Full year 2024 Results Webcast. All participants of the webcast are in listen-only mode, and the webcast will be recorded. Please note that the recording by participants for publication or broadcast is not allowed. After the presentation, there will be a Q&A session where you can ask questions in written form and orally. Written questions can be submitted at any time via the dialogue on the left side of the Livestream tab. Additionally, you can ask your questions verbally via the tab Audio Q&A. Details on that process will be explained at the later stage. I will now hand over to Domenico Truncellito, Head of Communications and Investor Relations at Medmix.
Good morning, everyone. My name is Domenico Truncellito, Head of Corporate Communications and Investor Relations at Medmix. I'm joined by René Willi, our CEO, and Jenny Dean, our CFO. In the interest of brevity, we will assume that you have read the disclaimer on the site regarding forward-looking statements. With that, I will now hand over to René.
Thank you, Domenico. Also, from my side, good morning, everyone. I'm very pleased to present the full year 2024 results to you today. Jenny, who's next to me, will guide you through our financial performance. I will update you on our business review and our strategy, as well as our near and midterm outlook. Let's go to slide number four. On slide number four, you can see the key figures for the full year 2024. We managed to increase gross profit and maintain profitability at the upper range of our revised guidance, despite slightly decreased revenues. We are very pleased with our cash generation, as we managed to substantially increase both operating net cash flow and free cash flow. Another highlight of 2024 was our improved sustainability ranking by CDP, a globally recognized organization that evaluates companies' environmental impact and initiatives.
We moved from taking coordinated actions on climate issues, which is a B, to implementing current best practices, which is an A. Furthermore, we have launched a growth and efficiency program, which is aimed at, firstly, unleashing growth by reallocating resources to our strategic priorities, and secondly, improving our performance by strategically reducing costs. Through this program, we target cost out of CHF 13 million over the next two years, with most of the actions to be executed in 2025, and a significant portion of the savings expected to have an impact already in 2025. On slide five, you see our highlights for 2024. As mentioned, we are very pleased with our cash generation. Net working capital management and lower CapEx were the key drivers for this positive result.
Adjusted EBITDA margin was stable year-on-year on a more favorable mix due to the higher dental sales and an increase of OPEX due to our new facilities in Atlanta and Qiaoyi, China. In Q4, we have concluded our strategy review in order to create a sound foundation for the future sustainable growth. We have analyzed our organizational setup and our businesses along the following five pillars: one, customer centricity; second, innovation; third, operational excellence and cost discipline; fourth, portfolio; and as well as five, our culture. Business unit revenues on slide six. We are very proud that our Dental business unit grew significantly above market growth rate in 2024, and we are pleased with the development of our Surgery business unit, which grew as well.
Drug Delivery declined due to the dual sourcing impact, which will continue in 2025. We will only see material device revenues from our new platforms towards the end of 2026. The Drug Delivery business unit continues to be an important pillar in our strategic pivot to healthcare. I will elaborate more in the strategic part of this presentation. The Industry business unit decreased organically year-on-year, driven by weak end markets and volume not recovered since our Poland exit. Beauty top line increased nominally compared to 2023. This was driven by successful product launches and a strong contribution of the Qiaoyi acquisition, which is delivering on plan. The decline in organic beauty revenue was mainly due to the sluggish end markets worldwide and the corresponding lower order intake. With this, I will hand over to Jenny, who will take you deeper into the financials.
Thanks, René. Our main KPIs can be seen on slide eight. As already explained, our revenues declined year-on-year. Acquisition effects more than offset foreign exchange impacts, with underlying organic growth negative year-on-year, matching our revised guidance of flat to negative. Compared to the second half of 2023, group revenues increased by 1.8% and 3.3% organically. Sequentially, that is, the second half of 2024 versus the first half of 2024, revenues also increased by 0.6%. Both segment gross margins expanded at Medmix level by 50 basis points. I have a further slide on that later. Our overall gross profit and margin also expanded by 60 basis points, as in addition to our nice product margin growth, our underabsorption and global operations and facilities costs declined. We are particularly pleased, as René mentioned, with our cash flow metrics.
