Medios AG (ILM1) Earnings Call Transcript & Summary

Good morning, and welcome to our earnings call for the first quarter 2026. My name is Claudia Nickolaus, and I'm Head of Investor Relations 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 is with me our CEO, Thomas Meier; and our new CFO, Stefan Bauerreis. Thomas will start with an executive summary, followed by Stefan, who will then provide details on the financials of the first quarter 2026 and on the guidance for 2026. Finally, Thomas will comment on Medios focus activities in 2026. After the presentation, we will begin with a Q&A session. I would now like to hand over to Thomas.

Thank you, Claudia, and welcome, everyone, to the first quarter conference call of Medios. Let's start with the first things. First, financials. You have seen it, top line growth, albeit at a reduced margin. Margin was impacted by price pressure and increased cost base. In detail, revenue grew by 8.9% to EUR 527.6 million. EBITDA pre decreased to EUR 21.2 million. That's a minus 7.9%. This is resulting in an EBITDA pre margin of 4%. We had significant improvements with the operating cash flow to EUR 12.5 million due to successful working capital management and a strong cash conversion. A few details to those results. I mentioned we had price pressures and the price pressure was especially pronounced in Germany, and that was true for the wholesale business and the personal treatment business of Medios. We will look into those numbers in detail. And overall, we have to say that the legal and long-term compensation discussions and the overall environment for pharmacies in Germany is challenging right now. And of course, we have seen that in our first quarter results. The entry into the medical cannabis market was successful. We had first sales, and we are happy with the uptake in the market of our products. So that's a good one. And overall, we have seen that the market is there. We had healthy growth on the top line. And it's my great pleasure, and I know you will enjoy it, Stefan Bauerreis, our new CFO, will be part of this call. He signed on in the first quarter, and he actually started mid-April and had a really, really good start here. He fits into the team, and we all like to work with him. And the next good news is, of course, that we are convinced that we can confirm our guidance, the revenue in the range of EUR 2 billion to EUR 2.12 billion and EBITDA pre [ margin ] of EUR 94 million to EUR 102 million. That's our target, and we believe and our forecast shows that's in the numbers for us to do. With that, on the next slide, we see the comparison of the quarters. Here, again, on the left side, you see the healthy growth from EUR 485 million to EUR 528 million in the first quarter year-over-year, 8.9% more revenue. At the same time, the margin pressure, you compare EUR 23.1 million for Q1 with the EUR 21.2 million for Q1 2026. And you see this as a result of the pricing pressure and the cost base. We will mention here that we had a first term onetime EUR 1.4 million EBITDA in 2025 due to the sale of the pharmacies and more details on the EBITDA with a nice bridge will be presented by Stefan just in a minute. As a result, we continue to remain with our guidance, and that means that for the upcoming quarters, we need to significantly improve our profitability, and we have plans there, how we're going to manage this, and we believe it's possible. So that's the bottom line. We think it's going to get better. And with that, I pass it on to Stefan. Stefan, have a good start into our presentation here. Please go.

Thank you very much, Thomas, and also very welcome to this call to all the participants. And Thomas, thank you for the very warm welcome to the group to Medios Group. So during the next couple of minutes, I would like to guide you through and giving you an overview about the financial situation. As Thomas already gave as an overview, we made a revenue of EUR 527.6 million, which is a total increase of 8.9% compared to the first quarter of prior year 2025. In that perspective, you can see that revenue increase, it was covered and supported by all operational segments. And with those segments, we will go through them individually in the next slides. But we also have to say that this goes hand-in-hand also not with the same development on the gross profit margin. There is due to some price reduction of various products that we see, mainly in the 2 segments, PS and patient-specific therapies. There are some impacts on that on the material consumption, what we then can see and also having a look on material consumption, we will come on that later in the presentation. EBITDA pre-margin at 4%. This is below prior year. So obviously, nothing that we really like. But also that is for a certain part of that increase or influence by some one-timers that we saw as well in 2026 as well as positive one-timers in 2025. Thomas already mentioned the sale of one pharmacy in Netherlands, which contributed to the last year numbers already with EUR 1.4 million. The earnings per share is adjusted, it's more or less on the level of prior year. So I prefer showing more the adjusted one because this is then shown adjusted by all of the specific one-timers. So last year it was EUR 0.46. Now we are at EUR 0.44 and hoping and convinced that this will improve also over the couple of the next months. Strong operating cash flow, I think that is the very, very positive message that we were able in both sides, the operating cash flow as well as the free cash flow before M&A to improve significantly. And therefore, we made in the operating activities, the cash flow last year first quarter, EUR 3.6 million positive. This year, EUR 12.5 million, which is obviously very much also supported by an effective working capital management. And that is also to be focused also in the months and the years to come to remain with the company as a strong cash flow generating entity. When we talk about investing cash flow, it's minus EUR 2.1 