Medios AG (ILM1) Earnings Call Transcript & Summary

Good morning, and welcome to our earnings call for the 2025 financial year. My name is Claudia Nickolaus and I'm Head of Investor and Public Relations and ESG at Medios. As a reminder, this conference will be recorded [Operator Instructions]. As always, all relevant documents can 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, Thomas Meier; and our CFO, Falk Neukirch. Thomas will start with an executive summary, followed by Falk, who will then provide details on the financials of the fiscal year 2025 and the guidance for 2026. Finally, Thomas will comment on Medios' focus activities in 2026. And after the presentation, we will begin the Q&A session. I would now like to hand over to Thomas.

Thank you very much, Claudia. Good morning, everyone. Welcome to the conference call for the financial year 2025. I started as the CEO of Medios in February. Over the past few weeks, I got to know our teams and operations and our partners more closely. I'm very impressed by the strong organization and the opportunities ahead of us. On this slide, I highlighted some past experiences and summarized my first 54 days in office. I'm fully in the listen and learn mode. As I mentioned, I meet people and I'm trying to understand the organization and work together with my colleagues. As I said, 54 days, it's kind of a little bit more than halfway through the first 100 days. And I can tell you one thing, Medios is a great place to work. And above all, Medios has all the ingredients for success in the specialty pharma business. Let me present the highlights of 2025 on the next slide. We had a very solid financial year 2025 with a significant improvement in profitability, and we continue to see good growth. In more concrete figures, revenue grew by 10.4% to for the first time, over EUR 2 billion to EUR 2.1 billion. EBITDA pre, rose disproportionately by 17.8% to EUR 93.1 million. Consequently, EBITDA pre margin rose from 4.2% to 4.5%. And it's especially rewarding to realize that all earnings figures, EBITDA, EBITDA pre, earnings per share, earnings per share as adjusted grew disproportionately compared to the revenue. Revenue of EUR 2.1 billion and EBITDA pre of EUR 93.1 million were broadly in line with the '25 guidance. In 2025, Medios prepared to enter the reimbursed medical cannabis market. We announced that, and we did that in Germany with an exclusive partnership with Bedrocan. This business is up and running, and we are happy with the start we see. Outlook. For financial year 2026, we expect revenue to reach EUR 2 billion to EUR 2.12 billion, reflecting a growth of up to 2%. And EBITDA pre is expected to be in the range of EUR 94 million to EUR 102 million. Again, a disproportional raise in the profitability with up to 9.6%, reflecting a margin of 4.8%. If you're looking at the quarter's development over the last 3 years, we always see that the fourth quarter is a little bit weaker than the other quarters, especially looking at the profitability. We have seen the similar fluctuation this year. However, back in fall, we had expected a slightly stronger Q4 result. So the question is out there, what happened? And unfortunately, we indeed experienced an unexpected one-off effect. But nevertheless, and I think that's very obvious, the overall trend remains unchanged. We see disproportional earnings growth going forward. Furthermore, and the key point, the earnings of Medios, they translate in a very strong cash flow. And I think that's a really strong statement for the company and the capabilities we have. On Slide 9 now, we talk about our ESG highlights. And for everybody at Medios, when I talk to them and for myself personally, it is important that we deliver for -- pharmacies for patients. And we strongly feel that we are an important element of the strategic infrastructure for supply security of pharmaceuticals. We work every day to make sure that patients get their medicine they need. In addition, of course, we have ESG targets that we achieve, and we highlighted some on this slide. And let me also tell you that for the first time, we completed Scope 3 analysis of all relevant categories. And with that, I conclude the initial part and hand it over for more details on our financials to Falk. Falk, please?

