Stratec SE (SBS) Earnings Call Transcript

Ladies and gentlemen, welcome to the H1 2025 Financial Results Conference Call and Live Webcast. I'm Moritz, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Jan Keppeler. Please go ahead, sir.

Thank you, Moritz, and also a warm welcome from my side to everyone joining us today to our H1 2025 earnings call. With me today are Marcus Wolfinger, CEO of Stratec as well as Oliver Albrecht, our CFO at Interim, who will guide you through the presentation and thereafter, we'll be happy to take your questions. This presentation is being webcast live, and you can download the corresponding slides either directly from the webcast or from our website. And lastly, I want to draw your attention to our safe harbor statement, which we have on Page 2 of this presentation. And now I'm happy to hand over to Marcus.

Yes. Thanks, Jan, and good afternoon in Europe and good morning in the United States. Welcome to our H1 presentation. As always, this presentation is split into, let's say, 4 major segments. First of all, I would like to give you an overview of what happened and particularly highlights. Then Oliver will walk you through the financials, then he'll get back to me, and I'll walk you through the outlook. And at the end, we'll have a Q&A session. So I think it is important to understand that H1 was exactly as planned with one exception, which is obviously FX, and I'll dive into this and Oliver as well. So we returned to sales growth, thanks to the high Development Activities. And certainly, we saw stabilization with our Analyzer Systems. I think still, we see some volatilities here and there. However, particularly in instrumentation, the overall situation stabilized. And when we returned from one of the most important congresses in this industry, the ADLM in end of July in the United States, I think we definitely felt the spirit and the change of mood there and actually the appetite of driving innovation forward and investing money not only into developing new tests, but developing the infrastructure was clearly transparent at that show. That's why we came back with, let me say, a better mood in terms of resource allocation, particularly in Development as, let's say, our Analyzer System business as well as our Spares and Maintenance Parts business was good since the beginning of the year or actually, this includes Q4 of 2024 as well. Still, we see some volatilities here and there. And in certain areas of our business, we still have to drive within eyesight, which is for an organization which was used to growth for almost a decade a stressful situation in a stressful setup. At this moment in time, we are suffering a little bit with consumables, but we are expecting to get back to the historical rates towards the end of the year. We have progressed in the development of partnerships and definitely see this upturn in our deal pipeline, particularly in terms of System Development. It's worth mentioning that things are still fairly fragmented, which means at this moment in time, our partners are a little bit -- are still a little bit shying away from investing money into really substantial big developments of the big next-generation things and are trying to, first of all, keep their analyzer systems and infrastructure young by investments into new software versions, facelifts, upgrades and so on. And I know I'm always using this lousy example of a car. What we definitely see in terms of age of the installed base is that same thing happens that if people are in an economically less robust situation and they typically replace their car after 100,000 miles that they now start to replace their cars only after 150,000 miles, which means they keep the instruments in the field as long as feasible and are investing more into Maintenance and not into these new Analyzer Systems, and that's exactly what we see these days. This is means to an end. We see this end coming up, and we see particularly those customers with high COVID exposure and then going over the cliff after COVID-19 that they start seeing recovery in the field. The volume of tests is going up and up, not only in those areas which were not affected, neither positively nor negatively during COVID, but those ones which were positively affected and placed a lot of analyzer systems during COVID. And then thereafter, sold less analyzer systems that we see that they are emptying their warehouses. We see that new orders are coming in. I'll dive into details when we break down revenue streams. In the course of the presentation, we will give you some supplementary information. I think, again, it is important to understand that we had this stable gross margin. So we were fairly proud that although we still see increasing input prices that we could keep traction in terms of output prices to a certain degree, we have a program ongoing in order to continue to improve on the one hand side, our cost situation; on the other hand side, our gross margin situation. So the delta we see really bottom line EBIT is almost exclusively caused by FX. If we would exclude the FX situation we had in H1, our EBITDA margin and our EBIT margin would be 200 basis points higher, and that actually shows the operational development of the company in the first 6 months. We can confirm our full year outlook, the developments in H1 were in line with intra-year expectations. And that gets me to the point where I would like to hand over to Oliver leading you through the financials.

