit of color, we have agreed with the unions about a thorough being put in place across the company. That does include absolutely everyone, not only the production, but also the innovation and also the G&A and functional departments.

So it shows, it testimonies how resolved we are at driving costs out of the system. First -- that was the first thing.

Second thing is that incentive related and the profit sharing related expenses will be lower and will reflect our results.

So the impact of this is significant -- is significant and goes -- is above EUR 5 million savings that you see in H1.

The third things that comes on top of that is that there is a frugality which is being put in place under the direction of Pierre across the company. And all in all, we expect the savings to be significant on the year.

As for fiscal year 2027, we will see lasting impact of these savings, but we don't want to hamper the potential of the company for a recovery by doing inappropriate cuts into our resources. It's too early for me to -- for us to guide on 2027, obviously.

Francois, on POI, to take your question. POI experienced a very, very intense growth last year to equip our Asian, particularly Chinese customers, and that really made our POI as a standard in this area. And we see clearly a relay coming from Western world customers for flagship smartphones.

This year being, as we already said, a transition between these 2, let's say, these 2 moves and to shift of, I would like to say, continents.

But we clearly see and we continue to see a 20% growth CAGR on POI because we see more and more adoption, more and more customers than plus 50% may be flattish for this fiscal year. And -- but we see, over the years, clearly, a strong growth, around 20% CAGR and more and more adoption.

And on the gross -- and on the gross margin potential for the company, I mean what kind of target do you -- anything you can add here?

I'm trying to -- I will try to answer this question and help with modeling. The first thing is that we don't want any more to guide on the gross margin. And the reason for that is not because we don't have visibility on what the gross margin will be, but we don't want our action on the inventory reduction to be hampered or constrained by the guidance we gave to the market on the gross margin.

So we don't guide. Nevertheless, you need to model what our gross margin will be and we'll help you in so far as we can.

So a few things for you to know. When you look at our costs, of course, raw material cost is 100% variable. So needless to elaborate on this. When you look at our direct manufacturing costs and indirect manufacturing cost, I would say that around 30% are variable, 70% are fixed. So if you combine these manufacturing costs with the raw material, it's 1/3 fixed, 2/3 variable.

And to go a bit further helping you with the modeling, when you look at our cost split in terms of cash and noncash that may be useful because we fully realize how difficult it is to model, I would say that our manufacturing costs are approximately 70% -- 30% minus cash and 30% plus noncash. And I hope that helps.

[Operator Instructions]

The next question comes from Jakob Bluestone from BNP Paribas Exane.

Firstly, you made a comment, I think it was part of the SmartSiC write-down around increasing competition from Chinese players. And I just wanted to clarify, is that just purely for SmartSiC? Or are you seeing broader competition emerge from Chinese players? If you could maybe just clarify that comment.

And then just secondly, I think you mentioned further inventory destocking in FY '27. So maybe if you can maybe put that in the context of where do you see the EUR 2.3 million kind of going next year? And is that your expectation that, that's the bottom? Or just kind of what are your thoughts around FY '27 in the context of the comments you made on inventories?

Yes, Jakob, on the first question, yes, very fierce competition coming from monoSiC has impacted our SmartSiC, let's say, initial plan that was built in 2021. And we revised it to really bring SmartSiC as a premium product that fits with the 5 customers' expectations we have today under qualification.

And of course, competition is everywhere. But so far, so quite good because we are maintaining our market shares everywhere, including in China.

As you know, if we look at just RF-SOI that used to be our mono product a few years ago, and we're still, of course, observing cautiously this market, we are proceeding with many tier downs of smartphones coming from any integrators, any OEM, and we clearly see that SOI is a standard, first for particularly radio front end and more and more for filters with our POI solutions.

And in many cases, it is Soitec solution. Then our market share today are, let's say, protected because we continue to innovate because we are able to deliver in terms of quality to our customers wherever they are, including in China.

But that said, we are not naive, and we are very picky in the observations on any players trying to promote SOI-like solution.

