Medios AG

Ladies and gentlemen, welcome to the conference call of Medios AG. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. If any participant has difficulties hearing the conference, please press star followed by zero for operator assistance. May I now hand you over to Claudia Nikolaos, Head of Investor and Public Relations at Medios.

Welcome everybody to our conference call on our results for the first half year of 2022. As always, all relevant documents can also be downloaded from our investor relations website. Additionally, this presentation can be followed in parallel via the internet link provided to you in the invitation. Today with me is our CEO, Matthias Gärtner, and our CFO, Falk Neukirch. Matthias will start with an executive summary, followed by Falk, who will then provide details on the financials for the first half, as well as on the outlook for the current fiscal year. And finally, Matthias will comment on Mio's growth story. Both gentlemen will be then available to answer your questions. I would now like to hand over to Matthias.

Thank you, Claudia. Also, a warm welcome from my side. Thank you for attending this call and your interest in Meteos. I'm proud to present a further set of excellent results today. The first six months of 22 were by far the best ever for Meteos, and Q2 was our sixth consecutive record quarter. Not only is our M&A strategy paying off, We also have delivered strong organic growth. And even more important, our margins are rising as planned. Let's go directly to slide three, providing an overview of the achievements and highlights for the first half of 2022. Our growth strategy is on track. We are successfully integrating the new co-farmer group. This latest acquisition has significantly strengthened our market position in the manufacturing area. The merger with Newco Pharma enables us to expand our competence in the field of patient-specific therapies and thus also significantly and sustainably increase the profit margin of the entire Medius Group. We continue to leverage Synergy potentials. and cross-selling opportunities through the expanded network of compounding facilities, as well as through the network of specialized partner pharmacies, which has increased to around 600 through the merger with NUCO Pharma. In our P&L, the acquisition is already paying off, as demonstrated by the positive development of our financial resources. strong inorganic growth, and attractive organic growth. Adjusted for M&A effect, we grew organically at a rate of about 9% in the first six months of 22, as well as in the second quarter 22. Total revenue climbed by 25%. Furthermore, in H1, we have strategically increased inventories in anticipation of further growth and rising prices. We are already benefiting here as we have started to sell them off at now better margins due to inflation-related price adjustment. And finally, Meteos is highly robust. So far, we do not see significant negative impact from the economic uncertainties. Our growth is currently hardly affected by the war in Ukraine, inflation, supply chain disruptions, or the general macroeconomic environment. I'm very proud to successfully lead our company through these challenging times together with my fellow board members and the entire Meteos team. The early extension of my contract as CEO, which was announced recently, will ensure consistency on the Executive Board as well as in the management of Meteos. We are very happy to be back in the SDAGs since June 22. This gives us more attention in the market. Regarding ESG, we are making progress in implementing the measures of the Meteos ESG Strategy 25. In a nutshell, we are showing dynamic and profitable growth and are excellently positioned for the future. Our new labs in Berlin are currently going through the validation and qualification processes and we expect to start compounding in Q4 this year. New partner pharmacies are adding cross-selling opportunities and the digitalization of the healthcare system offers attractive growth potentials. And not to forget, there are M&A opportunities in the market for internationalization and to set up new businesses in the area of specialty pharma. Against the background of the very successful business development in the first half, we confirm our forecast for 2022, despite the ongoing global uncertainties. We expect our revenue to reach the upper range of our guidance. Falk will provide more details on our outlook later. How can the first months be summarized best? Again, record numbers. We continued the goals and success story. We have set ambitious targets. We confirm our forecast and expect revenue to reach the upper end of the range of 1.45 to 1.6 billion euros, based on the excellent performance in the first half of this year. Now a short summary of the financials for the first half of 2022, illustrated on slides 4 to 6. Slide 4 illustrates the impressive continuous quarterly growth of our two KPIs, Revenue and EBITDA Pre, again reaching new records. Also compared to the second quarter of last year and the first quarter of this year, all KPIs have increased. This development clearly proves the positive effect of the most recent acquisitions, especially the remarkable increase of EBITDA pre and the respective margin. Following the corona burdened second quarter 20, we have seen eight quarters in a row of continuous growth of revenues as well as EBITDA pre. Even more impressive, each of the last six quarters represented new record levels. The same picture on slide five. A record first half with substantial growth year-on-year, record sales, and a strong disproportional increase of EBITDA pre. Falk will give you more details about this later. Let's move directly to slide six, providing a revenue and EBITDA pre breakdown per segment for the first half of this year. This reflects the impact of the consolidation of Newco Pharma since January. As Q1 already showed, we have also for the first six months a remarkable increase of the share of PST business regarding EBITDA pre from 25% for the full year 21 up to now 43%, already above the 40% share that we aimed for January. in full year 22. This development is fully in line with our strategy and goal to increase the share of the higher margin PST business. On slide seven, we can see the strong network that we can build on with the integration of Newco Pharma Group. This is also the driver of strong share of PST regarding our profit. Let me briefly summarize the main benefits of the acquisition. We complement each other, especially regarding the regional coverage. Together, we ensure an almost nationwide supply to our partner network of specialized pharmacies within the shortest possible time. Together with the additional labs of our new building in Berlin, we will reach compounding capacities of 500,000 to 600,000 preparations per annum, and we have clear plans on how to use these capacities. The combination of Meteos and UCO offers significant growth potential through combining our partner networks of meanwhile around 600 specialized pharmacies, expanding our product and service portfolio as well as synergies and cross-selling. In a nutshell, this is remarkable strengthening of our attractive higher margin segment patient-specific therapies. And I'm very blessed that this is clearly reflected in our half-year results, leading to a significant increase of our group EBTA pre-margin up to 3.6%. We have already realized synergy effects that result from the recent merger with Kana and Newco Pharma, mainly in the purchasing and logistics, but also from cross-selling opportunities within our extended partner network. This is all from my side for the moment. I now hand over to Falk to provide more details on the financials for the first half of 2022 and on the guidance for 2022. Thank you, Matthias. Also welcome from my side.

