Earnings Call: Q4 2020

Mar 30, 2021

Ladies and gentlemen, welcome to the Analysts and Investors Conference Call of Medias AG. At our customers' request, this conference will be recorded. The presentation to this call can be downloaded from the Medios Investor Relations website and the recording will also be made available on the on this website. May I now hand you over to Claudia Nikolaos, Head of Investor and Public Relations at Medios, who will lead you through this conference. Please go Go ahead. Good afternoon, and welcome to the earnings call of Medius AG for the full year of 2020. As our customers This conference will be recorded. And before we start, let me make some general 1st, the presentation will be recorded. And as stated by the operators, all documents It can be downloaded from our Investor Relations website. And of course, as always, this presentation can Today with me is our CEO and CFO, So, Matthias Gjerdner, he will guide us through the presentation and will be available to answer your questions. I would now hand Over to you, Matthias. Go ahead. Okay. Thank you, Klauder, and also warm welcome Welcome from my side. Thank you for attending this call and of course for your interest in Medius. We had a successful financial year 2020. After the COVID-nineteen related decline in the Q2, we have regained our old strength And close the year with a very successful Q4. I will start with the highlights for the full year 2020, the 1st month of this year, followed by some comments on our financials and on our outlook for 2021. I will also We'll be referring to the slides of the presentation. So let's start with the highlights of our operations, Financials and the recently announced management changes outlined on Slide 3. Our growth strategy In absolute terms, pharmaceutical supply is once again the main growth driver, Including sales for 4 months for our new indication hemophilia, which we started at the beginning of September Last year, very successful. We also made significant progress in further implementing Medios' growth strategy. Most significantly, both acquisitions we carried out offer attractive growth potentials. 1st, culture Vistra will strengthen our compounding business by adding the new innovative service Glistering. And second, Grana Pharma is one of the leading specialized pharmaceutical wholesalers in Germany. There is, we will be able to achieve sales up to €1,200,000,000 for 20 Specialized pharmacies. These measures offer synergy effects, mainly in purchasing and logistics and cross selling opportunities within our extended partner network. Furthermore, we We increased our product portfolio, whereof the indication hemophilia is the most important. Meanwhile, we became A leader in this attractive market of around 5,000 patients. In addition, we returned a new We rented a new building in Berlin within the complex where our wholesale business is already located. With this, we will be able to triple our production capacity in the midterm and realize further synergies by concentrating logistics and warehousing at one site. In December, we already started the construction We should be able to start production in the Q4 of We have also concentrated our administrative units at one new location in Berlin Mitte since May 2020. We advance digitalization within Medios and our partner network by further developing This platform connects doctors, health insurance companies and specialized pharmacies with each other and serves as an ordering, billing and settlement portal. The number Users as well as the number of ordering and billing processes carried out on Medios Connect is constantly Increasing and already reached more than 12,000 transactions per month. This is partly due to the introduction of the software in Federal states in addition to Berlin. We also advanced the establishment of an e prescription This allows the aforementioned stakeholders and Mediros to benefit from the increasing digitalization in the Hence, the message is still the same. We are well prepared for the mandatory start of the e Description in January 2020 in Germany. And we successfully conducted capital measures in 2020 to be able To finance our organic and external growth. Finally, Medeos is a member in The SDAX since September 21, 2020. On January 1, I succeed Manfred Schneider as CEO, while also remaining responsible for Finance and Accounting as CFO, working together with my Board Alex Mio Miele and Christoph Bruiseid as a proven and highly motivated executive board team, albeit now in Slide 4 provides an overview of the acquisitions of Kraner I will not further comment as we already provided comprehensive information on both transactions. So let's switch directly to Slide 5, an overview on the financials. Overall, our financial Your position remains strong. We handled the challenges caused by the COVID-nineteen pandemic very well and successfully. Full year revenue grew by 21.2 percent to around €627,000,000 for the group. Both segments, Pharmaceutical Supply and Patient Specific