Tecan Group

Thank you for joining our conference call this morning. We are pleased to share and discuss the results for the fiscal year 2024 with you. With me on the call are our Chief Executive Officer, Dr. Achim von Leo Brechting, and our Chief Financial Officer, Sanja Micki. Before we begin, let's quickly cover a few formalities as usual. The press release announcing our financial results was issued this morning at 6 a.m. Central European time. Both the press release and the 2024 annual report are available on our company webpage, tecan.com, under the investor relations tab. Our 2024 sustainability report was also published as part of the annual report this morning. I'd like to remind you that this call is being webcast live on our homepage. Additionally, the PDF of the presentation slides, which we will be discussing during this call, is available for download. With that, let me now turn the call over to Achim von Leo Prechting.

Thank you very much, Martin, and a very warm good morning and welcome to the TCAM 2024 full year results presentation. Before Tanja discusses the financial results in full detail, I will provide an overview of the financial and operational highlights. As we navigate through challenging conditions, TCAN has focused on enhancing operational resilience. Throughout 2024 and in our preliminary results earlier this year, we have discussed the market developments that have shaped our performance. Globally, reduced capex spending by the biopharmaceutical industry, along with government and academic customers in the US, has impacted demand. We also observed a general market weakness in China. However, solid demand in clinical diagnostics, particularly from genomic diagnostic companies, provided a positive counterbalance. Additionally, we saw demand normalization in two areas. Firstly, we saw a positive rebound of consumables demand following the destocking after the pandemic. Separately, we saw a negative base effect in 2024 in our largest OEM account after having recorded a boost of demand in 2023 caused by the replenishment of depleted inventories. Turning to TCAN's business divisions, these market developments have had varying impacts. In our life science business, the reduced CAPEX spending in pharma globally, as well as in U.S. academic and governmental accounts, led to decreased demand for life science related instruments. Additionally, the market weakness in China negatively impacted instrument demand, and the announced stimulus had an adverse effect as customers shifted from their normal ordering path to apply for stimulus funds. However, as the implementation of the stimulus program was so slow, we booked virtually no stimulus-related revenues in 2024. Despite these challenges, our service business remains solid, supported by a higher installed base of instruments, which grew over the past years. Consumables sales showed recovery post-pandemic, and we continue to see strong interest and demand for newly launched products. In our partnering business, low demand from customers for life science-related instruments affected our CAVRO and PARAMET product lines, while weakness in China impacted our CAVRO and global Synergens IVD customers with significant China exposure. However, we observed positive developments for Synergens outside of China. In addition, the PARAMET product line was affected by customer-specific factors, including the normalized demand pattern for a key customer that I just mentioned. Turning to our operating highlights for 2024. We have made significant strides across several key areas, demonstrating our focus and ability on driving operational resilience, innovation, global expansion, and corporate sustainability. To enhance our operational resilience, we have implemented a comprehensive cost reduction program and further consolidated sites to optimize our global organizational footprint. After successfully transferring carbon component production to facilities in Morgan Hill, California, and Penang, Malaysia, and closing the San Jose site in 2023, we relocated our genomic reagent site from Redwood City to the expanding Morgan Hill campus at the end of 2024. Simultaneously, we were expanding our global commercial presence with the establishment of a new sales office in South Korea, and we achieved a successful FDA inspection in our manufacturing facility in Penang, Malaysia, laying a strong foundation for future production of medical devices, including Class III medical devices. Innovation remains at the forefront of our strategy, as we drive the commercialization of new products across both business segments. We have advanced our product portfolio with significant launches in genomics, proteomics, and cell biology. Additionally, we previewed the groundbreaking multi-omics liquid handling workstation VEA, which we launched earlier this year at SLAS 2025, the international conference and exhibition of the Society of Laboratory Automation and Screening. Meanwhile, our digital ecosystem continues to expand with products that significantly enhance laboratory productivity and access to automation. We also continued building a robust pipeline in the partnering business, with several new launches across our Synergens, CAVRO and Aramid business lines. These programs include collaborations with key partners in life sciences, lab diagnostics and medtech segments. In advancing sustainability risk management initiatives, we completed a climate scenario risk analysis to proactively address transition and physical risks related to climate change. In preparation for CSRD, the Corporate Sustainability Reporting Directive, ESG data management has been integrated into our finance function. Recognizing the importance of data quality, we implemented an ESG data management platform, and we are proud that our financial auditors conducted a limited assurance audit of key 2024 environmental and social data points. Furthermore, we have increased our purchase of electricity from renewable sources to 87%. These highlights reflect our commitment to driving sustainable growth while enhancing our operational resilience and global reach. And now I'll hand over to Tanja, who will provide more details on the 2024 financial results. Tanja, over to you.

