Seco — Investor Presentation 2024

Sep 12, 2024

1H 2024 Results & Business update presentation

September 12, 2024

Disclaimer

This document has been prepared by SECO S.p.A. ("SECO" or the "Company"), for information purposes only, exclusively with the aim of assisting you to understand and assess the activities of SECO. The information contained in this presentation does not purport to be comprehensive and may not have been independently verified by any independent third party.

Statements contained in this presentation, particularly regarding any possible or assumed future performance of the SECO Group, are or may be forward-looking statements based on SECO's current expectations and projections about future events.

Such forward-looking statements are subject to risks and uncertainties, the non-occurrence or occurrence of which could cause the actual results, including the financial condition and profitability of SECO to differ materially from, or be more negative than, those expressed or implied by such forward-looking statements, due to any number of several factors, many of which are beyond the ability of SECO to control or estimate precisely. Consequently, SECO and its management can give no assurance regarding the future accuracy of the estimates of future performance set forth in this document or the actual occurrence of the predicted developments.

The data and information contained in this document are subject to variations and integrations. Although SECO reserves the right to make such variations and integrations when it deems necessary or appropriate, SECO assumes no affirmative disclosure obligation to make such variations and integration, except to the extent required by law.

SECO does not undertake any obligation to publicly release any updates or revisions to any forward-looking statements to reflect events or circumstances after the date of this presentation.

Any reference to past performance of the SECO Group shall not be taken as an indication of future performance.

In addition, this presentation includes or may include certain ''Adjusted'' financial and operating indicators and other measures, which have been adjusted to reflect extraordinary events, non-recurring transactions and activities which are not directly related to the Group's ordinary business.

Such "Adjusted" information has been included to allow a better comparison of financial information across the periods; however, it should be noted that such information is not recognized as measures of financial performance or liquidity under IFRS and/or do not constitute an indication of the historical performance of the Company or the Group. Therefore, investors should not place undue reliance on such data and information.

This presentation does not constitute a recommendation regarding the securities of the Company. This document does not constitute or form part of any offer or invitation to purchase or subscribe any shares issued by the Company and no part of it shall form the basis of or be relied upon in connection with any contract or commitment whatsoever.

By reading this presentation, you agree to be bound by the terms set out.

Presenting today

Massimo Mauri

Chief Executive Officer

Lorenzo Mazzini

Chief Financial Officer

Clarence Nahan

Head of Corp. Dev. & IR

Key takeaways from 1H 2024

More resilient revenues in a challenged sector

• 1H24: Net sales at €95.3m, down 14.8% vs. 1H23, with 2Q24 slightly up vs. 1Q24
• Resilient historical client base in the Edge computing business
• Clea revenues at €12.6m in 1H24 (13.2% of sales), up 359 bps vs. 1H23

Continuously Improving GPM YoY

• GPM incidence at 52.7% in 1H24, up 312 bps vs. 1H23
• Reinforced by our unique business model, product offering and growing Clea contribution
• 2Q24 GPM slightly impacted by an unfavorable client / product mix

EBITDA hit by unfavorable mix

• Adj. EBITDA at €15.8m in 1H24 (16.6% of sales), down 40.4% vs. 1H23
• 2Q24 weakness driven both GPM compression and higher Opex incidence on Sales
• Adj. Net Income at €3.9m in 1H24

Strong Net Financial Position

• Stable Net Debt level at 1.4x, supporting SECO's future expansion plans
• Reduction in inventory and increase in trade payables, partly offsetting the increase in trade receivables

Update on current market environment

SECO has been one of the main beneficiaries of the unprecedented shortage situation between 2020 and 2022 Our revenues grew 1.6x over the period and we added over 100 new clients to our global portfolio We have since been facing a cycle where the available capacity our industrial end-market clients has moved from tension to excess As we are adapting to this demand normalization and inventory adjustments, we have demonstrated resilience in navigating this challenging environment, limiting the impact vs. the competition while significantly strengthening our gross margin.

Our business model is amongst the most resilient in the sector Allowing us to defend some of the highest GPM amongst peers

1H 2024 financial highlights

• Edge computing business contraction due to different market conditions: customers destocking in 1H24 vs. high demand against shortage in 1H23
• Clea revenue at €12.6m in 1H24 vs. €10.8m in 1H23 (+17%)
• +312 bps 1H24 vs. 1H23 margin increase driven by the higher contribution of Clea, coupled with more favorable conditions in the components market
• Gross margin reduction due to contraction in business volume
• Pressure on profitability explained by Gross margin effect and unfavorable Edge product mix
• -40% in 1H24 vs. 1H23
• D&A: +€1.3m higher vs. 1H23
• Financial expenses under control: -€2.1m vs. 1H23
• -69% in 1H24 vs. 1H23
• Taxes calculated with theoretical tax rate

Net sales €12.6m 1H 2024 Clea revenue 13% of Net sales Net sales breakdown (1H 2024) €95.3m 1H 2024 Net Sales by Area by End Market Industrial 28% Fitness 12% Medical 6% Vending 41% Transport 2% Aerospace & Defense 1% PKE 5% Others 5% EMEA 85% USA 9% APAC 6%

• 1H24 Net sales decreasing by 14.8% vs. 1H23
• Sales volume contraction distributed across geographical areas and verticals due to customers' final stages of destocking
• Positive signals from Vending, Defense & Aerospace and Fitness
• Clea business at 13% of revenue in 1H24, +359 bps vs. 1H23
• +17.0% vs. 1H23
• Software business continues to deliver profitable steady growth

Note: percentages may not sum to 100% due to rounding; all numbers in €m are rounded to the closest first decimal place, so there may be deltas for up to ±€0.1m when variation figures are displayed

