Medios AG

Ladies and gentlemen, welcome to the conference call of Medios AG. As a customer's request, this conference will be recorded. As a reminder, all participants will be on 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 over to Claudia Nikolaus, Head of Investor and Public Relations at Medios.

Ladies and gentlemen, welcome to our conference call on the results for the first nine months of 2022. As in the past, 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. The course today is hosted by our CEO, Matthias Werner, and our CFO, Falk Neuters. Matthias will start with a summary, followed by Falk, who will then provide details on the financials for the first nine months of 2022, as well as on the outlook for the remainder of the year, And finally, Matthias will comment on NITO's growth strategy. Both Matthias and Frank will be available to answer your questions afterwards. I would now like to hand over to Matthias.

Okay, thank you, Claudia, and also a warm welcome from my side. Thank you for joining this call, and thank you for your interest in NITO. I am proud to present a further set of excellent results today. The first nine months of 2022 were by far the best for me, and Q3 was our seventh consecutive record quarter. Let's go directly to slide three, providing an overview of the achievements and highlights for 2022 so far, whereby my comments refer primarily to the third quarter. What were the highlights of the third quarter? First, we have received the manufacturing permit for our new GMP lab in Berlin. This is a significant step towards increasing our compounding capacity in the higher margin segment patient-specific therapies, abbreviated PSP. Furthermore, we will be able to prepare for compounding for next-generation medicines, for example, in the field of personalized therapies. With this permit, everything is set to begin compounding for our partner network of specialized pharmacies next week. Those attending our Capital Market Day on November 24 will get a first-hand look at our new cutting-edge labs here in Berlin. Second, the integration of NUCO is progressing very well and we continue to see good synergy and cross-selling effects. And third, our financials are strong with another record quarter in terms of revenue and EBITDA3, driven by the integration of new co-pharma and to a lower extent also by organic growth. In a nutshell, we are very well positioned to achieve our targets for this year. Consequently, we confirm our guidance for 2022 Also, we were impacted by the changed reimbursement schemes in our P&T segment for some phytostatic medicines, which became effective on September 1st, 2022. While we expect our revenue to reach the upper range of the guidance, EBITDA-3 will presumably come in at the lower half of the range of 52 to 58 million euros, due to this effect. FICE will provide more details on our outlook later. Our mid- and long-term strategy, including internationalization, will help us to mitigate further the potential negative effects of the general economic and regulatory environment. We are working on additional measures, which will also help us to offset the potential effects. we are very confident to successfully continue our growth story. Now a short summary on the financials for the first nine months of 2022, illustrated on slides 4 to 6, impressively showing our profitable growth. Slide 4 illustrates the strong continuous quarterly growth of our two KPIs, revenue and EBITDA premiums. again reaching new revenue and EBITDA-free records for the seventh record quarter in a row. The nine-month figures on slide 5 highlight the disproportionate EBITDA pre-growth of 55% to almost €44 million, also leading to higher margins. We have also made good progress towards our goals of expanding the share of the compounding business within the materials portfolio as illustrated on slide six. This reflects the impact of the consolidation of Newco Pharma since January. A remarkable increase of the share of PST business. Compared to last year, we increased the revenue share for PST from 5% to 14%, and for EBITDA-3, we doubled the PST share, coming from 20% to now 41%. This development is fully in line with our strategy and goal to increase the share of the higher-margin PST business. As the numbers demonstrate, we are successfully integrating the new co-pharma group. We are on track to combine growth with significantly and sustainably increased profit margins of the entire METEOS Group. On slide 7, we can see the strong network that we can build on with the integration of the EUCO Pharma Group. Furthermore, the start of the compounding at our new GMP lab in Berlin will help to increase the METEOS Group's manufacturing capacity in the higher margin PST segments up to 600,000 preparations per year. This new GMP lab is one of the most modern, safe and effective GMP laboratories in Germany. And it will enable us to work even more efficiently, make processes over-saver and increase profitability at the same time. 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 nine months of 2022 and on the guidance for 2022 as well. Thanks, Matthias.