Yes. Thanks, Marcus. Good afternoon, ladies and gentlemen. And let's start with a quick view on our major KPIs on Page 5. Sales increased in the first 6 months by 5.2% to EUR 118.6 million. This increase was mainly driven by a strong first quarter and a strong sales contribution from our Development business. In the second quarter, the sales figure decreased slightly by 1% year-on-year to EUR 58.2 million. And as Marcus already mentioned, however, we see a clear upturn in the deal pipeline in the area of System Development. And despite a stable gross margin, our adjusted EBIT margin decreased in the first 6 months by 160 basis points, to 7.2%. And regarding the second quarter, the margin decrease was even higher with 640 basis points year-on-year. Marcus mentioned already, this margin decline is primarily attributable to impairment of financial assets in the amount of EUR 400,000 and the negative effect from currency translations in the second quarter, mainly with a net effect of EUR 1.7 million. And yes, without these effects, our margin would be at 8.9%. So I will come back to this later on in my presentation when we talk about our P&L in more detail. On the next page, please, on 6, I would like briefly to comment on the adjustments to EBIT. By looking on the left-hand side, I would like to explain the effects from the adjustments from PPA amortization and some other one-off effects on our EBIT figure. Unadjusted EBIT amounted to EUR 5.3 million and adjusted EBIT was EUR 8.5 million. So in total, we adjusted EUR 3.2 million. EUR 1.6 million was for PPA amortization and the other onetime expenses include consulting fees for M&A and strategy advisory and some additional accruals for audit costs, but also for reorganization measures in the finance department to solve capacity constraints and some severance payments. So these provisions for the audit and reorganization of the finance department are also in connection with the change of auditor and the adjustment of the accounting method as explained in our annual report. Let's move on to the next page, please. Talking about sales development in the first 6 months of 2025. As said, our sales increased by 5.8%. This is based on constant currency calculation. The first 6 months show a resilient growth with Service Parts and Consumables and increased recognition of Development and Service sales. The ramp-up curve for newly launched product is still subdued. And we see a low, but stabilizing demand for MDx systems after pandemic-related decrease. On the next page, I would like to show you a breakdown of our sales by division. Looking on the chart on the left-hand side, you see revenue from system sales decreased slightly by 2.4% to EUR 34.9 million. This is a share of 29.5% of total sales. The revenue from Service Parts and Consumables increased by 2.8% to EUR 53.7 million. This is now the biggest part of total sales with a share of 45.3%. And sales from Development and Services increased by 20% to EUR 28.8 million and accounts now for 24.2% of total sales. Maybe Marcus, you would like to comment more on this Development?

Yes, I think here, the 6 months charts are a little bit misleading. And the plots are -- will certainly not be in line with what we'll see at the end of the year. I think it's obvious that at this point, and Oliver elaborated on that already that at this moment in time, particularly Service Parts and Consumables are higher than after the 6-month period in 2024. Same applies for Development and Services, and we are shorter in Analyzer Systems. On a full year basis, this picture will definitely change. So at this moment in time, revenues with Service Parts and Consumables are very heavy loaded by, particularly Service Parts and Maintenance Parts and less by Consumables. This is about to change. Same thing applies for Development Activities. So I think at the end of 2025, Development and Services will fall shorter than actually in 2025. And for Analyzer Systems, we'll definitely see higher growth rates as compared to 2024. So what I want to get across is that at this moment in time, it looks like growth is driven by the Service Parts, Consumables and Development. However, on a full year basis, it will definitely be driven by Analyzer System. And I think that's important to understand that this is going to happen in the second half of the year. A lot of the activities, which will lead to sales, particularly like prework for manufacturing has been done already in the first 6 months. We have additional order, particularly and if you might please bear with me, we talked about that at the end of last year that things were pushed out into 2025 that some of those things will now become effective. And that's why we are expecting on the one hand side, a reduction of the inventory levels because things are inventory at this point. And secondly, that Analyzer System sales is going to accelerate materially. Oliver?

