Evotec SE

Thank you, Moritz, and good day, good morning to all of you on the call. I'm sure you all have seen our press release on our 2023 results this morning, as well as the announcement last night on the appointment of Dr. Christian Wojtkiewski, who will be our new COS of 1st of July. This development is the reason why we also have Iris Löw-Friedrich, our chairwoman of the supervisory board, with us on the call today. But before we go there, it's my obligation to familiarize you with the cautionary language we have outlined on page two. But now, without further ado, I would like to hand over to Iris. Please, Iris, the floor is yours.

Yeah, Volker, thank you very much and a very warm welcome to all of you, also from my side. We are ready to win the future for Evotech. Our core offerings are in high demand. Our business model is solid. Business is growing. We focus on profitability and most importantly, we have a super strong team in place and we are strengthening the leadership in EvoTech further. And that's the reason why I participate as the chair of the supervisory board in a regular full year's results call today. So with me today are Leticia Ruxell, our chief financial officer, who will cover the review on EvoTech's performance in 2023. followed by Matthias Evers, our chief business officer, who will guide you through the rationale and the details of the reset of the company's priorities for the coming year. Our chief operating officer, Craig Johnston, and our chief scientific officer, Kurt Dorman, will stand by to answer any questions you may want to address to them during the Q&A session. I have the duty to excuse Mario Polivka, our interim CEO, who is ill today and unfortunately not able to participate in this call. So we sent him our best wishes for recovery. I would like to deeply thank Leticia and Matthias for stepping in for Mario on short notice. Before we move to operational topics, please allow me to share the good news on the supervisory board's actions taken during the last close to four months. These efforts have led to the successful appointment of Dr. Christian Wojciechowski as our new CEO and of Aurélie Dalbiès as the newly created management board role of a chief people officer. A few words about the new CEO. The Evotech turnaround starts with a high-performing team at the top. If I can speak about myself, but I know it's also on behalf of the entire supervisory board, We all feel highly accountable to drive the reset of the company, starting with the best leader for the further evolution of Evotech with all the relevant stakeholders in mind. We are confident that we have made the right choice. We reviewed a wide slate of diverse internal and external candidates. We ran a structured interview process with more than 10 candidates. and an in-depth in-person workshop with the five finalists. We pressure tested their approach to our business, we tested their strategic competency, their operational execution, their experience, and of course their leadership skills. The appointment of Christian Wojciechowski as the new CEO of Evotech underscores our determination to drive a turnaround with a focus on profitability, efficiency and highest performance, while of course we need to further evolve the excellent science in all businesses of Evotech. Christian Wojcicki comes with an impressive track record of successful transformational change in the life sciences business, the creation of high-performing organizations and a clear focus on profitable growth. He demonstrated his strategic and operational leadership skills at the executive board of Linde, where he transformed the healthcare business into a global market leader with sales tripled and leading EBITDA margins. As the CEO of MEDIC, he transformed the business from a distribution model to a service model with streamlined business processes, a focused portfolio and a high performance culture. All of this resulted in a turnaround towards profitable growth. And these experiences will, of course, benefit Evotech greatly. So Christian is an accomplished leader who will make Evotech fit for a prosperous future. Next slide, please. The management team is further strengthened with the addition of Aurélie Dalbiès, our first chief people officer. Aurélie joins us from Corbillon, where she was the chief human resources officer. She comes with a long-standing career in talent-related positions. Aurelie will ensure the alignment of the Evotech people strategy and cultural evolution with the company strategy, while she will further evolve sustainability, first and foremost creating an inclusive culture with proficient teamwork, innovation and customer orientation top of mind. Aurelie was chosen following another intense search process, which illustrated once more that Evotech is highly attractive for eminent leaders. The combination of heightened attention to our people in Evotech, with our high-quality science and innovation, and with a performance-oriented business model, will make us unique and, I'm deeply convinced, finally unbeatable. I recognize that we have a lot of work to do to achieve this, and the reset has started. And with that, it's my pleasure to hand over to Laetitia to familiarize you all with the details of Evotech's performance in 2023 and the most recent developments.

