Technoprobe S.p.A. (TPRO) Earnings Call Transcript

Good afternoon, everyone, and welcome to Technoprobe's 9 Months 2026 Financial Results Presentation. Operator Instructions] And I have the pleasure handing over to Technoprobe's CEO, Stefano Felici. Please go ahead, Stefano.

Good afternoon, everyone, and thank you for joining us for Technoprobe's results presentation for the first 9 months of 2026. As usual, I'm with Stefano Beretta, our CFO, presenting the 9-month 2026 results and the guidance for the last quarter of this year. We delivered strong growth during the period, supported by AI-related demand and our ability to translate that demand into operating results. Our performance in the first 9 months of 2026 reflects the combination of structural AI growth and strong company execution. Revenue reached EUR 787.4 million, up 68.8% compared with the same period last year. Gross profit increased by 116% to EUR 447.3 million, with a gross margin of 56.8%. EBITDA reached EUR 376.3 million, up 158%, with a margin of 47.8%. What stands out is that profitability grew significantly faster than revenue, demonstrating the operating leverage in our business as volumes increased. On the demand side, growth in GPUs, CPUs and ASICs continues to support our business. At the same time, increasing device complexity requires greater test intensity and more testing sessions. Our opportunity, therefore, reflects both rising volumes and more demanding testing requirements. On the execution side, our focus will continue to capture this demand and delivering at scale while maintaining consistent operational performance. We are also laying the foundations for further improvement. That means investing in capacity and strengthening the manufacturing processes needed to support a larger business. Being capacity is the key driver also for the next year, in addition to a deep dive into 9 months and quarterly financial results, we will discuss the state of art of investments we are making to expand the manufacturing capacity. Let me now hand over to Stefano Beretta for further details on 9 months results.

Thank you, Stefano. Good afternoon, and thank you for joining us. Today, I will briefly review our third quarter and 9-month results before focusing on the most important message how we are preparing Technoprobe for an extraordinary phase of capacity growth in 2027 and 2028. The third quarter marked another record for Technoprobe. Revenue reached EUR 323.3 million, up 130% compared to the same period last year and 16.7% sequentially, reaching the high end of our outlook range. Gross profit was EUR 197.7 million, representing a margin of 61.1%, while the EBITDA reached EUR 170.2 million, with a margin of 52.6%. For the first 9 months, as already shown by Stefano, revenue was EUR 787 million. with an increase of 68.8% year-on-year and gross profit reached EUR 447 million, with a margin of 56.8%. And the EBITDA was EUR 376 million. up 158% with a margin of 47.8%. This growth was organic and driven primarily by the artificial intelligence and data center applications. Consumer segment recorded moderate growth while automotive and industrial continue their gradual recovery. Foreign exchange remained a headwind compared to the same period of prior year, with a negative impact of approximately EUR 30 million on the 9 months revenue with the 9-month average USD-euro rate at $1.16 versus $1.12 for the same period of 2025. Profitability, both at gross margin and EBITDA level benefited largely from the improvement in production efficiency, product mix, operating leverage as well as the partial expansion of manufacturing capacity realized so far. Stable overhead and R&D costs also supported the strong EBITDA performance, even including a negative ForEx impact for approximately EUR 22 million, which would have brought the year-to-date margin at 48.6%. Our financial position gives us the ability to keep investing ahead of growth. At the end of September, our positive net financial position stood at almost EUR 800 million. while operating activities generated approximately EUR 241 million of cash during the first 9 months. These results matter not only for what we have delivered but also for what they allow us to do next, we can invest in facilities, equipment, people and systems today. rather than wait until demand puts additional and unsustainable pressure on our ability to serve the customers. Let me now turn to our capital expenditure plan, which is the central element of our preparation for the next phase. We confirm approximately EUR 350 million of investment through the first quarter of 2027, with around 75% expected in 2026 and the remaining 25% in the first quarter of next year. The investment plan slide shows EUR 167 million finalized in the first 9 months and additional EUR 158 million already committed at the end of October. So approximately EUR 270 million of the overall program is already allocated to Italy and EUR 80 million to the rest of the world, in particular to Taiwan and China. The program combines new facilities with the optimization of our existing manufacturing footprint. We are not simply adding floor space, we are increasing throughput, introducing the next-generation laser cutting in the assembly equipment, reconfiguring layouts and preparing dedicated production lines. At Cernusco Lombardone, the completion of the new facility is now expected in December 2026, with the ramp-up targeted for February 2027. This brings forward the construction completion compared with the timing discussed at the half of the year and adds 4,000 square meters for probe head assembly. Consistently, additional space in the other part of the facilities, especially in Agrate Brianza will support further expansion in probes manufacturing. In parallel, we are repuposing existing production areas and improving manufacturing processes across our sites. Together with a new facility, all these investments are expected to bring our annual manufacturing capacity run rate to approximately EUR 1.6 billion in the first quarter of 2027. We are also developing a further investment plan for a total amount of between EUR 150 million to EUR 200 million to the end of 2027 and without increasing the footprint. That could progressively increase that capacity run rate to approximately EUR 2 billion by the end of 2027. Just to avoid any misunderstanding, these figures describe manufacturing capacity, not revenue guidance and the timing and utilization of that capacity will depend on the demand and the execution. Our ambition extends beyond the next quarter and beyond 2027. So we are preparing the ground for an extraordinary expansion capacity across 2027 and '28. So that Technoprobe can support customers to substantially greater scale. The priority is operational readiness, buildings and equipment must be ready, but so must the people who operate them and the system that coordinates them. That is why the CapEx program cannot be viewed separately from our digital transformation and hiring program, through which by the end of this year, we will have more than 5,100 employees with an increase of approximately 1,700 people compared to the beginning of the year. Our preparation also extends to China, where Nexprobe combines our Shanghai office with the Suzhou facility, covering approximately 12,000 square meters. The platform brings together local probe manufacturing and assembly, supported by our proprietary patents and technology transfer from Italy with local engineering and customer support. The ramp-up is expected within the first quarter of 2027. Across the group, our manufacturing investment based on a shared proprietary technology, base spanning ceramics, lasers and precision mechanics. So let me turn the floor to Stefano Felici, who can walk you through this page.