Okay. Let's move on to the next page, where I would like to comment on our adjusted EBIT and EBIT margins. As you can see here on the left-hand side, the chart here, our EBIT decreased by 14% to EUR 8.5 million and adjusted EBIT margin decreased by 160 basis points to 7.2% year-on-year. This is attributable to a sharp decline in margin in the second quarter, where we achieved only 5.4% after 8.9% in the first quarter. If you look on the -- if you look at the table at the bottom right, you can see how costs have changed year-on-year. R&D and sales-related expenses are slightly better year-on-year. G&A expenses increased by EUR 1.7 million, but these expenses include one-off expenses in the amount of EUR 1.6 million, as I already mentioned, for consulting fees, some auditor fees and severance payments. A major negative impact, as I said, on profitability comes from the currency translation effects arose in the second quarter. These are booked under other operating expenses and the net FX effect in the first 6 months amounted to EUR 1.7 million. Year-on-year, the change of the net balance of other income and expenses is even higher with EUR 2.3 million, if you look here on the table. That's one of the main effects on our EBIT margin decline. In addition, we booked -- maybe another word regarding our FX effects. I think that's also mentioned. If you look into the future, and if you look on the development of the U.S. dollar exchange rate, so just to give you a certain flavor here, regarding our budget, we calculated this exchange rate of [ EUR 1.11 to U.S. dollar ]. And now the current exchange rate is around USD 1.16 to USD 1.17. And we expect that the U.S. currency exchange rate will be by the year-end between USD 1.15 and USD 1.20. And we have calculated this based on our expected U.S. dollar sales. So we expect or we see a certain risk if the dollar is going in the direction of USD 1.18, so we see here maybe another effect of USD 1 million, but this is in regards to sales to lower sales and then with a related margin effect. So that's maybe regarding the FX, what we expect here. Then in addition to this FX impact, in addition, we booked a EUR 400,000 flat rate allowance for overdue receivables. This is for receivables, which are overdue for more than 90 days. And in general, we do not have any problems with bad debt. And so we see here not an increased risk in this area. That's just for cautious reasons here, and that's some of the requirements from IFRS, where we have to show this now on a singular basis. The margin decline in the second quarter should not be viewed as an ongoing trend. Our gross margin was stable despite a low sales volume in the second quarter. And for the second half of the year and especially in the fourth quarter, we expect much higher revenues from System sales, but also from Service Parts and Consumables and Development business, which should have a positive impact on economies of scale and will lead to a significant EBIT and EBIT margin improvement in the remaining 6 months of 2025. And as Marcus mentioned at the beginning, based on these expectations, we confirm our full year sales and margin guidance. Let's move on now to the cash flow development on Page 10. Our operating cash flow amounted to minus EUR 5.8 million. The main factors influencing this weak cash flow situation were, on the one side, lower net income of EUR 1.4 million, high tax payments for the Stratec Germany company in the total amount of EUR 6.9 million. These are mainly tax arrears for the period 2018 to 2022. And in consequences, we had also now higher tax prepayments for 2025. We also see here a net increase of inventories by EUR 3.3 million, and we see a decrease in trade payables in the amount of EUR 3.7 million. Our DPO is currently at 60 days. And regarding the increase in inventories, we can -- you can see in the balance sheet here an increase from EUR 122 million to EUR 125 million. This initially appears to indicate a further growth. But if we look on the raw material and the raw materials are the biggest part in our inventories, they remained virtually unchanged. And I have to say that inventories of work in progress and finished goods rose slightly. We expect a significant increase in System deliveries in the third and fourth quarter. And just to give you a rough idea, we expect sales from Systems, this will increase roughly from EUR 35 million to EUR 57 million in the second half of the year. And in order to meet this higher demand, we have to stock some material in new parts. And therefore, despite measures that we have taken in our purchasing department, for example, we have significantly reduced our commitments from framework agreements concluded in previous year, inventories did not decline overall by the end of June. However, with higher shipments, we expect noticeable improvement by the end of the year with corresponding positive effect on operating cash flow. Due to the negative operating cash flow, the free cash flow swapped into a negative figure of EUR 14.7 million as well. Our financial indebtedness calculated on net debt to adjusted EBITDA deteriorated from 1.8x to 2.3x. So we have enough headroom to be compliant with our financial covenants. And another remark here, we are currently in the process to refinance our bridge loan and part of our bank loans by a new syndicated loan in the amount of EUR 125 million with a term of 5 years plus 2 years of extensions. We expect the signing and closing of this transaction by end of August. With that said, I would like now to return to Marcus, who will comment on our outlook and on our guidance. Thanks a lot.

