Virbac Sa Unsp/Adr

Good afternoon to all and welcome to VIRBAC 2026 Annual Results Webcast. We are pleased to have you here and online, of course. Today's call is hosted by our CEO, Paul Martingale, and Abhi Brahmdani, our CFO and Deputy CEO. Before we begin, I remind you that the slides and additional financial material presented are available online on the investor section of our corporate website. The replay of the meeting will also be available at the conclusion of the meeting. If you have any questions, you can submit them live, of course, for those who are in the room, but you can also submit through the chat feature online in the bottom right-hand corner of your screen. We will answer all questions during the Q&A session or follow up afterwards if we run out of time. It is now my pleasure to turn the floor to Paul and Habib.

Thank you, Carol. Good afternoon, everybody. Bonjour. Pleasure to be here with you today for my first Virbac full year results announcement. And perhaps in that spirit, I just share a couple of messages of my first six months in the company. I think three things that really stand out for me. One, just an incredible journey of learning, so spending as much time as I can over the last six months across our affiliates, across the world. As you know, Virbac is an incredibly international organization today, proudly French, but incredibly international. spending as much time as possible really on the field, on the factory floor, out visiting the vets, the customers from across the world and really just trying to listen and learn as much as possible to be able to be here today as well to share some first thoughts on our strategy going forward. Second point for me really that struck me in the last six months is just how incredibly important animals are in our life. And to me it's been really quite striking, incredibly powerful, very moving just to listen and hear those stories every single day, whether it be from pet parents across the world, from farmers, from vets, and even from our own employees who are so, so passionate about this space. I'm absolutely convinced from everything that I see and listen to every day over the last six months that animals have never played such an important part in our life, both as part of our family, but also society, nutrition systems, quality protein sources for the future, and the broader One Health initiatives. The third and final piece of my learning over the last six months has really been truly to discover the fantastic company and, more importantly, the incredible people that we have at Virbac. Many of you know the company probably much better than me still, but this really is an incredible company, a wonderful culture. We have people that I'm proud to work with every day because they are so, so passionate about animal health. And we have this incredible track record now of almost 60 years. And of course, it's an absolute privilege for me to join the team and for us to try to continue that journey, advancing the health of animals with those that care for them. So today, with Habib, I'll just take you through a couple of headlines from 2025 and a first look at a slightly refreshed strategic direction going forward. And then I'll hand over to Habib. the more detailed financial section and we'll of course take your Q&A. Quite a busy chart, but we try to just sum up a little bit everything that's happened across the wonderful world of Virbac in 2025. And it's really been a strong and solid year with significant and important progress. And to highlight that beyond the basic numbers, I think three things to really call out. First of all, this is a company and we will continue that. that is a company based on strong performance culture and very, very strong financial discipline. And you've seen the numbers published today. You've also seen our guidance for 2026, so a strong commitment to continue that sort of strong financial performance. At the same time, and this is what I'm extremely proud to see coming out of 2025, while delivering that performance, a record year of investment across many key areas in in verbac a record year of investment in terms of our r d which of course is the is really the lifeblood of our future in terms of innovation and making a real difference for animal health a record high year in terms of capex investment for the continued modernization agility customer service and quality that we strive for every day and another very very important year in terms of our business development and licensing efforts. We call out specifically in one year now 2025, nine deals that we signed specifically on different technology assets to bring into our R&D pipeline and capabilities. On top of that, during 2025 and at the end of 2025, we executed again on our M&A strategy. You know, this has been important part of the history of Virbac. We'll come back to that again. It will continue to be so. I'll talk specifically about the acquisition we made a little bit later, but we're delighted