Yes. Thank you, Stefano. Let me close with the technology that underpins our growth and positions us for the opportunities ahead. At the heart of Technoprobe is the proprietary technology core, spanning ceramics, laser technology, precision mechanics, PCBs and MLOs, electronics and MEMS. Our strength comes from bringing these capabilities together to solve increasingly demanding test challenges. As semiconductor technology advances, this shared foundation allows us to deepen our presence in existing markets and expand into new applications. In AI and high-performance computing, customers need greater test capacity and throughput while managing higher current and more demanding thermal conditions. Our capabilities in parallel testing, high current handling and thermal management directly address these. As silicon becomes more complex, test intensity per chip also increases. Fine-pitch MEMS, dense contacts and precision integration enable us to meet tighter contact requirements, reinforcing our technical differentiation. In HBM, the challenge is to combine test parallelism with speed and power handling. Our capabilities extend up to full wafer vertical probe cards, supporting our expansion in this application. Silicon photonics opens and other revenue for growth. Here, our capabilities include autonomous and electrooptical probe cards with embedded high-currency and stable fiber array and unit positioning. This brings optical and electrical testing capabilities together to address applications such as co-packaged optics across industrial and AI power applications. We can apply our expertise in high current handling, thermal control and stable content across temperatures to markets, including ADAS, microcontrollers and wide band gap power devices. The key point is the same proprietary technology based supports multiple growth opportunities. We can build on existing expertise, combined capabilities in new ways and tailor our solutions to customers' evolving requirements. Our 9-month results demonstrate the financial performance, this positioning can support. The investments we have outlined today are designed to give us the manufacturing scale to pursue the opportunities ahead. Let me hand over to Stefano Beretta for the fourth quarter guidance and final remarks.