Thanks, Oliver. So again, Oliver already mentioned that we want to confirm our financial guidance. So Oliver mentioned and I mentioned before that we still see some volatilities and lumpiness here and there. However, we factored in enough leeway and wiggle room to deal with those factors even, like as Oliver mentioned, if FX continues to move in the wrong direction, so the max risk exposure top line with a dollar exchange rate of 1.18, which is, I think, at this moment in time, consensus by certain banks, where we will be at year-end. This means an additional applied pressure top line of about EUR 1 million, like I said, already factored in, and there is some leeway here and there. So confirming guidance, so consolidated sales for 2025, we expect growth low to medium, high single-digit percentage range on a constant currency basis. Current forecasts are looking very well, orders in the books. So -- and actually things in production. We actually see some upside here and there, are discussing with a number of customers if they -- what happens if they increase their forecast between now and end of year, whether or not we are able to supply. And I think, again, it's worth mentioning that the times are over where a supplier network -- a worldwide supplier network with all those headwinds facing here and there is able to increase manufacturing materially within weeks or months. So that's why at this moment in time, we are planning manufacturing based on actually mentioned demands or actually given in forecast, which are typically customer contract, independent forecasts are given covering 4 quarters. So typically on a rolling basis, so we are covering at least a year in terms of forecast. Adjusted EBIT margin forecasted to be in the area of 10% to 12%. So obviously, we had this discussion about what happens with FX applying pressure in the first 6 months. As mentioned now a couple of times, we would be further up by about 200 basis points if this wouldn't have happened. So is this -- does this mean that our guidance tends to the lower end? So the answer is no. Like I mentioned already, we already factored in certain wiggle room when we have given this guidance at the time, particularly considering things like tariffs and customer behavior and shipping times and weaknesses of certain markets, uncertainties in China and so on. So we were really trying to err on the safe side. Investments in tangible and intangibles combined in the area of 8% to 10% of sales. Last year, super cautious, only 7.1%. I think this year, there is a certain catch-up effect that will probably get between this forecasted 8% to 10% probably based upon incoming orders and particularly new development activities, which, like I said before, have been brought in over the past 3 months and other very promising upcoming, so probably requiring further investments, which will get us into this 8% to 10% ratio. Certainly talking about our focus for the remainder of the year and beyond. So definitely, maintaining cost discipline is a very important thing for us. We want to keep things under control. So we -- over the past 2 years, we have initiated 2 independent earnings improvement programs. We were very cautious with trying to keep motivation up on the one hand side, but on the other hand side, applying a high degree of discipline, not that we certainly wanted to avoid the drainage of know-how and talent, which I think worked out very well. However, we'll continue to keep an eye on that. In certain areas, we are expecting a certain catch-up effect because, like I said, for an organization, which was used to growth for almost 2 decades and now going like over the past 2 years sideways now expecting growth to come back. This is a situation we had to learn and live with. And I think this worked out very well, but please bear with me, we will certainly maintain a high degree of cost discipline. Executing a deal pipeline, I think it is worth mentioning again that things got very fragmented over the past 2 years. So the really big teams were lacking -- really