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 are 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 0 followed by the hash key for operator assistance. May I now hand over to Claudia Nicolaus, Head of Investor and Public Relations and ESP Communications at Medios.

Ladies and gentlemen, welcome to our conference call on the results for the full fiscal year 2022. As in the past, all relevant documents can 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 call today is hosted by our CEO, Matthias Werther, and our CFO, Fife Neuschel. Matthias will start with a summary, followed by Fife, who will learn to write details on the financials for the fiscal year 2022, as well as on the guidance for 2023. And finally, Matthias will comment on media's growth stories. Both Matthias and Fred will be available to answer your questions afterwards. I would now like to hand over to Matthias.

Thank you, Claudia. Also, a warm welcome from my side. Thank you for joining this call and your interest in METROS. Overall, 2022 was a very successful year, by far the best for METROS. And this against the background of the global crisis and uncertainties. we are proud to present a further set of excellent results today. Let's go directly to slide 3, providing an overview of what were the highlights for 2022. First, we substantially strengthened our patient-specific therapy segment, the abbreviated PSP, through the acquisition of new co-farmers. The integration is on track, and we continue to realize good synergies and cross-veiling effects. This is what we also expect for the agreement on the sterile manufacturing collaboration with Apotheken, the Spezialversorgung OHG, as part of the acquisition of DDW as of January 23. It is also worth to mention that the manufacturing in our new GND lab in Berlin has commenced after receiving the permit last year. This was a significant step towards increasing our compounding capacity in the higher matching segment patient-specific therapies. Furthermore, we will be able to prepare for compounding for next-generation medicines, for example in the field of personalized therapies. Those who attended our Capital Markets Day on November 24th for the first-hand look of our new cutting-edge slab. Second, we have achieved the best financials in our company history, €1.6 billion in sales and a disproportionately higher EBITDA-free, representing a substantial increase of the group margin to 3.4%. Driven by the integration of Newco Pharma and to a lower extent also by organic growth. Furthermore, we posted strong operating cash flows and a more than double EPS. For 23, we expect growth with a revenue of up to 1.8 billion euros and an EBITDA tree of up to 63 million euros. And third, we started the implementation of our extended growth strategy 25, presented at our Capital Market Day in November 2022. We are particularly glad that we have been able to recruit an internationally experienced senior manager, who will try forward internationalization as part of the extended strategy. Heading this new department, I will come back to this later in more details. In line with our growth strategy, we recently extended our operational activities by providing hereditary nutrition for prematurely born babies, a quite challenging and complex service. Our ESG strategy is well embedded in the overall make-makeup strategy, and we continue to successfully implement this strategy as well as further improving our ESG rating. In a nutshell, we achieved our targets for 2022. Also, we were impacted by the changed reimbursement scheme in our PST segment and the general economic uncertainty. We expect ongoing growth in 2023. TALS 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, let me share... A short summary on the financials for the fourth quarter and full year 2022 as illustrated on slide 4 to 6. Slide 4 shows the strong continuous quarterly growth of our two KPIs, Revenue and TPTA3, until third quarter of 2022, with the fourth quarter reflecting the negative impact of the regulatory changes which became effective on 1st of September 2022. The two-year figures on slide 5 highlight the disproportionate EBITDA free growth of almost 43% to almost €55 million, also leading to higher margins. We have further expanded the share of the compounding business within the major portfolio, as illustrated on slide six. This demonstrates the impact of the consolidation of EUCO Pharma since January 22, a remarkable increase of the share of PST business. Compared to last year, we increased the revenue share of PST from 5% up to 14%. And for EBITDA-3, we more than doubled the PST share, coming from 21% up to now 43%. This development is fully in line with our strategy and goal to increase the share of the higher-margin PST business. Now let's move to my favorite slide 7, which we have already shown in the past. It describes our strong network of meanwhile around 700 specialized partner pharmacies, an excellent basis for our German expansion. The start of the compounding at our new G&G lab in Berlin helps to increase the major group manufacturing capacity in the higher margin GST segments to up to 600,000 preparations per year. This new G&G lab is one of the most modern, and effective gene field laboratories in Germany. And it will enable us to work even more efficiently, make processes even safer, and increase profitability at the same time. Based on our increased capacity and the agreement of manufacturing for AFS that we mentioned before, we target to compound more than 400,000 preparations in 2023. On slide 8, please find an update on our ESG activities. In terms of ESG, we have built a good foundation over the past two years. The ESG strategy provides us with a framework up to 25, and through the ESG committee, sustainability is an integral part of all management levels. With the help of ESG software implemented in 22, we have been able to expand the depth and breadth of our ESG database. 22 thus becomes our baseline year. Based on this, we can manage the targets and measures. In 23, the focus will be on increasing energy efficiency, maintaining a female quota of over 50% in leadership positions, and implementing a supplier code of conduct, among other things. This is all from my side for the moment. I now hand over to Falk to provide more details on the financials for the full year 2022 and on the guidance for 2023.