to be able to close 25 with a successful acquisition. It's, of course, not really impacting the numbers in 25, so that's fully coming in in 2026 and beyond. So a strong year across the business, both delivering performance, but also the transformation for the future. What I do want to call out and give a little bit of context to, because we know that the animal health industry has been rather healthy and positive. So is our strong performance simply us riding a wave? No. The teams across Virbac, driven by that sense of both purpose and performance, we are always looking to outperform the market. That's been our history and that will continue to be our guidance, as you'll see. You see here the red line is the market growth, the blue line is VIRBAC growth quarter on quarter. And you can see that over the last five years, we've got a very, very strong track record of being able to outperform the wider animal health market. And that, again, is strongly linked, of course, first of all to our teams, to our innovation, to our M&A, but also our broad portfolio across species, across animals, and across countries. see as well at the bottom because the market doesn't cover all segments at times, especially on pet food. But just a reminder that it's not a one-off in terms of 2025 growth. Last five-year CAGR over 8%, so really impressive track performance. Now, following those six months and working with the team across Virbac, What we're definitely very excited to share today is a little look at what we would call our refresh strategy. As you've seen and heard, there's lots of things that are working really well across Virbac, so I'm certainly not here to create any sort of revolution. But of course, the world outside changes, the expectations of pet owners, farmers, vets, and our customers continue to change. The competition, of course, is there, and therefore we continue to evolve. And so we've put together a strategy towards 2030, while at the same time, we continue some of those bigger investments in R&D, CapEx, and other M&A, which will, of course, take us even further beyond 2030. But to give a slightly more short, medium-term horizon for you and for our teams, we want to be laser-focused on delivering through 2030. We call it Growing Together because it's very much the spirit of Virbac, growing together with our partners, with the vets, with the customers, but also ourselves across our teams within Virbac and also growing all of us as leaders. And it's really focused on four pillars. And, of course, we'll have time for Q&A so we can go deeper on this. But just to give a couple of headlines, first of all, while we do have a very broad portfolio, which brings many advantages within it, I'm really excited to see that we have some absolutely fantastic science, some real jewels in our portfolio, and some positions of real strength which have perhaps not always been fully exposed and fully understood. So we've put together a portfolio a portfolio view and we've come out with a group of products and platforms that we call now our supercharged platforms. These particular products and platforms will contribute a significant amount of our growth over the next five years to 2030. These are also products and platforms where we believe we have real superior product differentiation, science, and also we have in general margins that are ahead of the company average, so we can also continue that positive cycle of being able to reinvest in our business. Pillar number two is really focused around innovation, so no big surprise there. Again, the lifeblood of what we do. The one thing that I would stress and that we will talk about more, I'm sure, is innovation. While R&D, our internal R&D, of course, is important and, as you saw, continues to be strongly funded, we believe strongly that our role as well is to be a fantastic partner. There's so much happening in the world of science, across biotechs, startups, universities, small, small companies, local, regional players, and we want to be the company that those types of people that are working on incredible breakthrough science for animal health will come to and want to work with. And we believe we can be that, because on one hand, we have a global footprint. We're present everywhere. At the same time, we're still small enough and with a culture of intimacy and care. And if you come to us to work on your on your product or platform that you've been working on sometimes for many, many years, you know you get people that will really care to take this forward hand-in-hand with you in the future. At the same time, Virbac has been strongly focused. Of course, we were created by a vet for vets, and while vets will continue to play an absolutely fundamental role, of course, across animal health, we know that the world changes. We know that in many countries, in many therapeutic areas, Much of the repurchase happens now online and therefore for us to evolve from being almost vet exclusive to being really vet endorsed. So we definitely