Operating net cash flow and free cash flow both made a strong recovery in 2024. I'll describe the detailed drivers on our slide 12. Our negative net income for the year reflects the impact of impairments related to the growth and efficiency program. Excluding this, we are flat year-on-year. Net debt to Adjusted EBITDA ratio is improving year-on-year due to lower debt. On slide nine, you can see the 2023 to 2024 revenue bridge. As mentioned, within healthcare, strong dental and surgery growth was offset by a decrease in drug delivery. C&I segment also declined. Acquisition effects of plus 2.6% more than offset foreign exchange impacts of negative 1.7%, with underlying organic growth negative year-on-year, in line with our revised guidance. On the right in the colors, you see the percentage revenue contributed by our business units.
Consumer and industrial segment contributes 63% of revenue, just one point lower than in 2023, and healthcare segment, therefore, 37%. On slide 10, we can see our full year healthcare and C&I gross profit year-on-year. Total segment gross profit was broadly stable at CHF 217.5 million , delivering a margin of 45%, a year-on-year increase of 50 basis points. On the left, healthcare segment gross profit increased by 1.3% year-on-year to CHF 107 million , broadly in line with organic revenue growth and delivering a gross margin of 61.5%, an increase of 90 basis points. Dental business unit revenue growth offset pressure within the drug delivery and surgery business units. On the right, consumer and industrial segment gross profit of CHF 108.8 million decreased by 0.2% year-on-year, delivering a gross margin of 35.4%, an increase of 20 basis points.
Efficiency gains in industry business unit after the opening of the Valencia plant drove the improvement, supported by a full year of the accretive Qiaoyi acquisition in beauty business unit. Slide 11 shows the walk from our Adjusted EBITDA in 2023 to 2024. Pricing upsides almost offset the negative volume movement. Upsides from margin and mix reflect more dental volume in the mix at accretive margins and industry efficiency gains. Operating expenses increased CHF 5.1 million year-on-year due primarily to the impact of the ramp-up of the Atlanta and Qiaoyi sites. Other items include the non-repeat of 2023 impacts, positive ones, related to the closure of our Poland facility, and 2024 impacts of the growth and efficiency program and one-off increases in pension and long-term incentive plans.
Non-op and others reflects the year-on-year difference in the value of one-off or non-operating costs, restructuring and impairments, reversed out of operating expenses and margin to calculate Adjusted EBITDA, which stayed flat year-on-year at 19.1%. Turning to slide 12, you can see the walk from our operating net cash flow in 2023 to 2024. Operating net cash flow increased significantly to CHF 61 million, up from CHF 17.9 million in 2023. This improvement was the result of collective hard work and primarily due to better net working capital management, with significant decreases both in inventory and accounts receivable and lower capital expenditure after the completion of our Valencia facilities. With that, I would invite René to come back to discuss our strategy and outlook.
Thanks, Jenny. When I took office last June, I was given a clear mandate for change. We have been implementing our measures along the following three areas. Firstly, strategy. Secondly, structure, particularly empowering the business unit and ensuring clear accountability. And thirdly, the launch of a growth and efficiency program in August last year. Let me give you a detailed overview in the next slides. We have refined our strategy in order to create a sound foundation for our future growth. Our strategic priorities focus on the adaptation of our organizational setup to enhance our customer proximity, pace of innovation, and ensure clear accountability. First of all, we are creating an entrepreneurial culture that empowers our employees and rewards individual and team performance at all levels of our organization. We strive to achieve a flawless customer experience.
To this end, we have simplified reporting lines, defined clear accountabilities, and streamlined our processes to ensure we are fast and agile and deliver the performance our customers expect. This is relevant for all aspects of our customer experience in innovation, order execution, and after-sales services. As we have stated in our results, our dental business unit has resumed strong growth in 2024. We have increased our focus on faster-growing product categories to further reduce our dependence on the impression category. We are building strategic partnerships with our key OEMs to foster collaboration and provide them a competitive advantage. In addition, we will advance our trade channel strategy with innovative products and competitive private label offerings. In our surgery business unit, with the buildup of our Atlanta site, we started to insource manufacturing and increased our customer proximity.
