Medios AG (ILM1.F) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the earnings call of Medios AG for the first 9 months of 2025. At our customers' request, this conference will be recorded. [Operator Instructions] May I now hand you over to Claudia Nickolaus, Head of Investor and Public Relations and ESG Communications at Medios. Please go ahead.

Welcome, everybody, to our earnings call for the first 9 months of 2025. As always, all relevant documents can also be downloaded from our Investor Relations website. Additionally, this presentation can be followed in parallel via the Internet link provided to you in the invitation. Today with me is our CEO, Matthias Gaertner; and our CFO, Falk Neukirch. Matthias will start with an executive summary, followed by Falk, who will then provide details on the financials of the first 9 months and the guidance for 2025. After the presentation, we will begin the Q&A session. I would now like to hand over to Matthias.

Okay. Thank you, Claudia. Ladies and gentlemen, welcome to our conference call for the first 9 months of '25. We continue to see solid growth, which is reflected in strong financials for the first 9 months of '25. We posted record revenues for the third quarter as well as for the first 9 months of '25, driven by organic and inorganic growth. With Thomas Meier, we could announce our new CEO as of February '26. I'm very confident that he, together with my Executive Board colleagues and the entire team of Medios, will lead our company into the next decade of growth, success and market leadership. Back to the highlights and achievements in the first 9 months of '25 on Slide 3. We had a very good year so far, and I'm proud of the progress we made. Again, we posted very solid financials. Revenue grew by 9.2% to EUR 1.5 billion. All segments contributed to revenue and earnings growth, meaning both organic and inorganic. EBITDA pre rose disproportionately by 26.1% to EUR 70.4 million. Consequently, EBITDA pre margin rose from 4.0% to 4.6%. I would especially like to highlight the solid organic earnings growth of 5.1%. This is in line with our guidance assumption of organic growth in the mid-single-digit percentage range. Furthermore, EPS increased by 84% to EUR 0.79 and EPS adjusted grew by almost 26% to EUR 1.5. Also, the operating cash flow was strong, up over 90% compared to last year. All in all, we have once again succeeded in our ambition to increase our overall profitability. This confirms the operational strength of our company and our strategy, which is focused on increasing margins while maintaining growth. Based on these results, we fully confirm our guidance for the year '25. Falk will provide more insight into the financials later. Our international activities strongly support our European platform and make us a leading player in the specialty pharma compounding in Europe. This network is an excellent basis for our further international expansion, the realization of synergies and cross-selling opportunities. Furthermore, it will support the development of our activities in the field of advanced therapies, the future of individualized medicine. As outlined at our last earnings call, we successfully conducted a share buyback of 1 million Medios shares, representing 3.92% of our current share capital. Another good news was that since October 16, we are back in the SDAX. Also in October, we welcomed Janus Henderson Group as a new major shareholder in Medios with a stake of around 6.4%. They bought all the shares from Bencis Capital. And since November 4, we have a new analyst coverage by Montega with a buy recommendation and a target price of EUR 24. Slide 4 shows the quarter-on-quarter development of our 2 KPIs, revenue and EBITDA pre. There are fluctuations between the various quarters. In '23 and '24, we saw very strong third quarters due to the special effects, the inflation-related price increases. Even without this effect, Q3 '25 revenue was on a record level. EBITDA pre, however, was slightly below Q3 '24. Falk will come back to this later. Now the same illustration for the first 9 months shown on Slide 5, whereas revenue for the first 9 months '25 increased by 9.2%, EBITDA pre grew even stronger by more than 26% compared to the first 9 months of '24. As already mentioned, this is in line with our strategy to further focus on profitability. Let's move to Slide 6 with some comments on our activities in the field of advanced therapies. We are establishing a stronger presence in this new field of activities that is predicted to reach a double-digit growth rate in the future. Currently, our focus is on the subfield of personalized cancer vaccines. These vaccines have the potential to replace conventional cancer therapies and even to cure cancer. Manufacturing these new vaccines require high expertise in the area of small-scale fill and finish. This expertise already exists within the Medios networks. Before I hand over to Falk, I would like to thank everyone who participated in the perception study conducted in September. We received valuable feedback that we will consider, in particular, with regards to our Investor Relations work. This is all for now from my side. Now Falk will provide more details on the financials for the first 9 months of '25 and the guidance for '25.