Welcome to my side also. I will give you now an overview on the numbers and will focus on the first nine months of 2022 unless I refer to a different period. A full set of financials, as always, you can find on our website. So let's start with slide 9. As the revenue increased by 22.5%, there are 6.7% organic and 16.8% inorganic resulting from eco-pharma acquisitions. We see a disproportionate rise of earnings positions compared to previous years, so the growth margin increased from 5% to 6.7% due to the higher share of PC business also resulting mainly from eco-pharma acquisitions. EBITDA pre-rose by 55.1% and the EBITDA pre-margin reached 3.6% compared to 2.9% in the previous year. Personnel costs followed a higher number of headcounts with 514 as of September 30. The increase of personnel costs by €10.2 million to €24.3 million is mainly attributable to 7.4 million euro personnel cost of Leuco Pharma, 1.2 million euro from stock option programs, and the development of central functions and board remuneration. The increase of other operating expenses by 7.6 million to 16 million euro was in the amount of 5.1 million euro driven by the integration of Leuco Pharma Group, followed by rising rental costs primarily due to the trees in rented space, and the new manufacturing site in Berlin, further cost increases resulted from higher energy, consulting, and integration costs. Despite the higher expenses, EBITDA pre-outperformed revenue growth considerably, so the nuclear exhibition is already paying off. For your information, the adjusted EBITDA, so-called EBITDA-P, was adjusted by extraordinary expenses in the amount of 2.7 million euros, on the one hand for stock options by 2.1 million euros, and on the other hand for M&A transaction costs of 0.6 million euros. Depreciation and amortization climbed from 11.6 million to 16.1 million euros, mainly due to the amortization of customer-related intangible assets, as the reputable Genuco Pharma. Of the 16.1 million euros, almost 11.2 million euros result from former PPAs. Roughly 5 million euros result from non-PPA acquisitions and thereof 2.3 million euros from IFR-16 amortizations. Operating cash flow amounted to roughly €18 million instead of €8 million in the first quarter of 2022 compared to around €40 million in the first nine months last year. This development is caused by two extraordinary effects in 2022, the tax and social contribution payments for stock option plans of almost €8 million in the first quarter of 2022, and the temporary increase in inventory in the first half of 2022 to prepare for expected price increases. We already started to reduce our stock in the PS segment and would expect continuing reductions with further positive side effects for operational cash flow during the fourth quarter of 2020. Cash flow from investing activities was especially impacted by effects in connection with the acquisition of Nuko Pharma, the cash component of the purchase price for Nuko acquisition was 88 million euro and further operational investments of 3.5 million euro mainly in the new manufacturing site in Berlin. The financing cash flow of minus 39 million euro resulted primarily from the repayment of tranche A of the SIN loan of 25 million Furthermore, the cash flow includes the scheduled repayment of almost €10 million from former shareholder loans of the nuclear pharmacy. Currently, Medius has access to a credit facility of €17.5 million, which has not been used yet. Medius currently negotiates a spin loan of €75 million to replace the present loan. Cash and cash equivalents amounted to 62.1 million euros at the end of the reporting period. The equity ratio increased from 75.2% by end of 2021 to a very solid level of 75.6%. On slide 10 and 11, we provide a breakdown of the organic and inorganic growth assessments for the nine months of 2022. Sorry. Let's start with a slide set. Revenue grew organically by 66.8 million euro or 6.7%. The inorganic growth amounted to 155.9 million euro or plus 15.8% driven by the acquisition of Nucleopharma. Around 74% of the inorganic revenue growth were allocated to our PST segment and the remainder to PST. The organic growth of 66.8 million euros occurred almost entirely in the P&S segment. Slide 11 shows the EBITDA pre-breakdown by segment for the first nine months, 2022. EBITDA pre-grew inorganically by almost 16 million euros because of the new pharma integration. Thereof, 12.7 million euros were allocated to our P&S segment and the remainder to P&S segment. The increased demand for headquartered functions, customers, mergers, integration efforts, and consulting costs increased cost levels in the segment service. Let's now switch to slide 12. As just explained, organic sales closed about 10.5% in the segmentation-specific CRP, and overall segment revenue climbed because of the NUCO Pharma X. EBITDA pre-grows prospectively. This is fully in line with our strategy to focus on higher margin products and to increase the share of compounding business. The EBITDA pre-margin decrease is a result of user-specific business with lower margins due to a different product mix and the regulatory price reduction, the so-called risk factor, effective since September 22 for compounding of some hypostatic products. As already highlighted by Mathias, the share of the segment PST in ABCAP of the group is, as it was for the first part of 2022, above the target level of 40%, while PST revenue is at 14% of group revenue. Let's now switch to slide 14 and 15. Despite ongoing economic and regulatory uncertainties, NATO confirms the guidance for 2022. We expect revenue to reach the upper end of the range of €1.45 billion to €1.6 billion. However, EBCA-3 is expected to reach the lower half of the range of €52 million to €58 million due to the regulatory changes in the patient-specific therapy segment for the compounding of certain types of statics. According to our current projections, the reduced purchase price from December 1, 2022, and the adjusted manufacturing prices for the compounding of the patient-specific therapies from October 17, will lead to a negative DVCA pre-effect in the amount of 3.2 up to 3.6 million euros in 2022. Global uncertainties, as outlined on slide 50, do still exist, but there is rising inflation and supply chain problems. Our growth course is currently not affected, but we are cautious and are monitoring the situation closely. In addition, we must include the impact from the most recent regulatory change that affects our VC business. Ladies and gentlemen, the numbers demonstrate the sustainable and profitable growth story of Medium. The summary of our growth initiatives, both organic and via M&A, is outlined on slide 16 and will now present the final ideas.

Thank you. We are very excited to introduce the new strategy in two weeks from now. Therefore, I will only briefly highlight the key ambitions. The general direction of our growth strategy remains unchanged. But I would like to emphasize our efforts relating to M&A, in particular in the field of compounding, which will help leverage our additional compounding capacities. One of our main goals is to increase our EBTA-free market. That's why we want to test further opportunities which will enable us to achieve our objective, in particular by internationalizing our business in the future and by potentially launching new segments, respectively new services, all within the field of specialty pharma. We are excited to present more information and details on how we plan to achieve these goals at our capital market stay in two weeks. This is all for me from now. We are looking forward to seeing some of you at our capital market stay. Of course, we will publish the presentation on the METEOS website as well. Before I conclude the presentation, let's switch to slide 17. I just want to highlight that the implementation of our ESG software tool is scheduled to be finalized by year end. Ladies and gentlemen, this concludes our presentation. We hope to see you in person in two weeks here in Berlin. Thank you for attending.