This enables us to build a full portfolio of value-adding services for our customers and therefore become a strategic partner, providing them also a competitive advantage. Today, large medtech companies are increasingly seeking to collaborate in a platform approach if their suppliers and Medmix is one of the few players who can provide a comprehensive range of products. We have solutions for bone repair and tissue banks, surgical sealants, and adhesives. With the market trend to injectable drugs, drug delivery is one of the most attractive growth areas in healthcare. In our drug delivery business unit, in addition to our existing devices in the market, we have two next-generation device platforms with PiccoJect and D-Flex. Both are at the beginning of their life cycle. We have a strong pipeline of projects for originator drugs, biosimilars, and generics, and for a variety of indications.
Our focus is on commercializing these platforms, ramping up our capacity, and for PiccoJect, ensuring long readiness with our customers. We are very well positioned to capture the growth opportunities and are already working with leading pharma companies who use our solutions for demanding applications. For example, for the injections of drugs with high viscosities or emergency devices. In our Industry Business Unit, our Valencia facility, after a record buildup within one year, is now delivering our full portfolio. In the next step, we are focusing on increasing efficiency and profitability through smarter flows and automating production processes. Our strategic focus also lies on implementing new co-development projects with our key customers. Our long-standing relationships and our proven products are a sound basis for innovative solutions, such as our GreenLine portfolio, to enhance our customers' competitive edge.
In our beauty business, we have been continuously increasing our profitability through new high-margin projects, showcasing our capabilities. We have identified a broad potential for further efficiency and our automation project as part of our growth and efficiency program. An integral part of our strategic review is the continuous evaluation of our portfolio of activities and a keen focus on optimizing our capital allocation. Our clear goal remains to pivot towards healthcare and increase our business stake organically or through strategic acquisitions in areas where we see high growth and high margin potential. I'm convinced that our growth and efficiency program is key to reaching our full potential and delivering on our strategic imperatives. Firstly, to ensure that we can allocate sufficient resources to our strategic priorities, we must reduce costs in non-core areas. Secondly, we need to be faster, more agile by reducing complexity.
Thirdly, by renewing our high-performance culture and empowering the teams, we can ensure improved customer experience. Let's move to slide 17. With the program, we will reduce costs, which will enable us to reallocate our resources to the high-priority growth areas. We will implement over 80 initiatives over the next two years, targeting operational improvements like automation of manufacturing processes, simplifying process flows, and insourcing differentiating activities, FTE reduction, and other cost-saving measures, such as reducing headquarters and support functions. We target cost out of CHF 30 million over the next two years, with most of the actions to be executed in 2025 and a significant portion of the saving expected to have an impact already in 2025. Part of the cost out will be reinvested to pursue our healthcare growth strategy and increasing efficiency in our production facilities.
We will continue to invest in R&D, which will ensure that we stay at the forefront of innovation. On slide 18, you see our capital allocation principles. Needless to say, these are an integral part of our strategy. These are shown in descending order of importance. The focus of our capital allocation is, on the one hand, to strengthen our foundation and, on the other hand, to invest in profitable growth. Let's go to slide 19, and let me talk about our innovation capabilities, which are vital to fuel our future profitable growth. I would like to show you the broad range of our innovation projects. We have innovations in every business unit, but they have one common theme. They provide our customers with a competitive advantage. On slide 20, you can see two innovations from our Beauty business unit and one from our Industry business unit.
With our next-generation shadow printing decoration technology, we are able to create attractive and iconic surface structure without adding any materials. Therefore, the recyclability remains unaffected by the decoration. The second picture features PCR PP material that is suitable for primary packaging in the cosmetic industry, such as bottles or for washable mascara or other makeup packaging. It reduced significantly the CO2 footprint as it saves 75% CO2 emissions compared to virgin PP material. The packaging is made out of a minimum of 95% post-consumer recycled content, and this does not affect color brilliance. Our MIXPAC GreenLine product family in our industry business unit lowers significantly the CO2 footprint of the cartridges as well since it's produced with up to 100% recycled plastics. Our customer Sika has just adopted these new solutions and will switch its current portfolio to our new GreenLine range.