Thank you, Thomas. Good morning, and welcome also from my side. I will now give you a more detailed overview on the financials for full year '25. As always, you can find the full financial statement on our website. Let's go to Slide 8. All in all, we had a very solid fiscal year. Our revenue showed double-digit growth and came slightly in above our forecast for '25 of EUR 2 billion. Also, the EBITDA pre increased significantly and the EBITDA pre margin even improved to 4.5%. However, due to one-off effects in Q4, as already mentioned by Thomas, and also due to somehow too optimistic expectation on the timing of the ramp-up of business opportunities, especially in segment International in '25. In '25, the EBITDA was just below forecast of EUR 96 million. The new business opportunities began to materialize at the end of '25, but are expected to fully unfold in '26. Medios fiscal year figures for '25 were driven by first time full year consolidation of the Ceban Group acquired in June '24. As you know, in the previous year, Ceban only contributed to the group's result on a pro rata basis for 7 months. Consequently, the operational segment International Business still contributed in '25 significantly by inorganic growth. Besides this, pharmaceutical supply contributed with a solid organic growth in revenue and EBITDA pre. Overall, revenue rose to EUR 2.08 billion from EUR 1.88 billion, which is an increase of 10.4%. Of this increase, 63.2 million, that is 3.4%, were attributable to inorganic growth from segment IB mainly to the just mentioned 12 versus 7 months effect. The rest, an amount of EUR 132.4 million corresponding to 7% is attributable to organic growth, mainly from PS segment. The revenue increase of PST segment is mainly caused by the discontinuation of performance-based payments for increased compounding volumes in 2025 versus 2024. Gross profit of Medios Group improved significantly by EUR 49.1 million to EUR 203.7 million, an increase of 31.6%. This improvement is mainly due to the IB segment, which contributed EUR 77.4 million in gross profit, an increase of [ EUR 37 million in sale ], EUR 31.7 million inorganically, resulting from the just mentioned 12 versus 7 months effect and the income from divestments of smaller Ceban entities, mainly pharmacies in the amount of EUR 2.7 million. Gross profit of PST segment rose by EUR 8.3 million to EUR 55.6 million, representing a gross profit margin of 23.8% and a margin increase of 3.1 percentage points. This is mainly due to the positive business development and the elimination of performance-based payments for compounding orders in the amount of EUR 6.2 million. Gross profit of PS segment increased again organically by EUR 4.3 million, reaching a gross profit margin of 3.8%, which is unchanged compared to previous year. All of that together contributed to a higher Medios Group gross profit margin, which rose by 1.6 percentage points to 9.8%. Personnel costs rose by EUR 17.2 million to EUR 69.4 million. This rise was mainly attributable to the first-time full year consolidation of the Ceban Group as well as one-off expenses related to the change in the Executive Board in financial year '25 and a higher average number of employees compared to the previous year. Noncash expenses for stock option decreased from EUR 1.7 million to EUR 1.2 million. Other operating expenses rose from EUR 39.5 million to EUR 50.2 million, an increase of EUR 10.7 million, thereof EUR 6.5 million attributable to the IB segment. In addition, other operating expenses increased year-on-year, mainly because of higher IT costs, EUR 4.3 million, thereof EUR 2.4 million increase for one-off costs for the implementation of an ERP system, which we adjust under EBITDA pre. The EBITDA pre increased by 17.8% to EUR 93.1 million. The EBITDA pre margin thus improved by -- thus improved to 4.5% compared to 4.2% in the previous period. This was supported by 2 factors. The EBITDA contribution of the IB segment with higher EBITDA pre margins and the strong organic growth of PS segment focusing on higher-margin products. EBITDA pre was adjusted by extraordinary expenses in the amount of around EUR 9 million compared to EUR 16 million last year. These adjustments consist of EUR 5.1 million for ERP system implementation, EUR 1.5 million one-offs related to changes in the Executive Board, EUR 1.2 million other M&A expenses and EUR 1.2 million for expenses for stock options. The decline in overall adjustment is mainly attributable to the discontinuation of performance-based payments for increased compounding volumes and lower M&A expenses compared to previous year. Depreciation and amortization increased by EUR 6.6 million to EUR 37.9 million, a significant portion of this increase, EUR 6.9 million is attributable to the IB segment and mainly results from the full year consolidation of the Ceban Group in '25. The financial result decreased by EUR 8.5 million to minus EUR 18.3 million, mainly driven by extraordinary financial expenses of EUR 9.2 million recorded in the fourth quarter of '25, which are related to the revaluation of the NCI liabilities for the acquisition of minority shares in connection with the acquisition of the Ceban Group. Interest expenses for liabilities to banks declined due to the scheduled repayment of the term loan facility and the replacement of the bridge financing facility for acquisition of Ceban Group against the syn loan facility in November '24. The tax expenses rose from EUR 9.3 million to EUR 12.5 million due to higher earnings before tax. The tax rate remains due to nontax deductible financial expenses from the revaluation of NCI liabilities still high as in the previous year, where nontax deductible financing costs and M&A costs increased the tax ratio as well. Especially the one-off financial expenses due to the revaluation of NCI liabilities reduced the growth of the net result. Nevertheless, the net profit was up 22.4% to EUR 15.4 million in 2025. Accordingly, earnings