Evotec SE

Ladies and gentlemen, welcome to the conference call of Avertec SE. 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 to feel courtesy in the conference, please press star key followed by zero on your telephone for operator assistance. May I now hand you over to Dr. Werner Lantala, CEO, who will lead you through this conference. Please go ahead.

Thank you. This is Werner from Evotec. Welcome from sunny Hamburg. We have uploaded a presentation to follow this conference call that should help you to go through last year's events into this year where we say setting the pace. We have uploaded this presentation to the web and you can follow this presentation throughout this event. When you go to page number two of this presentation. Let me start by not only introducing my team, but first of all also thanking my team. I'm here together with Craig and Cord and our CFO Eno, and it is a great pleasure to make another year together with you and close out another year together with you. And we could close out nothing Thank you very much. can be treated more precisely than they are treated now. We've been shifting gears up in 21 to follow our mission stronger than ever. If you go to page number four of this presentation, let us first briefly look back into the last year, which marks many highlights but also some lowlights. Overall, it marks a fantastic year following our long-term strategy, which we call Action Plan 25, the R&D Autobahn to Cures. Highlights of 2021 can be marked by multiple new and extended integrated deals. The opening of our J-Pod in Reitman, the initiation of our J-Pod in Toulouse, Very good progress in our co-owned pipeline, which we call Evotec Royalty Pool, because the long-term mission behind it is to have a co-owned pipeline with royalty in flow to Evotec. We see excellent progress in our induced pluripotent stem cell and protein degradation partnerships, especially with Bristol-Myers Squibb. We see strong clinical developments, and many of them are in the making. We see multiple innovate partnerships where Cord will talk about them in the presentation to come. And we see a clear acceleration of our leadership in innovative platforms and technologies that bring probabilities of success up. We launched our EMPD, which is the largest and highest quality molecular patient databases on the planet, especially when it comes to selective indications, for example, kidney diseases. We are continuing our strategy on bridges and we have launched a very important global initiative which we call Protect for Pandemic Preparedness. Last but not least, also in the globalization strategy of our company, it was important to also make our mark even bigger in the United States by listing the company on NASDAQ and progressing multiple of our operational ventures. and others out there. Yes, it's not only about highlights, but accompanies a living sculpture. Well, sometimes also things don't go that well. And the discontinuation of the development of Ilya Piksand, which happened after period end, is clearly something that we didn't expect and which was a low light to call out. We also see, but that's something where we are in a good situation Aurelie Dalbiez is called at Evotec Action Plan 25. Let me also here confirm our long-term guidance goals for Action Plan 25 because we see our macro environment truly supporting what we are building into the future. So overall, our strategy from good to great can be called Action Plan 25 and it is fully confirmed with our long-term goals. Page number six shows you that the drug discovery and drug development hub, as we are putting it together, is unique and it is setting the pace when it comes to quality and efficiency in many of the processes that we are building. Evotec increasingly is the benchmark in the industry that other companies try to follow. We see this with our precision medicine platforms. We see this with more access to more efficient drugs for our partners that we are building. If you go forward to page number seven, you should see that learning curves are happening on our platforms more often than anywhere else. Why is this important? Because that illustrates to you that at EvoTech, everyone wins when people are cooperating with us. It's the shared learning curves that mark our shared economy for R&D. This makes our environment so productive when it comes to sharing not only experiments but also know-how and learning curves in our partnerships. And with this we see a very clear indication for our strategy not only to be strong but to even be stronger in the future because there are many tailwinds behind our industry-wide strategy. Page number eight illustrates to you that we are on our strategy building this R&D Autobahn to cures not only on all modalities but also closer to our partners and closer to the academic centers where we see true innovation happening. Today we are also reporting to you that at every site where we are currently present we are expanding our footprint into the future Page 9 illustrates to you that a company like ours can only grow if we grow our talents. So it has been an extremely rewarding year for us to see that we can attract top talent that wants to join Evotec and wants to build this company together with us. For the first time, we were able to recruit net more than 600 new employees into the company. This is remarkable. But even more remarkable is that this is more than 30% PhDs out of this new class in 2021 that we were able to recruit. It's a true scientific powerhouse that we are building which is unparalleled in its scientific and in its know-how power on a global scale. We are very happy that we are continuing this path and you can expect more than 600 talents to be recruited into Evotech in 2022. When it comes to talent, on the next page