Stratec SE (SBS) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I'm Natalie, your Chorus Call operator. Welcome, and thank you for joining the STRATEC conference call regarding today's announcement for the full year 2021 financial results. [Operator Instructions] I would now like to turn the conference over to Marcus Wolfinger, CEO of STRATEC. Please go ahead.

Yes. Thanks, Natalie, and good afternoon in Europe, ladies and gentlemen, and good morning in the United States. Thanks for getting up so early for us. Before I go into the presentation regarding our 2021 results, please allow me to mention some housekeeping stuff. Actually, you can download that presentation either. Within that portal, you can see it online or download it from our website. I think I don't need to read you through the safe harbor statement, obviously, covering forward-looking statements, which will or will not be updated. As always, I'll try to split this presentation into 3 major segments, followed by the Q&A session. First of all, I would like to get you an overview and then followed by some financial details and certainly trying to get you an outlook, which is probably one of the most important things on the one hand side, but certainly regarding 2022 is certainly one of the most difficult things, particularly in the light of the events of the past 2 years. So group sales went up by 16.7% year-over-year in constant currencies, leading to revenues of about EUR 287 million that compared to EUR 250 million in 2022. This represents a double-digit growth rate in all segments and all operating divisions and throughout all applications. I think it's worth mentioning, and I would like to highlight that again that at the beginning of the pandemic, certainly application segments like hematology and particularly immune hematology showed some weaker developments, but we saw a nice catch-up effect, particularly in 2021 as far as hematology and immune hematology was concerned. I think it's worth mentioning already, at this point, and I will dive into details later on that, I would like you to perceive Q4 as probably a negative outlier overall. And I'll like I said, dive into details why, in particular, in the light of the nice development in quarter 1 of 2022 with a solid top line growth and a good margin development despite strong comps. I would like you to compare later on the result of Q1 2022 with Q4, as mentioned, to be perceived as a negative outlier. Adjusted EBIT margin improved by 220 basis points. And again, I would like to highlight that this is all comparing to an already super strong year 2020. And in so far, we are really proud that we delivered those results. Operating cash flow nearly doubled year-over-year after EUR 31 million in 2020 to EUR 63 million in 2021. The Board and the Supervisory Board are going to adjust the dividend increase by EUR 0.05 from EUR 0.90 in 2020 to '21 of 95%. This is certainly subject to the approval of the Annual General Meeting. Besides several market launches we had in the last quarter, I would like to highlight 2. Certainly, on the smart consumables side, we launched for a North American partner a consumable, which is addressing one of the fastest-growing segments in clinical diagnostics and has really the potential to become one of the growth drivers over the next years showing disproportionate growth in our recurring revenue business with smart consumables and certainly driving the margin there. As I mentioned several times, we believe that our Smart Consumables segment will not only be the fastest growing within the STRATEC Group, but even the most accretive from an EBIT margin perspective. The second thing I would like to highlight is certainly our CLIA platform, which has the real potential to become a game changer. It's the first chemiluminescent immunoassay platform which is on the one hand side, an open platform, which means open to several partners, allowing smaller companies to become members of a very narrow and elite group of companies offering close system solutions in the chemiluminescent immunoassay arena, closed towards the end customers like the users in the lab, open between us and them that several customers could use the same instrument. But actually, that our partners could combine forces and commonly with a common menu approach the end customers where really FACSDuet can be joined, as mentioned before, and in menus with different strengths, eliminating weaknesses in the menu through this combination of an offering combined between 2 of our partners towards one common end customer on the basis of the same platform. CLIA could really become a game changer, and we have a number of customers lining up, a number of already executed contracts in terms of the supply agreement as well as the valuation agreement. Very, very nice development here. Next point is certainly that we have several products in the ramp-up phase and more products to come in the next 12 months, that's actually important. As always I would like to get you an overview of it that when we are talking launch, these don't necessarily mean that we will already see meaningful contribution in our P&L in the consecutive year. I think it is important to understand that if we provide our partners with the next generation of an instrument or consumables, this typically means, that our partners still have to go through a phase of clinical trials and approval then certainly launch, which usually doesn't happen worldwide. In parallel, typically, they launch in different geographical regions and have a staggered