Eckert & Ziegler SE (EUZ) Earnings Call Transcript & Summary

Ladies and gentlemen, this is Harald Hasselmann, CEO of Eckert & Ziegler speaking. Very much welcome. Good morning and good afternoon. I'm speaking out of Berlin. And together with my colleagues, Karolin, [ Olivier ] and Julian, whom you all know pretty well, we are going to lead you through the Q1 results, followed by a Q&A session. My presentation, which will last for the first half of today's meeting, will be recorded. So for those who cannot participate, you are able to listen to it once, thereafter, whereas the Q&A session is a live session only. So in a nutshell, the Q1 result of 2026 confirms that our strategy is in line and that our numbers are on track. By that, we are also confirming our outlook, which has been published earlier this year. I will lead through the overview.

Sorry for interrupting. I only see the title slide. I don't know if the others.

That's right. That's right.

Okay, fine. I'm sorry.

Yes. So I will lead you now through the presentation and just wanted to keep you alerted that the key message of today's Q1 result is everything, as we say here in Germany, is on green light. Now let me go through the slides step by step. You know the usual disclaimer, which demonstrates here that everything is based on the legal and overall environment. The Group Executive Committee consists of Gunnar Mann and myself running the company. Together with our Group Executive Committee, which is represented by all important functions throughout the organization, we take the full responsibility and ownership of what's happening here within the business. Looking backwards, looking forward, you see both here, revenue increasing year-by-year, that is the dark blue line. And the net profit line. We have chosen here the net profit because we used to present net profits for a long, long time. That's why you see here the numbers over the last year constantly increasing both in absolute numbers as well as in margin. Now, how does this look like in precise numbers for the years to come? We remain extremely optimistic for the field of nuclear medicine, that is the medical part in which Eckert & Ziegler plays a dominant role. And you see here the key milestones starting with Bayer's Xofigo product more than 10 years ago and then launching Lutathera for Novartis, launching Pluvicto, Lantheus and others. All in all, there's a strong increase. We do expect together with overall consensus of 15% CAGR year-by-year until the next -- until the end of this decade until 2030, assuming up [ to a ] EUR 26 billion overall market in which Eckert & Ziegler wants to play an important role. Here are those companies who have decided to participate in the game of radionuclear medicine. Big companies, smaller companies. The M&A trend continues. There are still companies on the market who haven't been acquired. And mostly, it's the big companies who do acquire smaller ones in order to also participate in that imaging and therapeutic field of radio diagnostics and theranostics as a buzzword. And I'm happy that this slide remains part of our investors and analyst deck because it gets busier and busier every time I'm presenting here that slide to you and the other folks. Eckert & Ziegler plays in most of the existing isotopes an important, if not the market leader position -- Gallium, our generator business, very strong in the market in North and South America and Europe, but also in Asian countries. And then we have the individual vials, which we are selling Y90, Actinium, Lutetium, but also then the wholesale business, the overall analytic and quality instruments, which we are selling combined with the CMO and CDMO work. Here, the customers. Some of you have seen that slide. Here, again, more companies are added, both for Lutetium as well as for Actinium for the isotope part, but then also for the CMO part where we have our sites here in Germany as well as in North America and in South America. Eckert & Ziegler produces nothing else but radioisotopes for the medical part, that is the upper part here for hospitals, clinics, health care professionals to the benefit of patients and for the industry, for validation sources, quality assurance or overall industrial measurements, we are the leading provider. What are the highlights of last year -- of last quarter, I'm sorry. In February, we entered into a development partnership with Molecular Partners. We are constantly now producing Actinium out of our facility in Czech Republic, and then it's further processed in our Braunschweig facility. And we have a new analyst. NuWays initiates coverage with buy rating. So overall, all good news. I talked already about our partnership with Molecular Partners last time. But here, once again, it enables us to also move into different areas. Now let's come to the numbers, and let's discuss here what has been achieved in the first year. The medical part, which is shown here in orange, clearly plays a dominant role both in revenues as well as EBIT adjusted. You see 65% is generated by the medical division. And here, we have revenue of EUR 171 million last year and an EBIT adjusted of EUR 50 million for the isotope business. The revenue is comparable, more or less equal. But in terms of EBIT, it is getting smaller because the driving engine is the medical business. So that was all last year. Here, again, our strategy pays off, I will say, and hopefully, you can confirm that growth in overall revenues as well as EBIT adjusted and also the EBIT margin. Constant increase here, the numbers of last year. This is all not new. So here we go to the Q1. The overall sales grew by 7%, above EUR 73 million almost. If you look to FX adjusted revenues, it would have been double digit. You all know that we are seeing currently a weak U.S. dollar, and that is also headwind for us. So FX adjusted, that would have been better. But that's the case, sometimes you win, sometimes you lose. Radiopharmaceuticals continue to grow. I will come to that later on, on a separate slide with more than 20%. And most of that is coming out of the medical business here with more than 20% growth compared to last year. IP, the third-party sales in the isotope business is lower than the quarter of last year, minus 7%. We will talk about that in a minute. So here are the sales and looking to EBIT adjusted, there is nothing easier to compare this quarter of 2026 with the first quarter of 2025 because you all know that the comparison of these 2 quarters is really ambitious. Last year, at the same time, we were suffering from a heavy cyber attack on the negative part. We had delivery and logistics issues with bringing the generator on the street to the customer. So that was really painful in the first quarter. On the other side, the positive effect of last quarter was that we had a license deal with China, bringing not only cash to the company, but also revenue and income. Now if you compare these 2 events, both the cyber attack and the delivery issues for the GalliaPharm on the one side and then the positive effect with the license deal, these are 2 extraordinary events, which make it very ambitious and difficult to compare with this year towards last year. Now we see a strong sales increase despite all these challenges. Now with the license deal, which was heavily also putting money to the bottom line, there we were suffering together with the low performance of IP in the first quarter. That's why if you look to the EBIT adjusted numbers