Aumovio SE (AMV0) Earnings Call Transcript

Ladies and gentlemen, hello, and welcome to the H1 2026 Aumovio Investor and Analyst Call. The conference will be recorded. [Operator Instructions] Let me now turn the floor over to your host, Lutz Ackermann.

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

Yes. Thank you very much, Lutz. I'm very happy to be here today after missing the Q1 call. I'm really excited to share with you our latest news. So we are now close to one year a standalone company, and what you will see and what you have seen already is that we again made big progress. One of the progress you can see here, and I guess after you most probably have seen this slide, you're very familiar meanwhile with that slide. I will try to summarize it very shortly. BMW has been always one of our main innovation partners. As a very innovative company, we have been working with them on many different projects, which we first brought to the market together with BMW. That's why we are very happy to be back and to deepen our long-term cooperation and strengthen the technology partnership with a very diverse portfolio of new businesses ranging from brake technologies, access systems, and different other electronic solutions. So a portfolio of different projects which we agreed upon and which are around EUR 1.5 billion lifetime sales. For our MK C2, our integrated brake system, we agreed to deliver and to extend the series deliveries through the mid-2030s. While paying these EUR 350 million, which are scheduled to be paid in Q3 and Q4, we have finalized our warranty case, and we are happy to be back there with BMW, extending our portfolio and working on new and fresh products. And we have started actually with the first workshop the day after our announcement. What you see on the next slide is then our financial results, where we have in a demanding environment, where our sales went down with close to 8.5% made before the BMW agreement, just roughly EUR 4.3 billion sales. And we managed while having these sales down to keep our margin of 3.5% in the second quarter, although we have had one significant positive one-time event in Q2 last year in User Experience. So we do reflect this result as a very decent one and very confident that we will build on to this result and now also into the second half. The normalized free cash flow is slightly below zero, and that's mainly due to the fact that we have had higher variable compensation payments than we have had last year. That's something we actually also deem to be necessary for our organization, because why have we been missing or have been negative because we had higher variable compensation payments. As you know, we are forming our organization into a high-performance organization, where we do say that we are very tough on fixed costs, but if we do have success in 2025, we have deemed to be a very successful year. So variable compensation, we also pay out to have our people participating in successful financial results. And that's why we had in the second quarter, a significant cash out, also compared to last year, significantly higher. If we're looking onto the customer side, we have seen that we have major project wins in Asia across all business areas. What we see that the size, the structure of our order intake is quite fine, and we are happy with that. We do see that there are still challenging decisions in a challenging environment, specifically in Europe, where we do see that sourcing decisions have been moved into the third and the fourth quarter. So it means we have not really lost projects, and we still have a very robust project pipeline. We have seen the EUR 1.5 billion BMW, which we will record now in Q3, but we have already managed to get some other projects in. We are quite confident to reach our goals here in 2026. Within Q2, we have successfully completed the sale of our Rheinbollen plant, and we have at the beginning of the quarter, also signed a sale of our Mechelen plant in Belgium. The transaction is expected to be closed in the third quarter. With that, we come closer and closer to our ultimate goal to have less than 45 production locations worldwide, which shows our clear commitment towards operational excellence and to have production costs into the right direction. About R&D, I'm going to talk later as well, also there we are full on track. We have delivered and will deliver measurable savings. You will see for the first half, already above EUR 100 million Jutta will show. We expect them to be at more than EUR 200 million and additionally to EUR 150 million next year in order to reach our target to be below 10% in 2027. Yes, and then one topic on the customer side, we have made quite some progress on the compensation for higher memory and raw material costs. I mean, we have concluded with the first customers. And we do see that these significant headwinds, which we experience, we can discuss with our customers quite intensively and made, as I said, quite significant progresses. Today, we will also mention the long-term updated capital allocation framework. Jutta will explain what we have established. And I think on the one hand side, we will preserve our financial flexibility as well as supporting then the long-term value creation. That should serve as a compelling foundation for all