Medios AG

Good afternoon and welcome to the QSP 2020 conference call of Medios AG. May I now hand over to Claudia Nikolaos, Head of Industrial and Public Relations of Medios. Good afternoon and welcome everybody to our conference call on our results for the first nine months 2020. Before we start, let me make some general remarks. First, the presentation will be recorded. Second, All relevant documents can also be downloaded from our investor-related website. And finally, this presentation can be followed in parallel via the Internet link provided for you in the invitation. Today with me is our CFO, Matthias Gärtner. He will guide us through the presentation and will be available to answer your questions. I would now like to hand over you to Matthias.

Okay, thank you, Claudia. Also a warm welcome from my side. Thank you for attending this call and your interest in maintenance. I will start with the highlights for the first nine months of this year, followed by some comments on our financials and on our outlook for 2020 as well. I will also be referring to the slides on the presentation. We start with the highlights of the operations, financials and the recently announced management changes outlined on slide 3. Our growth strategy is on track. Both segments reported safe growth despite the ongoing COVID-19 pandemic effects. In actual terms, pharmaceutical supply is the main growth driver, including sales for one month for our new education hemophilia that we started at the beginning of September this year. We expanded our compounding business through the acquisition of Kölsch Lister in April, a good example for external growth. The blistering business offers us additional attractive growth opportunities as well as energy effects in purchasing and logistics, for example. Furthermore, we won around 130 new customers since the beginning of this year, including about 80 specialized pharmacies via Kölsch Blister, and we started to offer the service of blistering to our partner experts. In addition, we arranged a new building within the building complex where our wholesale business is already located. With this, we will be able to triple our production capacity in the midterm and realize further synergies by concentrating logistics and warehousing at one site. In December, we will be able to start the planned construction work to set up our new lab. we should be able to start production in the third quarter of 2021. We have also concentrated our administrative unit at one new location here in Berlin Mitte since May 2020. From now on, I will provide a regular update regarding our self-developed digital platform named NATO Connect, which represents a crucial element in our growth strategy. This platform connects doctors, health insurance companies and specialized partner pharmacies with each other and serves an ordering, billing and settlement process. The number of users as well as the number of ordering and billing processes carried out on Nicheos Connect is constantly increasing. in addition to burning. In the next step, we intend to establish an e-prescription-capable platform that offers added value for doctors, health insurance companies, specialized partner pharmacies, and patients. So these stakeholders and makers can benefit from the increasing digitalization in the healthcare system. Hence, the message is, we are well prepared for the mandatory start of the e-description in January 2020 in Germany. Last but not least, we became a member in the SBAC on the 23rd of September 2020, after we were successfully uplifted from the general standard on the Stock Exchange Frankfurt to the prime standard, the segment with the highest transparency and publicity requirements in Germany. As announced most recently, our CEO Manfred Schneider will not extend his contract, which expires on the 31st of December 2020, and will leave the Executive Board due to family reasons. Effective January 1st of next year, I will start treatment with a CEO while also remaining responsible for finance and accounting at CFO. I'm very glad that I can continue to work together with my board colleagues Miong Mila, COO, and Christoph Brussai, CIO, as a proven and highly motivated executive board team. Or be it now in a three-member board. The future will reveal whether we will keep this structure or maybe extend the board by a dedicated CFO again as our dynamic growth continues. The supervisory board will closely watch this development. Now a brief overview on the financials and the relevant COVID-19 related effects shown on slide four. We do not see any material changes to COVID-19 related effects on the financials since our last update in August. We reported revenue growth again for the first nine months of this year. Both segments, pharmaceutical supply and patient-specific therapies contributed to revenue and earnings. However, sales growth was to some extent still impacted by the pandemic of 2020. Earnings were more negatively affected by COVID-19 than revenue. The stockpiling that began in the first quarter as a result of the allocation of quotas for certain trucks was carried out at higher purchase prices and thus led to lower margins than planned. This effect continued in the second and third quarter. This was and still is a challenge for Meteos as a growth company. We continue to assume that this COVID-related situation and its effects will persist in the next month, and we do not know how long this quota system will be in place. The Federal Institute declares that as long as the COVID pandemic persists, the quota will remain. We believe that the situation may start to ease in 2021 and can be back to normal in 2022 and we already saw first signs of improvement in Q3 as illustrated on slide 5. The third quarter shows a significant improvement in sales and earnings compared to the previous second quarter. increased from 130 million euros up to 160 million euros, and EBT, without extraordinary expenses, so-called EBCP, from 1.2 million euros to slightly above 3 million euros. We remain confident that we will close the financial year with a significant increase in sales. Consequently, we confirm our guidance for 2020. communicated in August. The conclusion for us is unchanged. The growth story of Matrix continues, as illustrated on slide 6. Our business model is intact. There is ongoing strong demand. We could even further increase sales if drugs were available. Our partner network now covers around 330 specialized pharmacies. We are investing in growth. Here are some examples. As mentioned before, we started the new and attractive Indication Immobilia in September this year. Our new blistering business will give us the opportunity to further extend the share of manufacturing business. The new building, which will offer the possibility to triple production capacities mid-term, And due to further consolidation of the market, we have the potential and the financial power to grow via acquisition. The message