here, we are more or less on last year's level. Net income is slightly better, but let's focus here on the EBIT adjusted numbers for the time being. We will for sure in the Q&A session talk about that later. Medical, I mentioned that already. There was Q1 here, it's in bold letters. It's mentioned Q1 2025 was heavily impacted of the cyber attack. Now, still, we are growing more than 20%, FX adjusted by 24% compared to last year because Q1 was low last year. This year, it's a normal one. And even in terms of pure generators, we are growing, and that's why we are also very optimistic, positive and confident about the overall performance within medical. EBIT adjusted, strong increase against previous year in spite of the license deal of last year. So a good result here in the EBIT adjusted and also in the net income, we see a positive trend due to the high and profitable GalliaPharm business, which we performed in the first quarter of 2026. Here we go again. For those who are following the GalliaPharm business more closely, you see all in dark blue the countries where we are selling GalliaPharm. And in -- we are not covering the entire world map, but we are represented in all the big important markets. The latest country, a small country, is Georgia here in Eastern Europe, but more and more countries are going to be added, and that brings also more sales in addition to the wideness of the indication level. Lutetium and other important isotopes. And what I'd like to show here is that there are lots of new products on the horizon. These are the potential estimated market entry dates in addition to the already existing products from Novartis against neuroendocrine tumors, small lung cancers and prostate cancer. Lots of new products, which are already in Phase III, happy to supply them. You all know that Eli Lilly, for instance, is a big customer for us, and that's the reason why we are investing a lot of money in a second production facility here. So in the years to come, we do see an overall market increase by factor of 5 from EUR 100 million these days to EUR 500 million in the years to come by 5 years. The potential of the overall market for Lutetium should be increased by a factor of 5. Looking to Actinium. The situation is comparable. Also here, we see a lot of new products coming. The patience which has to be delivered and demonstrated here is a little bit longer. We see here products only coming by '28, '29, 2030, but it's a huge also playground played by Novartis, Bayer and other big companies. They want to launch their product. And here, again, we see a market by the year 2034 of close to EUR 200 million in the prostate cancer area. So big momentum these days, and that's the reason why a lot of clinical studies are performed in the area of Lutetium -- 200 studies for Lutetium, 30 studies for Actinium -- and you see other potential isotopes being launched or further developed for the treatment or imaging of different cancer areas. Let's also talk about isotope products. I mentioned already that here, we are, for the first quarter, not happy with the results, revenue lower by 7% compared to last year. Here, strong impact of the currency FX adjusted, the sales would have been flat, but it is as it is. And in last year, we had, at the same time, also those products who were heavily contributing to a strong EBIT adjusted in the first half year that was lower. You see oil well logging, one of the pillars within the IP segment, is minus 1/3. Isotrak, minus 1/3, isotope sales. So overall, we are not really happy with the results of isotope products. But the message is clear that from March onwards, we see a positive momentum and the outlook for the entire year is that we will achieve the budget for the IP segment in spite of the slow start-up here in the beginning of this year. The overall adjustments, that is something Julian and his team is always very keen on, but from the EBIT reported in this year, 14.1% to 14.0%, you don't see a big momentum both in isotope as well as medical. So the adjustments being made in this quarter are extremely minor. We don't need to talk about this. How are the revenues divided in the different regions? We see here 40% in Europe, 40% in America and 12% in Asia. Now the reason why this is lower than last year is exactly the license deal, which happened last year at the same time, and that is not the case of 2026, first 3 months of this year. That's why we see a shortfall, but that is very easily explainable due to the missing license deal, which we don't see here in this year, at least not for the first quarter. The rest remains relatively stable. Strong growth momentum here in Germany, where also the generator business continues to grow in addition to the isotopes, Lutetium. Now, overall, the radiopharmaceuticals business, that is what -- is the umbrella for that core business, our isotopes, the hot cell business, both from IP segment as well as the Technetium generator are produced in South America. We see a growth from Q1 last year to Q1 this year increased by 23%, and that is a strong growth by EUR 7 million approximately. And that is why we remain confident that if we look to the guidance of the radiopharmaceuticals for this year to achieve EUR 160 million, which is part of the overall guidance. If you just do a simple controlling extrapolation, you would be flat compared to last year, but the reason is what I already mentioned that the starting of this year was not really mirroring and matching with our overall expectation. That's why we see here a stronger growth, both for the outcoming -- still pending license business still to come this year for the remaining Telix deal as well as for other isotopes, which just have been started. Lutetium, Actinium is just on the ramp-up scenario, and there will be more sales during the course of the year. Looking to the balance sheet. We have here cash EUR 120 million, quite a lot of money. I'm pretty sure we might talk about our cash situation later on. The rest remains stable. Loan has been repaid. So it's only EUR 12 million less -- left, sorry. And we are also, if necessary, able to change that number upwards or downwards. The key figures, which you see here, normally, there is not much to say about here. Once again, the cash position increased from EUR 108 million to EUR 112 million. Loans from EUR 18 million down to EUR 12 million. Cash flow activities due to the license issues I mentioned, slightly lower than last year. The rest is stable, also our CapEx, our investments, EUR 5 million last year, EUR 5 million this year. Outlook. And that brings me already to my second last page here. The outlook remains unchanged, remains as we published earlier this year in March, EUR 320 million in terms of sales and revenue, whereas EUR 80 million EBIT adjusted. And that is on the basis that we have here not major deviations out of the currency, which might then change the revenue slightly, but we are confident that we are in a good deal here and also the license is still to come. Here are some dates for upcoming conferences. There's one conference in New York pretty soon next week. There's another one from Cantor in Hamburg. And then we do here our Rothschild conference in New York. We have then our [ boss ] meeting. Some of you are participating in the annual meeting later on in Berlin here, June 25. And then next time we are reporting numbers is August 13 with the full half year report. Happy to see all of you then at the latest again. Thanks for that.