want the vets to be promoting and speaking positively about our products and about our company because they trust us, because we have quality innovations and great quality products. It should be vet endorsed, not necessarily just vet exclusive. The third pillar all around just executing of excellence, a real focus from all of us in the organization, of course, supported by the ongoing transformation that we have in our digital data and AI that allows us with the very complex industry across the thousands of vet clinics and hundreds and thousands of products to be even more precise, targeted, and free up time for better work on those innovations. And the fourth pillar, which again, has been part of our Virbac model in terms of ensuring sustainable, profitable growth. But if we want to continue to do all the great things we're doing in terms of innovation in R&D, CapEx and M&A, then of course, we need to make sure that we can sustainably fund that. And so we kick off our fund the growth program, really focused around productivity improvements, our industrial footprint, as we've been built from so many acquisitions. of course, purchasing, but also smart simplification and some newer areas like revenue growth management, where the more we find ourselves dealing with bigger customers, chains, online platforms, the ability to smartly manage pricing, discounts across those different channels becomes ever more important. So that's our framework for our growing together strategy to 2030. I just, and I won't present everything, but just to call out a couple of the examples because I guess the growth platforms and the growth drivers is something that you'll be very interested in. Perhaps just to give you a little bit of a flavor in that area, to pick out one example, the space of reproduction. If you look today, less than 1% of all neutering of animals is done in a non-surgical way. Surgery's been done for decades. At the same time, there's more and more science that demonstrates that has Of course, it's a perfectly acceptable option, but it does have other consequences. It has behavior change. As more and more younger generation, Gen Z and beyond now, start to be pet parents, they perhaps have different attitudes towards neutering and surgical castration. And we are one of the few companies that offers a non-surgical alternative to that. But again, less than 1% of those procedures today are happening in a non-surgical way. So amazing opportunity for us to continue our work, to educate, to bring the science, to explain, to help change those behaviors, both of the vet and the pet owners. So just one example of where we believe that it's not just about the existing market growth, but there's a big opportunity still to really drive penetration. of our products and what we do and the platforms that we're sharing here. Each one of those has that type of opportunity for us still to go much, much further. Again, we've talked a little bit already or highlighted that for us R&D is absolutely at the heart of what we do. Important perhaps just to share a few numbers and give you a flavor of our focus in terms of R&D. but we do have a considerable organization. You saw the investment in Euros that we talked about earlier, almost 800 people across R&D, regulatory affairs, some of the connected areas there. So this is a significant organization across six R&D centers worldwide. And you can see here a few highlights. We have an extensive pipeline, so around 200 projects in total. Of those, we have 40 what we call priority projects. These are the ones that get absolute priority on our resources, our funding. Of course, very important to note that the peak sales potential as normal of that type of pipeline is not risk-adjusted. It's, of course, absolutely part of what we do when you're talking about breakthrough science, but some of that will not come through. But I think it's important to give you a flavor that we're not working on just small things. There's a considerable pipeline, and you get a little bit of a flavor here as well of the priority focus areas in terms of some of the species and segments that we look at. And just to bring that to life, at least in 2025, proud to share a number of the innovations that we've brought to life in 2025. So we're not a company that's doing just one or two things per year, given our strong geographical footprint and the fact that we're operating in both companion and farm and across many species. You can see in 2025, it's been another busy year and very positively busy year in terms of innovation and really meaningful launches. Vicali, for those here in France or with more connection to France, you know, was an award-winning innovation, award-winning from the vet, which is the most important. Vicali is the first ever medicated pet food in the world, around 15 years of work behind that one. We've proven benefits that the medicated pet food is actually giving a better result than just giving the medicine and a separate pet food. So