approach. Usually, our partners do not launch with a comprehensive menu, they typically launch with their most important patent instrument, which critically means that between the actual, commercial availability of the product and meaningful contribution to the growth of STRATEC, we see kind of a staggered approach lasting 2 to 3 years. But then, therefore, it's very rewarding because typically, when we sell those platforms for at least 12 to 15 years. We made further progress on implementing our ESG strategy. Just picking out 2 examples. Greenhouse emissions, scope 1 and 2 could be reduced by more than 60% compared to the 2019 level. And in August 2021, we signed the U.S. Global Compact. This gets me to the second section of this presentation. As mentioned before, we grew on a constant currency basis, by 16%, nominally by about 15%. Q4, as already mentioned, we showed some decline in activities, particularly top line, but bottom-line certainly as well. Like I said, I'll dive into the details within the next few slides. Adjusted EBITDA on a full year basis up by 28%, adjusted EBITDA margin coming from 20.8% to now 23.2%, up by 240 basis points, and that goes through to all the margin and earnings KPIs at about the same level growth of between 25% and 30% leading to a basic earnings per share for IFRS growth by about 40%. As already mentioned, some negative contributors in Q4 mainly supply chain activities. But like I said, I'm going to dive into the details in that slide now coming. As already mentioned, constant currency growth, 16.7%, leading to EUR 287 million, double-digit organic growth rate in all operational divisions in all applications. Certainly, we see the support by the ramp-up of our very young product portfolio. I think it's worth mentioning that looking into our product portfolio, it's obvious that at this point, we only have 3 products, which are at the end of their relevant majority phase. Two of them already, the next-generation programs are under development supported by the customer with new contracts. And actually, in one of those we had a competitive takeaway as well. So it's not just that we are working on the replacement but we see some growth coming from the new products and again, on top of competitive takeaway of a sister product to the product we already offer. Then certainly, sales in all relevance and applications up, particularly very strong growth rates in molecular diagnostics. I'll dive into details that we are about to launch 2 further molecular families. We got a third one on board, which will be launched in 2023 or early in 2024. So obviously, molecular diagnosis be one of the growth drivers of the company. But certainly, immune hematology, we've as already mentioned, a product where we are currently developing the next generation and something which is definitely not the focus of STRATEC where we inherited clinical chemistry product line from Diatron and made some major amendments to the product there, which is currently leading to growth. But as mentioned, certainly clin chem not one of the focus areas. Q4 2021 certainly impacted by customer lead times. We haven't seen any significant tailwinds from like Omicron but I think it's worth mentioning that we are actually a little bit worried that the top line growth constraints for 2022 will be mainly caused by the input side rather than by the demand side coming from our customers. We had a push a development program, which was actually margin having, which doesn't happen that often and the recognition of the development and services sales has been -- in some cases, have been pushed and deferred into Q1 of 2022. On the other side, we see certain delays in Q1 2022 already, which means we certainly had a higher-than-usual level of back order at the end of the year. But certainly, this already goes into 2022 as well, and I fear we will see the same situation throughout the entire year 2022 as mentioned, a little bit worried that the growth constraints if we see any will be caused by the input side rather than by the demand coming from the customer. And like I said, this higher than usual level of back order is something which particularly for 2022 has potential to become the new normal rather than the exception what we saw in Q4 of 2021. Diving into the breakdown from segments compared between the different segments certainly, worth mentioning the service parts and consumables showed very strong development. On the other hand side, obviously, instrument here mainly driven by our molecular portfolio as well as by our immune hematological portfolio and nice growth rate in the immunoassay section as well. Development and services a little bit weaker in 2021 as always, I'm complaining at this point about IFRS 15, this has nothing to do with the actual performance of the development and service department. This is just about recognizing revenues. I think we will have a different picture in 2022, and again, mainly driven by certain delays in the recognition of revenues coming from development and services in 2020 and now pushed into 2021. But again, more sustainable things that we will see some staggered delays and that's why we believe that particularly as far as development and the backorder situation that we will have an increased level for the entire year 2021. Now talking about a percentage of sales, comparable picture between 2020 and 2021, I still don't perceive this as normalized. So I think long-term development and service activity should be north of 10% whereas we foresee nice growth rates in the service parts and consumers, particularly