Schmid Group N.V.

Company Overview

Business Model: SCHMID Group N.V. is a global supplier of high-end equipment, software, and services for diverse industries including printed circuit board (PCB), substrate manufacturing, glass, energy storage, and photovoltaics. The company focuses on technologically advanced production processes, offering a modular product portfolio for high-end PCB equipment and semiconductor packaging devices, including subtractive, semi-additive processes (SAP), and modified semi-additive processes (mSAP). SCHMID Group N.V. also engages in extensive joint research and development projects with customers for next-generation electronics products and provides comprehensive after-sales services such as machinery and software upgrades, spare parts, logistics, customer training, on-site management, maintenance contracts, and project management.

Market Position: SCHMID Group N.V. is a long-established, fifth-generation family-controlled business founded in 1864 in Freudenstadt, Germany, with a 160-year tradition of technological leadership. The company positions itself at the highest end of its target markets in terms of technology and performance, recognized for quality and innovation. It is currently the sole participant in the market capable of supplying equipment for Embedded Traces (ET) production, a technology believed to be the next level for high-end PCBs and substrates. The PCB high-end equipment market is consolidated with a limited number of major global suppliers, including multinational and regional competitors.

Recent Strategic Developments:

• Business Combination: On April 30, 2024, SCHMID Group N.V. completed a business combination (de-SPAC) and began trading on the Nasdaq Global Select Market.
• Technology Innovation: The company is patenting its Embedded Traces (ET) technology, which offers increased manufacturing precision, enhanced design features, cost savings, and reduced CO2 emissions and water consumption. It expects significant growth in the ET market, particularly in North America, in 2026.
• Strategic Partnerships: SCHMID Group N.V. is collaborating with TRUMPF, a high-tech company, to develop an innovative manufacturing process for the latest microchip generation, specifically for glass interposers in advanced packaging, utilizing through-glass vias (TGV) etching.
• Market Expansion: The company has entered the glass substrate machining market and is offering specific machines in this sector, which can be combined with ET layers. It is also expanding into equipment for fuel cell production, adapting its process know-how for bipolar plates.
• Operational Efficiency: SCHMID Group N.V. initiated a "Sprint" cost-saving program in late 2025, targeting over €4 million in annualized savings, primarily through natural attrition, termination of temporary labor contracts, and a short-time work program in Germany.
• Geographic Expansion: A new subsidiary in Malaysia is planned for 2025 to serve as a spare parts and service hub for the Asian region (excluding China and Taiwan).
• Financing & Liquidity: In late 2025 and early 2026, the company undertook significant financing measures, including a €5 million shareholder debt waiver, a debt-for-equity set-off of $26.96 million with XJ Harbour HK Limited, a secured €10 million two-tranche term loan facility with Black Forest Special Situations I (of which €2.5 million was drawn), and a $30 million 7.00% Senior Convertible Note due 2028 with Linden Advisors LP (first $15 million tranche funded in January 2026).

Geographic Footprint: SCHMID Group N.V.'s headquarters and one of its two production facilities are located in Freudenstadt, Germany. The second production facility is in Zhongshan, China, focusing on the Chinese market. The company maintains an extensive service and sales network across five centers in the United States, Europe, and Asia, with additional facilities in Malaysia, Singapore, South Korea, and Taiwan primarily for customer service. Distribution partners are located in Brazil, Italy, the Netherlands, Sweden, Austria, Israel, India, and Japan.

Cross-Border Operations: SCHMID Group N.V. operates globally through numerous subsidiaries in the United States, Singapore, South Korea, Hong Kong, China (multiple entities), Taiwan, and Malaysia. It holds a 50% interest in SCHMID Avaco Korea, Co. Ltd. in South Korea and, as of December 31, 2024, a 49% interest in SCHMID Energy Systems GmbH in Germany (following a partial disposal). The company's international operations expose it to diverse legal, regulatory, political, social, and economic conditions across various jurisdictions, including complexities in managing personnel and complying with foreign laws and tax regimes.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 19.8% (2024) vs. 29.3% (2023)
• Operating Margin: -134.4% (2024) vs. 35.7% (2023)
• Net Margin: -138.2% (2024) vs. 42.0% (2023)

Investment in Growth:

• R&D Expenditure: €3,974 thousand (6.5% of revenue) in 2024, down from €5,148 thousand (5.7% of revenue) in 2023.
• Capital Expenditures: €5,111 thousand in 2024, down from €6,907 thousand in 2023 (for intangible assets and property, plant & equipment).
• Strategic Investments: Focus on growth for ET and glass substrate projects, automation solutions (next generation of fully automatic factories), and software insourcing for SECS/GEM.