per share rose from EUR 0.51 to EUR 0.61, an increase of 19.6%. Adjusted EPS increased to EUR 1 -- EUR 1.94, sorry, compared to EUR 1.61 last year. Earnings per share adjusted are based on the net result after tax adjusted for extraordinary expenses, PPA, depreciation and amortization, revaluation of noncontrolling interest liabilities as well as corresponding tax expense adjustments. Operating cash flow was within the expected range and amounted to EUR 52.3 million versus EUR 73.7 million for fiscal year '24. This increase (sic) [ decrease ] was despite a higher operating result, mainly attributable to the net working capital due to higher trade receivables in the PS segment at the balance sheet date and higher tax payments in 2025. Free cash flow reached EUR 44 million and was thus largely within the estimated free cash flow range as communicated in the past of EUR 40 million to EUR 50 million. The investing cash flow of minus EUR 4.0 million mainly reflects CapEx of minus EUR 8.3 million, subsequently accrued purchase price payment for the acquisition of Ceban in the amount of EUR 2.3 million as well as cash inflows of EUR 5.9 million from the disposal of fixed assets and the sale of pharmacies in the IB segment. Financing cash flow of minus EUR 72.6 million mainly reflects the scheduled repayment of the term loan in the amount of EUR 25 million, net repayment of the RCF loan of EUR 20 million in '25 and cash outflows from interest payments, EUR 10 million and EUR 12.6 million for the acquisition of treasury shares. You will find a summary of the share buyback program in the appendix of the presentation. Cash and cash equivalents amounted to EUR 81.8 million at the end of the reporting period. The equity ratio of 56.9% increased again slightly as of the end of December '25 compared to the previous year with 54.6%. On Slide 9 and 10, we have provided again a breakdown of organic and inorganic growth. Slide 9 shows the inorganic revenue growth amounted to EUR 63.2 million or 3.4% fully dedicated to the IB segment. Organically, revenue increased by EUR 132.4 million or 7%, resulting from all operational segments, but mainly from segment Pharmaceutical Supply. Slide 10 shows the organic and inorganic EBITDA pre breakdown by segment. EBITDA pre increased inorganically by EUR 12 million or 15.1%, fully dedicated to IB segment. Organically, EBITDA pre increased by EUR 2.1 million or 2.7%, resulting from segment Pharmaceutical Supply and to a smaller extent from International Business. The decline of the organic EBITDA pre growth of the segment PST is mainly a result of onetime higher personnel costs, e.g., to severance pay and onetime higher other operating expenses mainly to maintenance and repair. EBITDA pre for the internal Services segment fell to minus EUR 10.8 million from minus EUR 10.5 million in the same period last year, primarily due to moderate increases in staff costs, which are relevant to EBITDA pre. Let's go to Slide 11, providing the 12 months overview of all segments compared to the previous year. As mentioned before, the 10.4% increase in group revenue is mainly driven by the strong organic growth in the Pharmaceutical Supply segment, inorganic and organic growth in the IB segment and to a lower extent by PST. The external revenue of the PS segment strongly increased by 6.9% to EUR 1.69 billion. PST segment contributed EUR 220.1 million, an increase of EUR 6.5 million, plus 3%, of which EUR 6.2 million are attributable to the elimination of performance-related expenses for the acquisition of compounding volumes. The IB segment contributed EUR 169.2 million external revenue in '25, which is an increase of EUR 80.4 million, thereof EUR 63.2 million inorganically. EBITDA pre for the PS segment amounted to EUR 52.5 million, a plus of 5.1%. EBITDA of the PST segment reached EUR 22.2 million, a minus of 4.6% due to the already mentioned onetime higher personnel and other operating expenses as just stated. IB contributed EUR 29.1 million EBITDA pre thereof EUR 12 million inorganically. This translates into a segment EBITDA pre margin of 17.2%. Slide 12 provides status information on the recent financing structure. In November '24, the debt financing of Medios was replaced by a syndicate loan facility with 2 tranches in the total amount of EUR 225 million. There is net debt amounted to around EUR 120 million as of 31st December '25, leading to an attractive leverage ratio of 1.3. An estimated annual free cash flow of around EUR 40 million to EUR 50 million will enable Medios to continue repaying the term loan, cover interest payments, and of course, finance further growth. At the end of the reporting period, the total loan amount drawn under the syndicated loan agreement amounted to EUR 155 million, consisting of EUR 100 million under the term facility and EUR 55 million under the RCF. Let's go to Slide 14, providing our guidance for the full year '26 for the Medios Group. Our guidance parameters are again revenue and EBITDA pre. For '26, we expect revenues to reach the range of up to EUR 2.12 billion, reflecting growth of up to 2%. EBITDA pre is expected to be in the range of EUR 94 million to EUR 102 million, a disproportionate rise up to 9.6%. Taking into consideration the middle of the EBITDA pre guidance corridor, organic EBITDA pre growth should be in the mid-single-digit percentage range. Both parameters reflect an EBITDA pre margin of up to 4.8%. The EBITDA pre guidance is adjusted for extraordinary expenses like M&A-related costs, expenses for stock option programs, implementation costs for ERP system and for one-off expenses for efficiency improvements. Thank you for your attention. As I will be stepping down from my role as a CFO at Medios and leaving at the end of April, this marks my final earnings call. I would like to thank you, our investors and analysts as well the whole Medios team for your support and trust in the past. And I herewith hand over to Thomas. Thank you.