big deals were lacking. However, we see that our customers are now discussing new bigger things. We keep our product portfolio young with the help of our customers. They are financing their relevant products to keep them young. We have nice promising things ongoing. So we are very positive that we can execute on this deal pipeline. With those deals we have executed over the past years, which are now leaving the deal pipeline and will leave the development pipeline over the next 2 to 3 years, we will definitely support our operational growth. However, we need to fill up the development pipeline, and that's actually an ongoing process with very promising activities there as well. Then certainly, within our strategic development, we have identified areas of growth where we are investing as in the past, our own money, in order to be able to maintain our business model where our customers are stepping in at a certain point, and we are not developing their product, but are using our technologies in order to develop specific products for our customers using our background technology, which helps us in order to be responsible for supply, long-term services, product life cycle management and consumable and spare parts supply over the entire product life cycle. So definitely a very important part of our business model. Those areas are amongst others, and we obviously only mentioned those areas which are well known and where we have already a certain footprint, like high-sensitive immunoassays, certainly advanced imaging where we have invested a tremendous amount of money over the past years and certainly, particularly as far as liquid handling activities are concerned in cell and gene therapy. Then certainly, with the acquisition of Natech and with the activities we already had in our Smart Consumables business, we are now able to show the full value chain, helping our customers to leverage the relevant business models of Natech-Stratec Consumables and Stratec Instruments in order to move further away from supplying our customers with the relevant parts like instruments or consumables and stepping closer to actually a full system supplier, being responsible for literally everything except the biochemistry coming from our customers over the entire product life cycle. We have a very well-filled pipeline as far as M&A is concerned, very binary. But I think if you believe in consolidation and we believe in consolidation, this is the time to act. Over the past 10 years, we saw definitely elevated prices and the quality was not as expected what we saw now. The times are there that the quality of potential targets is increasing and prices are getting more and more reasonable. So this is the time to act, and that's why we keep our eyes open. Then certainly, we definitely need to improve our cash flow dynamics. Oliver mentioned our activities here and there, definitely, and we discussed that at length over the past 12 months to improve our inventory efficiency. And again, please bear with me, particularly for those Analyzer Systems and Consumables, which are turning and which are generating our cash flows and revenues. Inventory management is already optimized. And when we are sitting on inventory levels or elevated inventory levels, this particularly affects those Analyzer Systems, which are unfortunately not turning. But as the product life cycle of those analyzers are 10, 15 years and particularly for those ones not turning at this moment in time, they are still at a very early stage of the product life cycle. This is not a waste. We are just sitting on inventory levels. Our customers are financing that or we are applying material and substantial pressure on our customers to finance that. So we hope we can work that down. And as Oliver mentioned, and I think we still stick to that figure. We are expecting a cash release coming from inventory of north of EUR 10 million on a full year basis. This gets me to the end of the outlook and the focus. And I would like to hand back to Moritz, who will explain us how to do Q&A.