really making the life of the pet and the pet owner simpler and with better results, exactly the type of innovation that we strive for. Again, I won't present all of them. You've taken a look and happy to take questions on any of this later. I do want to take a moment because it was only in December, so still relatively fresh that we announced the acquisition of Tyranorm. The reason we call it out specifically, it's not new that we do M&A. We've been doing it, as you know, across our history. But for me coming in, this was one that I was particularly excited about, and I would say almost a sort of perfect model of what we would look at when we think about M&A in VRBAC. Why do I say that? First of all, it always starts with the unmet need. So for any pet parents of cats out there, then I'm sure you will know and understand that trying to give a cat with a chronic condition a daily medicine and especially a daily pill is particularly painful and not at all the type of moment of connection that you want to have with your animal every single day. What we loved about Tyra Anonymous is it's a fantastic alternative to that current treatment. It's a much, much preferred format, fantastic flavor. We've had incredible videos of pet parents sharing how what was once a painful moment of trying to force a pill into the mouth of the cat is now actually a moment of embracing the cat because the cat's literally jumping on their lap, wanting to take their medicine because it's been so well prepared. Fantastic fit with our existing portfolio in Virbac and our priority countries, so especially Europe and USA. And we know that the cat population is growing today faster than the dog population. We see more and more this trend with younger people in a city living. And therefore, as the cat population increases and the life expectancy is also increasing, then these types of chronic conditions become up to 10 years of a cat's life requiring this type of treatment, and we have a fantastic solution from them in that space. We, of course, also believe that compared to the previous developer and owner, the Virbac strength and power in market in terms of our sales force, our reach, our relationship with the vets and customers will also be significantly stronger than the company that developed it, and therefore we'll be able to many, many more animals and pet parents. Really, we think a fantastic acquisition that will be both growth and margin accretive from 2026 and beyond. And again, a good template of what we'll look to continue to do in the future. Before we jump into the more detailed financial pieces, of course, always important, and this is really at the heart of Virbac, our employees. This is not just a chart and words on a page. This is really something that I've again seen from day one. There is that deep-rooted passion for what we do, both for the animals, but for the broader society. And we have a very, very clear roadmap that's been laid out, that's been just approved as well by our board. A strong, ambitious roadmap across these four pillars. And we'll continue to bring more news and more updates on that, but very, very proud of what the team is doing there. We've made, we saw some updates very recently, significant improvements on our carbon footprint. That's another reason as well for our CapEx investments. Of course, both the quantity of supply, the capacity, the agility, but also doing it every time in a cleaner way. And I'm also very proud having joined to see the the incredible work we do to every time reduce any need or to the very, very minimum animal testing in what we do. To wrap up from me and to sort of bring that into a very simple synthesis, on one hand, of course, the world changes and I'm new and we'll try to evolve and continue that Virbac magic. But a lot of the same discipline that you've been used to will continue. And I think just important to sum up and give you a bit of a picture that growing together strategy is really framed around these four pieces. Our number one target, it always starts for us with the desire, the expectation, the challenge to our teams to be able to consistently outperform the market. Number two, we continue to believe that an important part of our model is that programmatic or bolt-on M&A, so the example of Tyranorm, not necessarily big transformational M&A that would distract the teams and be too internally focused, but things that we believe that when you bring them into the VRBAC with our strength, we can make them bigger and stronger relatively quickly. We remain committed to the 20% EBIT margin that we've communicated in 2030. So that's an integral part of our 2030 strategy. And we continue to have a laser focus on cash. We remain extremely low debt. And that's, of course, what allows us to continue that investment in R&D, CapEx and M&A. So some change. and plenty of things that continue in the same vein. And with that, I have the pleasure to hand over to Habib to take you through the numbers in a bit more detail.