Now I will give you an overview on the numbers for the first half of 2022. And as I explicitly referred to different reporting periods. The full set of financial figures can be found in the financial statement on our website. Let's start with slide 9 showing relevant KPIs. The full consolidation of Nucleopharma since January 1st, 2021, 2022 is reflected in the financials. Revenue increased by 24.8%, thereof 8.6% organic and 16.1% inorganic. We also see a disproportionate rise of the earnings positions compared to the prior year. The cross-margin increased from 5.1% to 6.7% due to the higher share of the PST business resulting from new co-pharma acquisitions. EBITDA pre rose by 55.9% and the EBITDA pre margin reached 3.6% compared to 2.9% in the previous year. Therewith, revenue and profitability reached new levels as Matthias said already. Personal costs follow the higher number of headcount with 517 as of June 30, 2022. The increase of personnel costs by €7 million to €16.3 million is caused with €4.8 million by NUCO and with €0.8 million from stock option programs. The increase of other operating expenses by €4.7 million to €10.3 million was mainly driven by the integration of NUCO Group, followed by rising rental costs mainly due to increased rental space needs a new manufacturing site. Further cost increase resulted from higher consulting and integration costs. Despite these higher expenses, EBITDA Pre outperformed revenue growth considerably, driven by the consolidation of the new Kufama Group, so the acquisition is already paying off. EBITDA Pre was adjusted by extraordinary expenses in the amount of €1.7 million for stock options, €1.4 million, and M&A transaction costs, which make €0.3 million. Depreciation and amortization climbed from €7.7 million to €10.7 million, mainly due to the amortization of customer-related intangible assets attributable to Nuku Pharma. Of the 10.7 million euro, roughly 3 million euro reside from non-PPA acquisitions. They are of 1.5 million euro IFRS 16 driven. And almost 8 million euro reside from former PPA effects from acquisitions. Operating cash flow amounted to almost 10 million euro. They are of 12.5 million euro in the second quarter. of 2022 compared to almost 30 million in the first six months last year. This development is caused by two extraordinary effects in 2022. One, the payment of retained taxes and social contributions for stock option plans of almost 8 million Euro in the first quarter of 2022. And second, the temporary increase in inventories to prepare for expected price increases. We expect this inventory build-up to be offset in the course of the financial year with positive operational cash flow effects for the second half of the fiscal year 2022. Cash flow from investing activities were especially impacted by effects in connection with the acquisition of NUCO Pharma. The cash component of the purchase price for NUCO acquisition of €88 million and investment in the new labs in Berlin of €1.4 million. The financing cash flow of minus €15.6 million resulted primarily from the scheduled repayment of a former shareholder loan of Newco Pharma Group in the amount of €9.8 million in the first quarter and the scheduled repayments for the syndicated loan of €3.2 million. The syndicated loan amounts to €22.1 million as of June 30, 2022. Cash and cash equivalents amounted to 78.3 million Euro at the end of the reporting period. The equity ratio decreased from 75%, sorry, 75.2% by end of 21 to a still very solid level of 70.8%. On slide 10 and 11, we provide a breakdown of the organic and inorganic growth by segment for the first half of 2020. Let's start with slide 10. Revenue grew organically by €54.9 million or plus 8.6%. The inorganic growth amounted to €102.4 million or plus 16.1%, driven by the acquisition of NUCO Pharma. Around 74% of the inorganic revenue growth were allocated to our PST segment and the remainder to PS segment. Organic growth of €54.9 million occurred almost entirely in the PS segment. The slight organic sales increase of the compounding business for the first half of 22 is again strategically driven by focusing on higher margins, but usually lower revenue. Slide 11 shows the EBITDA pre-breakdown by segment for the first six months of 22. EBITDA grew inorganically by 11 million as a result of the new pharma integration. There of 9 million were allocated to our PST segment and the remainder to pharmaceutical supply. The increased demand for headquarter functions following the inorganic growth path of the company plus the development of forward remunerations are reflected in higher costs in the service segment. Let's now switch to slide 12. As just explained, organic sales development was almost flat in the segment patient-specific therapies and overall segment revenue climbed as a result of the new pharma acquisition. EBITDA pre-rose respectively. This is fully in line with our strategy to focus on higher margin products and to increase the share of the compounding business. The EBITDA pre-margin decreased is a result of the NICU PST business with lower margins due to a different product mix. The EBITDE pre-margins given on slide 12 are calculated on overall segment revenue, including internal revenue. Related to external revenue only, EBITDE pre-margins PST is 12.05% for the reporting period, related to 12.9% in the previous year period. As already highlighted by Matthias, the share of the segment PSD in EBITDE pre of the group is meanwhile above the target level of 40%, while PSD revenue is at 14% of group revenue. Let's now switch to slide 14 and 15. Despite ongoing economic and regulatory uncertainties, MEDEOS confirms the guidance for 2022. The company expects revenue to reach the upper end of the range of 1.45 to 1.6 billion euro. EBITDA pre continues to be expected to fall within the range of 52 to 58 million euro. Global uncertainties, as outlined on slide 15, do still exist, such as rising inflation and supply chain bottlenecks. Our growth course is currently not affected, but we are cautious. and are monitoring the situation closely. In addition, we must include possible regulatory risks in our consideration. Ladies and gentlemen, the numbers demonstrate the sustainable and profitable growth story of MEDEOS. A summary of our growth initiatives, both organic and via M&A, is outlined on slide 16 and will now be presented by Matthias.