Currency Impact Analysis: SCHMID Group N.V.'s international sales and operations expose it to fluctuations in foreign currency exchange rates, primarily EUR, USD, and RMB. A significant portion of revenues is non-Euro denominated (USD, RMB), while most costs are in Euro. While RMB revenues are largely matched by RMB costs, a weakening of the USD and, to a lesser extent, the RMB against the EUR could negatively impact results. Foreign currency transaction gains and losses are recognized in other income and other expenses. In 2024, foreign currency losses amounted to €2,347 thousand. The company does not have a formalized risk management system for currency hedging but addresses identified financial risks on a case-by-case basis. Foreign entities use their local currency as their functional currency.

Business Segment Analysis

Technical equipment and processes

Financial Performance:

• Revenue: €49,593 thousand in 2024, a decrease of -37.0% YoY from €78,743 thousand in 2023.
• Segment Adjusted EBITDA: €611 thousand in 2024.
• Key Growth Drivers: Expected adoption of ET technology in the PCB and substrate markets, introduction of the new TGV Etching system, expansion of the product portfolio in high-end PCB and organic substrate markets, and growth in equipment and processes for glass substrate manufacturing and fuel cell production (bipolar plates).

Product Portfolio:

• Major product lines and services within segment: Modular equipment kit for high-end PCB and semiconductor packaging, including automation, wet processes (horizontal, vertical, single panel), and vacuum processes. Specific product lines include Infinity C+ Line (vertical spin-process), Infinity V+ Line (vertical inline), Infinity P+ Line (high-end PCB), CMP (chemical mechanical polish), PlasmaLine (vertical inline and cluster plasma), InfinityLine A+ (automation), and Infinity H+ Line (horizontal wet process).
• New product launches or major updates: Embedded Traces (ET) technology, a fully additive process enabling new 3D structures and glass cores, offering miniaturization, increased complexity, and advanced properties for high-performance applications (AI, high-end consumer electronics, autonomous driving). The TGV Etching system for advanced microchip packaging using glass interposers.

Market Dynamics:

• Competitive positioning within segment: SCHMID Group N.V. operates in a highly competitive, yet consolidated, market for PCB high-end equipment, with a focus on quality and innovation. It is currently the sole supplier of ET production equipment.
• Key customer types and regional market trends: Customers include leading global Original Equipment Manufacturers (OEMs) from the semiconductor and consumer electronics industries, as well as companies within their supply chains (e.g., manufacturers of computers, mobile phones, tablets, PCB boards). Key market trends include the global surge in AI-server boards, requiring high-density interconnect (HDI) and ultra-high layer-count PCB architectures, and "back-shoring" and sovereignty initiatives in Europe and North America.
• Regulatory environment by jurisdiction: Not specifically detailed for this segment, but general regulatory risks apply.

Geographic Revenue Distribution: (Segment-specific distribution not provided, but overall company revenue distribution is below).

Spare parts and services

Financial Performance:

• Revenue: €11,192 thousand in 2024, a slight decrease of -2.7% YoY from €11,503 thousand in 2023.
• Segment Adjusted EBITDA: €2,459 thousand in 2024.
• Key Growth Drivers: Expected to benefit from economies of scale as the installed base of machinery increases, leading to proportional growth in service revenues.

Product Portfolio:

• Major product lines and services within segment: Worldwide customer-oriented services including on-site management, remote maintenance and diagnosis, customer training, project management, provision of spare parts, upgrades, and maintenance contracts.
• New product launches or major updates: Not specifically mentioned for this segment, but software-enabled service offerings are noted to enhance equipment performance.

Market Dynamics:

• Competitive positioning within segment: Focus on comprehensive customer support and service network with over 100 service engineers globally.
• Key customer types and regional market trends: Serves existing customers across all industries, leveraging its global service network.
• Regulatory environment by jurisdiction: Not specifically detailed for this segment, but general regulatory risks apply.

Geographic Revenue Distribution: (Segment-specific distribution not provided, but overall company revenue distribution is below).