our shareholders. Gabriel, do we have it? Okay, the slides are back. What you can see here is that this slide shows that our technology thrust strategy is translating into tangible commercial proof points across all our four business areas. So our purpose is that we make mobility safe, exciting, connected, and autonomous. And we do see that we have significant customer tractions through different awards, through launches, and also through ecosystem progress. As you can see, for example, the ecosystem progress on the Autonomous and Commercial Mobility side, where our AD components continue to gain market relevance, in that our radars and sensors are being qualified for all leading AD stacks, example here, NVIDIA and others. So we do see that we gain traction, not only on the Aurora side, which I am going to go a bit more into detail on next slide, but also on the pass car side. I come to that as well on our Architecture and Network Solutions, HPC wins. On the commercial vehicle and specialty vehicle side, we have further broadened our portfolio. By that, diversifying out of the pure pass car business into commercial and specialty vehicle business, in a region and an area where we do see quite some growth and quite some potential for us. On the Architecture and Network Solutions, we can see here we have important wins in high-performance computing, specifically with one of the emerging autonomous mobility provider, from the U.S. We have won businesses on the telematic side, on the zone control side, and on ultra-wideband-based. And that's where one of our focuses are, is in Asia, where we do see significant improvement and significant potential for our business. In Safety and Motion, we continue to see strong customer demand for safety-critical technologies. I think recent awards, specifically in China, for airbag control, One-Box and other braking-related solutions, are showing our success here. Also in Europe, we have reinforced our business with two other European OEMs with various awards. In User Experience, we secured two series production awards for our under-display camera technology across LCD and OLED technologies. You can see that across all our four business areas, we are operating in attractive technology fields, which is reinforcing our confidence in the competitiveness of our portfolios, and then also the future growth capabilities and abilities in our industry. Let me today focus one more minute on one of our highlights in our portfolio. That is our partnership with Aurora. For us, the direction is very clear, and that I think we can all agree upon. With Aurora and the ability to scale autonomous trucking, we have a great chance and a great future ahead of us. We do see that the structural pressures in the U.S. trucking market, particularly the driver availability and capacity constraints, are accelerating, and that the interest in these autonomous freight solutions are constantly increasing. Some of you might have followed up to recent U.S. policy discussions, which include programs which are aimed to bring more veterans into truck driving as we do have really a scarcity here, which underlies that the industry demand is increasing for technology that can add capacity and, that's one very important part, increase the asset utilization for carriers. So we believe that this will create a long-term market with significant upside potential for this partnership, for Aumovio and together with Aurora. That's one of our highest strategic priorities where we are working on, and you're following up now for the last four years. And We come closer and closer towards the production, and you see that it's going to be second half of next year. It's an innovation. It might be some days earlier, some days later, but we are very confident that we are going to get there. What you see here, and that's what we wanted to demonstrate, is Aurora is, from our point of view, the industry leader in safe driving freight with the most mature partner ecosystem to deliver then these solutions at scale. Aurora launched its first generation of driverless trucks last year and has expanded its network to support 10 driverless routes in the U.S. Sun Belt. And this expansion is accelerating customer adoption, and Aurora has now nine driverless customers. And customers you might heard of it, like Hirschbach, are now planning to buy 500 trucks, and delivery will start then next year. So this further reinforces the opportunity for us to deliver this transformative product at scale. Aurora now, and we might have seen that last week, they deployed its second-generation driverless trucks without a person behind the wheel to meet this accelerating customer demand, a very important next milestone. And the third generation is then with our hardware. Today, Aurora expects to deploy 200 driverless trucks on the road by the end of the year. And what we are doing is now we are -- that's our proof points, which we wanted to share with you today here is that we have the design validation started. We have -- and that includes validation tests and equipment readiness and the calibration facility here in Germany in Ingolstadt is already operative. In New Braunfels in Texas, we extend our facility. You might have heard we are investing more than USD 100 million. [Foreign Language]

Hello? Operator?