Thank you, Falk. Our growth strategy remains unchanged. and its implementation will further advance. With eight consecutive quarters of growth behind us, we are on track and well positioned for further growth in 2022 and beyond. During our previous earnings calls, I highlighted the various activities to achieve growth. So today, I only want to stress our efforts relating to M&A, in particular in the fields of the compounding business, which will help to leverage our additional compounding capacities. Also, geographically, we would be interested in expanding our partner network, especially in Bavaria and Eastern Germany. And as we want to further increase our EBITDA pre-margin, we want to tap further opportunities, which will enable us to achieve our objective, international expansion of our activities. We still benefit from the high market potential in Germany with the consolidating market. However, we want to internationalize our business in the future and are considering launching new segments, respectively new services and or products within the field of specialty pharma. We are looking forward to presenting more details of our strategy at our Capital Markets Day that we have scheduled for November here in Berlin. We will then present more details of our mid- and long-term strategy. We will elaborate on our plans about internationalization and diversification. Before I conclude the presentation, I will now provide a short update on our ESG strategy and what has been done so far, illustrated on slide 17. First of all, we made progress in implementing the ESG software tool, which will simplify and improve the data collection and transparency. After software training, we will be able to already use the software for this year's ESG data collection. Furthermore, we held a successful annual general meeting in June. Among other things, the shareholders voted in favor of modernizing the articles of association about corporate governance. As part of the sustainability strategy, we established a digital whistleblower hotline and initiated a project to improve the transport logistics. This includes various targeted measures at the different sites through Germany, ranging from material saving for packaging the shift to more local suppliers for laboratory protective clothing or testing alternative sustainable packaging. Ladies and gentlemen, this concludes our presentation. Thank you for your attention. Falk and I are now available to answer your questions.