million. We are more or less -- consists of the CapEx of EUR 2.6 million, followed by some other small divestment and also interest received, which is then offset by that. So this shows, let's say, our low CapEx need that we have in our business as a good portion of that is trading goods. Financing cash flow, I think that is almost on the same level than end of 2025. Due to the fact that all loan repayments on the one side, then higher RCFs taken on the other side, interest payment, this is more or less equaling to 0. You might have then the question what we are doing with the good operating cash flow. I can tell you that is what then adds currently to our cash position compared to prior year, where we added around exactly this EUR 10 million, what we now have in addition based on the good operational cash flow generation. Finally, on that slide, the net debt leverage is on a very healthy level with 1.2. So even in those challenging times, we were able to reduce it once again to that level. Now going more in those details by segments, and this is just an overview slide showing here the 3 operational segments, the pharmaceutical supply, the patient-specific therapies and the business international, all of them, as I already said, are contributing to good sales development. But on the EBITDA pre margin, we were able to increase the total number on the pharmaceutical supplies on the other side, and there we will come on that in the next couple of minutes. We saw some reduction in the segment of patient-specific therapies as well as on the international business. That's why I would say we jump directly in the next slides going exactly through the 3 of these operational segments and starting with pharmaceutical supplies, our traded area. So here, we had some price effects on various products, which led to slightly lower gross margin. We have to say that. The medical cannabis on the other side, started obviously, a little bit later than planned, but we already see now with this postponement a little bit in the starting point, a quite good starting and a good market penetration, which is on track. This also makes us positive for the future. The same is for the sales of established originator products with an exclusive distribution rights. For example, we have some products here with Novartis and also that is helping us. Going on the PST, so the patient-specific therapies. So we see here an increase in the sales from EUR 56 million to EUR 60 million, which is, at the end, also the result of a good volume impact or at least around 4,000, let's say, specific, let's say, therapies that we made in addition to the first -- more than compared to the prior year to the first quarter. But on the other side, we see a reduction on the EBITDA from -- coming from EUR 6.3 million last year now to EUR 5.4 million and a margin of 8.9%, which is obviously not satisfying and activities to be done. To bring you here more transparency on that slide is on this area because that is obviously something we have to work and we already started with some cost optimization programs and bringing back this area to the higher profitability that we saw last year. So starting from the EBITDA pre on Q1 2025 with EUR 6.3 million. I just wanted to guide you a little bit through the walk to the EUR 5.4 million what we see now in this first quarter. There is a positive volume impact, which is great of about EUR 0.5 million. But this is completely covered or, let's say, eaten up by this drug price regulation, which has a negative impact on the margin, where we have to say we're not able yet to compensate that completely with our suppliers and with our own operations. So that is a step where we have to go in there. In addition, we see an increase in our personnel costs due to higher employees. Part of that can be explained by higher volume. But here, efficiency gains to come, and that is what we will work on. The increase of the personnel cost is in brackets just EUR 0.2 million. This is a salaries adjustment in Germany of about -- of around 2%, more or less, if we take the increase of last year and what is coming this year because that is mainly German focused business. And on the other side, we have to say also some increase in other costs, mainly logistics, but also some maintenance of our laboratory activities were on that level responsible for additional costs, followed by some onetime effects that we had to accept for the first quarter of another EUR 0.2 million. Finally, the growth effect is the growth is in line. That is great. We have and we will focus on cost structure, cost optimization to recover and get back to the profitability that we had historically in that segment of Medios Group. Continuing with the international business. So the revenue is going up, but the EBITDA pre margin here is if we take the adjustment of the sale of the pharmacy, which is not made in these numbers, these numbers are always including these specific topics. But if we take that out, we would be more or less on the level of prior year profitability. What does that mean in numbers? The Q1 last year was about EUR 40 million, and we were able to increase that to around EUR 43 million in total revenue. So I think also here, a very good year-on-year growth of 8.5%, which is for sure, and you might have the question why this on the one side, is growing compared to Q1, but on the other side, it's lower than Q4. But there, obviously, there is also the seasonality and also some other onetime issues on pricing in there, which has a specific impact on the Q4, which is obviously always for the international business, a very strong one. So therefore, we cannot compare here this like an apple-for-apple comparison. But Q1 last year and Q1 this year, a good increase of 8.5%. And don't -- when you're just calculating the numbers increase by 3% from the 40, the year-over-year growth, the 8.5% is the real number and not a lower number because we are calculating that on the real total numbers of sales. And if you come to