you see a series of pictures which is just illustrating Great expertise that we are able to attract. But nevertheless, let me first of all thank all 600 new colleagues in the company that they have joined our mission and that we are very happy to gather with them. But the page number 10 illustrates to you that, for example, Liz Mortimer joined us to lead our safety efforts in the future, that Valerie joined us to lead Heavy Capital Intense Project, that Matthias Evers will join us as of May 1st as new CBO, that Sundar joined us as an expert in biotherapeutics to lead our quality efforts and strategic efforts within just Evotech Biologics, that we have hired a series of entrepreneurs in residence for our operational venture strategy like Mirko Scherer, like Dan Mahoney, and like Dara Henry. and that we have hired great expertise in our biologics sales strategy with for example Christelle joining us from another place which was also selling biologics. It's fantastic to build this company together with you. And on the next page it's also fantastic to translate a company with the right strategy into great numbers. Great numbers means for us not only that we are growing but that we are growing at the right pace, at the right quality level, and especially with the right partners. So we are very happy to confirm that we have achieved all elements of our guidance in 21 and that in 21 you also see a great quality of growth behind every single line here. Why is this important? Because a company that aspires to go beyond a billion in sales by 25 needs to be built on the right quality of sales going forward. A company that wants to lead R&D has to invest R&D into the right quality of R&D projects and with this also long-term create the right quality of EBTA that we want to bring together. So we feel very comfortable about the balance that we are striking here between investing into the future with R&D and even increased R&D in 2022 as you will see, but at the same time building a top growth quality company together here. This is best illustrated by taking the next page, page number 12, and looking a bit into the future. And we are very happy that this will be the 12th year in a row with double digit growth on the top line. 12th year in a row with double digit growth in the top line going beyond 700 million in euros up to 720 million as our initial guidance is strong growth with about 15%. Unpartnered R&D will go up higher than ever because we see higher potential of our precision medicine platforms than ever before with about 30% increase here. We feel very comfortable with these investments. and our adjusted EBTA with about 105 million to 120 million will be at least stable, if not strongly increasing. A lot of this will depend on milestones that have to be achieved throughout the year. Let me also stress that this is not only a year of strong growth in all traditional lines that we're reporting, but that we are investing more than ever before into our strategic footprint to build the supporting growth platforms into the future. So with about 300 million in capex that we are spending throughout the whole footprint and into upgrading the organization, we are illustrating our strong belief and the strong demand behind the platform. With this, let me again thank my team, thank the whole company, but also thank you following us because it's a pleasure to hand over now to Eno who will bring you into our numbers, then to Put the dialogue forward to Cord and to Craig, and I will come back then later.

Thank you, Werner, and also a warm welcome to all of you from my side. The audit of the financials and the results and substance have been completed, and therefore, regarding content, the audit can be considered complete. Some extended procedures have to be considered, for example, new reporting format like the 20F and extended ASEF tagging, including our US documents. And while thoroughness has priority over form and sometimes speed, the ASEF process remains to be completed. And once this is done, the unqualified opinion is planned to be issued. Thus, the full report will be available on April 26 for your download. And there you will find the same numbers that we present here to you today. But let me start and come to the numbers. The 12-month 2021 numbers show an excellent 23% increase on our revenue line, substantially pushed by the positive development of our base business and by the realization of multiple milestones, in particular in the second half of 2021. The gross margin amounted to 24.5%, slightly lower than last year's 25%. And this is mainly due to the often mentioned end of the Sanofi subsidy for our side in Toulouse after Q1 2020 and adverse FX effects in 2021. If adjusted for both effects, gross margin year-to-date 2021, and here in a like-for-like comparison, would come in at 25.5%, The planned increase in unpartnered R&D expenses by 25%, namely 46 million versus 58 million, leads to a 13% growth in overall R&D expenses. This development is especially driven by further enhancing our multiple platforms and continued acceleration of our co-owned pipeline. The increase of 37% in SG&A expenses versus last year is mainly caused by increasing headcounts and cost for our secondary NASDAQ US listing Werner was just referring to. This rise in this position generally reflects our continuous growth efforts. And this is, for example, the ramping up of our operational J-port in the US while initiating our second J-port in Toulouse already. Further part is about enhancing ongoing integration tasks and ensuring overall growth opportunities across the different sites. The other operating income and expense stands slightly above last year's level and contains three main components. R&D tax credits and the recharges for ID Lyon as the main positive building