Slide 21 shows a good example of our investment in faster-growing dental product categories. The picture shows a device, MicroL, which provides our OEM customers with a competitive advantage as it is pre-sized, features more applications per unit, and reduces material waste. On slide 22, you see an example of an incremental innovation in our Surgery business unit. The vented piston in our G-System significantly reduced the time required to prefill the syringes by our OEM customers and tissue banks. This provides them a significant efficiency gain, but also the vented syringe allows for more effective agitation and mixing of bone graft material in the operating room, so also an advantage for our end users. PiccoJect is a next-generation auto-injector with unique features that provides attractive benefits for our customers and their patients. We have spoken about PiccoJect in the previous call. Let me shortly repeat.
Firstly, PiccoJect has only eight parts in total compared to most alternatives on the market that have at least 15 parts and sometimes as many as 18 or 19 parts. This offers not only cost advantage, but also increases the reliability of the device, which creates a competitive advantage for emergency applications. Its optimized size and shape make it easier for patients to hold the device and administer the drug. PiccoJect is also designed for higher viscosity, a challenge for many injectable drugs. It has around two-thirds less CO2 footprint compared to other available autoinjectors. The platform is ready, tooled up, and assembly lines are being put in place as we speak. The first clinical use is planned with our customers this year. With this example, I've concluded the innovation part of this presentation.
Let me now talk about the outlook, which I'm sure is of great interest to you. 2025 will be a transition year. We expect our healthcare segment revenues to be flat year-on-year, with dental and surgery business units growing strongly, offset by a decline in our drug delivery business unit due to dual sourcing. Medical device revenues from our two new platforms are only starting towards the end of 2026. We expect our C&I segment to be flat due to continued uncertainty in our various end markets. On this basis, we expect revenues in 2025 to be flat on an FX-adjusted basis. We will lay the important foundation for a stronger and more resilient future in 2025.
We will see the first impact of our growth and efficiency programs, but this will be partly offset by the cost of some of the programs we launched and reinvestments in our growth opportunities. For this reason, we anticipate that our Adjusted EBITDA margin in 2025 will be between 18% and 19%. Looking further forward, in the midterm over a three-year period, we expect a compound annual growth rate in the revenues of above 4% and an Adjusted EBITDA margin above 20%. With this, I will hand over to the operator for our Q&A session. Thank you.
Thank you. We will now start the Q&A session. In order to submit a written question, please submit your question via the dialogue on the left side of the live stream. We will then read them out loud and answer them. If you prefer to ask your question verbally, please click on the tab "Audio Q&A" and then enter the audio Q&A session. If you are ready to ask your question, please raise your hand by clicking on the "Raise Hand" icon in the menu bar at the bottom of your screen. The moderator will then call your name, will give you speaking privileges, and you can ask your questions. In case your organization has very strict IT security in place and you cannot join the audio Q&A, you might consider asking your question via text Q&A or dial in via phone.
Instructions on how to dial in via phone can be found on the panel on the right side of the audio Q&A screen. At the moment, there are no written questions, so we will take the first question from Alessandro Foletti. Alessandro, you are now ready to talk. You have to unmute your microphone. You are still on mute, Alessandro. You have to unmute. Yeah, now we can hear you. Alessandro, it was yours.
Thank you very much. It was an intelligence test.
You passed.
Yeah, barely. Good morning, everybody. Thank you for taking my questions. I would like to ask one still sort of backward-related 24 and then a couple looking forward more. So if you agree, and my first question backwards, what I don't understand in the gross margin of the healthcare system, why did it actually not develop that strongly considering the fact that dental was really doing well?