Thank you. Let me briefly address the near-term outlook. For the forecast for Q4 largely reflects the impact of the digital transformation process launched on October 1, 2026, which led to the full adoption of a new ERP, a new MES and new warehouse management systems, together with other integrated vertical systems. The impact on operation was as expected significant during the first month of adoption and the full recovery and efficiency is expected by the end of 2026. For the Q4, so we expect revenue of EUR 270 million, plus/minus 3%, a gross margin of 54.2%, plus/minus 200 basis points and an EBITDA margin of 45.1%, plus/minus 200 basis points. As I set out in our prior press release, we almost confirm our full year range of revenue with a growth and EBITDA margins in the region of 56% and 47%, respectively, in the mid-range. The temporary operational effects of the systems transition in the course of preparing our organization for the next ramp should be viewed alongside our long-term investment priorities. So overall, we remain highly positive about the opportunity ahead while recognizing the uncertainties associated with geopolitics, policies and the pace of recovery across end markets. Our response is to focus on what we can control, technology, capacity, people and execution. Thanks for your attention. We can now move to your questions.

[Operator Instructions] The first question comes from Giovanni Selvetti.

Yes. I have a few. The first 1 is really on CapEx. If you can elaborate a bit more. Maybe Stefano, I know you mentioned it before, but just to understand if I got it correctly, these new EUR 150 million to EUR 200 million of additional capital. Is it going to be mainly did you say, machinery? Or is like the purchase of another factory or the building of another factory? And what are the drivers in a way of this additional CapEx, whether it's more demand for GPUs or if you're preparing for the ramp-up in production of HBM, if you can kind of give a sense on that? And maybe if we stay on HBM, whether if you have an update for us to share along the qualification process of the other 2 memory players.

Thank you, Giovanni, for these questions. So that gives me the opportunity to reiterate the message that it was mentioned during my prepared remarks. So the new additional CapEx do not relate to new footprint. So what we expect to invest in the second part of 2027, so starting from second quarter to the end of the year related only to equipment machineries and systems, and that will allow us to increase the entire efficiency of our production because we will be able to better allocate the equipment altogether for certain department flows. And to answer to the second part of your questions, there are no dedicated departments by products because our production is, let me say, transparent in terms of final output [indiscernible] board and certification and what else in our production flow that can be almost easily translated into the final product, depending on the demand that we are facing from customers. So there are no specific department allocated to specific products.

Okay, maybe on HBM.

You were asked about the qualification status. So we -- I think we can confirm that we have been qualified by one of the players and still in qualification for the other 2. And we can say that for next year for the -- first of all, for this year, we expect revenue of around EUR 10 million. And for next year, a multiple of that number that will be at least by 3.

okay. That's very clear. With this -- if it's possible, you're assuming the same, let's say, times 3 with the same customer or times 3, including also like assuming the qualification of the others?

With the same customer because we cannot, let's say, make any prediction until the qualification is done with the other 2. So the revenue is projected with the same customer right now.

The next question comes from Alexander Duval.

Alex Duval from Goldman Sachs. Obviously, you've issued a new guidance of this EUR 2 billion capacity run rate by the end of '27. Consensus on a full year '27 basis is more like EUR 1.65 billion. So just wanted to understand what the run rate would mean in terms of that full year sales. How should we think about those overall revenues in '27 that can be implied by that new run rate as you ramp, assuming the demand is there. And then secondly, for 2026, you did raise your revenue materially but it seems like margins haven't increased to the extent one might have expected. So just wanted to understand that. Does it reflect conservatism? Or is this, perhaps, a preparation for the expansion ahead? And I've got a quick follow-up.

Okay. About the capacity run rate. So again, let me reiterate clearly the message. This is what we are preparing to be able to manufacture by the end of 2027. So at the end of Q1, we expect to be able to deliver EUR 1.6 billion on a yearly basis, starting from end of Q2. so consensus reflects revenues rather than capacity. So if you project at the year-end, the ramp between EUR 1.6 billion and EUR 2 billion will be gradual based on the investment growth, together with the demand from customers and the utilization we will be able to put into our fab. So this is the projection of a potential ramp that will be available only at the year-end. So it doesn't mean at all we will be able to deliver EUR 2 billion right now by the end of 2027.