Thank you, Iris, and a warm welcome to all of you for joining us today to delve into our performance of the financial year 2023. It was a very intense year for Evotech. It started off extremely strong. We expanded and extended two collaborations with BMS and were able to win Janssen as a strong partner in the field of oncology. On April 6, we have been hit by the cyber incident that had led to 70 million missed revenue in 2023, largely in Q2. Despite all the challenges, we could celebrate successes with just signing a technology alliance with Sandoz in May, validating the just value proposition. Through our focused efforts, we have seen a strong recovery of the business in 2003, coming back to 80% of operations with a strong revenue growth of 13%. In Q4, we faced a challenging market environment that was still masked by positive contribution from the fading cyber incident recovery. With that said, let us take a look at the full year results. We are pleased to report that our revised guidance for 2023 was fully achieved. Our group revenues for the year were 781.4 million in the upper range of 750 to 790 million as we had projected. Unpartnered R&D expenses totaled 64.8 million falling within our estimated range of 60 to 70 million and reflected our continued focus on innovation and growth. The adjusted EBDA for the year was 66.4 million, meeting our guidance range of 60 to 80 million. As just mentioned, we achieved 781.4 million revenue in 2023, a solid 4% increase compared to the previous year. and despite facing significant operational cyber-related impacts for the majority of Q2. These headwinds, mainly in our development and cyber-tech business, were more than offset by the strong performance from our key strategic partnerships. Notably, revenue from just Evotech Biologics reached 108.4 million, reflecting a remarkable growth of more than 110% compared to the prior year. This substantial increase underscores the success of our partnerships, especially with Sandoz, and the strengthening of our portfolio. Our gross margin experienced some pressure, declining slightly to 22.6% from 23.2% due to the cyber incident, development market challenges, the ramp-up of capacity at just Evotech Biologics, and excluding just gross margin was 27%. We remain committed to investing in the future with unpartnered R&D expenses of 64.8 million as we continue to drive innovation. Adjusted group EBDA for the year was 66.4 million, marking a 34% decline from last year, largely due to non-recoverable business and reduced capacity utilization in Q2. One from cyber related costs included in EBDA represent 26.5 million. Excluding just biologics, adjusted group EBDA would be at 72.7 million with execute absorbing most of cyber related expenses. Furthermore, we are proud to have made significant strides in sustainability, reducing our scope one and two emissions by 29% to 27,480 tons CO2 equivalent as we are growing greener. As outlined on the previous slide, Innovate has an excellent growth of more than 30% despite the challenges we faced. main drivers for this positive development were the extension and expansion of contracts with BMS in neurodegeneration, as well as in target protein degradation. Also, new collaboration with Janssen in cell therapy as well as the tech alliance with Sandoz demonstrates that demand for differentiated and paradigm shifting technology platform is very robust and a truly distinctive factor in an overall challenging market. As we indicate here on the slide as well, our full sales funnel has grown significantly across shared R&D and particularly also since validation of our just Evotech biologics CDMO offering. A substantial part of this opportunity sits in early funnel stages and we are working hard on conversion, winning this new partnership and translating this into revenues in later 24 and 25. Total executed segment, including inter-segment revenue, had stable revenues at $738.7 million, driven by the Sandoz collaboration, yielding a gross margin of 20.9%. Innovate segment revenue was $266.9 million in 2023, reflecting a gross margin of 30.8%. Despite the strong challenges, this year we achieved a 4% organic growth in group revenues. As mentioned, just Evotech Biologies revenue rose by 111%, demonstrating exceptional growth, driven by the collaboration with Sandoz. Innovate reported a 30% increase, showing strong momentum attributable mainly to BMS and other key strategic partnerships. As we mentioned in our previous course, Execute was mostly adversely impacted by the voluntary shutdown of our operations in response to the cyber incident and the softening market towards the end of the year. However, overall segment revenues for Execute grew year over year, inclusive of inter-segment revenues, as we reallocated resources towards supporting high-value partnerships within the Innovate segments. Despite a lower contribution from milestones upfront and licenses, our diverse business model continues to show its robustness, maintaining a solid gross margin of 27%, excluding just biologics. Focusing on Q4, group revenue were 201.3 million, reflecting a 16.4% decline compared to the strong comparable base in 2022. While in a challenging market, positive contributions were related to BMS Celgene programs and the successful delivery of work packages as part of our new technology partnership with Sandoz. It's important to note that the revenue mix had a very different structure as opposed to Q4 2022. Contributions for milestones to the tune of 17.7 million were significant in the last year's quarter, while Q4-23 was a rather modest period with milestones and upfront payment reaching 1.2 million. Also, Q4-22 saw the one-off effect of royalty income from SKBO of about 2 million, which had a positive effect on margins too. Gross margin contracted to 18.7% compared to a robust quarter of previous year, influenced by the overhang of low sales during the cyber incident, challenging market conditions, unfavorable sales mix, and reduced milestones upfront and licenses payment, and ramp up of the cost of just Evotech biologics also impact the margin while showing our commitment for the future growth. Switching now, our focus to cost management. R&D expenses were 20.2 million for the quarter, 5.4% lower than the comparable prior year period. This decrease was influenced by a temporary reduction in R&D costs stemmed from the cyber incident, but still indicate our strong dedication to innovation. Our adjusted group EBDA, which does not include external one of cyber related cost for the last quarter of 2023 represents 16.5 million compared to 57.1 million in Q4 2022. While the gap is significant, I want to recall that Q4 2022 was the strongest quarter in Evotech history by a wide margin and year over year comparison needs to be seen in that context. The negative development in Q4-23 triggered the need for a comprehensive review of the business. Together with Mario, we therefore initiated an in-depth analysis to assess measures needed to foster a sustainable, profitable growth in the future. With that, I would like to hand over to Mathias to share with you our thought process, findings and decision on actions to be taken.