Thank you, Falk. That was a concentrated piece of numbers, and as always, very precise and eloquently delivered. Thank you very much. As I started at Medios, the question is in the room, what is Medios doing? People ask me what exactly is it that Medios does? And I tried to put 2 slides together where I would like to talk about the market system as I see it, which is based on some consultancy that worked on it. And then internally, we added some specifics and flavors. And as such, we operate in a market system along the value chain. I see commercial products from the very start, they're partially going directly into the dispensing channel. And then there are individual steps. You see that at the top of this list that go from wholesale into compounding, into logistics into the dispensing being at the hospital, the physicians, pharmacies, clinics, you name it. And as this value chain is somewhat fragmented in individual unit operations, one must also understand that this is an abstraction and it's way too simple. It is more complex, and we're trying to figure out our ranges of operation wherever they fit best and where we can deliver the most value. But at the bottom of the slide, we highlighted in any case, where we are currently active. And what we call pharmaceutical supply is covering the wholesale and compounding aspect. And there is a somewhat vertical integration in such that some of the drug products are compounded for patient-specific needs or some API is getting delivered out into the compounding area where we use it to make the patient-specific or compounded product that then is going into the logistics and getting dispensed wherever it is needed. Our International Business covers, again, wholesale and compounding with a very firm and very, very nicely carved out compounding footprint that also delivers a nice profitability. In the dispensing segment of this value chain, we have currently 20 community pharmacies that were part of the acquisition in the Netherlands. So this is the big picture how I see that Medios is operating and the market is working to serve the patients. And now on this slide, we even deliver you numbers. And again, be mindful about those numbers. I want to talk about numbers, but we also need to see that, for example, I pick a number, if we say the compounding market is EUR 30 billion, that does not mean that our addressable market is close to that number because right now, a large part of this market is not addressable for Medios for various reasons, being regulatory reasons that are individually and different from country to country, being it that we are not active in the entire Europe market. So we are in a smaller segment of this compounding market, and we make sure that we deliver the most value in the market we are active. But we are firmly nested in this combination of wholesale compounding. And we believe looking at the market CAGR that is here estimated to be between 5% to 15% for compounding and a healthy profitability estimated around 10% to 20%, that this is an area we would like to continue to grow, and we are focusing our operations, our network that we can do that even better for our partners and customers going forward. The wholesale business, we make sure that we continue to do it successfully on a specialty base where we believe and this 5% is a little bit moved that we can achieve a profitability hopefully in the range of 3% to 5%. And I think that is the picture how we see it right now. And when we continue on the next page, I would like to highlight some of the activities that Medios did in 2025 to achieve a good positioning in this value chain and also experiment and try to gain additional value propositions that help the profitability. And one proof of concept is shown here Simbrinza, a well-established drug for eye drops of Novartis. We were able to partner with Novartis and are now in Pharmazeutischer Unternehmer, in German, a pharmaceutical entrepreneur. That means our name is on those boxes. Cranach Pharma will be visible in the pharmacies, and we are using our distribution channels in addition to the wholesale for bringing those drugs into the pharmacies and all under the idea, as I mentioned before, that Medios wants to be an important piece of securing that drugs are available for patients. Here, a well-established brand that Novartis says, "well, it is better in your hands, you give it more attention and customers will find the drug they need, they like." Going forward, we trust you, Medios to do this well. And I think we have proven that we are the right partner. We did all the regulatory necessary improvements in Cranach Pharma in Hamburg. We got inspected by the authority, and we got approved to be a pharmaceutical Unternehmer entrepreneur going forward. Something to watch, not a massive revenue contribution in 2026 to be expected, but as a proof of concept, something we wanted to try out and the team really delivered in 2025. And so we are up and running. We are happy with the results we have seen so far, and we want to continue this avenue for our pharmacy supply PS business. On this slide, a very beautiful example from the International Business part. I said we are in the business to keep medicines on the market. And sometimes, as you know, if global