because of the installed base, which was growing nicely in 2020 and 2021. Adjusted EBIT and EBIT margin, up by -- EBIT up by 30% to EUR 54 million, and adjusted EBIT margin achieved a level of 18.9% in line with guidance. if we make the analysis of the margin expansion of 220 basis points year-over-year, certainly, it's worth mentioning that we achieved a nice degree of economies of scale, particularly coming from our most important product lines, certainly positive sales and product mix here. We have different levels of positive contribution. On the one hand side, it's certainly typically the revenues recognized in development are coming along with weaker margin to a lower percentage of sales coming from development, obviously means a higher contribution from the product with typically higher margins. That's one of the layers and certainly higher contribution from margin heavy instruments like higher throughput instruments in the immunoassay and immunohematological space, but obviously, molecular products as well, nice contribution from nice growth rates on the more complex continual side leading to a higher -- to a better margin than certainly from an overall perspective, the growing contribution from consumables and maintenance parts and certainly service part, just growing about 100 basis points as a percentage of sales, but certainly looking into the sensitivity analysis is contributed by 70 to 80 basis points on the EBIT margin, which is certainly showing the nice earnings profile in those product categories. Then we had a lower burden from stock appreciation rights, which helped to drive margin on the other side, certainly a super thin supply situation with materially rising input costs. And again, I would like to dive into the details later in the course of this presentation. Looking into the segments. Here, certainly, the biggest segment of business unit instrumentation with a nice performance 2021 with an EBIT margin slightly under the grow but nice top line growth as well in constant currency, about 16.2%. Very nicely development in our Diatron business unit, very strong growth here with hematology, mainly on the veterinary side, showing nice growth rates, but certainly the smaller molecular products, which are manufactured by our Diatron business unit showing nice growth rate as well in the turnover situation, and obviously, several times described our marketing business unit with, again, a nice top line and the turnover on the EBIT side. We believe that with all those new products which have been launched and will be launched in the periods to come, that this turnaround is a sustainable situation. And as we already mentioned, in the course of the acquisition back in 2020 -- in 2016. We believe that in the next year, margins will be EBIT margin accretive, which certainly means a lot. On the cash flow side, certainly, a nice development here as well, almost double in operating cash flows and free cash flow more than tripled. I think it's again worth mentioning that we nicely managed our leverage ratio almost half. And as I have already mentioned, cash flow in operating activities in 2021, almost doubled. And on the other side, we nicely managed our investment ratio, which was significantly higher over the past 2 years, which has nothing to do with investments into product development or investments in tools associated to products the past 2 years were actually driven by real estate activities, mainly at the headquarter in Birkenfeld, where we significantly increase capacity for development and prototyping activities. The next step will definitely be in manufacturing. But at this point, we believe that the growth, which is foreseen to happen in the next 3 to 4 years can be covered with our current capacities and only then new investments will become necessary. Now talking about the outlook with our financial guidance. As I mentioned before, certainly, 2022 is most likely one of the most difficult years in terms of predictability and currency. Talking to our customers and trying to find out what their customers actually believe, we find a very heterogeneous picture. So some of our customers actually believe that we will see further meaningful corona wave, others don't. Our planning assumptions are actually not really considering a high follow-up business coming from the road. On the other side, we do not believe that we will see that a lot of the instruments will become less engaged as they have been in the past years. So on the one hand side, certainly, our sales foreseen is to match the previous level on a constant currency basis, we have ramp-up of our very young product portfolio. I think it's worth mentioning that a lot of the products which have been launched in 2017, 2018, 2019, have been put on the back burner by our customers during corona and are now seeing this phase where we believe that they get into those holistic effect. So all in all, certainly the liaisons diving into details later on for DiaSorin, certainly, an important product for Becton Dickinson and other products, which will be launched. On the EBIT margin side, I think it's worth mentioning that although we are certainly an important contributor for our customer is for as the coronavirus testing business is concerned, it's certainly -- we are not dependent on that. So we saw that some of our customers already reported a nice recovery effect in immunoassay. And I mentioned a couple of times now, in hematology, certainly hematology picking up nicely. Our customers are supplementing their menus on the molecular side, and