I'll stop sharing the slides for a moment, switch on my camera. And as the first 15 minutes are over, and I'm now together with my colleagues, more than happy to take all your questions and comments. Please use your electronic hand because that makes it easier for us to see who has a question. I see the first question from Simon Keller. Here you are. The microphone is yours.

On the IP segment, starting off with this one, what explains the sales lumpiness that you've seen in Q1? Just fundamentally, what's the core project type nature that basically explains it? And what gives you confidence that it will grow in the last remaining 3 quarters? And also, maybe do you have some orders already that indicate the pickup, for example? And then also similarly, on the medical segment, you've performed particularly strongly. Do you see any reason that momentum comes down a bit and basically your segment guidance is a bit out of order, basically? That IP is growing slightly less and medical is doing better? And then a last question also on the cash position that you just highlighted, are you currently considering acquisitions or share buybacks? That would be helpful to know.

Perfect. Perfect. So the easiest answer would be sometimes you lose, sometimes you win. At the end, it's plus/minus 0, and that confirms the guidance. That would be the easy answer to your 2 segment-related questions. And coincidentally, it might work out, but that is not the case. The situation is a different one. And if I look to the isotope, the industry area, I like to explain a little bit more in detail. We have had a comparably strong Q4 of last year, lots of orders were coming in, and that's the reason why then if you have a strong November and December, which we reported last year, then it's quite natural that in January, February, you have a slower momentum at this stage. And that is exactly the case. That January and February was, in general, in the IP segment lower than last year due to the effect I mentioned of the strong Q4. In March, we already saw regaining business in all areas in the Isotrak business, but also in those areas where you are most interested in, and that is the oil well logging business. Oil well logging is that business which always goes up once more companies are looking for new oil sources, try to. Now due to the Iran situation, it might look obvious that there is a higher demand in oil sources, which in theory is right, and we see also a slight increase in the demand. However, I ask you not to exaggerate that assumption because they are still oil well logging on source. So we cannot really see for the time being whether once the inventory, the stock, which is still available, has been consumed, whether then this boostering effect will continue or not. So it's a little bit too early here to celebrate apart from the overall political situation, of course. But we are, by that, quite confident that the growth momentum, which we have seen in March, will continue also in the remaining part of the year. That's why we are confident that IP remains at the budget level. Now, in terms of the medical, yes, right you are, we have seen good momentum. And if I look to the GalliaPharm order book, which gives us a lead time of approximately 3 to 4 months. So I know pretty well what is happening in the next months to come and weeks to come, so that the Q1 and also Q2 are basically safe. Now what is happening in Q3, you never know exactly. And if I speak to people, they are saying, yes, but it might be that there is more F-18 coming up or whatever, and that a product launch from a different country or whatever will be delayed. So that's why I remain a little bit cautious what's happening here, and I don't want to change here the numbers which we have published beforehand. But right you are, GalliaPharm is the driving engine of the overall medical success here. But all in all, we are not changing the numbers here upwards or downwards. In terms of the cash position, yes, it's obvious now [ Olivier ], our Chief Accountant, is here participating in this call, and he always reminds me that some funds which we have assumed under cash are reserved for certain positions where we cannot just spend the money or throw the money out of the window. Still, it's a lot of money which we have, and also the potential debt we could raise gives us some flexibility in case we need the money. When would we need the money? If a super target floats by and if we then say, okay, that fits ideally to our company's strategy. That can happen, but -- and we are very carefully looking to the market, but there is nothing to be announced as of today. But I can promise you that we will take each and every possibility to enhance or enlarge our business in addition to the organic growth once it fits and once it is affordable. We will not pay money which is out of our scope of possibilities or where we don't see a fair value for a target. So it's not the case that Eckert & Ziegler desperately needs to buy something. Our organic growth remains very stable. And that's why if it pops up, it's okay. If not, then the organic growth is more than confirming our strategy.