Thank you, Matthias. Welcome also from my side. I will now give you a more detailed overview on the numbers focusing on the full years of 2022. The full set of financial figures can be found in the annual report on our website. Let's start with slide 10, showing relevant key financials. As Matthias already said, the financial year 2022 was a very successful one for Miele. Revenue increased by 18.7%, thereof 3.4% organically and 15.3% inorganically, resulting from mutual farmer acquisition. Growth profit also found revenue growth significantly with plus 55.4%, so growth margin increased from 5.2% to 6.8% due to the higher share of TSC business, also resulting mainly from the Yugo Pharma acquisition. Personal costs follow the higher headcount, the increase of personal costs are 11.7 million The increase of other operating expenses by €10.6 million to €24 million was in the amount of €7.2 million driven by the integration of mutual groups, followed by rising rental costs due to the increase in rental space for the new manufacturing site in Berlin. Further cost increases resulted from higher energy prices, consulting for strategies, and post-monitor integration projects. Despite these higher expenses, EBITDA 3 grew by 42.8% and thus also found revenue growth considerably. EBITDA 3 margin reached 3.4% compared to 2.8% in the previous year. The higher level of profitability is also reflected in the development of earnings per share, which more than doubled from 37 cents to 77 cents in 2022. For your explanation, the adjusted EBITDA, so-called EBITDA-free, was adjusted by extraordinary expenses in the amount of 3.7 million euros, thereof for stock options and for M&A transaction costs, €0.8 million. Depreciation and amortization climbed from €19.4 million to €22.2 million, mainly due to the amortization of customer-related intangible assets, assets attributable to local farmers. Of the €22.2 million, almost €14.8 million results from TPA, Roughly 7.4 million euros received from non-CPA acquisitions and 2.9 million euros from IFRS 16 amortizations. Operating cash flow reached very sound 37 million euros despite extraordinary cash outflows for tax and social contribution payments for stock options of almost 8 million euros in the first quarter of 2022. Previous year operating cash flow was positively influenced by scheduled stock reduction in hemophilia products, which were built up end of 2020 in the PSF market. The cash flow from investing activity was mainly impacted by two aspects. The net cash component of the purchase price for NUCO, acquisition of 82 million euro, and further operational investments of approximately 5 million euro. The financing cash flow of miners 40 million euros resulted primarily from the repayment of a SIN loan in the amount of 25.2 million euros and a scheduled repayment of former shareholder loans in the amount of 9.8 million euros. By end of 2020, Nibius arranged a new revolving syndicate loan of 75 million euros, of which 25 million euros were drawn and January 23 to finance the latest acquisition of DBW. Cash and cash equivalents amounted to 79.2 million euros at the end of the reporting period, down from 168 million euros. The decrease is mainly a result of the cash components for mutual pharma acquisitions, the repayment of former shares alone, and the repayment of the former SIN loan. The equity ratio meanwhile increased to 77.8% from 75.2% in the previous year. Let's go to slide 11 and 12. There we did provide a breakdown of the organic and inorganic growth expectant for fiscal year 2022. Let's start with slide 11. Revenue grew organically by 46 million or plus 3.4%. The inorganic growth amounted to €207.4 million or plus 15.3% driven by the acquisition of NuclePharma. Around 73% of inorganic revenue growth was generated in the PST segment and the remainder in the TS segment. The organic growth of €46 million occurred almost entirely in the TS segment. However, the organic growth of CSG reached 10%. Slide 12 shows the EBITDA-3 breakdown by segments for financial year 2022. EBITDA-3 grew inorganically by 19.1 million, driven by the new-to-pharma integration. Thereof, 15.2 million euros were allocated to our PC segment and the remainder to PS. The increased demand for headquarter functions, post-merger integration efforts and strategic consulting costs increased cost levels in the segment's services. Let's now switch to slide 13. As just explained, organic sales growth of almost 10% in the segment patient-specific therapies and overall segment revenue climbed because of the new Kuhama acquisition. EBITDA pre-growth 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 decrease is a result of new Kuhama business with lower margins due to a different product mix and regulatory price reduction effective since September 2022 for compounding of liposuction drugs. As already highlighted by Matthias, the share of this segment GST in EBCR3 of the group is above the target level of 40%, while GST revenue is at 14% of group revenue. This led to a higher group margin in total. Slide 14 provides an overview of our financing power. ready to be used for our growth plan, which will be specified in more detail by Mattia shortly. Overall, we have more than 100 million euros of free funds available, providing for available cash and free funds from our new revolving credit facility. On top of that, we will ask for a potential 10% capital increase to be approved at our forthcoming AGM in June, which could even strengthen our financing power for future growth. Let's now switch to slides 16 and 17. Our guidance for 23 has been communicated. Despite economic and regulatory uncertainties, we expect revenue to reach the range of 1.6 to 1.8 billion euros. EBITDA-free is expected to rise to 56 million to 63 million euros. As a consequence, the group EBITDA-free margin is again expected to improve. The guidance takes into consideration assumptions as outlined on slide 17. Global uncertainties to selectives, such as rising inflation and supply chain bubbles. The impact from last year's regulatory price changes is considered in this guidance. However, the key message remains the same. Our growth course will continue in 2023. A summary of our strategic priorities is outlined on slide 18. For this, I hand over to Matthias.