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

I have 3, if I may, and I would like to ask them one by one. The first question is on your Analyzer System business. You mentioned an increasing momentum in this business in the second half of the year. Can you provide more details on this? Specifically, which application areas are driving this growth?

Yes, Jan, thanks for the question. And I think it's a smart move to handle those questions step by step. So what's happening here? So definitely, what we see is that particularly in areas like I would say, at this moment in time, higher throughput analyzers. So driving the trend of centralization is definitely what we see, particularly in areas like immunoassays, particularly in immunohematology, a little bit less in molecular, but return and again, allow me to kind of mention that we are in a special situation, which is not just related to the, let me say, the tail end of COVID and oversaturation and working down the inventory levels and capacities built during COVID-19 at the end customer side. So you probably remember that we are in a generation change for a molecular instrument for one of our most important customers. It's a smaller instrument, a benchtop analyzer system where we are about to change generation, which is going from version 1 into version 2, requiring additional approval schemes. And we are in this transition phase. So this is not just let me say, overcapacities in the field, it's as always that if you announce a new analyzer system that the demand of the old one shrinks, nobody wants to buy something, which will be outdated soon. That's why we still see a kind of hesitant behavior of end customer, end customer for the Panther franchise still with a high dominancy in the United States and high exposure in the United States with still high degrees of saturation in the centralized lab. We are going sideways. As far as the TMA solution, if we're looking into the Panther point -- sorry, PCR solution, we still see increasing demand, which is actually nice to see that demands are really coming back. All our other molecular analyzer systems always showed good traction. So we definitely cannot complain here, and that's why we see momentum coming back. Hematology is one of the weak spots at this moment in time. We see a lot of -- particularly in commoditized areas, we see a lot of competitive pressure, particularly as far as pricing is concerned. And we don't have -- in certain areas, we don't see any technological advantages on our end. That's why we are investing a tremendous amount of money here as well to keep our, let me say, the level of innovation up, and we'll see what's going on there. Like I said, very good tailwinds in immunohematology. Return of demand in molecular, good traction as far as our Advanced Sample Prep business is going. In other areas, like particularly in the Smart Consumables section, we see that demand is still very volatile. We hope that we will see a recovery towards the end of the year and beginning next year. And hematology is really suffering from competitive setup, particularly coming with instruments, like I said, in the commoditized areas coming from Asia. Next question.

Great. Then second question is you mentioned that some of the recent product launches are less dynamic than expected. Is this a structural issue or just a timing issue? Or to phrase it differently, do you still believe that these launches could be a meaningful contributor down the road?

Jan, if you allow me, I would like to kind of make a little bit of bigger circle just to make sure that everyone understands the question. So during COVID-19 and thereafter, I think it was very obvious that the analyzer systems with huge additional demand driven by COVID-19. So I'm mainly referring to molecular instruments, particularly PCR-based instruments. I think it was obvious that this will lead to a certain saturation and that saturation will lead -- in the years to follow COVID-19 will lead to a kind of lower demand for these very analyzer system. But we were trying to explain to the financial market that particularly during COVID-19 and right thereafter, we have launched a number of instruments and that we, at that time, believed that the launches were able to actually offset the declining demand from these instruments with high COVID-19 exposure and therefore, oversaturation and therefore, lower sales following COVID-19. This unfortunately didn't happen in the expected manner. We named 3 different analyzer systems, which were affected by that, but they had all different stories. So I think in immunoassays, I think the market after COVID-19 was driven by a high degree of centralization and less -- lower instruments. That's why the pickup here was lower. But I think with this next wave in immunoassay systems and decentralization in Europe and the United States and still higher demand in testing volumes, we expect that this midsized analyzer systems will pick up materially. Our customer is bringing menu on that analyzer system. So we have no doubt that this will pick up. Then we have a DPCR instrument still suffering. The customer isn't bringing menu on that analyzer system. So here, we expect a certain pickup. I wouldn't say that this is structural. This is very much driven by the individual focus of the relevant customer and by the relevant situation of our customer. And when I say situation, it means the menu available on the analyzer systems, the markets our customers are trying to tackle here, so differentiating Asia, the United States and Europe. Again, Oliver mentioned, we still see, as referred to the initial business cases we had with those instruments and the contracts we have with our customers, particularly talking minimum business guarantees, we see at this moment in time in all 3 areas, lower-than-expected upturn curves. However, in the communications we have with our customer, we are expecting that with a certain deferred consideration that we will get to the point we expect it to be already 2 years ago. So yes and no, Jan, this is partly customer independent, partly structural. But like I said, this business didn't vanish. It's just pushed out. I hope that helps.