Thank you, Matthias. Welcome also from my side. I will give you a more detailed overview on the financials for the first 9 months of '25. You can, of course, find the full financial statement on our website. Let's go to Slide 8. All in all, we had a strong first 9 months in '25. Revenues rose by EUR 129.5 million to EUR 1.53 billion, which is an increase of 9.2%. Of this increase, EUR 65.3 million, 4.7% are attributable to inorganic growth of segment IB. The inorganic growth mainly comprises the 9 versus 4 months effect as Ceban was initially consolidated as of June '24. The rest, an amount of EUR 64.2 million, 4.5% is attributable to organic growth, thereof EUR 48.3 million to PS segment, EUR 4.5 million to PST and EUR 11.6 million to IB segment. Gross profit of Medios Group improved significantly by EUR 44.3 million to EUR 151.5 million, an increase by 41.3%. This improvement is mainly due to segment IB, which contributed EUR 34.4 million gross profit, thereof, due to inorganic growth approximately EUR 32 million. Besides the 9 versus 4 months effect as the income from divestments of smaller Ceban entities, mainly pharmacies in the amount of EUR 2.1 million contributed to the inorganic growth. Gross profit of PST segment rose by EUR 7.5 million to EUR 42.2 million due to organic revenue growth, a better product mix, but also the elimination of performance-based payments for compounding orders in the amount of EUR 4.8 million. Gross profit of PS segment increased again organically by EUR 2.8 million, with a gross profit margin of 3.8%, which is unchanged compared to previous year. All of this contributed to a higher Medios Group gross profit margin, which rose by 2 percentage points to 9.9%. Personnel costs rose by EUR 15.9 million to EUR 51.7 million. The essential part of the increase amounting to EUR 13.2 million is attributable to the IB segment fully caused by inorganic effects because of the initial consolidation of Ceban in June '24. In addition, an amount of EUR 1 million is caused by modest personnel cost increases in PS and PST. Segment services personnel costs increased by EUR 1.7 million, thereof EUR 1.2 million attributable to changes in the Executive Board. Noncash expenses for stock options amounted to EUR 0.6 million versus EUR 1.1 million in the previous year. Other operating expenses rose from EUR 27.4 million to EUR 36.2 million, an increase of EUR 8.8 million, thereof EUR 7.7 million attributable to the IB segment, of which approximately EUR 7 million have an inorganic character because of the initial consolidation of Ceban in June '24. The EBITDA pre increased to EUR 70.4 million compared to EUR 55.8 million in the previous year. The EBITDA pre margin increased to 4.6% compared to 4% in the previous year. This was supported by an EBITDA contribution of segment IB with higher EBITDA margins and the organic growth of PS and PST also focusing on higher-margin products. EBITDA pre was adjusted by extraordinary expenses in the amount of EUR 6.7 million compared to EUR 11.7 million last year. These expenses consist of EUR 3.8 million for ERP system implementation, EUR 1.4 million one-offs related to changes in the Executive Board, EUR 0.9 million other M&A expenses and EUR 0.6 million expenses for stock options. The decline in overall adjustments is mainly attributable to the discontinuation of performance-based payments for increased compounding volumes and lower M&A expenses compared to previous year when Ceban was acquired. Depreciation and amortization increased significantly by EUR 6.6 million to EUR 28.4 million, largely due to the acquisition of the Ceban Group. Of the total amount for depreciation and amortization, EUR 18.2 million are attributable to the amortization of customer base, EUR 4 million are attributable to lease assets and the remaining amount of almost EUR 6.2 million belongs to operational depreciation. The financial result of minus EUR 7.3 million decreased by EUR 1.4 million, mainly due to higher interest expenses for the syndicated loan. The tax expenses rose from EUR 6 million to EUR 8 million, reflecting a tax rate of 29.7% compared to 36.2% in the previous year. The tax rate in the previous year was impacted by nontax deductible expenses for M&A activities. Due to the strong performance of all operational segments and the expanded consolidation scope plus the described reduction in extraordinary expenses, the net result almost doubled to EUR 19.9 million. Also, depreciation, amortization and financing costs increased significantly. So earnings per share rose from EUR 0.43 to EUR 0.79, an increase of 84%. The adjusted earnings per share increased to EUR 1.50 compared to EUR 1.19 last year. This figure is based on the net results after tax adjusted for extraordinary expenses, PPA depreciation and amortization as well as corresponding tax expense adjustments. Operating cash flow rose significantly by 91.1%, now amounting to EUR 52.7 million. This has been achieved by an increased cash-generating operational performance and lower tax payments. Due to the very good operational cash flow, also the free cash flow of EUR 48 million almost doubled compared to last year. Please note that quarterly fluctuations in the operating cash flow are by no means unusual as has been the case in the past. The investing cash flow of minus EUR 2.3 million mainly reflects CapEx of minus EUR 4.7 million and subsequent accrued purchase price payments for the acquisition of Ceban of minus EUR 2.3 million as well as cash inflows of EUR 3.4 million from divestments mainly due to the sale of smaller pharmacies in the Netherlands. Financing cash flow of minus EUR 63 million, primarily resulted from scheduled term loan repayments of EUR 18.8 million and net repayments of the RCF of EUR 20 million. Interest payments for loans, EUR 6.4 million and payments for lease liabilities, EUR 3.8 million and the repurchase of treasury shares of EUR 12.6 million. For more details on the repurchase of shares, you