Yes, you can go on. Thank you.

You can move on.

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

Now, we are back again.

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

Well, that's okay. Thank you, Philipp. A warm welcome to everyone also from my side. Apologies again for the quite bumpy start this morning and the technical issues that we are still experiencing. So hope that we get through that call now in the remaining time. I'm going to talk about the numbers. And just as a remark upfront, to provide a clearer view of our underlying business performance, all comments on Q2 and the first half results actually refer to the figures excluding the BMW settlement effects, unless I stated otherwise. While the settlement had a significant impact on reported EBIT and adjusted EBIT, our underlying financial performance remained relatively strong. This is the focus of our discussion today. Let me start with an overview of our Q2 performance. Adjusted sales in Q2 came in at EUR 4.3 billion compared to EUR 4.7 billion in the prior year quarter. The decline of 8.6% was mainly driven by volume and price effects of EUR 231 million, portfolio management measures of EUR 160 million, and a negative foreign exchange translation effect of EUR 60 million. Despite the lower sales base, our adjusted EBIT margin remained stable year-over-year at 3.5%. When taking into consideration that the second quarter 2025 margin was elevated by reimbursement effects in User Experience, as also Philipp pointed out earlier, our underlying profitability of the second quarter was in fact stronger than in the second quarter in 2025. This resilience reflects the continued benefits of our transformation measures, disciplined operational execution, and our ongoing R&D efficiency improvements. Now turning both normalized and adjusted free cash flow were lower than in the prior year quarter. The main driver, also Philipp mentioned that already, was higher than prior year variable compensation payments. These payments represent a recurring seasonal cash outflow in the second quarter and were partially offset by lower CapEx. Adjusted free cash flow was impacted by ongoing transformation effects, including spin-off and restructuring cash outs. Now turning to the next slide 10. Turning to our first half-year performance, adjusted sales amounted to EUR 8.7 billion, representing a decline of 8.2% year-on-year. This development reflects the impact of ongoing geopolitical uncertainty and continued softness in the automotive market. In contrast to sales, profitability continued to move in the right direction. Adjusted EBIT margin increased from 2.7% to 3.0%, driven by the ongoing impact of our transformation measures, cost discipline, and further R&D efficiencies despite sales and cost, material cost, and memory cost headwinds. Normalized free cash flow improved by 34% year-on-year to EUR 130 million, mainly driven by lower CapEx. Adjusted free cash flow, however, remained on prior year level, primarily driven by increased restructuring cash out. Overall, the first half of '26 shows that even in a challenging market environment, we are able to improve our profitability. Now, on slide 11, let's have a closer look at the key financial KPIs for the first half-year, and I start with the development of our top line. As a reference point, adjusted sales in the first half-year '25 amounted to EUR 9.5 billion. During the first half-year, our adjusted sales performance was also influenced by the continued execution of portfolio and footprint measures. These effects amounted to minus EUR 196 million, primarily driven by the discontinuation of the display business in User Experience amounting to EUR 130 million, as well as the phase-out of contract manufacturing, contributing minus EUR 66 million. Excluding these portfolio effects, sales for the first half-year period came in at around EUR 9.3 billion. Looking at the remaining drivers, H1 was characterized by two items. Sales were further reduced by EUR 586 million, with the largest share coming from lower volumes and pricing effects of EUR 434 million, as well as negative foreign exchange translation effects of EUR 152 million. Accordingly, adjusted sales amounted to EUR 8.7 billion in H1. From a regional perspective, adjusted sales exposure remained unchanged to previous quarters. Now, let's have a look at the key effects of the adjusted EBIT year-on-year on slide 12. With H1 2026 adjusted EBIT margin coming in at 3%, we have achieved an improvement of our profitability compared to the first half of '25. While adjusted gross profit decreased by EUR 96 million in absolute terms year-on-year, improved the adjusted gross margin by almost 0.6 percentage point year-on-year, reaching now 20.1% in the first half 2026. This improvement was supported by lower production costs and a favorable product mix. Adjusted net R&D expenses decreased by EUR 115 million, now reflecting the tangible progress of our R&D efficiency initiatives and the disciplined execution of our transformation program. As a result, adjusted net R&D to sales ratio decreased to 11.9% in the first half of this year, and this improvement was even more pronounced in the second quarter with 11.4%, despite the lower sales base. And that demonstrates our enhanced productivity and a structurally more efficient R&D organization. Adjusted S&D and FG&A expenses increased by EUR 64 million year-over-year. This was mainly attributable to costs associated with the buildup of central functions following the spin-off, despite continued discipline across all functions. Other items contributed EUR 43 million to the increase in adjusted EBIT, also driven by foreign exchange effects. Taking all these factors together, adjusted EBIT for the first