Yes, it does. And then finally, on your margin guidance. We have seen over the last few years that orders or the realization of developments that were postponed by a few quarters. How do you view the risk that this happens again this year in view of the required implied acceleration in...

Yes. I think that's actually already factored in. So we learned from the mistakes of the past. So obviously, we were -- and all who are following us for a long period of time that we were always trying to kind of decouple activities to a certain degree to make sure that our years are not always as back-end loaded as they used to be in the past. However, again, in 2025, the year will be back-end loaded. However, we factored that in. That's why at this moment in time, if we are looking into the KPIs, if we are looking into the inventory levels, if we are looking into how we put our analyze systems into manufacturing, the demands of the customers, the communication we have with the customers, how they are planning to take those instruments showing that this guidance is actually in line with the way how we are supplying our customers with instruments, consumables, software upgrades and so on. So we don't expect any disruptions here.

Then the next question comes from Michael Heider from Berenberg.

I would also like to go one by one here. The first one is on U.S. tariffs, relatively unexpectedly for me and also for the Swiss country, the U.S. has imposed high import taxes on Switzerland, 39%, I believe. Can you give us an update on your production share in Switzerland? And what do you expect whether these high -- now much higher tax tariffs will have an impact on demand or maybe even on your competitive position?

Yes, Michael, thanks very much. Thanks for bringing that topic up. It was like a 30-second question, which requires probably a 10-minute answer. So I'll try to make it brief. First of all, I think it is important to understand where Stratec is standing in their value proposition towards the end customers. So if we see a typical setup where we are providing analyzer systems and plastic consumables to our customers, which are the life science research companies or the diagnostics companies of the world, and they are selling their products and services with their biochemistry to the end customers, which, let's say, is a laboratory to make things easy. Then our value proposition is only 10% for the Analyzer System and 90% of that value proposition towards the end customer is coming from our customers. And those customers are typically, particularly in the United States and in China and in Europe are manufacturing locally, which means if what we provide sees a perceived price increase by, it doesn't matter, 30%, 40%, then we make that 10% to 14%, adding the 90% coming from our customer, which makes the price increase from, say -- or the price or the perceived value from EUR 100 to EUR 104. So I think I did the right math, and I hope you understand what I mean. So long story short, I think short term, this is not meaningful. But I can confirm that literally each and every of our customers with U.S. sales exposure is bringing up the discussion about localizing manufacturing. What do we do about tariffs? How can we handle that? So we literally have, say, different discussions in different depth levels with literally each and every of our customers. I'm not super worried about, say, short and midterm structural changes or behavioral changes of our customer. I'm more worried about that a U.S. customer says, "Why do I continue to work with a European company even if the quality and the pricing scheme fits and we are a perfect partner if we see volatilities in the tariffs here?" We have to definitely make sure that our customer perceives our services, particularly in the United States as being brought from the United States. That's why we are undertaking activities in order to do more in the United States, which is definitely important for our customer. This is, like I said, less a transactional thing, but more a perceived thing. So we are working on that. At this moment in time, particularly on the instrumentation side and on the spare parts side, we are generating between 40% and 50% of our revenues in Switzerland. However, we have the means to split up things that -- let me give you like an oversimplified example, that we are shipping analyzer systems, which are going to the United States from our German manufacturing site and try to serve the rest of the regions of the world out of Switzerland. So we have certain levers. But like I said, this is an ongoing discussion. It's not an easy one. It's painful and requires a lot of transactional activities in order to be on the safe side and to make sure that, let me say, the customer doesn't perceive this as a further burden. I hope that helps.

Okay. Then on -- again, on the H2 development that you're expecting, did I understand Oliver right that you're expecting EUR 57 million sales in the second half in systems?