that's why we are actually not super worried. But I think the width of the corridor provided on the EBIT margin side shows that the relevant product mix is not super clear at this point. We are receiving forecast from our customers. All in all, I would say that it shows sustainably high demand in all those areas. On the other side, certainly, we have to deal with rising input costs which can be partly passed on to our customers when we are about to undertake those debts. And certainly, we see a more normalized product mix, are expecting higher contributions from immunoassays in 2022, higher contribution from newly launched products and certainly higher contribution from our maintenance parts business and service parts business and certainly consumers on the other side, definitely a more normalizing level on the molecular product. Investments, the intangible and intangible assets combined of around 6% to 8%, which is about 200 to 300 basis points lower than in the previous year. So actually meaningful. As already mentioned, our budget scenario is fairly conservative. We were trying to not undertake any credit assumptions as far as our coronavirus business is concerned in here, mainly molecular, but on the immunoassays as well. And therefore, we had an extraordinary high level of more conservative assumptions as well as higher risk adjustment than normal and like what happened in the past. Just getting you a COVID-19 update. This is the perspective of the market as far as we talk to our customers, a collection of statements and assumptions and expectations. So I think it's obvious that COVID-19 pandemic has driven 2020 and 2021 from a market growth perspective. And we and our customers believe that we get back into a more historical growth rate scenario for the years to come up about 4% to 6% overall diagnostics certainly certain market segments like molecular or like point-of-care testing, like smart consumables with significantly higher growth rate but I think a fair assumption on an average basis is to assume 4% to 6%. Then certainly, we have this high comparison basis to search in core testing, where the volumes might adversely affect market growth rates in 2020 and I think STRATEC is in a very special situation in order to cover this effect nice, I'll dive into details on the next slide. And certainly, we see a return to the historical market growth rate as soon as we have reached this new baseline, this new plateau where we believe the testing volume and therefore, instrument demand and instrument replacement cycles and so on will be significantly higher, but again, a new plateau. And then certainly, we have to see that most likely, there will be further infection waves but most likely with waist deeper ramps, that's what we at least saw during Omicron but shorter durations. And therefore, we expect that the end customers will actually cover that to higher spare capacity levels to be held by the labs in order to cover those peaks. This doesn't mean a continuous higher demand, but certainly higher replacement rates instruments, were used on a 24/7 basis, which means we see higher warranty, shorter replacement cycles, high investments into product maintenance and support and all those aspects are covered fairly conservatively in our guidance. So I think it's in a very -- I believe, in a very specific and in a very special situation, well positioned. In contrast to the overall markets, we see no negative pricing effect. We on the one hand side, didn't contribute super positively from the high pricing environment some of our customers saw. We stick to our prices to the extent possible, and that's why we expect to not be affected negatively. Then certainly, the majority of our customers gained further market share, actually locking down accounts, we believe that they will continue to be on that track as soon as COVID-19 testing gets more into regular approval pathways rather than those emergency approvals. End customers will become more selective in terms of competitive pricing, approval and so on. I think this is already an ongoing process. STRATEC and its customers being well positioned here. And certainly, the overutilization of the equipment, and I mentioned that before, is already now triggering a significant replacement potential. We already see at this point that we are replacing instruments, which have only been sold at the beginning in mid of the year in 2020. So like I said, overutilization leading to way, way, way faster, where in here, the instruments are particularly the equipment, which is not used in blood banks is designed to run like 7, 8 lab shifts a week for a period of 5 to 7 years, and we already see this material variant here. Then certainly, the nicely growth of the installed base is driving our service parts and consumables business. We already see this in Q1 of 2022, and I already mentioned, not only nice top line growth, but certainly better-than-expected margin development. Then we definitely see that some of our customers nicely managed to see nice recovery as far as there are -- the breakdown of their menu, the tests available on the instruments are concerned, a lot of them managing to get more with this installed base, which is way bigger than it used to be prepandemically that they managed to move certain esoterical tests more on the screening or into screening formats and still labor shortages leading to a higher degree of automation. And then on top, I mentioned that [indiscernible] in the course of the presentation already, we saw some customers which we're really focusing