Thank you, Paul. And good morning, good afternoon to those of you that are with us in the room, and good evening to some others. It's my pleasure to take you through our 2025 financial results, at least the key elements. And let's We start with some of the key takeaways of what we have achieved in 2025. Paul mentioned it, a very solid year in terms of top line growth with an organic growth of 7.9%, constant rate, constant scope. It's been down through a significant 5% volume growth and 3% price. We have had a 16% margin, which is a 16.3 EBIT adjusted margin at constant rate and scope, perfectly in line with what we have guided for the year, around 16%. We have suffered, and we'll come to that, from some strong FX impacts. Also some temporary industrial challenges, I will come back to that in the later slides. But all of that has been partially offset by some strong discipline in the management of our costs, which enable us to have that stable EBIT adjusted in 2025, which shows the resilience of the group. The net result at growth by 3.2% versus 2024. And what is very notable this year is a stable level of debt. Despite the record investment that we made in several areas, as Paul mentioned, R&D, CapEx, as well as the Tironorm investment, the acquisition that we did, we've been able to maintain a stable level of debt at a very low level as well. I'll come back to that again in the detailed slides. So let's start now by going more into the details of the top line growth. You see it's been a broad-based geographical growth. All of the regions have contributed to the growth, even the Pacific, which has suffered during the first semester of 2025. We've seen a rebound during the second part of the year. North America has been leading the way with close to 15% growth, nearing 200 million euros of revenue in 2025. You see as well Europe and Latin America with more than 7% growth. Very solid performance on the back of both farm animals and companion animals with most of the supercharged categories that have contributed significantly to the growth of those two regions. And final comment on India within the India, Middle East and Africa region. India has had another very strong year with more than 8% growth during 2025. We've suffered some headwinds in terms of FX rate, which you see on the slide, minus 50 million euros on the top line, minus 16 million euros on the bottom line, and it has also impacted our profit as a ratio by half a point. And you see the majority is coming from three regions, Latin America, EMEA, and North America that concentrate the majority of the downside in terms of FX impact. will go very quickly on that slide the revenue split between companion animal and farm animals has not substantially changed we are at 59 percent companion animal as you can see on the on the slide and close to 40 percent in farm animals both segments have grown during 2025 an extremely dynamic 11 percent growth on companion animals and 7% growth on farm animals. Let's go a little bit more into the details of the segment, the contribution of all of the segments, starting with companion animals. What stands out is three main pillars that have driven the growth in 2025. Pet food, 19% growth. We continue to have an extremely dynamic growth. A portion of that has been... done through the acquisition of Mopsan in Turkey, who has a very strong pet food business. But even outside of that acquisition, we have had an extremely solid double-digit growth on pet food, which continues in many markets to grow and take shares. second one is specialty you've seen some of the launches that we've made part of these categories is one of the the super charge with the endocrinology and the contribution of one of the recently launched products supra lorin as well reproduction has contributed there to the 17 percent growth that we've seen on on that category and the third pillar with very impressive growth is the other segment. You see the 16% growth, and within that segment, we have one of the supercharged category, the dental, that has continued to perform extremely well across the board, across the geographies, but with a notable, very strong performance in the U.S., A part of that, we've been more or less stable in two categories on vaccines and parasiticides. You remember that we had a record year in vaccine in 2024. So we have had a stable performance in 2025. And to finish on that slide, antibiotics and dermatology, we have a strong segment in otics here with a recently launched product, Cortotic, that has again contributed to the growth of that segment in many geographies. Let's move now to farm animals. A bit of the same picture. We have some pillars that have contributed significantly to the growth. You see the vaccines, 13%. We have had a dynamic performance in Latin America with our range of ruminant vaccines, as well as in Europe. We've been able to respond to the blue tongue virus quite effectively with one of our products that have enjoyed a nice growth and was a good answer to that epidemic. Nutritional has had a solid double digit growth. The demand is increasing here. It's a preventive treatment. We have had a very solid performance in many geographies and notably in India with a very strong growth in that country. We can mention as well the antibiotics, parasiticides, all of them have had a growth in 2025. The only segments that have suffered is the aquaculture segment, as you can see on the slide, minus 5%. And this is linked to the intense competitive pressure that we have, notably in Chile, surrounding the parasiticides and our vaccines range. but not different