Therapies, contributed to the revenue and Earnings. However, sales growth could have been stronger without the pandemic related effects In 2020, earnings were more negatively affected by COVID than revenues. The stockpiling That began in the Q1 2020 as a result of the allocation of quotas for certain trucks was carried out And continued at a weaker extent until the end of the year. We have adapted to the situation And are coping very well. We do not know how long this quota system will be in place. The Federal Institute declared, As long as the COVID pandemic persists, the quota will remain. However, we believe that the situation May start to ease in 2021 and can be back to normal in 2022. And we already saw Strong quarterly improvements as illustrated on Slide 6. I want to stress once again The 3rd and 4th quarters showed significant improvements in sales and earnings compared to the very weak Q2 of 2020. Consequently, we met our guidance for 2020 and could finish 2020 with a new all time Record with revenues of more than €170,000,000 in Q4. The conclusion is unchanged The growth story of Medios continues as illustrated on Slide 7. Our business model is intact. There There's ongoing strong demand. Our partner network now covers around 500 specialized pharmacies. We are investing in growth. Here are some examples. As mentioned before, we started a new and Attractive indication hemophilia in September of last year. Our new blistering business will will offer the possibility to up to triple production capacities midterm. Due to further consolidation of the We have the potential and the financial power to grow via acquisitions and additional potential of cross selling opportunities, especially through the extended partner network via the acquisitions of Kana Before I elaborate on our financials for the full year 2020 in more detail, I am happy to comment on Our ESG strategy and what has been done so far illustrated on Slide 8. Let me start The following general remark, we are convinced that we can only remain successful if we behave in Sustainable manner. For this first time, we explained the work we are doing in connection with environment This report is included in our annual report and posted on our website as well. Furthermore, we recently joined the Therewith, we have voluntary committed to its 10 universal principles in the areas of Fum rights, labor, the environment and corruption. And at the end of 2020, We published our code of conduct. This code is binding for all Medios employees. But we still have a Slide 5 Sustainability will be an integrated part in our corporate strategy. So we have already started to Develop a comprehensive ESG strategy for Medios. In addition, we will shortly implement ESG targets in our Compensation system for the Executive Board that will be presented at our forthcoming AGM on June 10. We were rated by a few institutions, for example, by ISS ESG, While receiving more and more requests with regards to ratings and general ESG topics, our conclusion, ESG She is of top priority for us. We will keep you posted about Medios ESG developments. I will now comment on our financials for the full year 2020 and our outlook for 20 The figures can be found in the annual report 2020 on our website and in the appendix of this presentation as well. If not mentioned otherwise, I will refer to the full year figures of 2020. As explained before, our figures were affected by the pandemic. However, revenue rose by 21 point 2% with organic sales increase in both segments, driven by our wholesale business, including Colchialysis for 9 month as well as hemophilia for 4 months. Since we were faced with the procurement restrictions Revenue growth was hampered and lower than it could have been without the imposed quota. The COGS ratio increased by 0.6 percentage points to 94.1%. At our last Earnings calls, we already explained the COVID-nineteen related effects and their impact on our results. Due to higher procurement prices On COGS, COGS costs on goods sold. Earnings could not keep up with revenue and Furthermore, personnel expenses rose by Around €4,000,000 due to an intentional staff increase to prepare the future growth, such Running the new indication hemophilia and further mandatory e prescriptions from January 2022 onward, Not to mention the expansion of our compounding business, which I had already commented on. The increase of other expenses Due to investments in future growth, for example, M and A related costs, including the acquisition of Kolschapista and Already to some extent for Kana Pharma. EBT pre decreased from €16,200,000 For the full year 2019 to €12,000,000 for 2020, please be aware that the EBITDA is adjusted For the following extraordinary expenses, around €1,200,000 for stock options, around €1,300,000 for M and A and almost €700,000 for amortization of the Operating cash flow substantially decreased to almost minus €38,000,000 mainly because of the start of the new indication hemophilia. The launch and development of New indication with very high priced medicines