with all resources available into those businesses with corona exposure, and those newly launched instruments like the LIAISON XS with DiaSorin or FacsDuet or even our CLIA had been pushed on the back burner and it's now starting to see new focus, and we see a nice pickup in the demand here as well. And then certainly, a super strong outsourcing trend, nice recovery here. I mentioned that several times during the past 2 years that particularly at the beginning of the pandemic that customers focus from our perspective, a little bit too much into those businesses with COVID exposure and less new development, a little bit aside. Now we see a very strong pickup. And I think it's worth mentioning that besides the 2 molecular systems, we will be launching in the next 12 months that we got a third molecular instrument on board and several other programs. So nice pipeline effects as well, which will then see the market in 2024, 2025, 2026. And I think it's worth mentioning that from a development performance perspective, we never spent so many hours in development, either into the what we always call the small our part to develop our background technology, but certainly, those customers product, which is the big D, like it's more R, the big D from R&D. And we see a nice effect here as well as far as our pipeline is concerned. The company never spent so many hours in development as over the past 2 quarters. Focus in 2022 and beyond. Certainly, executing on the current development and launch pipeline. This is not only a question of getting the systems to the market but actually allowing the company to take new development activities on board and to release those development resources from existing products into new products and getting products to the market and see those nice ramp-ups that I was just describing. And certainly, M&A remains a part of the company's growth and diversification strategy, certainly diversification is a material thing for us. Although it doesn't look like that we are undertaking a lot of M&A activities after the last transaction on that end, we did was actually in 2016. However, we have a team sitting on that. We are continuously looking into activities. At this point, we are looking into 2 different companies with -- and here, I would give you the higher chance than in the past that we will find something suitable for acceptable prices pretty soon. Again, this is a very binary thing, but I think it's worth mentioning that we are undertaking those activities. I think one of the core focuses is definitely the United States. The majority of our customers are sitting in the United States. So far, we nicely managed to take care and to service those customers even from Europe, 8 out of 10 decision-makers in our industry are sitting in the United States. Therefore, certainly with the repatriation of manufacturing the United States is obviously becoming something which is growing in importance, and therefore, our activities on the M&A front are certainly U.S. centric. Then certainly, the next aspect is executed on the deal pipeline. We brought a lot of things on board. We are performing several feasibility studies and are negotiating several contracts that we want to actually push those things across the finish line. Then certainly, we have to implement countermeasures in order to tackle the supply chain issues we have. And I want to be very honest and I was trying to be that for us, the situation gets even worse rather than better. We are putting a lot of effort to tackle the situation, but it means definitely, on the one hand side, higher cost for supply chain and higher cost for input products on the one hand side and a lot of inefficiencies and frustration in manufacturing closing product lines because certain raw materials or pre-materials are not available, ramping in up a week later on and so on. It's definitely a frustrating situation that we are in a situation that we can only confirm orders towards our customers as soon as we have all the materials in, which is a difficult situation. So far, we haven't had any material interruptions in our manufacturing. However, we are actually adding up as far as delays are concerned. It was easier for us if customers showed additional demand to satisfy those additional demand within a 2- to 3-month period of time. In the meantime, we are talking 6 to 9 months to ramp up manufacturing lines and so on. Like I said, it's definitely if we see constraints, it's more on that end rather on the demand end. That all gets me to the point of that we want to restore pre-pandemic efficiencies throughout the company that with home office and other activities, certainly, things which took us a day or 2 to cycle something is now taking us a week. So definitely, we have to catch up as far as efficiency is concerned, but I think we are on a good way to, on the one hand side, tackle that nicely, on the other hand side, showing enough flexibility to manage all the situations coming up and then certainly manage the transitions to post-pandemic priorities, which means accelerating in development, delivering on time, having that wide scope of all those different application areas and a little bit less focus on molecular although 3 of the probably 10 products, which will come to the market in the next 3 to 4 years are molecular which means in the future, we will continue to increase molecular products as a percentage of sales, no doubt about that. This gets me to the end of the presentation, and I would like to hand back to Natalie who will explain us how to ask questions.