May I have one short follow-up question? And that is share buyback. Is that something you take into consideration? Maybe on the M&A side, what would be the ideal bolt-on acquisition for you?

Yes. Yes. So I can be -- to the first question, share buyback is always attractive once you don't have any other option to maximize shareholder value. And our strategy is to maximize share to the benefit of the shareholders, and that's why better to invest the money for CapEx or for M&A activities than to give it back to our investors. That's why, for the time being, we are not taking this as an alternative. And regarding M&A targets, I can be very precisely answering you that we are only looking to those companies who are within our scope of activity, and that is isotopes, isotopes, isotopes. And that's why we are not deviating from our strategy. And there are lots of conferences. The next one is in Los Angeles, where a lot of start-up companies are floating around. And if they are knocking at our door and it fits, that's it. Good. Ladies and gentlemen, who is next?

Well, I think that's me. So just a very quick one on the competitive environment. So you -- it's just sort of following up from Simon's question. Did you -- have you seen any change in the competitive environment generally, particularly on the isotopes segment? Is there any sort of lower conversion rate or anything additional you can tell us about that?

Yes. So we see in -- if I look to the Lutetium business, for instance, we know the competitors pretty well, and there is no new player coming into the market. Same applies to Actinium. Also, the existing competitors are well known to us. And don't see any change in the competitive landscape there neither. So if I look beyond isotopes in the CMO business, that is a broader field because sometimes companies are entering into that field, they stay there for some time, and then they disappear. So there, the overall market remains more flexible. And also for Eckert & Ziegler, the CMO market and business is an important one because it enables us to participate in the growth momentum and to foster the relationship, but we take always the CMO business as an enabler. So we look what the others are doing and whether we remain competitive towards the others, but it's not so much in our day-to-day focus whether a new company pops up and disappears at the same time. Overall, the landscape remains unchanged, I would say.

May I ask you a question on competitive? Do you see more competition coming from China, first question?

And second?

The other questions are related to the road map of product 2027. What for you are the most credible products that we will see in 2027? It seems that there is a big road map coming. It should be interesting. And third question will be on the capacity availability. Where are they? Which isotope is most ready to enter this? How you will answer, I would say, to this road map of a product in terms of capacities?

Okay. So China, we have 3 cooperations with Chinese, so to speak. We have had one cooperation for our brachytherapy business, and then we have a tech transfer with a Chinese company in Chengdu, and then we have our joint venture close to Shanghai. And that is, as of today, the most important one. There will be the big inauguration event in beginning of June with the facility which is now ready to -- for the last mile. And for us, it remains of utmost important to stay in China to produce that because the mandate for China is really China first produced -- product being produced in China, likely will have a strong advantage for -- against products, coming from external or from outside. Now the companies which we are talking are either state-owned companies or semi-private companies, and the mandate is pretty clear. They do not want to lose track momentum comparing to Western countries, European or North American countries. The competitive landscape here also remains stable with the remark that these companies are really pushing their pipeline. So they also do want to play a role in Actinium in the years to come, in Lutetium in the years to come or in CMO business and things like that. And that's why it is good that we are already with a presence in China, so they can also approach us for potential cooperations. And that's why colleagues of mine have been in China earlier this month, coming back with a lot of potential activities. Now we know that out of 10 activities, only one will survive, but I'm pretty sure that, that will be to the benefit of Eckert & Ziegler. Competition will be not more challenging than in other countries.

You know the market shares that you have in the different isotope today?