from what we expected when we entered 2025. So overall, again, a very solid performance, 7%. It's also a good testimony to the diversity of our portfolio, where we are able to compensate for some of the challenges that we may have every year by some strong dynamics in many other segments. So we've covered the top line. Let's move now to the profit and loss statements. It's also here a strong testimony to the resilience of our business. I mentioned the 16% EBIT adjusted, perfectly in line with our guidance. We are moving from 16.6% in 2024. The majority of that decrease is linked to the FX impact, which we've suffered in 2025. At constant rates, the level of profitability has been quite stable versus last year. And if we go a little bit more into the details, we had some headwinds that we had to manage during the year. One of them was linked to the temporary shutdown for maintenance of one of our antigen production sites. It lasted longer than what we originally expected, and as such, we have not been able to absorb all of the fixed costs that we were supposed to absorb in 2025, and it hit us quite significantly, around half a point in 2025. Again, a temporary impact. We've had also higher inventory write-off in 2025 versus what we had in 2024. But some of that has been offset by improved operating expenses in terms of ratio to revenue during 2025 and the operational discipline that we have throughout the group. A final comment on the EBIT adjusted is on R&D. We have had a more or less stable ratio of R&D investment as a ratio to revenue at around 8%. And Paul mentioned that in absolute value, we had a record investment here in terms of R&D at 115 million euro. Let's continue to go down the profit and loss statement. You see the other non-recurring income and expenses that have gone from 10 million euros to slightly more than 3 million euros. You remember last year we had the one-off expenses linked to the SASEA, the Japanese acquisition. This year we have recorded essentially two elements. One of them is the one-off expenses linked to the Tyronorm acquisition that has been mentioned. And the second one is linked to the depreciation of inventory and equipment associated with the decision to stop one of our R&D projects for slightly more than 2 million euros. So overall, our EBIT has remained stable in terms of ratio to revenue. Our net income, as you can see, has slightly improved, which is a consequence of a slight improvement in financial income and expenses, moving from 9 to 8.6 million euros, and a slight increase in our income tax expense. And I wanted to conclude on that slide by saying a few words on the effective tax rates. Our effective tax rate has slightly increased in 2025 versus 2024, moving from 25.5 to 26.5, and this is essentially linked to a country mix effect. Let's move now to the cash situation. You see that our net free cash flow has stand at 81.4 million euro, slightly down versus last year. Essentially, this decrease is essentially linked to two effects. One of them is the CAPEX. We have had a record year of investment in CAPEX to prepare the future of VRBAC. And the second one is linked to the FX impact that has been higher than what we had last year. But the operating cash flow has remained quite dynamic, even increasing versus last year. So all in all, when you add to that the M&A acquisition spending that we did for Tironorm at slightly more than 100 million euro, we have been able to maintain a stable level of debt, a low level of debt, I shall say, since you can see on the slide our net debt on EBITDA ratio is below one, around 0.5, which give us plenty of room for any future, potential future acquisition in the coming months or years. Very quickly, some comments on our balance sheet. I wanted to call out one element, which is our working capital situation. You see on the slide in light blue, we have improved in 2025 our working capital situation. The ratio has improved by around three points, which is quite significant. Essentially linked to the evolution of our inventory. You remember that after some of the supply chain crises that we have suffered in the years 2020, 2021, we have seen an increase of our inventory. We said we will go down gradually to the level prior to that period. And that's what we have achieved. It's been now three consecutive years that we've seen our level of inventory as a ratio to revenue going down, and that has benefited quite nicely to our working capital. Shareholding structure has not fundamentally changed, as you can see, versus the end of last year. The Dick family remains the majority shareholder with slightly more than 50% of the shares and 66% of the voting rights. And to conclude, before we move to the Q&A, our final slide is... On the first step of our 2030 strategy, which is obviously 2026, and I wanted to share our guidance, which we have communicated in January, which we are confirming today. We expect a solid net revenue growth next year between 5.5% to 7.5%. That is including the impact of Tironor, but excluding any potential additional acquisition we could be doing in months or years to come. EBITDA margin is stand at around 17% for 2026. This is one point improvement versus 2025. And again, this is also at constant rates and scope, but including as well the tyronorm impact for 2026. Cash generation, we expect 80 million euro of cash to be generated in 2026. Despite an increase of our capex, we expect to have around 125 million euro of capex spending for 2026. And I suggest we move to the Q&A sessions now. And we are very pleased to answer any question you may have with Paul.