half '26 amounted to EUR 258 million, corresponding to an adjusted margin of 3%. Including the BMW settlement, adjusted EBIT is lowered by around EUR 100 million, coming in at EUR 157 million and an EBIT margin of 1.8%. So let's now turn to the performance of our business areas. In the first half of 2026, our business areas delivered a mixed performance, reflecting the varying market dynamics and maturity profiles across our portfolio. Despite an overall challenging operating environment, Architecture and Network Solutions and User Experience achieved year-on-year underlying earnings improvements. In Autonomous and Commercial Mobility, adjusted sales declined by 12.6% year-on-year, primarily driven by lower volumes amounting to 10.6% of organic sales decline. It is also important to note that the first half of '25 benefited from strong sales volumes related to the EU Mobility Package II. Following the completion of this program and the postponement of the third package, volumes declined in the current period, resulting in a less favorable sales mix. And as a consequence, adjusted EBIT decreased compared to the prior year. Autonomous and Commercial Mobility continues to invest in future technologies, while ongoing cost and efficiency measures helped offset part of the top line headwinds. In ANS, Architecture and Network Solutions, adjusted sales decreased by 6.1% year-on-year, mainly reflecting foreign exchange headwinds and lower volumes. Excluding foreign exchange effects, the organic sales decline was 4.9% year-on-year. Despite the lower sales base, adjusted EBIT increased by almost 40% to EUR 142 million, resulting in almost 2 percentage points higher margin, supported by the continued execution of our disciplined cost management and efficiency program. In Safety and Motion, adjusted sales declined by 6.7% year-on-year, reflecting market environment with the primary driver being lower volumes amounting to 5.6% of the organic sales decline. Adjusted EBIT, not taking into account the impact of the BMW settlement, decreased by 16.5% to EUR 131 million compared to the first half of 2025. Safety and Motion continued to face headwinds from elevated material costs. Lower net R&D expenses driven by restructuring and efficiency measures, yet have not been sufficient to compensate overall market challenges. In User Experience, adjusted sales declined by 6.3% year-on-year, with price effects and demand shift contributing 4.4% of the overall sales decline year-on-year. At the same time, adjusted EBIT increased to EUR 14 million, benefiting from improvement of operational execution. Adjusted for the elevated reimbursement level recorded in the second quarter of the prior year, relative performance of UX was even significantly stronger. User Experience continues to show the successful transformation measures over the recent quarters. Overall, continued market and macroeconomic headwinds affected the top line and earnings performance across our business areas, while our transformation initiatives and self-help measures provide support on overall profitability of the group. Now, let's turn to slide 14. Adjusted EBITDA amounted to EUR 605 million and forms the starting point of our cash flow development in the first half year. Employee benefits, provisions, and other cash items, including the reversal of non-cash items, impacted adjusted EBITDA considerably, amounted to EUR 125 million, resulting in an operating cash flow before interest and taxes of EUR 455 million. Cash effective investments of EUR 193 million reflected a more cautious spending in the first half, which we continue in the second half if market circumstances persist. Interest and tax payments totaled EUR 148 million, benefiting from lower income tax payments compared to the prior year. As a result, normalized free cash flow came in at EUR 113 million. Cash effective restructuring and separation-related costs continued to weigh on the adjusted free cash flow. These special effects included EUR 230 million of restructuring-related cash outflows and EUR 55 million associated with spin-off and separation activities. After taking these special items into account, adjusted free cash flow amounted to a negative EUR 177 million in the first half of 2026. On slide 15, we show that our liquidity position remains a key strength of Aumovio, providing both financial stability and strategic flexibility. Starting from a strong net cash position at the beginning of the year, the position remains strong at EUR 1.2 billion, affected by negative free cash flow as discussed on the previous slide, and minor changes in leasing liabilities. At the same time, the pension liability slightly decreased, mainly driven by the increase in the discount rate in Germany from 4.3% to 4.4%, which positively affected the valuation of our pension obligations. Overall, our solid net cash position, reduced pension liabilities, and disciplined financial management provide a robust foundation to navigate ongoing market volatility while maintaining the flexibility required to execute our transformation agenda and support future growth. Let me now turn to our updated outlook for the full year 2026. Starting with adjusted sales, we now expect full-year adjusted sales in the range of EUR 17 billion to EUR 17.5 billion, compared to our previous outlook of EUR 17 billion to EUR 18.5 billion. The adjustment primarily reflects a lower light vehicle production outlook and the business performance in the first half of this year. Turning to profitability, we now expect an adjusted EBIT margin in the range of 3% to 4%, compared to our previous outlook of 3.5% to 5%. The refinement of our adjusted EBIT margin outlook incorporates our revised assessment regarding higher raw material prices, as