International Operations & Geographic Analysis

Revenue by Geography:

International Business Structure:

• Subsidiaries: SCHMID Systems, Inc. (USA), SCHMID Singapore Pte. Ltd. (Singapore), SCHMID Korea Co., Ltd (South Korea), SCHMID Asia Ltd. (Hong Kong), SCHMID Technology Guangdong Co., Ltd. (China), SCHMID China Ltd. (Hong Kong), SCHMID Shenzhen Ltd. (China), SCHMID (Kunshan) Co., Ltd. (China), SCHMID Taiwan Ltd. (Taiwan), SCHMID Automation (Zhuhai) Co., Ltd. (China), SCHMID Solar (Shenzhen) Ltd. (China), SCHMID Trading (Zhongshan) Co. Ltd. (China), Pegasus Digital Mobility Acquisition Corp. (Cayman Islands), SCHMID Asia Pacific Sdn. Bhd (Malaysia).
• Joint Ventures: SCHMID Avaco Korea, Co. Ltd. (South Korea, 50% ownership). SCHMID Energy Systems GmbH (Germany, 49% ownership as of December 31, 2024).
• Licensing Agreements: While not explicitly detailed as licensing agreements, SCHMID Group N.V. expects licensing revenue to increase over time as its installed base expands, leveraging its portfolio of over 100 patents and industrial property rights.

Cross-Border Trade: SCHMID Group N.V. is exposed to international trade disputes, such as those between the United States and China, which can lead to restrictions on the import and export of goods and technologies, and the imposition of tariffs. The company's supply chain is vulnerable to disruptions from escalating trade tensions. Trends towards nearshoring global semiconductor supply chains could also impact business as customers may favor competitors with closer production facilities. The company is subject to intercompany pricing laws and regulations related to the flow of funds between its international entities.

Capital Allocation Strategy

Shareholder Returns: SCHMID Group N.V. has never paid or declared cash dividends and does not anticipate doing so in the foreseeable future. The company intends to retain all available funds and future earnings to support business development and expansion.

• Share Repurchases: Not disclosed.
• Dividend Payments: €0.
• Dividend Yield: 0%.
• Future Capital Return Commitments: None explicitly stated.

Balance Sheet Position:

• Cash and Equivalents: €3,791 thousand as of December 31, 2024, down from €5,710 thousand in 2023.
• Total Debt: €77,433 thousand as of December 31, 2024 (comprising €40,433 thousand in current financial liabilities and €37,000 thousand in non-current financial liabilities).
• Net Cash Position: (€73,642) thousand as of December 31, 2024.
• Credit Rating: Not disclosed.
• Debt Maturity Profile: Non-current financial liabilities of €37,000 thousand are primarily due at the end of 2026, with automatic annual extensions if not terminated. Current financial liabilities of €40,433 thousand include a $2.35 million loan due June 2025, €12.1 million in short-term shareholder loans, and €23.5 million in liabilities to XJ Harbour HK Limited from a share buyback.

Cash Flow Generation:

• Operating Cash Flow: (€1,252) thousand in 2024, a significant decrease from €9,897 thousand in 2023, reflecting changes in working capital and a downturn in business activity.
• Free Cash Flow: (€6,363) thousand in 2024 (Operating Cash Flow minus Capital Expenditures).
• Cash Conversion Metrics: Not explicitly disclosed.

Currency Management: SCHMID Group N.V. holds cash and cash equivalents in various major currencies, including EUR, USD, CNY, HKD, KRW, and CAD. The company does not employ formalized hedging strategies but assesses foreign exchange risks on a case-by-case basis. Cash holdings are maintained with financial institutions having at least an investment grade rating to mitigate credit risk.

Operational Excellence

Production & Service Model: SCHMID Group N.V. develops and builds its own innovative machines and systems, focusing on wet and vacuum processing for high-tech industries. The company utilizes a modular product portfolio and a "building kit concept" in design and manufacturing, which enhances flexibility, ensures high quality, optimizes cost structure, and allows for customization and future upgrades. This modular approach also supports longer useful lives for equipment. The company's after-sales service model is customer-centric, offering comprehensive support globally through five service centers and over 100 service engineers.

Global Supply Chain Architecture: Key Suppliers & Partners: SCHMID Group N.V. relies on a limited number of suppliers for critical components and materials, such as sensor and control technology, and pumps and filters. The company maintains long-standing relationships with trusted suppliers and implements diligent qualification processes for new suppliers, alongside in-house product development and strict quality control standards. Purchasing activities are centrally monitored, but local factories retain decision-making autonomy for sourced materials and components. Facility Network:

• Manufacturing: Two primary production facilities: one in Freudenstadt, Germany (headquarters, global customer supply) and one in Zhongshan, China (focus on the Chinese market). Both facilities have comparable capacity, allowing for dynamic shifting of production based on requirements.
• Research & Development: A 32,000 square foot technology center in Freudenstadt, Germany, serves as the core R&D hub, equipped with laboratories and prototyping facilities. It employs over 150 scientists, researchers, and engineers globally.
• Distribution: An extensive network of five service centers in the United States, Europe, and Asia, complemented by additional facilities in Malaysia, Singapore, South Korea, and Taiwan for customer service. Distribution partners are also located in Brazil, Italy, the Netherlands, Sweden, Austria, Israel, India, and Japan.