Yes. So like I said, I would not confirm. Oliver said definitely the EUR 57 million, and we are expecting that to happen. On the other side, there are things -- it very much depends on the perspective of analyzer systems, what's factored in. We have, let me say, different metrics on that. However, in the comparison we have on the slides, which are in front of you, the EUR 57 million can be confirmed. Could even be higher. We have certain tenders of certain customers, which are not yet fully confirmed. On the other side, we -- particularly if we bring in additional business for those tenders, we still have limitations to be able to supply. However, looking into our financial forecast, the EUR 57 million are factored in at this moment in time.

And then the operating cash flow was highly impacted by this tax payment, as you have elaborated. Related to this, so what is your best guess for your tax rate going forward?

At this moment in time, so I think we can sustain our existing tax rate. So definitely, we'll move away from historically low tax rates in the area of south of 20%. But I think -- and I mentioned that discussion. So obviously, the earnings generated in certain areas, which have lower tax rates in the group are particularly affected by tariffs at this moment in time, which means so doing more manufacturing outside those low tax areas, means certainly covering the revenue side of things, but not the tax side of things. So at this moment in time, I definitely want to shy away from giving you a robust indication. But as I've mentioned, we are in a phase where we have to act very agile, and we are intending to do that. Looking into the forecast, I could certainly give you that tax rate, and I actually have it in front of me. But at this moment in time, this is definitely too volatile and too lumpy that I would like to make that point and later on discuss the post-tax KPIs as compared to our indications given at this moment in time.

Okay. But I mean you said that you want to maintain it, you maintain it on the level of last full year or on H1?

The tax rate will be between roughly 20% to 23%. And as I said, this is -- this was tax arrears coming from a mutual agreement with the fiscal authorities between Germany and Switzerland. And here, we had to -- and we have finalized the negotiations and discussions with the tax authorities. And thereof, we had to pay here local and corporate tax in the amount of EUR 3.2 million regarding this mutual agreement, and we had also then to increase our prepayments for '25. This has now had an impact on the cash flow situation. And as you can see from the balance sheet, we have reduced also our tax liabilities on the balance sheet.

So Michael, was this more a cash flow question or more tax rate question?

Maybe regarding the profitability or the net income -- impact on net income was my understanding.

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

Marcus, the first one will be on currencies, just getting back on that. If I understood you correct, you talked about EUR 1.7 million headwind in the first half and potentially another EUR 1 million in the second half. I just want to clarify, is this just the impact on the other operating income line, which I guess is down to the revaluation effect at the end of the day. But I guess on top, you simply have the impact from the mismatch that you have meaningfully higher sales than cost exposure. So first question would be just can you clarify, is it just like balance sheet positions? And what would be the kind of all-in impact on the margin from currencies for the full year, and that would be helpful.

Oliver, more a question for you.

Yes, yes. Okay. Regarding this EUR 1.7 million, this is the net effect from translation -- from currency translation. This means evaluation of cash positions in the balance sheet, evaluation of intercompany loans, evaluation of accounts receivables, accounts payables. And here, we had a negative impact, which is more or less the other expenses shown in the P&L. And then we had to counterbalance this by operating -- other operating income. This is not only FX gains or gains from this currency translation there. We had also some effect from release of accruals, but the net impact on the currency was EUR 1.7 million, and this is all regarding the balance sheet items. Regarding the sensibility of our sales regarding fluctuations in the currency exchange rates, I said that we have calculated, of course, our guidance and our sales forecast based on an exchange rate of USD 1.11. And now the U.S. dollar is much weaker with about USD 1.16. And we have done also some forward agreements to secure exchange rates. They have a positive market value at the moment. And yes, we think that if the dollar continues to be weak and will be at USD 1.18 by year-end, then that might be a risk of USD 1 million coming or a burden regarding lower sales and therefore, a little bit lower EBIT margins coming from the lower revenues.

But just to clarify, that includes the impact from the mismatch between sales and costs that you have in U.S. dollar?