But today's impact, we have clearly disclosed that concerns the monoSiC particular competition that is changing the trajectory of SmartSiC.

If we look at the evolution of the 2.3 million 8 inches equivalent inventory Soitec by customers, we clearly -- we're going to continue to undership. It means that the trend of depletions going to continue semester after semester for sure.

Then in H2, we're going to undership. And we do believe that even further, we're going to undership in the year '26.

We don't know, at the end of the day, what's going to be the objective of each of our customers. It's going to depend on their strategy of inventories, but we are taking cautious assumptions, meaning that we do believe that many of them, a large part of our customers, going to reach the pre-COVID level of inventories, and we prefer to have this cautiousness than under shipment, depletion of the inventories, and it is highly probable the 2.3 million to decline semester after semester at minimum end of year '26.

The next question comes from Emmanuel Matot from ODDO BHF.

I have 2 remaining questions, maybe for Albin. First, what do you target in terms of inventories in the balance sheet, what normative level would be growing given the current visibility you have for the business?

I mean maybe an indication as a percentage of your sales revenue would make sense.

And second, has there been any progress in the tax adjustment procedure with the French authorities?

Very good question, Emmanuel. The company said in the previous year, I wasn't there, that the normal working capital requirements as a percentage of revenue should be within a range of 30% to 40%.

And I fully subscribe to what has been said. We will not guide for now in terms of components of working capital requirements, but I do confirm that 30% to 40% is something, which is a level, which is adequate, which should lead you to the conclusion that there is much cash generation opportunities ahead of us.

Because obviously, as things stand today, we are at a much higher level. So that's for the working capital requirements level.

As for the tax reassessment. So we are done, as you know, on responding to the request of the tax authorities. We did not receive an answer to our response yet. We will -- I will not forget. In the meantime, we have strengthened our defense, worked a lot with independent experts. I could not say more than that, but it should bring you some level of confidence on this.

The next question comes from Craig Mcdowell from JPMorgan.

Just the first one on pricing. You've talked about pricing in the context of gross margin. I'm wondering whether you can translate that back to what that's doing to your top line? And is this pricing pressure, more negative pricing pressure on particular products? Or is it particular customers? Any commentary probably on pricing impacting your sales would be helpful.

The second question, I just appreciate your thoughts at this early stage on the merger between Qorvo and Skyworks, I understand both of them are your customers. Just if you could give any thoughts on what that might mean for both pricing, but also how that might impact your sort of channel inventory worked on, presumably, they'll look at some kind of synergy on inventory if they do merge.

On the pricing than what we can see that, of course, there are continuous pressure depending on the product.

But overall, we are in low single-digit decrease and quite limited because we are also promoting more and more high and added value product.

We are also -- we are having road maps. There are projects that is increasing the overall value. And we are protecting, thanks to a good mix and a better mix, the level of prices to compensate the pressure we are getting.

And of course, as a kind of parallel of this pressure that we are limiting at the end of the day, we are benefiting from lower prices from bulk providers, thanks to the fierce competitions we have today.

Of course, we continue to have this discipline and to invest in our existing road maps to invest in our innovation and R&D to keep higher the value and the prices of our product and putting in the market new products and new features.

Just I will not comment that much on the Qorvo-Skyworks, let's say, ongoing project of merger. What we can tell you is that these 2 companies are customers, but complementary customers.

We don't see any de-synergies and potentially rather synergies, but it's going to be a long process, and we'll have to -- I'm sure, to comment later when they're going to be completed.

This concludes the question-and-answer session. I'd like to hand the program back to Pierre Barnabe for any closing comments.

Thank you all for following our H1 '26 analyst call and for the quality of your questions this morning. The next date in our agenda will be the release of our Q3 '26 revenue on February 4 after market close. In the meantime, we'll be very happy to host you in Shanghai on November 25, where we'll be hosting our first Soitec China Day with key industry leaders and customers from the China SOI ecosystem. This ends our call for today.

Ladies and gentlemen, the conference is now over. Thank you for participating in the conference. You may now disconnect your lines. Goodbye.