Earnings Call: Q3 2020

Nov 12, 2020

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 website. May I now hand you over to Claudia Nicolaus, Head of Investor and Public Relations at Myrios, who will lead you through this conference. Please go ahead. Good afternoon, and welcome to the earnings call of Medius AG for the full year of 2020. As our customers request, this conference will be recorded. And before we start, let me make some general remarks. First, the presentation will be recorded. And as stated by the operators, all documents can be downloaded from our Investor Relations website. And of course, as always, this presentation can be followed in parallel via the Internet link provided to the invitation. Today with me is our CEO and CFO, 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, Meteos. We had a successful financial year 2020. After the COVID-nineteen related decline in the Q2, we have regained our old strength and closed the year with a very successful 4th quarter. 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 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 is on track. Both segments reported sales growth despite the ongoing COVID-nineteen pandemic 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 Matyo's growth strategy. Blister will strengthen our compounding business by adding the new innovative service blistering. And second, Grana Pharma is one of the leading specialized pharmaceutical wholesalers in Germany. 21. Both acquisitions also contribute to the extension of our partner network of now more than 500 specialized pharmacies. These measures offer synergy effects, mainly in purchasing and cross selling opportunities within our extended partner network. Furthermore, 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 work to set up our new labs. We should be able to start production in the Q4 of this year. We have also concentrated our administrative units at one new location in Berlin Mitte since May 2020. We advanced digitalization within Meteos and our partner network by further developing with each other and serves as an ordering, billing and settlement portal. The number of users as well as the number of ordering and billing processes carried out on Meteos 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 other capable platform that offers added value for doctors, health insurance companies, specialized pharmacies and patients. This allows the aforementioned stakeholders and Meteos to benefit from the increasing digitalization in the health care system. Hence, the message is still the same. We are well prepared for the mandatory start of the e prescription in January 2020 in Germany. And we successfully conducted capital measures in 2020 to be able to finance our organic and external growth. Finally, Mitius 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 Board colleagues, Mio Mueller and Christoph Bruseid, as a proven and highly motivated executive Board team, albeit now in a 3 member board. Slide 4 provides an overview of the acquisitions of Kraner So let's switch directly to Slide 5, an overview on the financials. Overall, our financial 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 at higher purchase prices and thus led to lower margins than planned. This effect peaked in the second 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 strong quarterly improvements as illustrated on Slide 6. I want to stress once again that 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 for us. The growth story of Meteos continues as illustrated on Slide 7. Our business model is intact. There is 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 give us the opportunity to further extend the share of manufacturing business within the Mekius Group. The new labs of cross selling opportunities, especially through the extended partner network via the acquisitions of Kana Kana and Kolschaplysta. 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 with the following general remark. We are convinced that we can only remain successful if we behave in a sustainable manner. For this first time, we explained the work we are doing in connection with environment and social governance in a dedicated voluntary report, the so called non financial consolidated statement. This report is included in our annual report and posted on our website as well. Furthermore, we recently joined the world's largest responsible corporate governance initiative, the United Nations Global Compact. Therewith, we have voluntary committed to its 10 universal principles in the areas of human rights, labor, the environment and corruption. And at the end of 2020, we published our Code of Conduct. This code is binding for all Meteos employees. But we still have a lot ahead. Sustainability will be an integrated part in our corporate strategy. So we have already started to develop a comprehensive ESG strategy for Meteos. 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 is of top priority for us. We will keep you posted about Medyo's ESG developments. I will now comment on our financials for the full year 2020 and our outlook for 20 21, starting with 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 Colsepolister for 9 months as well as hemophilia for 4 months. Since we were faced with the procurement restrictions 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 costs on goods sold, earnings could not keep up with revenue and were lower than in the same period of last year. Furthermore, personnel expenses rose by around €4,000,000 due to an intentional staff increase to prepare the future growth, such as 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 is due to investments in future growth, for example, M and A related costs, including the acquisition of Kolschaplysta 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 EBIT period 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 customer base. 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 refinancing 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 reduced significantly, and the cash position has also been raised accordingly. The increase of the financing cash flow is a result of the capital increase conducted in June 2020 with net proceeds of around €52,000,000 Overall, cash and cash equivalents increased to around €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 Supply 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 7 stronger than by almost 23 percent to €62,000,000 including total revenue of blister of €5,400,000 for the second, third and fourth quarters together. 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 0.2% for the full year 2020 from 13.9% in 20 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 Kreuljeplista. Liquidity of around €20,000,000 as at 31st December 2020, representing a decrease of around 48 and laboratories 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 €1,150,000,000 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 corresponding to an increase of 152% to 159% compared to 20 20 and an EBITDA per year of €31,000,000 to €32,000,000 corresponding to an increase of €158,000,000 to 100 and significantly up to 2.7% in 2021. It was 1.9% in 20 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 'twenty 2 as well as significant investments into the expansion of our production capacities in Berlin. We are very confident that all of these investments will pay off in 2022 and the years beyond. Ladies and gentlemen, as you can see, the overall growth model of Matrix is intact. We will continue where we left off at the end of 2020. And build on the successful business performance of the 4th quarter, we are very well prepared to continue our successful and sustainable growth story. We are convinced of the mid- and long term growth potential, 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 'twenty one. A brief summary is outlined on Slide 16. First, we will drive organic growth by expanding our compounding business. The new building gives us 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 2022 by further market penetration through the innovative digital platform Matrix Connect and by further expanding and diversifying the indication areas. And second, we will drive growth via M and A illustrated on Slide 17, focusing on the on