[Operator Instructions] And the first question is from the line of Oliver Metzger from ODDO BHF.

Yes. First question is on clients on top line. So you leveraged about some happenings coming from lower COVID-related sales and also high base. You mentioned also the order log. In the past, you commented also on higher equipment sales due to high wear and tear on the diagnostic instruments over the past 2 years, also for the potential big customer. So -- now we also -- you mentioned the more consultants which was also case in '21. So last year -- just to get a better reception like last year, your guidance was conservative and it's basically with upside risk became through quarter-on-quarter. Now you also mentioned it's more conservative. So the upside risk, you consider to your guidance. If you compare it to '22 to '21 this upside risk, is it similar from a relative perspective? Or do you just think now, basically the guidance we are giving now is conservative apart from a net risk perspective, we cannot raise the -- or we will not raise the guidance during the course of '22 to a similar extent. It's a more bigger question. Second one is from the back orders. So you mentioned back orders, there is new normal situation. So how to think about this midterm? So could you imagine that this might be a topic in '22 and corresponding in '23 or '24 might need to do some additional push?

Thanks, Oliver. Thanks for the question. Actually, I think it's a little bit too early to talk about increasing the guidance at that very day when you issue a guidance. Again, I think it's worth mentioning again that from -- in terms of predictability, transparency and other factors making a guidance more firm or less firm, I think 2022 is most likely the most difficult year over the past 5 years for STRATEC and most likely within the next 5 years to come. Like I said, at this point, we didn't factor in and didn't bake in further meaningful waste like we saw with Omicron in Q4. As mentioned, we are fairly positive as far as the ramp-up curve of new products are concerned. So one of our -- actually, both of our molecular customers of those instruments and consumables, which will be launched in the next 12 months actually issued press release. It's covering that and both are actually in their clinical. So this is not a design risk anymore. And that's why we are actually positive. And I think I mentioned that a couple of times. If we are looking into the details on trying to break down revenues, one could easily say that picking out 80% or 85% of STRATEC revenue with products which had been -- have been launched let's say longer than 24 months ago. We exactly know the market demand. We know how well our customers are positioned. We see their forecast. So I would say, for those 85%, we have -- we could give easily a corridor guidance narrowing down to probably 2% or 3% plus or minus for the next 3 to 4 years. The actual unpredictability is particularly driven by the newer products where we don't know when those products will actually hit the market, how aggressive are our customers to sell those products, how comprehensive is the menu they will launch the product with, what will be their primary markets? And how good will the end customers assume certain technologies? So however, taking into consideration that particularly in 2022, the dependency towards molecular products and immunoassay products will not be as high as it used to be in 2020 and 2021 makes our guidance actually on the one hand side, conservative, on the other side, certainly less fragile in terms of what are the different contributors in order to fulfill that guidance. At this point, like I said, we want to defend the reputation to be a cautious company in terms of guidance, I think we have built that track record after 2018. And that's certainly something we want to maintain. On the other side, the width of the earnings guidance shows that we are not entirely sure about the revenue breakdown. But like I said, there are a couple of choices for our customers like replacing equipment, which has been worn down over the past 2 to 3 years with new equipment or putting them actively into maintenance cycles. On the one hand side, instrument sales would go up, on the other side, maintenance and spare parts would go up. And that's why we perceive this as -- on the one hand side, conservative guidance with a certain upside potential. Back order situation, and I think I mentioned that a couple of times, is something which worries us. We ended up with a higher-than-usual back order situation at the end of 2021. Looking into the situation in Q1, with a high degree of certainty, we will end up with a back order situation of similar level at the end of Q1. We hope that we can start to work that down. Lead times are significantly going up not only on the input side, even on the output side. So I fear that we will have a comparably high back-order situation throughout the entire year 2022. We hope and we have some indications that this might get better in 2023. However, the automotive supplier industry, which is a lot of those companies are sitting pretty close to where we are actually headquartered and we have good contact into those companies. I think those companies are actually worried that this is something which will continue to attend the activities of the companies in the next 24 months and will not just vanish in the next 12 months. That's what we actually see here. I hope that answers your question.