Understood. And perhaps on the margins.

For the margin, we expect the operating leverage will be more and more significant as far as we go to -- from, I'm going to say, EUR 1 billion 2026 to EUR 1.6 billion run rate to EUR 2 billion rate. The EBITDA margin, considering especially the SG&A and the R&D impact on our accounts that are limited compared to the revenue growth will be reflected in the growth of the EBITDA margin as well. Still to be quantified because we need to see the ramp up. And by the way, if you look at the 2026 last quarter profitability, you will see a slightly decrease in the profitability. Most of that is related to volume, but there is also a component related to additional costs we are facing in Q4, especially related to labor. This is a message we want to deliver very clearly because we have a hiring program for 2026 that consider approximately 1,700 hires. So an exceptional effort, entirely designed to support the rapid ramp-up that we expect in 2027. A good portion of these hires do not produce revenue right now, but we are recruiting well ahead of the ramp because skilled manufacturing capacity cannot be created overnight. So the new colleagues need time to train and learn our processes and become fully productive. We would rather have people in place and trained before we need them then arrive late. So with the equipment installed, but [indiscernible] start to operate effectively. So this choice of answer with some temporary inefficiency, we will incur costs before the full contribution of those is reflected in outlook. So our financial strength likely allows us to absorb that near-term impact. And with regard it as a deliberate investment in readiness and not a reason to delay the preparation of our customer we require.

Super clear. And if I could just squeeze in 1 very quick follow-up. Obviously, you reiterated the EUR 10 million on HBM memory revenues, and you've now talked about tripling that. Obviously, there's been some discussion in the industry about pushouts of stack heights of HBM. So I just wondered on a multiyear basis, to what degree that impacts how you're thinking about the potential on HBM if we look out several years, if at all?

The potential for HBM is really related to our core technology, which is a vertical technology. So we are leveraging from they technology developed for logic, logic devices, like GPU, CPUs, which are typically much more complex and the full potential, we expect to see the full potential of our technology with the next generation of HBM. So I'm talking about HBM 5. But -- right now, we see already there is a lot of interest to qualify this new technology, the technology we are proposing to be ready for the next generation. So I think we will see different potential in a couple of years from now.

The next question comes from Alberto Gegra.

So my first question is on capacity. You're giving this indication of capacity for 2027 to EUR 2 billion run rate, but you stated that you are expecting to further increase in 2028. So just to have a sense, a rough idea of the CapEx that we should expect in 2028. The second, on the guidance, the step down in the last quarter seems a bit more pronounced than the initial expectation. So I understand some internal inefficiency. Just wondering if there is anything to flag on the demand side. And the last one is the general question about visibility because in August, you talked about good visibility from your customer, I mean, not in terms of order, but on project volume expectation and so on. So how visibility has changed today? I mean, are you incrementally more or less confident about the growth of the next 2, 3 years, you're seeing stronger commitment from customers compared to the past.

Thank you, Alberto. So let me take the first point about 2028 CapEx. But it's a bit earlier today, again, to understand we should be the further of the further CapEx plan. So we are now completing a very important run of investment, seem to be completed in the next couple of months. And then we just mentioned another run of investment through the entire 2027, almost fully allocated to equipment and machineries and clean rooms and what is -- what will enable us to increase internal efficiency without increasing the footprint. So for 2028, of course, there will be other options to be explored, but so far, they are still on the paper. And it's very, very early stage to show that. And about the other point, we don't see any decrease on the demand from customer right now. So the Q4 decline is almost entirely, if not entirely allocated to the inefficiency for the new ERP, around [indiscernible]. So same logic, as we mentioned for the hiring program, the same logic applies to this digital transformation. So the new ERP went live on October 1 and this is marking a fundamental step in building the infrastructure required for a larger and more complex Technoprobe. So the operational slowdown has been as we initially expected. At the headquarters, the completed necessary cutover, for example, required 4 days of total shutdown October then involved the amount of operating inefficiency as the team adapted to the new environment and full operational recovery is expected by the end of November, beginning of December. So we should be clear that a successful cutover doesn't mean that every process is immediately at full efficiency. The priority now is to complete the stabilization and to ensure that through all our customers translating that into new infrastructure for a day-to-day execution. And the broader program includes a full adoption of the ERP, the MES, the warehouse systems, this is intended to give us a stronger visibility and control across planning, across production and inventory and help us to use our growing resources more efficiently. This is why we would encourage you to look at the transition in the context of the next couple of years rather than focusing on the last quarter, Q4 2026. So we are putting in place people and infrastructure required for a completely new chapter of Technoprobe in the service of all our customers.