for slide 7 is straightforward. The previously described strategy will remain in place. Under the new management structure effective beginning of next year, I also want to stress that Manfred Schneider will remain closely associated with Metos and has already agreed to a voluntary six-month lock-up agreement for the majority of his Metos shares. Additionally, he will become a key member in a new advisory board to be established for the company. I will now comment on our financials. for the first nine months of 2020 and on our outlook for 2020. Let's move to slide nine, covering the figures for the first nine months of the year. The full set of financial figures can be found in the quarterly statement on our website and in the appendix of this presentation as well. As explained before, our nine-month figures continued to be affected by the pandemic. Despite these challenges, revenue rose by almost 22%. Driven by our wholesale business, including Felcipista for Q2 and Q3, as well as Hemophilia for one month. Since we were faced with the procurement restrictions mentioned, revenue growth was hampered and lower significantly. than it could have been without the imposed quota. Furthermore, personal expenses rose by around 3 million euros due to an intentional step increase to prepare for future growth, such as running the new indication hemophilia and for the mandatory ease prescription from January 2020 onwards. Not to mention the expansion of our compounding business, which I had already commented on. Other expenses also increased significantly, representing investments in future growth, for example, legal and consulting costs in connection with M&A, including the acquisition of Kölsch Pista. As a result of these effects, especially the impact from higher procurement prices on cost of good storage, earnings could not keep up with revenue and were lower than in the same period of last year. EBT without extraordinary expenses decreased from 12.8 million euros for the same period of 2019 to 8 million euros this year. Please be aware that the EBT-3 is adjusted for the following extraordinary expenses. €600,000 for stock options, almost €900,000 for M&A and €500,000 for amortization of the customer base. Cash flow from operating activities rose compared to the last year. The increase of the financing cash flow is a result of the capital increase conducted in June. The start of the new indication hemophilia is also reflected in the increased inventory. Overall cash and cash equivalents increased to 67 million Euro, mainly due to the previously mentioned capital measures and the positive operating cash flow. As said before, I want to stress once again that the third quarter showed significant improvements in sales and earnings compared to the previous second quarter. Now some comments on our segment outlined on slide 10. The driver for revenue growth was, again, the pharmaceutical supply segment, reporting sales of €406 million for the first nine months. However, earnings of the segment were still impacted by higher procurement prices which also lasted throughout the third quarter. Cost of goods sold increased accordingly, and the resulting ratio rose by around 1 percentage point, which led to a 4.1 million euro impact on earnings, that is 1% out of the 406 million euro. Percentage-wise, the segment patient-specific therapies also grew even stronger by almost 24%, up to €46.5 million, including revenue for the second and third quarters 2020 of Kölsch-Pliester. The reported EBITDA pre-margin for this segment weakened as a result of the internal cost allocation and investments for future growth, for example, the expansion of our new glistering business. Without the allocation of these internal costs, the EBITDA free margin would have grown up to 60.8% for the first nine months of 2020 from 15.3% for the same period in 2019. It must also be noted that the comparable third quarter 2019 was very strong, including one-time proceeds of almost €1 billion as a result of the sale of the real estate in Berlin-St. Petersburg. So let's switch to slide 11. providing an overview of our currently available funds as of 30th of September, which amounts to around €128 million, reflecting a contract signed for syndicated loan in March with the amount of €62.5 million. Thereof, we have only used €1.5 million so far to pay half of the acquisition costs for Deutsche Flieser. Calmed liquidity of around 67 million Euro, representing a slight increase of 7 million Euro compared to mid-August. Positive operating cash flow within the first nine months of 2020. In line with our growth strategy, we will use these funds for organic growth and potential acquisitions. A high single-digit million-euro amount will be invested to build up additional laboratories in the already rented new building in Berlin. And we will pursue our M&A strategy looking for attractive targets mainly in the compounding business and or highly specialized trading companies as well. I would now like to comment on our guidance for 2020 as outlined on slide 13. Due to the unexpected ongoing COVID-19 effects on the supply side, we had to adjust our guidance at the beginning of August. I already explained the reasons behind this and what we expect going forward. So let me just give you a brief summary. As stated, the implemented quota system mainly resulted in limitations on revenue growth and in higher procurement prices. We adjusted our guidance accordingly as disclosed on August 5. We confirmed this guidance as shown on slides 13 and 14. Ladies and gentlemen, the overall growth model of Naples is intact. We are convinced of the mid- and long-term growth potential and our target is to reach the one billion euro revenue mark in 2023 at the latest. And this, of course, at higher margins than in an exceptional 2020. As stressed before, our growth strategy remains unchanged, and its implementation will further advance. I have explained why we are well positioned to try future growth. A brief summary is outlined here. on slide 15. First, we will drive organic growth. By expanding our compounding business, the new building gives us the potential to triple our production capacities in the future. By exploiting the blistering business with high future potential and synergy effects, by expanding our partner network of specialized pharmacies and expanding business with already existing specialized partner pharmacies, by taking on new business opportunities in relation to the electronic prescription as of January 2022, by further market penetration through the innovative digital platform Meteos Connect, and by further expanding and diversifying the indication area. And second, we will drive growth via M&A, focusing on the compounding business or on specialized wholesalers. As demonstrated, Makers is well prepared and has strong financial power in a consolidating market. Ladies and gentlemen, this completes our presentation. Thank you for your attention.