Okay, thank you, Karl. Now some words to our extended growth strategy 25, presented in November last year. Our attractive growth strategy is based on three pillars. First, developing and growing our business in Germany. Second, expanding our compounding business into selected European countries. And third, diversifying into a prospective new business segment, namely manufacturing of advanced therapies. Let me first make some comments on how we will push forward our manufacturing business in Germany. By closing the white spots in our geographic coverage of our partner networks, especially in Bavaria and or Eastern Germany. Remember the map of Germany, for example, by acquiring respective labs and or compute cooperation agreements, as well as by rolling out Metas Connect, our innovative digital platform for the TSP business. By increasing the number of doctors and surgeries behind our partner pharmacies. By diversifying and expanding major indication areas. The most recent example is that we started to provide hereditary nutrition for prematurely born babies Therewith, we offer highly specialized and very sophisticated services and help the German health system to prevent a gap in care. We once again expanded our product range and diversified our customer group, namely to include hospital pharmacies. As we are already extremely well positioned in Germany, the next logical step is the expansion into European countries with higher margins and attractive growth rates. Let's go to slide 19, which provides an overview of the four countries we selected, namely UK, the Netherlands, Belgium and Switzerland. And the reasons for which they were selected out of 12 screened European countries. The cumulative specialty farmer spend of these four prioritized countries is around 17 billion euros, and the same size of the total specialty farmer spend in Germany, which will double our potential market. What is our preferred plan for the expansion into other European countries? It would be ISO 2000. acquire sterile GMP labs to manufacture patient-specific therapies in these countries. We already demonstrated our abilities to successfully operate and integrate sterile GMP labs. We are very glad to inform you that we will strengthen our international team with the highly experienced executives in the European specialty pharma market. As from April 1st Constantine van Grieskoten will join NATO as head of international business development. I am sure some of you will already know Constantine. He is Dutch nationality, has 15 years farmer experience and has an extensive knowledge of and network in the European specialty farmer market. We are focused to accelerate our geopolitical expansion as part of our strategy. By internationalizing our business, we can further strengthen our market position and at the same time diversify our customer group to become more independent of German healthcare regulations. Slide 20 provides some information on the third and last pillar of our extended growth strategy. Entering the groundbreaking personalized medicine market. Summarized under the term advanced therapies. Meaning medicines based on genes, tissues or cells. All expensive and complex therapies. This fits well as we are already a trusted partner for high value and complex drugs in Germany. Advanced therapies are a rapidly growing market. with annual growth rates of around 18% until 2025, and a market volume of globally 13 billion euros, including COVID-M-RNA vaccines. Some of the advanced therapies require patient-specific approach, and we bring extensive experience in this field. Due to the increasing number of small and medium-sized pharmaceutical companies, and the increasing number of products at the commercial stage, a higher degree of outsourcing is expected, and this can be conducted by nature. In addition, there are already widespread capacity shortages in the manufacturing of novel therapies, and market experts expect capacity to lack demand in the future. All these trends support our strategy of complementing the manufacture of patient-specific drugs with the manufacturing of personalized therapies. In other words, this is the logical next step in the major growth strategy. We can achieve these objectives both through organic source, for example, by adapting and using existing laboratories to produce personalized therapies, and by acquiring other companies. Currently, we are reviewing our list of potential M&A targets, including European countries. As outlined by Kyle, we have a strong financial basis that enables the financing of our extended growth strategy. Before I conclude the presentation, let's switch to slide 21. At our capital markets day, we presented our two mid-term targets, 25 to 27. for the first time. One of our main goals is to further increase our EDTA free-marching. That's why we want to tap further opportunities, which will enable us to achieve our objectives by internationalizing our business and by potentially launching new segments, respectively new services, all within the field of specialty tarmac. By implementing our extended strategy 25, we aim to achieve a medium-term target of 2 billion euros in revenue and an EBITDA pre-margin in the mid-Singlish digital area. Ladies and gentlemen, this concludes our presentation. We hope to see you in person at the conference soon or to hear you at our next earnings call on May 11. Thank you. for your attention. Frank and I are now available to answer your questions.