other growth rates, this is then rounding. Going to the EBITDA pre numbers, EBITDA pre goes down by 13.5%. So on that perspective, that's also not a good sign that we show here. That is for sure. On the other side, if you deduct the -- from the EUR 7.3 million, what we saw here, the onetime positive impact of EUR 1.6 million of other operational earnings, which is at the end of the day, nothing else than sale of assets. And in this case, it was a sale of a pharmacy, which was of an amount of EUR 1.4 million out of that EUR 1.6 million total earnings. The EUR 1.4 million was the specific pharmacy. And as this is a onetime, obviously, and you take that out, then the logic is that we are quite close to what we also can see here in the Q1 of 2026. But also here, you will see on the next slide, the bridge explaining where we are and what are the different impacts. So starting once again here with the EUR 7.3 million of last year for Q1, we also saw here or see here a very good volume growth. So this story is absolutely valid and in good shape. The organic growth is running with EUR 2.7 million positive impact. The other side is the EUR 1.6 million. This is this divestment and mainly out of this EUR 1.6 million, the sale of one pharmacy is part of that with EUR 1.4 million. So this is obviously an extraordinary effect that is not repetitive. And therefore, it's -- I think it's not so critical that this is a one-timer in that way. We have temporarily higher material costs, mainly related to [ IV-syringes ]. So that is on the one side, negative. On the other side, also a good story is that we were able to optimize already here our supplies. And for the next quarters to come, we'll also see here some improvements. We saw wage increases in Netherlands. You have to know that there is, let's say, by law or by authorities, we have to accept a certain increase of the wages, which is higher in last year than -- this year than in Germany. It's around the 7%. So this is obviously the wage increase. And then as I already explained, with the patient individual therapies also here, we have some other cost increase, mainly transportation, but also some legal costs. And finally, also here some other expenses, which are mainly related to a timing issue within a year for IT maintenance issue and all this kind of stuff. So overall, there is work to do. There is a lot of optimization potential that we and the Board already decided to get -- to make that happen and to optimize our structures in the quarters to come. Finally, just giving you an overview of our financing structure as it is on end of Q1 2026. So the syndicated loan, you know that is EUR 225 million, which consists of a term loan of EUR 125 million for 5 years with an annual redemption of EUR 25 million. The current value as of March 31 was about EUR 94 million. And in addition to that, we have a revolving credit facility, a so-called RCF of EUR 100 million, which is currently drawn or was drawn end of March by EUR 65 million on that perspective. The attractive covenant-based margin grid continues. So we have a net debt as of 31st of March this year of EUR 110 million, also knowing that we have a quite significant positive portion of cash and therefore, have a reduced level of the net debt ratio. With that, I hand over to Thomas back again and to go -- continue with the guidance. Thank you very much.

All right. It took me a little while. Thank you for your patience. I'm sure you perceived Stefan like I do. He's detail-oriented. I think it's okay. Many people helped me here to turn on my mic. He's a very detail-oriented powerful man, and it's great to have him on board. Let's look at the guidance. And as you see, we keep the guidance, and we were not surprised by the first quarter. I think that's the reality. Some people said we are sandbagging on the guidance. I think that was not the case. We knew that we have a challenging first quarter in front of us, and that's what happened. We can stick with the guidance knowing that for the remainder of the year, we expect EUR 73 million EBITDA pre. That makes, if we do the math, like something like EUR 24.1 million every quarter, and that is quite a substantial target for our group. We are confident that we can do it. We have the operational expenses. We look how we're going to reduce those expenses going forward so that we can deliver the profitability that we think the business needs and that is possible in the market. We have a strong market. We can grow the top line. We now need to show that we can also bring in a decent profitability, and that's the target the team has, and we take measures to achieve them. On the next slide, I would like to show you a few of the initiatives that are happening at the same time as we make our numbers. And this one is a very dear one where we, again, want to see how we can create value for the ecosystem we are working in for doctors, pharmacies, Medios, for the entire ecosystem. How can we get the flow of information quick and efficient from the different players and get better planning into our interaction. And we do that together with connected consumables. That's a GmbH here in Germany, and we are -- see a substantial market opportunity there. We believe around 500 oncology practices in Germany are eligible for this software, and we could work better together with them. We're expecting to get some software licensing revenue. And most important, we believe that we can smoothen out the manufacturing and preparation of around 6,000 preparations per year and make life easier for everyone, so that information flows, planning happens early enough and we get a better system from end-to-end. We will certify this product, this software with the regulatory bodies. We have prototypes already out there and people love the product. And we hope that we can have the commercial version released this year. The second piece of example is speaking to a secure supply in times of medical shortages. That's something where we think that we can