well as increased prices for memory components. In addition, it also reflects the impact of the BMW settlement. We are actively mitigating cost impacts through close collaboration with our suppliers, redesign to cost initiatives, and compensation mechanisms. We expect to see those effects to become more visible in the second half of the year. Now, moving to cash generation. We expect normalized free cash flow to be in the range of EUR 500 million to EUR 700 million, compared to our previous outlook of EUR 500 million to EUR 800 million. This adjustment reflects partially the impact of the BMW settlement. Importantly, the outlook range was only reduced at the upper end. This effectively implies an improvement in the underlying normalized free cash flow outlook as we are confident in our ability to steer cash flows. Finally, let me touch on our further assumptions. For full year 2026, we now expect cash outflows related to the spin-off restructuring activities and partially the BMW settlement of around EUR 600 million. In net income and earnings per share, we still expect an improvement compared to the prior year. Now, let's have a look at our business areas on slide 17. The outlook for Architecture and Network Solutions remains unchanged compared to our previous outlook. For Autonomous and Commercial Mobility and User Experience, we have updated our outlook based on the first half 2026 results and our latest assessment of market developments. For Safety and Motion, the revised outlook also reflects the impact of the settlement agreement with BMW. Starting with Autonomous and Commercial Mobility, we now expect adjusted sales to decline significantly year-on-year, compared to our previous expectation of a moderate decline. The assumptions underlying our previous outlook remain unchanged, while the revised outlook additionally reflects the business performance in the first half of this year and our updated view on market developments. For adjusted EBIT margin, we continue to expect a stable year-on-year development. Despite the lower sales outlook, this expectation remains supported by additional cost reduction measures as part of our R&D transformation program, as well as continued cost discipline across production, sales, and admin functions. Turning to Safety and Motion, we continue to expect adjusted sales to decline moderately year-on-year in line with our previous outlook. For adjusted EBIT margin, we now expect a slight year-on-year decline. Previously, we had expected a moderate improvement. The revised margin outlook reflects the business performance in the first half of the year, the challenging market environment, and the impact of the BMW settlement agreement. At the same time, additional cost reduction measures across production, sales, admin, and research and development continue to mitigate the pressure from the market environment. Now looking at User Experience, we continue to expect adjusted sales to decline moderately year-over-year, consistent with our previous outlook. Sales development continues to be primarily impacted by adverse foreign exchange effects. For adjusted EBIT margin, we now expect a slight improvement compared to last year's level of 0.4%, whereas our previous outlook assumed a moderate improvement. The revised profitability outlook reflects the business performance in the first half of this year and our updated assessment of the market development. However, our profitability expectations continue to be supported by structural measures, lower material costs, and further gains in operational efficiency. Now, let's turn to slide 19 and talk about our newly established capital allocation framework, which becomes effective as we speak. The establishment of this framework marks another important milestone in our journey as an independent listed company, formalizing the capital allocation commitments communicated at our Capital Markets Day in '25 into a clear and actionable capital deployment framework. The objective of this framework is to provide transparency about our priorities and how we think about the use of capital in the interests of our shareholders. Let me now walk you through the framework and the priorities that guide our capital allocation decisions. On slide 20, you see our first priority is maintaining a strong balance sheet and financial flexibility. This includes our commitment to an investment-grade credit profile and a prudent liquidity position, ensuring resilience across market cycles and preserving strategic optionality. Our second priority is investing in organic growth. We will continue to allocate capital to opportunities that strengthen our innovation capabilities, and support long-term profitable growth while having a disciplined approach to our spending. In this context, we confirm a net R&D to sales ratio of around 9% in the long term, and we align our target for investments with market reporting standards and introduce a cash-effective CapEx below 4.5% of sales in the midterm. Our third priority is shareholder returns. We establish a sustainable dividend policy targeting a payout ratio of around 30% of net income. And beyond that, we plan to execute share buybacks based on the availability of excess free cash flow after dividends and M&A. And finally, we will pursue selective M&A opportunities where they can strengthen our technology portfolio, enhance our competitive position, or offer attractive value creation potential. Our capital allocation framework is fully aligned with our strategic and financial targets. It ensures that we balance growth, financial discipline, and shareholder returns in a consistent and value-focused manner and will support sustainable long-term shareholder value creation. With this, I hand back to Lutz.