Operational Metrics: The "Sprint" cost-saving program is expected to achieve over €4 million in annualized savings, primarily from personnel expenses in G&A, engineering, and R&D in Germany, without impacting assembly operations in Germany and China, which are running near full capacity.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels: SCHMID Group N.V. employs a global sales and service network with a local presence in key markets to maintain proximity to customers. The global central organization for sales and services is in Germany, supported by local employees in operating countries.

• Direct Sales: Implied by regional sales forces and direct customer relationships in key markets.
• Channel Partners: The company works with partners like SCHMID Avaco Korea, Co. Ltd. in South Korea and has distribution partners in Brazil, Italy, the Netherlands, Sweden, Austria, Israel, India, and Japan.
• Digital Platforms: The company is investing in software insourcing for SECS/GEM to offer its own software as an interface to customer solutions, enhancing data exchange.

Customer Portfolio: Enterprise Customers: SCHMID Group N.V. serves a concentrated customer base, including leading global Original Equipment Manufacturers (OEMs) in the semiconductor and consumer electronics industries, as well as their supply chain partners. These include well-known manufacturers of computers, mobile phones, and tablets, as well as PCB board manufacturers.

• Tier 1 Clients: The company has long-standing relationships and historical or ongoing joint development projects with some of the largest OEMs and PCB/substrate manufacturers worldwide.
• Strategic Partnerships: A notable partnership is with TRUMPF for developing advanced microchip packaging processes using glass interposers.
• Customer Concentration: In fiscal year 2024, the two largest customers accounted for approximately 23% of total revenues, and the ten largest customers represented approximately 58% of total revenues. The company served over 70 customers in 2024.

Regional Market Penetration: SCHMID Group N.V. aims to expand into new geographies, particularly in Asia (outside China) and North America. The new Malaysian subsidiary will serve as a regional hub for spare parts and services in Asia (excluding China and Taiwan). The company anticipates strong economic development in North America.

Competitive Intelligence

Global Market Structure & Dynamics

Industry Characteristics: The electronic industry, where SCHMID Group N.V. primarily operates, is highly competitive and characterized by rapid technological change, product obsolescence, and price erosion. The PCB high-end equipment market is consolidated with a limited number of major global suppliers. Key trends driving industry evolution include the expanding use of artificial intelligence (AI) requiring high-density interconnect (HDI) and ultra-high layer-count PCB architectures, increased connectivity and the Internet of Things (IoT), growing focus on Environmental, Social, and Governance (ESG) goals, expansion in electric vehicles, and demand for advanced microchip packaging (projected to grow to over $96 billion by 2030).

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors:

• MKS Instruments, Inc.: A NASDAQ-listed multinational competitor in PCB high-end equipment.
• Shenzhen SC New Energy Technology Corp: A multinational competitor in the photovoltaics market.
• Local manufacturers in China and Asia Pacific: These competitors often dominate equipment manufacturing due to market commoditization, price sensitivity, and favorable government policies for local producers.

Regional Competitive Dynamics: The competitive landscape varies by region. In China, local players benefit from government support and a price-driven market. Escalating trade tensions, particularly between the United States and China, and trends in nearshoring global semiconductor supply chains, can influence competitive dynamics by favoring local or regionally proximate producers. Some competitors may also benefit from favorable tax regimes or governmental grants and subsidies.

Risk Assessment Framework

Strategic & Market Risks

Global Market Dynamics: SCHMID Group N.V. faces risks from weakened demand in key markets, particularly in Asia (China, Taiwan, Malaysia), and a general decline in industry-wide spending on production equipment, driven by reduced end-market demand for electronics (e.g., personal computers, smartphones). Public skepticism regarding autonomous driving could negatively impact demand for high-frequency sensors. Customer mergers or consolidations could reduce the customer base and increase pricing pressure. Technology Disruption: The company operates in an industry characterized by constant and rapid technological change, product obsolescence, and price erosion. Failure to continuously develop new, improved, and cost-effective technologies, or if competitors develop superior or more cost-competitive processes and machinery (e.g., for ET technology), could adversely affect its market position and profitability. Customer Concentration: A significant risk stems from a concentrated customer base; the two largest customers accounted for approximately 23% of 2024 revenues, and the top ten customers represented 58%. Loss of key customers or their failure to grow sales could materially impact revenues.