deliver additional value for the pharmacies and the ecosystem and the patients. And this Dipyridamol capsules is one example. Our international business colleagues in the Netherlands took it up. They got it registered, and we are crunching out around 50,000 tablets a month right now and help patients who otherwise would not get the medicine they were on to stay on the same medicine without any interruption and conveniently covering this shortage in the market. That's something where we believe we are strong, and this example is another one of those. So thank you to the international team. And we are looking forward to continue this work to make sure that everybody gets the medicine they would like to get. Another aspect is legislation. What is happening out there in terms of regulations. And on the next 2 slides, I would like to give you our interpretation of how we see that developing. Those are developments. They are not in our control. We try to influence them as good and as ever possible. But ultimately, those are assumptions. So the first one is this famous Hilfstaxe in Germany, that was what gave us the hit since November. We have it this year -- this quarter for the first time in full. And here, we're looking what could be coming next. And it's important to mention that the German Association of Pharmacists terminated their contractual agreement with the German Health Insurance Association. That happened end of March. And now the negotiations are ongoing. We believe that this formal process will ultimately result in an agreement again. And until the agreement, it was agreed that all the pricing for the work that's done in the laboratory remains the same. We expect an outcome, and we believe that this outcome in 2026 will be about neutral for us. It might be that some of the medications get reimbursed a little less, but maybe you get some more for the work that is done in the laboratory because of this contractual termination. So let's see what's coming out there, but that's how we budget it. That's how we interpret what's happening. Then the second aspect is the German pharmacy reform plan. And there, we don't see anything that has a significant impact on our business. So that's good news. I would say. And then there's a stabilization of mandatory health insurance costs. I think everybody, at least in Germany knows about those 66 individual proposals to cut costs. And there's one we believe has an impact on Medios potentially, and that's the cannabis one. There's the reimbursement for extracts is in this proposal, and that would help all seriously ill patients to get their medication. At the same time, the flowers are not in there. So that is a certain impact we see. We don't know how it will pan out, but we are actively looking at the situation as it develops. Number four is the Health Security Act. And that's an initiative to make sure that the health system is also working in times of crisis. I think supply chain resilience is something people take much more serious than a couple of years back. And we, at Medios, we are seeing this early stage of development in the legislative process as an opportunity for us because we are certain that also in times of crisis with our volumes, with our infrastructure, we can help the system to be more resilient. And we will watch that, and we will also prepare ourselves to see how can we play there. But it's a little too early to say what's the specific impact on the business, but it's certainly something to watch. And in the same category, I would say, is number 5, the EU directive that was debated in the European Parliament on the 18th of March. It is expected to be concluded after the summer break sometime in October. And then we expect those legislation to be integrated in national law in the second half of 2028. So you see that's kind of a long-term project. And if we go into the specifics, what we see in the proposal that's on the table that there is the necessary flexibility for patient-specific treatments. That means there are ways that compounding is allowed. And at the same time, the legislative body also tries to counter medical shortages with those initiatives for compounding, but also wants to avoid the creation of loopholes into how medicines get approved. And I think that's the area where we are strong. And we believe that overall, this is a net positive. We should get more harmonized legislation in Europe. That's our read of the situation. And I think that's almost the last slide. It's exactly the same slide like I presented for the full year. I think we want to keep this push for recognizing potentials within the group and then lift them to make ourselves more profitable. We want to also do that in our manufacturing sites on a very structured base with operational excellence initiatives. I visited those sites. I spoke with the people. I think there's a hunger for improvements that come with operational excellence programs, but those programs, they take time. They need education. It is not a onetime overnight success. So give us a little time to see that -- making it work and have a positive impact. We have seen the acceleration of organic growth. I think we have good organic growth in the business. We have the growth where we would like to have it. The question now is how can we make it profitable? And that's in the works. That's very important to all of us. And we want to remain diligent and cautious with M&A activities. They need to be value accretive, bolt-on acquisitions, and that is unchanged. And that's my most preferred slide. I hope I can welcome all of you at our second Capital Markets Day for Medios. It will start with a dinner on the 28th of September in Breda, and then there's the visit of the Breda site on the 29th. And of course, we have presentations by the entire Executive Board and let you know how we see the company developing in person. I think it will be a highlight for all of us, and we would highly appreciate if you find the time in your busy agenda to join that.