supply chains are disrupted, there are shortages in the market. And we are on the watch to understand where shortages are happening. Our teams are connecting with the pharmaceutical companies, and pharmaceutical companies typically have a certain visibility into the future. They know, "oh, a shortage could come up here, shortage could be there." And we want to -- we learn that ourselves. We get our intelligence from the market, but also sometimes in collaboration with pharmaceutical companies, we prepare compounding for drugs we expect to go into shortages. This one is a histamine blocker that helps with bouts of where you might be itchy. And so they are necessary medicines and we are happy that we can deliver those whereas the shortage is happening in the market, and we are selling current volume 65,000 tablets a month. So a big thank you to our International Business, to the Medios team to help people having the medicine they like and not being affected by the shortage. Falk told us that he's going to leave the company. So it's important for me, and it's very good news that we can announce that with Stefan Bauerreis, we could gain a very experienced hand for our financial team. He will start mid of April, and he brings a very strong backpack of experience in international leadership in publicly traded companies at the German stock market. He was the CFO of Stabilus for several years. And before that, he was decades with Schaeffler Group as CFO, Europe and Germany at the end of his tenure there. He has a vast experience in corporate accounting, controlling, financing and transformation of management team. So we feel privileged and blessed that he will start in a month, even a little bit shorter and help us to continue our way of transformation and increasing profitability at Medios and make sure that we are matching the opportunities that are out there. And lastly, a few words before we go in question and answers. If a new CEO comes in, if a new team is building, of course, we're going to look at the business. We're going to look where we want to put our focus, and we want to make sure that we have all the capabilities we need to act swiftly and focus to achieve results. We are doing this exercise as we talk, and we will present tangible targets. We will present a read on where we want to position, the vision and mission of Medios at our Capital Markets Day in fall. And until then, we're going to make sure that we act as one team. We want to harmonize business and planning processes for compounding and pharmacy supply at first, and we will do that using modern tools, modern processes. And the core and centerpiece of that transparency, data-driven work is our ERP backbone that will be updated to SAP S/4HANA will be our knowledge backbone of the company going forward. The rollout is in preparation. We remain committed that Medios Pharma will be up and running very shortly. And this will help us to get better insight and hopefully result in faster decisions and progress. Another thing I would highlight after 54 days or during my 54th day is -- and I think it's not a new statement, we're going to optimize our network. And we want to do that on a solid plan, a solid plan that covers the entire group, and we're going to call this capital master planning, and that plan is already worked on, and we're going to accelerate the formation of the plan and the execution according to this plan. I think there's value in this, and I will put down some of my energy together with the top team that this is a priority for the entire group. Similar is business integration. We talked about the SAP project. That is, of course, now the mission-critical project for the entire organization. We're going to focus our energy on that one. But at the same time, we already know that we need to reassess our digitalization road map to make sure again that we have focus and we can execute quickly and swiftly towards that plan. All this done to accelerate organic growth. We see good growth potential in the market, and we want to be sure that we can achieve that growth together and for our partners and customers and also think that a go-to-market strategy to increase that group of partners and customers will help us achieving that organic growth. Buy and build is an important and vital element of what we're going to do going forward. It has always been part of the Medios' success story. And we want to keep it that way. We want to be very disciplined in what we are doing, but we're going to have value-accretive bolt-on acquisition, I believe, going forward. But of course, we can't let them -- can't let you know before this happens for obvious reasons. And with that, I think I have one more good news on the next slide, and then we are ready for question and answers. And the good news is we're going to have a Capital Markets Day in Breda, the Netherlands. That's at our Ceban unit. And the date shifted slightly. It's going to be on the 29th. I informed some of you that it's going to be the 30th. So please mark your calendar. It moved 1 day earlier. It's on the 29th. We're going to have a pre-dinner on the 28th, and I hope you will join us. I look forward to that. I look forward to interact with you in person. And hopefully, you find time in your busy schedule.