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

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

Yeah. Okay. I think everybody can hear me. We will reach out to you, and to also make sure that you can ask the question. Sorry for that. However, we have to stop the call now at this point in time, and we will come back to you shortly. [Technical Difficulty] Yes. Hello, everybody, again, and welcome to our Q&A session, which we have now. First of all, as [Daniel Bowinmen] just said from EQS, we have to apologize for the technical issues this morning. The provider had some technical problems that are hopefully solved now. And as we switch the format here to this tool, we now hope that we can go into the Q&A session without any interferences. Maybe [Mr. Bowinmen], you can once again say how to raise a question. There's already a first one, but maybe once again, how that works because I think there have been some questions with regard to that.

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

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

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

Yes.

Excellent. That's a good sign. I'd like to start with the capital allocation framework and the share buyback. Obviously, right now, you don't have the approval. You need that from the AGM. But once you have it, could you please comment on if you would be willing to start with the share buyback in '27 already right away? I mean, obviously, your guidance would be for free cash flow potentially close to 0 as a stated free cash flow, but you seem very confident in your cash generation also looking ahead and you have the balance sheet to start. So that will be the first question. Then the second one, if you would target a tender buyback or an ongoing buyback in the market. And then as a second question, it's potentially still a bit early for that, but could you comment on '27, just roughly what you see in terms of sales momentum, how the phaseout business and the divestments or portfolio management would impact potentially '27? And also when you think about the pass-throughs to the OEMs, you said you reached some progress already on the DRAM side. And I think you wanted to negotiate part of '27 already, too. If you could factor that into the comments as well. And last question will be, when can we expect an update on UX and a final decision if you want to sell it or keep it?

