Evotec SE

Ladies and gentlemen, welcome to the ABUTEC SE half-year report 2024 conference call. I am Judith, the course call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Volker Braun. Please, go ahead, sir.

Thank you, Judith, and good day, good morning to all of you attending our H1-2024 results call today. I trust that you all have seen our press release this morning and that you have had a chance to take a look into the report already, which we will discuss in more detail in the coming hour. Before we go there, it's my obligation to make you aware of the cautionary language as outlined on page two. But now I would like to hand over to Christian Wojciechowski, our CEO, to guide you through the deck that we have prepared for today's call. And please, Christian, the floor is yours.

Thank you, Volker, and welcome to everyone on the call. Before I share the agenda with you, I would like to introduce you to the participants in today's call. So here with me in the room, we've got Letizia Wicksell, our CFO. We've got Greg Johnston, COO. Kurt Dormann, CSO. Matthias Evers, CBO on the call as well. Aurélie, DBS, CPO. Special thanks also to my colleagues from the management board. They did a tremendous job onboarding me during my first month at Evotech. Letizia and I will guide you through the slides. And as Judith mentioned at the end of our presentation, We will have a dedicated Q&A session. So the entire team here is available to answer your questions. We will cover three topics in this call. The business revenue, including the first half year results, followed by an operational update. Finally, a follow up on our priority reset, which was announced earlier this year, and which will include further comments on the renewed outlook. Let me start the business update with a few words about what I found at Evotech just after a few weeks in the business. Our company over the past years has evolved into a true R&D powerhouse. Three elements in particularly make Evotech unique. Firstly, our people. The dedication of our world-class talent base is simply impressive. With almost 5,000 highly experienced employees, we have a strong scientific, innovative, and creative capacity. Secondly, the quality of our leading edge technologies and platforms. They allow us to bring R&D to the next performance level, and we go beyond the obvious. Thirdly, the deep partnerships with top pharma and biotech. Evotech has year over year demonstrated outstanding quality of services to our partners resulting in high levels of repeat business, long-term and integrated deals, and a spotless reputation of quality and innovation in the market. EvoTech is well positioned in a structural growth market. However, this year, we're facing a challenging market environment, and we will have to better leverage on our strength in the future. I will go into more details during this presentation. Let me first highlight the results for the first six months, 2024, which we have published today. In the first half of 2024, our group revenues increased by 2% to 390.8 million euro, versus the comparable period, 2023, which was 383.8 million. Total shared R&D revenues decreased by 7% to 302.4 million. while revenues of just biologics increased by 50% to 88.5 million. Adjusted ABDA for the first six months was minus 0.5 compared to 33.9 million in the first half last year. Leticia will share more details later on. I'd like to guide you through the key underlying trends that have led to Evotech falling short of revenue and profit expectations. Most notably, the market environment has given us no new signals of recovery to happen still within 2024, as we hope for. We expect a broader recovery now earliest in 2025. We continue to face stagnation of early R&D spending in biotech, while geopolitical factors and slow economic growth is leading to more cautious decision-making in the pharmaceutical industry. The sales order book in our discovery business, a core pillar of Shared R&D, continues to grow at a very healthy level. Q2 2024 was in fact one of the best quarters in terms of closed sales. Our 2024 revenues, however, do not follow the same upward trend, mainly for two reasons. Firstly, within Shared R&D, the portion of integrated multi-year contracts has increased. The multi-year contracts are generally positive. They provide us with a stronger order book for the years to come. However, we lack fast-turning orders, especially in our transactional businesses, notably development and cybertechs, but also fast-turning work in discovery. Secondly, especially with biotech, we experience a long time span between closing the deal and scaling up the work more broadly. Consequently, the conversion of orders to bills, our revenue phasing, and mix have changed. Currently, we are now working on adjusting our workforce capacity to the new market environment while also maximizing commercial efforts to drive short-term revenues. As a result, the mismatch of our revenue profile with capacities has severely impacted our short-term profitability. Moreover, EvoTech has a too high fixed cost based in relation to the current revenue profile. We identified areas where we can adjust capacity and approve, and this holds true for our operations, but also for other areas like IT. While costs for the recovery activities after our cybertech are gradually in decline, we are making sizable investments into our tech stack to be more agile in future. As mentioned before, our JustAvotech business has grown strongly in the first half of 2024. That said, costs related to the ramp up of our new J-Port facility in Toulouse will be higher than initially planned, while we also make important learnings as we ramp up this new and highly competitive and compelling technology platform. We've taken decisions to bring people on board in an expedited process in order to deliver on our commitments with our customers. Furthermore, in the first half of 2024, we faced non-planned one-off costs. In the light of the continued challenging market environment and the fixed cost situation, we updated our guidance last week. Further explanations later during this presentation. Earlier this year, the Management Board took immediate action to start course-correcting the development. We announced a reset of priorities earlier this year towards profitable growth, and this program is gaining further momentum. We aim to deliver 40 million of gross savings fully effective in 2025. I'm now handing over to Letizia for the financials.