The next question is from the line of Oliver Reinberg from Kepler Cheuvreux.

Marcus, I'd like to dive a bit into supply chain, which is obviously the dominating topic. I mean if we start with material costs, that's a big input cost of $145 million, is any kind of insight you can share? What is -- what is your assumption for the like-for-like pricing development for this kind of material cost base? And also to what extent has the pricing here gotten worse in the last 6 weeks? And then secondly, on personal costs, first question is really -- it was impressive to see that personnel costs remained relatively stable in 2021 year-on-year for. More importantly, it would be able to understand what is the assumption again for like-for-like. So excluding additional volume, what is the reasonable assumption for like-for-like increase for personal costs for both 2022 and 2023. Third item, if I may, on logistics, how significant is actually this item in terms of total cost because you highlighted it in the press release, as moving part on your margin line? And then the final question, if I may, obviously, to pass on this kind of cost headwinds, pricing is a key theme. So can you just talk about what is the reasonable assumption for a price increase across your portfolio once all is being implemented? And what share of implementation do you stand today?

Yes, Oliver, that's a super complex question. Let me put it that way. On the input side, we definitely see throughout the entire input base. And we certainly have those frame contracts with our suppliers for different commodities, subassemblies, modules and everything what we do. And certainly, they run out over time and our customers are certainly trying to implement the catch-up effect. I would say all in all, throughout the entire base, we see price increases of a minimum of 5% to 10% whereas certainly logistics costs are manageable from a share volume perspective, but we see significant increases. So just picking out one example which may sound stupid, but you'll see where I'm coming from. In some of our products, we actually use sea freight particularly for the long predictable demand. In the meantime, we have to completely move into air transportation because sea freight duration particularly as far as time lines were concerned are getting more and more unpredictable. So if we manage to get a product, we are sea freight to the United States within a 6-week period of time, it may now take between 3 months and actually 6 months, which is unacceptable but on the other side, it brings up costs partly. Those costs can be forwarded to our customers, particularly those costs on the input on the inbound side can actually not be passed on to our customers but are actually critical. Like I said, manageable, but very much driven by the significant increases for a limited period of time, we are expecting a very meaningful and significant increase. Throughout the entire input base, we are actually assuming a minimum of 5% to 10% price increase, which still is probably below average in our industry. The way how we could pass on those additional costs to customers actually contract dependent. In some cases, it means negotiations. In some cases, it means proof of cost increases and so on. Again, I think it's again worth mentioning that from a contractual perspective, we have ownership over the background IP rights to those products, which means our partners. On the one hand side, we are dependent to their sales activities, and we can only be successful if our partners are successful. On the other hand, certainly, our customers cannot move on if they just don't like higher prices. And I think in this situation, nobody can actually offer better pricing than we actually do. That's why I think this is a solvable situation. All in all, I would say that higher prices on the input side are occurring about 3 to 6 months earlier, then we could pass those higher costs on to our customers, which was particularly affecting earnings in Q4. As I already mentioned in the course of that call, already Q1 showed some nice progress here. Getting back to your personnel cost question. Again, we have some significant growth here on the one hand side, in our planning assumptions, not only in terms of salary increases over the next 12 months, but certainly massive hiring. I mentioned that, again, a couple of times in the course of the presentation that we won a lot of new projects. Certainly, we got several products to the market, which helped us to allocate existing developers and existing development resources into new products. On the other hand side, we definitely see the necessity to grow on the development side as well in terms of spend development hours, and that's certainly something which can only be covered by new hirings. And therefore, we have to consider on the one hand side, labor cost increases caused by new hirings and certainly -- and that's actually more an approach over the next 24 months and overall personnel cost increases in order to continue to stay an attractive employer.

Okay. But is there any chance to get an indication for a like-for-like personnel cost increase? Is it just 1% more than normal? Or...

Actually, like I said, we have made certain planning assumptions, but I think it is a little bit too early to talk about that.

Okay. And any idea what is the total cost of logistics per year or last year?

Like I said, logistics costs, and again, it's a little bit difficult to describe the situation very much driven by the fact that in most of the cases, we are actually shipping ex works or the like, which means outbound is partly covered by our customers, and we just cover the additional costs through logistical measures like smaller -- like shipments in smaller bulks and so on. I would say, all in all, about EUR 5 million to EUR 7 million. And again, the majority of the increases on the outbound side cannot be forwarded to our customers and none of the increases on the inbound side, which makes the overall situation so difficult.

So far. And just to clarify, I understood you correctly, you basically see roughly 5% to 10% price decrease across your entire input cost and the price increase that you also like to pass on is also in the magnitude of 5% to 10%. Was that correct?

Not the latter, that's only subject to individual negotiations.

So probably less than 5% to 10% is what you can increase in prices yourself?

Actually, no -- actually, it might be product and contract dependent and certainly it is dependent to the fact when we managed the last price increase cycle. So I cannot answer that on a generic level. I think some products will not be affected at all and some products will be affected on a higher level.

The next question is from the line of Jan Koch from Deutsche Bank.