require corresponding stockpiling and Pre financing of our partner pharmacies with regards to so called emergency deposits. As For the operating cash flow, inventories are driven by the start of hemophilia as well as Trade receivables and trade payables. However, these investments have paid off as we are already market leader in this indication, Thanks in part to the acquisition of Kana. As of today, inventories have already been significantly, and the cash position has also been raised accordingly. The increase of the financing cash flow It's a result of the capital increase conducted in June 2020 with net of around €52,000,000 Overall, cash and cash equivalents increased to €20,000,000 mainly due to the previously mentioned capital measures. Now some comments on Our segments outlined on Slide 11. The driver of revenue growth was, again, the Pharmaceutical By segment, reporting sales of €564,000,000 However, earnings of the Segment were still impacted by higher procurement prices, which also lasted throughout the second Half of twenty twenty. Cost of goods sold increased accordingly, and the resulting ratio rose by Around 0.7 percentage point, which led to a €4,000,000 impact on earnings. That is 0.7 percent out of €564,000,000 Percentagewise, the segment patient specific therapies also grew even Stronger than by almost 23 percent to €62,000,000 including total revenue of culture The reported EBITDA pre margin for this segment weakened because of the internal cost allocation Without the internal allocation of these costs, the EBITDA pre margin would have grown up to 14 So let's switch to Slide 12, providing an overview of our currently available Funds as at 31st December 2020, which almost which amount to Around €82,000,000 reflecting a contract signed for syndicated loan in March 2020 with the amount of €62,500,000 Thereof, we only use 1.5 €1,000,000 as at 31st December to pay half of the acquisition costs for Kolchev Blissa. Liquidity of around €20,000,000 as at 31st December 2020, representing a decrease of around 48 In line with our growth strategy, we will use these funds for organic growth and in the already rented new building in Berlin, and we will pursue our M and A strategy looking For attractive targets, mainly in the compounding business and or the area of digitalization. I would now like to comment on our guidance for 2021 as outlined on Slide 14. We confirm our preliminary guidance provided at the beginning of March as Shown on Slide 1415. In the 2021 financial year, we expect to Exceed the €1,000,000,000 mark, a new record and generate revenues of approximately 1 €1500,000,000 to €1,200,000,000 corresponding to an increase of 84% to 92% compared to 2020 and an EBITDA pre of €38,000,000 to €39,000,000 corresponding to an increase of 1 €1,000,000 corresponding to an increase of 152% to 159% compared to 20 And an EBITDA of €31,000,000 to €32,000,000 corresponding to an increase of €158,000,000 to 100 66%. Percentage wise, earnings increased disproportionately. EBT margin will recover Significantly, up to 2.7% in 2021. It was 1.9% in 20 And this guidance already includes ongoing uncertainty due to the corona situation, Extraordinary expenses because of the mandatory implementation of the e prescription as of January 2020 2 as well as significant investments into the expansion of our production capacities in Berlin. We are very confident And that all of these investments will pay off in 2022 the years beyond. Ladies and gentlemen, as you can see, The overall growth model of Meteos is intake. We will continue where we left off At the end of 2020 and built on the successful business performance of the Q4, we are very well prepared to continue our Successful and sustainable growth story. We are convinced of the mid- and long term growth Also driven by our acquisitions conducted in 2020 and the beginning of 21. And this, of course, at higher margins than in an exceptional 2020. As stressed before, Our growth strategy remains unchanged, and its implementation will further advance. I have explained why we are well positioned To drive future growth, not only for 2021, a brief summary is outlined on Slide 16. 1st, we will drive organic growth by expanding our compounding business. The new building gives 1st, the potential to up to triple our production capacities in the future by exploiting the Innovative, blistering business with high future potential and synergy effects by expanding our partner Network of specialized pharmacies and extending business with already existing specialized partner pharmacies. By taking on new business opportunities in relation to the electronic prescription as of January 22. By further market penetration through the innovative digital platform And second, we will drive growth via M and A illustrated on Slide 17, focusing on the And has strong financial power in a consolidating market. Ladies and gentlemen, this completes our presentation. Thank you for attending. I'm now available to answer your questions. Operator, could you please read out the