Thank you, Achim. Good morning, ladies and gentlemen. I will now provide a detailed overview of our financial results for the fiscal year 2024. Starting with order entry and sales. Adam has already covered the key drivers of our order and sales development. It was impacted by last year's weak market environment for instruments and instrument components. Let's review the numbers in detail. Order entry for the full year totaled 903.6 million Swiss francs, reflecting a year-on-year decrease of 12.1% or 10.5% in local currencies. This decline was influenced by a shift in OEM customers' ordering patterns within the partnering business segment, as customers transitioned from larger, long-term orders in 2023 to smaller, more regular orders in 2024, following the full normalization of supply chain disruptions. Meanwhile, the live science business segment experienced moderate order entry growth in local currencies during the second half of 2024, compared to the same period in 2023. I will address more segment-specific details shortly. Overall, the group's order entry in the second half decreased by 11.2% in local currencies. We have already discussed the main drivers impacting sales development. Now let's look at the numbers. Reported sales for the group in fiscal year 2024 decreased by 13% in Swiss francs to 934.3 million Swiss francs in local currencies sales were 11.5% below the prior year period, slightly better than the revised sales outlook from October 2024, which anticipated a decline of 12 to 14%. This was mainly driven by an uplift of instruments and consumables in LSB in Q4. Sales in the second half decreased by 12.3% in Swiss francs and by 11.3% in local currencies compared to the prior year period. The sales results, were previously communicated in our trading statement on January 8, 2025, and have not changed. Let's now look at the sales performance of our two business segments, starting with the Lifescience business segment. For the full year 2024, reported sales decreased by 12.1% in Swiss francs and 10.2% in local currencies. Consumable sales showed recovery following post-pandemic destocking. The service business remained solid and there was continued strong demand for newly launched products. The share of recurring revenues increased to 57.6% of segment sales. The book-to-bill ratio was slightly above one for the full year, with moderate order growth in local currencies during the second half. Reported sales declined by 5% in local currencies in the second half, following a 15.5% decline in the first half. With this improvement in the second half, sequential growth was 13.6% when comparing the second half of 2024 to the first half of the year. The partnering business segment generated sales of 537.3 million CHF in 2024, marking a decrease of 13.7% in CHF and 12.4% in local currency. As anticipated, we did not record any meaningful sales from the pass-through of material costs in the segment for 2024, comparing to the 8 million Swiss francs in 2023. The segment-specific drivers that Achim mentioned previously are listed on the slide again, and all these factors had a more pronounced impact in the second half of the year when segment sales decreased by 15.9% in local currencies. Regarding order entry, I have already mentioned that OEM customers adjusted their ordering patterns. Despite this shift, the book-to-bill ratio remained close to 1. Our next slide addresses our gross profit. Gross profit reached 320.6 million Swiss francs, which was 69.9 million, or 17.9% below 2023 levels. The gross profit margin decreased by 200 basis points, now standing at 34.3%. Several key factors explained this difference and collectively impacted our gross profit performance for the year. The main ones being lower sales volume, as well as increased depreciation, but also some specific one-off cost adjustments, which contributed to the decline. On the positive side, we benefited from a favorable product mix, price increases, and efficiency and cost improvements throughout our cost reduction programs. Let's take a closer look at our cost structure on the next slide. Operating expenses decreased by 9.6 million Swiss francs, while including 8 million Swiss francs in restructuring-related costs. This reduction was driven by tight cost control, lower performance-related compensation, and a decrease in personnel. Sales and marketing expenses decreased by 7.9%, primarily due to lower revenue-based compensation while we maintained readiness to capitalize on market recovery. In research and development, we sustained strong investment in innovation, multiple new products either in the pipeline or relaunched. General and administrative expenses increased, mainly due to restructuring costs, as well as exceptional corporate costs related to IT systems, specifically S4HANA, as well as M&A activities and legal fees. However, underlying costs slightly decreased. The adjusted EBITDA... Sorry. These adjustments reflect our strategic focus on optimizing our cost structure while continuing to invest in key areas for growth. Looking at the EBITDA development in more detail, our adjusted EBITDA, which represents earning before interest, taxes, depreciation, and