Adjusted EBITDA

Adj. EBITDA bridge (€m)

1 Gross margin effect and operating costs

• Gross margin at 52.7% of sales (up by +312 bps vs. 1H23), mainly thanks to Clea business expansion, as well as a decrease in components' price following market stabilization
• Negative operating leverage effect offsetting GPM positive contribution due to reduced sales volume and unfavorable product mix, with higher transformation costs

2 Adjustments

Adjusted Net financial position

Adj. Net debt last 9months evolution (€m)

Note: percentages may not sum to 100% due to rounding; all numbers in €m are rounded to the closest first decimal place, so there may be deltas for up to ±€0.1m when variation figures are displayed

Business update

At the core of one of the fastest growing end-market in technology

With a fully integrated offering, combining both hardware and software, SECO is uniquely positioned to capture an increasing share of this IoT era

Sources: Management estimates, Sector reports, Statista, Gartner

A mission-critical supplier for our customers

By driving our clients' success, we grow with them and create significant barriers to entry

Long term growth fueled by reliable client base

Constantly increasing our share of wallet as well as adding new verticals & customers

Each section represents the top 80% customers from whom we received revenue for the first time each year and their subsequent evolution over the following period

Recent design win improving sales mix across verticals & regions

			Country	Solution Business size/year
	Global tech leader in Energy metering		Switzerland	Smart device for High voltage sub-stations • €5M+ • Modular, boxed solution with IoT connectivity
	World-leading pioneer in water solutions		Denmark	• Advanced HMI for Industrial heating/cooling control panel €5M+ • Enhance efficiency & operational control
	Global leader in HVAC controls		Italy	• Smart climate control solution with HMI touch panel €3-5M Software support for GUI •
	Global leader in marine navigation systems		Japan	• Smart fish finder and marine navigation system €3-5M • Integrated electronic board for control panel on vessels
	World-leading banking solutions		Germany	Two projects based on off-the-shelf products for ATM solutions • €1-2M • Integration capabilities, including an embedded printer
Time to revenue model	~6 months Off-the-shelf solutions Up to18 months Custom solutions	Product specifications	Project planning	Pre Engineering Feedback Engineering Mass Prototyping production Field tests phase I from client phase II production batch

Completing our end-to-end value proposition

CLEA Revenue(€m)

IoT Business Model

Price / unit	Fees per device and by consumption
GPM	~80%
Visibility	5+5 years contracts Recurring and incremental business

M&A and R&D driving innovation

Dedicated Leadership

• Dario Freddi
• Chief IoT & Strategy Officer
• Founder of Ispirata
• 15+ years experience

~100 people Dedicated to IoT & AI software development

Continuously expanding our Clea Ecosystem

Strengthening an existing group of industry-leading partners with a clear strategy to fuel creativity & boosting growth amongst 3 rd party users

Expanding top-tier tech partnerships

Access to advanced technologies

Being on-board for tech integration projects

Joint go-to-market strategies

Growth Drivers for 2025

Edge computing

Historical customers Normalisation of volumes from Destocking end & Growing IoT adoption

New clients Entering mass production stage

Edge-AI High-perf, real-time, offline processing

Industrial infrastructure Doubling production capacity by 2026

Software business

CLEA Penetration

Gradual integration into existing clients

Dedicated Sales force

Implementation ongoing

Push strategy

From all parties of the ecosystem

Full Stack Offering

IoT & AI solutions as enabler for Edge AI

M&A strategy

Act as a consolidator

Focus on expending our Edge Computing footprint:

• Client base expansion
• Open production capabilities in new locations
• Leverage on cross-sell & Clea up-sell strategies

ESG – A key priority for the Group

30% of energy consumed from certified renewable sources in 2023

29 average training hours per employee in 2023

120 stakeholders involved in the Group's materiality analysis for 2023

Conflict minerals policy Adopted in December 2022

20 programmatic actions for 2023- 25 to integrate sustainability organization-wide, adopted by the BoD in December 2022

Our Mission - A digital, sustainable, intelligent future

Our technologies at the service of sustainable business enable the automation of processes, increasing the efficiency of production processes, reducing product waste, and optimizing resource and energy consumption

Our ESG Ratings

Forward looking guidance

€180m+ 2024 Revenues

• Our sector continues to face an extraordinarily low level of activity
• As order intakes recovery gradually materializes, the resilience of our business and strength of our client base should allow 2H revenues to be broadly in line with the first 6m of the year

50%+ Gross Margin

• Our priority is to maintain our industry-leading gross profit margin levels
• This performance should come from smoothed Edge computing sales mix, Clea business expansion and increasingly favorable conditions in consumption costs

OPEX under control

• We keep close attention to our OPEX levels and, given our positive view on the sector outlook, do not foresee any need for short-term adjustments
• Our strategy will allow us to capture the full benefit of the upcoming rebound

Normalized 2025

• In a normalized market environment, we are confident SECO will go back to delivering 15%+ organic top line growth driven by both historical and new clients' activity
• Our profitably will also grow back in line with historical levels, also benefiting from the steady progress of our Clea software suite

Why invest in SECO ?

Top 5 player globally in one of the fastest growing end-market in technology Profitable business model focused on high margin custom solutions End-to-end technological partner with unrivalled R&D excellence Fully integrated IoT offering, from edge computing to software stack Highly diversified client base, consistently growing through new project wins Experienced management team with a clear roadmap to deliver long term growth Strong balance sheet allowing for pro-active M&A strategy Uniquely positioned product range to fully benefit from Edge AI tailwind

Q&A

Thank you

www.seco.com