Okay. Should I start with the capital allocation and then maybe, Philipp, if you want to take the other two questions. And thanks everybody, thank you for taking your time again to connect a second time with us today. We really apologize and we really hope that now for the next 30 minutes, this will work well. Christoph, thanks for the question on the capital allocation framework and the share buyback. Exactly. First of all, we would need the AGM approval in next AGM is set up for, planned for May 2027. And then it really depends on our cash flow -- free cash flow development in '27 and also our expectations how the overall cash flow situation will develop. As we clearly stated, we think about the distribution or using for share buyback program, the excess free cash flow, so after dividends and also after potential M&A. And we will then see in the course of next year what the outlook for this excess free cash flow would look like. The question on what format we would choose the open market buyback or a tender. We have not yet decided while at the same time, we think that for our situation, there are a lot of arguments for going with an open market share buyback.

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

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

Yes, thanks. That was clear.

Okay. Then I take over. We have -- I mean, our view on 2027 is that we don't see a significant improvement in the market conditions. So I think it's fair to say that the markets are going from our point of view, going to be relatively stable and not going to grow next year. And consequently, we at Aumovio see then a similar development year-to-date, but it's actually relatively early in the year to already phrase clear expectations towards the next year. What we do see is, I mean, we are discussing with our customers, as I were mentioning in the morning, intensively over the rollover of -- or participation of these customers into the additional costs where we made significant progress. Which is, as you all know, in our industry as automotive supply always back-end loaded. So that comes then like in the last year's -- in the second half of the year because you first need to record the raw material costs and then you can discuss them. And that is then also something which we are preparing for 2027 with our customers where we are also seeing a lot of positive momentum to deal this situation in a strong partnership together going forward. With regards to User Experience, we always said we are in a strategy process, and we have -- we are in the mid of it. We will come to in a discussion in the second -- a decision in the second half. Exact date, we're not going to mention. But as you have seen, User Experience makes significant progress. Also from the bottom line and turnaround perspective. And that's something which we are going, as I said, going to mention of how we are going to deal with that portfolio part in the later part of the year.

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

I have three questions. The first one is a follow-up on Christoph's question regarding capital allocation. So more on dividends. Despite the likely net loss in 2026, is it fair to assume a potential dividend distribution as of 2027 based on 2026 results given your strong net cash position? This is my first question. The second question is regarding the restructuring charges. Can you please give us an update of what you anticipate in terms of P&L impact and cash impact for 2026? And what's your view for 2027 as well? And the last question is regarding Aurora. So you are mentioning that you will reach the industrial scale from H2 2027. My question is simple. How many trucks you need to be on the road to reach a breakeven in terms of EBIT and free cash flow?

Okay. I start with the questions on the capital allocation framework, the dividends, in particular, I hope that I understood the question correctly. You asked if it's fair to assume that there will be a dividend for '26 and '27, given that we have a net cash position. And this is not what our capital allocation framework is suggesting. We say that we pay dividends from a net income, a 30% payout ratio, around 30%. That is what we are targeting. And if there is no net income, then there will be no dividend. I think it's also important to understand that there is a second element, as discussed a few minutes ago, the share buybacks, and that is linked to excess free cash flow that we are going to generate. But if there's no positive net income for '26, then we are not going to pay out the dividend and in particular, not from the net cash position because the net cash position, we want to keep because this is providing us financial flexibility and is also a factor that is differentiating us from our competitors and is important to keep that balance sheet strength. With regards to P&L impact, restructuring, there has been, as you have seen, a significant portion of special items affecting our earnings already in the first half of the year. We do not give a guidance for the overall amount for special items or restructuring-related items for the full year. But what we are expecting is obviously then embedded in our guidance. We are not guiding reported EBIT, but we are guiding something on net income where we say that overall, at the end of the P&L, we are expecting an improvement compared to what we have showed last year.

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

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

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

Yes, please go ahead.

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

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