And for the visibility, we still have a very -- we're not seeing any slowing down, especially in the AI visibility. So all the main payers are still demanding as to increase capacity and they want this capacity as soon as possible. So at this point, we didn't see anyone one is going down.

The next question comes from Bernd Klanten.

Another follow-up on capacity, if I may. I appreciate that it's too early to talk about CapEx in 2028. But you've also shown that you can expand capacity quite a bit without spending new CapEx or without any CapEx assumption, how do you think about that EUR 2 billion number evolving over 2028? And then I just wanted to qualify on capacity as whether that excludes the opportunity from Nexprobe. And then I have a follow-up, if I may.

So let me say again, 2028, we will have still 2027 to be started. And we are totally focused right now to deliver what we have planned already and secured it with our customers. For 2028, of course, there are already some discussions in place. But that will be necessarily rediscuss it with the main customers we currently serve to understand also the speed of the growth. For Technoprobe, it is pretty -- let me say, easy to plan future growth as far as we have cash enough off. again, to be self-funded is a really a very clear base and an important base for Technoprobe to have cash enough to fund our own investments. And also to be prepared with a strong supply chain, we are currently securing that will grant Technoprobe to have equipment and out in case we will need. So further development will be decided and disclosed in the next last releases. So for now, we remain stick to 2027. Yes, as to the point on Nexprobe, yes, Nexprobe is included in this plan for 2027. so the ramp will start in January. And we expect in terms of volumes and turnover that they will be able to reach more or less EUR 100 million revenue in the next 3 years. So by the end -- by 2029, we expect that volume will reach a $100 million contribution, only for the Chinese market.

And then 1 other question on custom ASICs in particular. Can you remind you of the status quo on the adoption of vertical MEMS there for custom ASICs and where you stand with the key players?

So at this moment, we are one of the main suppliers for the all the ASIC customers. So we introduced new technologies, high-speed and RF technologies or this -- also for these devices. And we are a point of reference for ASIC testing.

The next question comes from [indiscernible]

Yes. I also have a couple, please. Maybe if I can start on the CPU side. Can you disclose what the CPU [indiscernible] versus GPU and how you would expect to develop into 2027. That's the first question, and then I have another one.

Sorry, Mark, can you repeat the beginning of your question because the line went busy for a couple of seconds for CPUs.

I'm in Munich at the semicon. I was just wondering about the -- if you could disclose the CPU-related growth compared to GPU-related growth? And what you would expect, how that growth would kind of trends into 2027. So the CPU versus GPU testing?

Actually, we for 2027, we don't see so much difference compared to 2026 as far as the ratio between GPUs and CPUs. So we expect some very large campaign of GPUs, new GPUs and as well followed by CPUs. So we will, let's say, the biggest portion will be still on the GPU side, but -- and the CPU will just follow.

Okay. No, that makes sense. And then just 2 clarification questions, if I may. The first 1 is on the HBM side of things. When you expect this EUR 10 million this year and EUR 30 million -- around 30 million next year, that is just for the base [ dye ] testing. Is that correct?

Not only for the base dye.

Okay. It's also the DRAMs. And then just finally, just also a bit more clarification on this Q4 sales guidance. Is it fair to assume that the impact on the Q4 would be roughly EUR 50 million on the top line, around about?

Yes, on the top line, yes, correct.