blocks. And on the other side, and in order to address the risk of a potential divergent interpretation All in all, this development results in a slight increase of 1% of this position. With a total of 107.3 million euros, our adjusted EBITDA lands well within our expectations. and like for like, we do recognize an increase of even 18% against the previous year. The net income amounted to 215.5 million and benefits substantially from a very positive one-off effect and the non-operating income resulting from a revaluation of our Accenture Evo equity engagement due to the successful IPO in September 2021. The next slide depicts our exceptionally strong milestone revenue contributions of 49.5 million in 2021, mainly resulting from our longstanding BMS-Seljin collaborations and the new Takeda collaboration. Our base business grew completely organically by 18% overall, and this despite negative portfolio and unfavorable FX effects. Therefore, our base revenues adjusted for these two effects year-on-year even grew 23%. Margin-wise, we arrived within expectations, which was also supported by the successful realization of significant milestones as mentioned before. The slight margin decrease versus last year is triggered by the same effects, namely Sanofi and FX, as just described for the revenue lines. plus additional ramp-up cost for the JPOD US in context of preparing the successful launch. Looking at the year-on-year revenue development, the increase is mainly driven by our very significant 27% organic growth of the business, reflected in 135 million step-up versus the last year. This is another evidence for our continuously high revenue quality Coming from a healthy mix of our sustainable repeat business with our long-term partners and strong additional demand for our Evo IR&D offerings. Mostly due to the on average weaker US dollar against the euro in the first seven months of 2021, revenues were negatively affected by a currency effect of minus 9.2 million euros. Thus, at constant 2020 FX rates, sales would have been even higher at approximately 627 million euros. Looking at the two segments, both continue to grow and perform well, reflecting a broad basis for our growth. Year-to-date executed revenues, including intersegment revenues, grew by 20%. Coming from 510 million in 12 months 2020. This is further driven by an increasing demand in the integrated offering or Evo IR&D and a strong demand for our base business. 12 months 2021 Innovate revenues amounted to 147 million, which is an excellent 38% above last year due to continuous high demand for precision medicine reflected by expanding existing as well as several new partnerships, and also due to the realization of substantial milestones, in particular in Q3 and Q4. Innovate's total R&D amounted to 81.9 million euros, which is 17% above last year, underlining our continued investment and commitment into innovation projects and long-term sustainability. A view on the single Q4 results illustrates the accelerated growth we have realized in this particular quarter. The 33% growth in revenues has been pushed by a strong milestone contribution of 21.6 million and a significant step up in base revenues compared to the three previous quarters and last year. In particular, to be mentioned, just Evotec Biologics and development in the Evotec Execute segment performed. Gross margin comes in at a good 27.8% and even exceeds last year's already high 26%. R&D expenses grew slightly by 5%, while SG&A expense expanded by 80% to support operational and financial growth and reflecting the cost for our going IPO at Nasdaq. All in all, EBITDA is up 25% versus last year. Net result however was negative with minus 31.5 million euros which after a very successful IPO of Exientia Holding in September resulted mainly from a drop of the respective share price thereafter. A view on the net income bridge shows the huge positive effect in the non-operating result from Exientia of 225 million and FX movements of roughly 15 million. This was partly offset by consolidated operational net losses from several equity participations in the amount of 16.6 million. In addition, the review of our equity participations resulted in an impairment of 2 million and fair value adjustments of 11.2 million. On page 20, I would like to highlight the very positive operating cash flow of 122.2 million euros. The capital expenditures of 118.9 million comprise mainly the JPOD US and other expansion projects as well as lab equipment underlining the acceleration of Evotec's overall business growth. In 2021, we invested 22.7 million into new and existing equity investments. Finally, the capital increase with the NASDAQ listing in the U.S. in November resulted in net proceeds of $403.1 million. Slide 21 summarizes Evotec's very solid and sustainable non-P&L related financial KPIs. The balance sheet is going up by a significant 53%, mirroring the ongoing dynamic growth of our business and influence Thank you very much. or Days Sales Outstanding Figure for Q1 2022 respectively. In addition, again following our NASDAQ listing from November 2021, the equity ratio stepped up to a very good 62% and we can report a net cash position of 494 million. These factors together indicate plenty of headroom and flexibility to further invest into organic and strategic growths. Total liquidity consequently increased to 858.2 million at the end of the year, allowing us to continue planned CapEx investments to support projects such as J-Port Redmond and J-Port Toulouse in Europe, as well as general expansion of our capacities across the various sites. Furthermore, Evo equity engagements into new and existing equity holdings are anticipated. With this, this completes the financial overview, and I therefore would like to hand over to Craig. Thank you very much.