Operational & Execution Risks

Global Supply Chain Vulnerabilities: The company relies on a limited number of suppliers for critical components (e.g., sensor and control technology, pumps and filters), making it vulnerable to supply chain disruptions, material cost increases, or shortages. These disruptions can arise from market shortages, inflation, regulations, labor stoppages, transportation delays, natural disasters, geopolitical developments, or trade restrictions. Regional Disruptions: Operations are exposed to geopolitical and macroeconomic turmoil, such as the war in Ukraine, and the changing political and economic relations between major global powers (e.g., US and China), which can lead to increased volatility and supply chain issues. Trade Restrictions: Escalating trade tensions, including import taxes, duties, and export controls (e.g., between the US and China), can restrict the import/export of goods and technologies, impacting competitiveness and production capabilities.

Financial & Regulatory Risks

Currency & Financial Risks: SCHMID Group N.V. is exposed to foreign currency exchange rate fluctuations, particularly a weakening of the USD and RMB against the EUR, which can negatively affect profitability. The company's ability to obtain additional capital on commercially reasonable terms is a risk, especially given that the funding of the second tranche of its $30 million senior convertible notes is conditional on the effectiveness of a registration statement by June 30, 2026. This condition, along with past liquidity issues, has led to a "going concern qualification" in its financial statements. Interest Rate Risk: Profit or loss is sensitive to changes in market interest rates, affecting interest income and expenses from loans granted and borrowed. A hypothetical 100 basis point increase in interest rates would result in a €378 thousand negative impact on profit/loss in 2024. Regulatory & Compliance Risks: The company is subject to extensive and evolving multi-jurisdictional laws and regulations, including environmental, health and safety, product liability, patent, trademark, competition, financial, accounting, and tax laws. Compliance with data privacy laws (GDPR, CCPA), anti-corruption (FCPA), anti-bribery, anti-money laundering, and economic sanctions laws is critical. Non-compliance can lead to fines, penalties, reputational harm, and operational disruptions. Global climate change legislation could increase production costs. Tax Regulations: International operations and corporate structure expose the company to adverse tax consequences, including intercompany pricing laws and potential disagreements with tax authorities. The new Global Minimum Tax regime in Germany (effective Dec 31, 2023) may increase the overall tax burden. The company's tax residency (Germany vs. Netherlands) could be challenged, and its ability to utilize net operating loss and tax credit carryforwards may be limited.

Geopolitical & External Risks

Country-Specific Risks: Operations in foreign jurisdictions (e.g., China, Taiwan, South Korea, Malaysia, United States) are subject to political and economic uncertainties, including changes in laws, unexpected taxation, currency restrictions, devaluations, or expropriation. Changes in Chinese government policy on foreign investment or increases in labor costs in China could adversely affect business. Economic Risk: Difficult global economic conditions, including inflation, sovereign debt concerns, and volatility in capital, credit, and commodities markets, can cause fluctuations in demand, product prices, volumes, and margins.

Innovation & Technology Leadership

Research & Development Focus: SCHMID Group N.V. maintains a research and development-focused business model aimed at expanding its market position and delivering high-tech solutions. R&D efforts concentrate on new technologies and processes, often in close collaboration with customers, universities (e.g., University of Konstanz), and leading research institutions (e.g., Fraunhofer Institute for Solar Energy Systems, Fraunhofer Institute for Reliability and Microintegration, Helmholtz-Zentrum Berlin). Global R&D Network: The company operates a 32,000 square foot technology center in Freudenstadt, Germany, which includes laboratory and prototyping facilities. Over 150 scientists, researchers, and engineers are employed globally across multiple laboratories. Innovation Pipeline: Key areas of innovation include:

• Electronics: Development of ET technology for substrates and HDI+ boards, offering increased precision, 3D structures, and compatibility with glass cores for high-performance applications (AI, high-end consumer electronics, autonomous driving). Also, the new TGV Etching system for advanced microchip packaging.
• Energy Storage: Focus on vanadium redox flow batteries (VRFB) technology development and equipment for fuel cell production (bipolar plates).
• Photovoltaics: R&D activities for next-generation solar cells and modules.
• Commercialization: A core priority is the efficient transfer of R&D outcomes into industrial applications and high-volume manufacturing. The technology center provides full prototyping capabilities across electronics, photovoltaics, and glass applications. Intellectual Property Portfolio: As of December 31, 2024, SCHMID Group N.V. held over 100 patents and industrial property rights and maintains various global trade names and trademark registrations. The company is actively patenting its ET technology. Technology Partnerships: Strategic alliances include collaboration with TRUMPF on Through Glass Via technology and research collaborations with academic and research institutions.

Leadership & Governance

Executive Leadership Team