amortization, was 164.4 million switch banks, down from 220.6 million in 2023. The adjusted EBITDA margin decreased to 17.6% of sales, aligning with the revised margin outlook of 16 to 18%. Several key factors contributed to this margin development. I've already mentioned the lower sales volumes that resulted in negative economies of scale, impacting profitability, which is very highly volume-dependent. The gross profit margin played this role, along with exchange rate movements in major currencies against Swiss francs, which negatively impacted the margin by approximately 40 basis points. On the positive side, as I already mentioned, effective cost control and efficiency gains supported profitability and partly offset the headwinds, thanks to our comprehensive cost reduction program. Looking at the operating profitability on a segment level, we can observe that key drivers are affecting both business segments similarly, with the EBITDA margin development primarily impacted by negative economies of scale. With that context in mind, let's move on to the figures. In the life science business, reported EBIT reached 39.5 million Swiss francs. The reported operating profit margin decreased to 9.8% of sales. This is primarily due to the negative volume effect which resulted in missing economies of scale. Cost control measures helped alleviate the impact of slower sales volume and adverse exchange rate effects. The adjusted EBITDA for this segment was 79.1 million Swiss francs. This reflects an adjusted EBITDA margin of 19.6% of sales compared to 22.9% in 2023. Moving on to the partnering business segment, reported EBIT amounted to 46.6 million CHF, while the reported operating profit margin reached 8.7% of sales. Similar to the life science business segment, lower sales volume and the resulting negative economies of scale were the main factors affecting margin development. The adjusted EBITDA for this segment was 91.1 million CHF compared to 125.6 million CHF in 2023. This reflects an adjusted EBITDA margin of 16.9% of sales compared to 20.1% in 2023. Now let's turn to the net profit on the next slide. Adjusted net profit was 103.1 million CHF down from 164.4 million in 2023 when earnings were significantly boosted by a one-time positive effect related to transitional measures from the Swiss tax reform. Adjusted earnings per share were 8.08 Swiss francs, comparing to 12.88 Swiss francs in 2023. Several factors contributed to this change. Adjusted EBIT impacted net profit unfavorably, while on the positive side, the financial result helped to improve net profit. Additionally, the tax rate increased to 13.6% compared to 1.3% in 2023, reflecting the impact of the Swiss tax reform I mentioned earlier. As I commented in August last year, the Swiss tax reform and related measures have a significant impact on the tax rate, as well as the OECD's Pillar 2 minimum taxation. However, it's important to note that this is an IFRS perspective and does not fully impact our cash flows. On a cash basis, we significantly benefit from the reform. Now, to the next slide, earnings per share very briefly. Adjusted earnings per share were 8.08 Swiss francs. The number of shares outstanding remain unchanged at 12%. Regarding dividends, based on the solid cash flows for the full year 2024 and an ongoing positive business outlook, the Board of Directors will propose an unchanged stable dividend of 3 Swiss francs per share at the company's annual general meeting on April 18, 2025. Half of the dividends, or 1 franc and 53 cents, will again be paid out from the available capital contribution reserve and is therefore not subject to withholding tax. We continue with the cash flow on slide 15. Cash flow from operating activities, 148.5 million Swiss francs compared to 160.6 million in 2023. The cash conversion improved to 15.9% of sales, up from 14.9% in 2023, and reached 100% of reported EBITDA, compared to 77.5% last year. Base sales outstanding increased to 52 days from 45 days in 2023, mainly based on lower volume, while the absolute value decreased significantly. So the higher DSO number does not reflect more overdue. Cash flow from operating activities includes 66.8 million Swiss francs for amortization and depreciation, with 13.5 million from IFRS 16, 19 million for purchase price allocation, 10.7 million from previously capitalized development costs, and an impairment of 5.6 million. Investments totaled 48.6 million Swiss francs, including 13 million in newly capitalized development costs, 17.7 million in property, plants, and equipment, and other intangibles, and a 20 million increase in time deposit. Cash flow from financing activities included 38.3 million Swiss francs in dividend payments, 28.9 million for the purchase of treasury shares, and 13 million in lease liabilities. Thanks to solid cash flow management, our net liquidity position, which includes cash and cash equivalents plus short-term time deposits, Less bank liabilities, loans, and the outstanding bond increased to 153.7 million Swiss francs as of December 31st, 2024, up from 112.6 million Swiss francs on December 31st, 2023. With this, I now hand back over to Dr. Bonneau-Questing again.