I have also 3, please. Can you share your thoughts on the many moving parts for the first quarter 2022? You briefly touched on that at the beginning of the call. I understand that you should do some orders from Q4 into the first quarter and -- but you should benefit from the [indiscernible] in the first quarter. And that some of course, discussions we recently had should start to kick in as well. So what should we expect here in terms of revenue and earnings? I know it's a bit too early to speak about specific numbers. If you compare -- if you could compare that with Q1 2021, that would be helpful. And secondly, on your Smart consumable business. So if I look at the margin in the second half, it was negative again following a strong first half. Can you provide more details on this. And you quickly touched on the margin potential of this business. Could you speak a bit about the phasing over the -- phasing of the margin expansion over the coming years, you expect? And then finally, a broader picture question. Are you planning to provide a medium-term outlook at some point in time? And if yes, when would be a good time for you doing that in your view?

Yes. Thanks, Jan. Thanks for those questions. Actually, definitely, it's a little bit too early to talk about Q1 2022 compared to 2021. I think, again, it's worth mentioning that particularly the growth in Q1 2021 was extraordinary high. Although we already had those high comps. And now we are facing even higher comps. However, at this point, looking into the forecast of the quarter, we see nice top line development and growth and on top an even better margin progression compared to Q1 of 2021. And that's some of the factors which doesn't actually even consider ramp-up of existing product lines, which have been launched in 2018, 2019 doesn't take into consideration those early product sales for 2020 with the new molecular lines where we are now starting to sell higher numbers of early series units. And so -- and I think it's actually, like I said, important to mention at the tail end of this year has the potential to become even better. Smart consumables margin, I'll put you on mute just for a second. I'm back. Sorry, I was just checking a figure. Smart Consumables margin, Jan, you were right that the margin in the second half of the year dropped again, which is actually related to certain ramp-ups in manufacturing. I think it is important to understand that after the acquisition of Smart Consumables pack, which was the Sony DADC BioSciences business back in 2016. We slightly modified the business model of smart consumables. At the time, the company was focused on early-stage well-funded companies, start-ups, pay-based, Boston area based company. So the revenue contribution from development activities were fairly high. A company which makes its money with serious manufactured of injection molded product, certainly it was, on the one hand side, a certain paradigm shift. On the other hand side, I think kind of natural progression to move that business closer towards the blue chip companies in the IVD space or in translational research or for cell manipulation and all those businesses. And I think we manage that transition fairly nicely. It's still a phase where the company has to lift heavy investments. On the other side, we see that we are getting into serious manufacturing for a variety of products, and that makes us believe that this turnover situation, on the one hand side is sustainable. And certainly, let me say, the breakdown of revenues coming from like getting heavier on the serious manufacturing side and getting a little bit weaker on the side of recognized revenues for development activities is certainly an important factor to be mentioned. So long term, and I think, Jan, we stick to that statement, and I can only reiterate, we will definitely come up with a longer-term guidance in the course of that year, but it will not surprise you that we stick to what we always said that we are aiming long term on a compound annual growth rate basis for high single-digit growth rate. We have several products in the pipeline which might trigger effects that we might adjust that more towards the top end, like low double-digit growth rates, but actually, our long-term statement is in that area. I think this is something which can be digested organically where the market is there, where we have the customers lining up, where we have the means and measures to cover this with our existing background technologies to make -- arrange that shift from diagnostic solution exclusively more maneuvering the company into areas like translational research on the one hand side, like it and there are a number of other applications where with existing technologies and existing applications, we see areas of growth on the one hand side and diversification on the other hand side.

In the interest of time, we have to stop the q&a session. I hand back to Marcus Wolfinger for closing comments.

Yes. Thanks very much, Natalie, and thanks very much. I think when referring to the Q1 2022, forecast regarding bottom line development, I was actually referring in comparison to the 2020 margin because this leaves us on a more comparable scenario, the 2021 margin in Q1 was fairly high. That's why I was referring to 2020, which gives us a better comparison basis. I just want to make that point very clear, probably I didn't express myself in a proper manner. This actually gets us to the end of our 2021 financial results disclosure. If you have any follow-up questions, please do not hesitate to call our Investor Relations department. Thanks very much, and I would like to wish you a good day. Thanks, everybody.

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.