will find a summary in the appendix of this presentation. Cash and cash equivalents amounted to EUR 93.4 million at the end of the reporting period. The equity ratio was nearly unchanged at 55.2% at the end of September '25 compared to 54.6% on December 31, 2024. On Slides 9 and 10, we have provided again a breakdown of the organic and inorganic growth. Slide 9 shows that inorganic revenue growth amounted to EUR 65.3 million or 4.7% fully dedicated to IB segment. Organically, revenue increased by EUR 64.2 million or 4.5%, resulting from operational segments -- from all operational segments, but mainly from segment PS. Slide 10 shows the organic and inorganic EBITDA pre breakdown by segment. EBITDA pre increased inorganically by EUR 11.7 million or 21%, fully dedicated to IB segment. All 3 operational segments have delivered organic earnings growth. The EBITDA pre development in segment services reflects mainly intensified activities for the new strategic segment, Advanced Therapies, but also increased Board remuneration. Let's go to Slide 11, providing the 9 months overview of all segments compared to the previous year. As already mentioned, the 9.2% increase in group revenue is mainly driven by IB and to a lower extent, by PS and PST. The external revenue of PS segment increased by 4.1% to EUR 1.24 billion and revenue of PST segment by 2.7% to EUR 166 million. The IB segment contributed EUR 124.2 million external revenues for the [ first 9 months of '25 ], which is an increase of EUR 76.9 million, thereof EUR 65.3 million inorganically. EBITDA pre for the PS segment amounted to EUR 38.8 million, a plus of 4.7% and for the PST segment to EUR 18.1 million, a plus of 8.4%. This organic earnings growth was boosted by a targeted focus on higher-margin sales. IB contributed with an EBITDA pre of EUR 22 million for the first 9 months of '25, thereof EUR 11.7 million inorganically and an EBITDA pre margin of 17.7%. EBITDA pre of IB segment includes an income of EUR 2.1 million from divestments. Slide 12 provides status information on the recent financing structure. In November '25, the debt finance of Medios was replaced by a syndicated loan facility in the total amount of EUR 225 million, consisting of 2 tranches: a term loan facility of EUR 125 million with a term of 5 years. Repayment has started in March '25 and for the first 9 months '25, we repaid EUR 18.8 million and a revolving credit facility, RCF, of EUR 100 million, also with a term of 5 years. The RCF has a term extension option of up to 2 years and a step-up option for further EUR 50 million to finance future growth. There is net debt amounted to around EUR 100 million at the end of September '25. That leads to a leverage ratio of approximately 1.1. An estimated free cash flow of EUR 40 million to EUR 50 million enables Medios to repay the term loan and to finance further growth. At the end of the reporting period, the total loan amount drawn under syndicated loan agreement amounted to EUR 161.3 million, EUR 106.3 million under the term facility and EUR 55 million under the RCF facility. Overall, we are confident about the business development for the fourth quarter and confirm our guidance for the full year '25 as shown on Slide 14. Our guidance parameters are revenue and EBITDA pre. For '25, we expect revenues to reach approximately EUR 2 billion, reflecting growth of around 6%. EBITDA pre is expected to grow by around 21.5% to around EUR 96 million. Organic growth should be in the middle -- in the mid-single-digit percentage range. Both parameters reflect an EBITDA pre margin of approximately 4.8%. The EBITDA pre guidance is adjusted for extraordinary expenses like M&A-related costs, expenses for stock option programs and implementation costs for our ERP system and for one-off expenses due to the change in the Executive Board as explained before. Thank you for your attention. I'll now hand over to Matthias.

Thank you, Falk. Dear investors and analysts, today is my last analyst call for Medios. After more than 10 years serving as CFO and CEO, I will be stepping down from the Management Board at the end of this year. It's been an unforgettable decade, truly the professional experience of my life. And I have to admit this isn't an easy step for me. There are so many things I'm grateful for and just as many that I will really miss. It's been a privilege to work for so many years alongside some of the smartest and most talented colleagues in the specialty pharma sector and to build together with our entire team what Medios stands for today, Germany's leading specialty pharma company and one of the key players in Europe, a healthy solid growth business, ready to take on the challenges of the future. Together with our [ 1,000 ] colleagues, we now produce more than 1 million individualized medicines every year across Europe. In doing so, we help ease the suffering of patients, slow or even stop the progression of diseases and in some cases, achieve complete cures. That is something I'm particularly proud of. To everyone I have had the pleasure of working with over the past 10 years and especially to all of you on this call today, our valued investors and analysts, I want to say a sincere thank you. Thank you for your trust, your support and yes, also for your critical questions and comments. I've learned a lot from them, both professionally and personally. It has been an honor, and I truly appreciate it. But now it feels like the right moment to move on, to make room for new minds, new ideas and fresh energy. I'm confident that my colleagues on the Management Board, Falk, Christoph and Constantijn, together with my successor, Thomas Meier and all of our 1,000 colleagues, will continue to do an outstanding job. I'm sure they will take Medios to the next level, making it an even more profitable and globally recognized leader in specialty pharma. Thank you once again for your partnership, for your engagement and for being part of this incredible journey.