So I can handle that one, Alessandro. You're right. As René mentioned, at this point in time, we are really pursuing the faster-growing product categories in the dental market to reduce our reliance on the impression material product category. At the moment, there are no real step changes in the products we're offering. This is to come with some exciting product introduction. At the moment, the margin itself in dental has not been an issue. We had a volume challenge with stocking, but the margin is relatively flat. So dental needs to help because dental has a nice healthy margin, but the margin itself is not significantly increasing.
On the other side, the challenge within healthcare remains the volume decline due to the dual sourcing in drug delivery. And this is having a negative impact because it puts more pressure in the mix in drug delivery on the projects, which are lower margins than the product device revenue.
Right. Okay. So basically, it's a question of mix in this sense.
Correct.
All right. So now going forward, first of all, the cost program, the cost, sorry, the growth program, I imagine it has some cost, right? Because otherwise, I don't understand your EBITDA guidance for 2025. Can you put a number on that cost?
You want to take it or no?
So I think numbers are challenging, but I think you're right. When we say that we would take cost out of CHF 30 million, if you look in the guidance and some of the comments René made, the purpose of this program is to unleash growth by reallocating resources into our high-growth, high-margin areas and pivoting to healthcare. And you're right, there are some costs attached to that. On the gross margin side, we will invest in automation and efficiency programs in both C&I and all business units. These are not new facilities.
These are not new facilities. They will be additional costs because we're accelerating our programs, putting automation programs in parallel that we might otherwise have to spread out, so we will see a negative cost impact while we're working on the automation programs, and that will keep gross margins down in 2025 and 2026. In terms of other costs related to the program, there are also some material costs within operating expenses. If we're talking restructuring provisions and impairments, these would be eliminated from Adjusted EBITDA, but we also want to unleash our growth potential, and this means investing in selling teams, for example, so we will strengthen our product organizations, we'll strengthen our country teams so that we can be a step up against trading costs, but again, it's not a one-off, but part of our normal ongoing business.
Yes, absolutely. For example, if you look about our sales organization, then we have actually strengthened that in dental. We have also really had a positive impact. We have also restructured our surgery sales force, and we are strengthening and strengthening this year. We are really focusing also strengthening our industry sales organization, which should provide us additional growth in numbers.
Okay. But when I look at the CHF 30 million cost saving, I mean, on our CHF 100 million EBITDA or let's say CHF 90 million EBITDA like this year, it's a third of that. So it's a big cost saving. I would assume that at some point, this surpasses this additional cost.
Absolutely. Absolutely. But we envisage it would take two years to implement the program. So it won't be until the third year of our midterm guidance that we see the full impact of the cost out. And hopefully, by that point as well, we'll be recognizing more volume. These, of course, our outlook is always organic only. So keep that in mind. The purpose here is to unleash cash and capital so that we can inorganically as well as organically invest in healthcare during that period as well. And this is not taken into account in the plan.
Right. Okay. So I take it that the 20% margin target, or you say above 20%? I mean, 30% is also above 20%. But if you say above 20%, I take it, I don't know, 21%, 22%. Yes. Which is kind of far away from what you had before. So the fact that you are staying kind of close to the 21% is because of what you just said, that it will take a while to implement. But then afterwards, we might be looking for a higher number than just, I don't know, 20 plus.
Yes. And one thing which comes on top of that, what you just said, Alessandro, is when we look about the device sales we expect in drug delivery. This will also come beyond these two years because this will really start end of 2026. And this will have a significant impact also on the profitability. When you look about our drug delivery business at the moment, and we said it already last time that our share of, because we have two types of businesses, one is device sales, the other one is project. And in the next two years, still, we have the device sales. The share of the project business will increase, and the project business has lower margins.
All right. Can I ask you one last question? You mentioned, René, I think in the voice, and I don't remember if it was written, your clear focus or clear intention to pivot to healthcare. Now, I'm not sure I understand properly because when I look at all the innovation slides and all the growth program slides, etc., you are investing actually a lot also in consumer and industry. So how do I sort of reconcile these sort of two statements that seem to me somewhat contradictory?
Yeah. Let me just about, if you look about the beauty segment. In the beauty segment, you have to innovate in a fast cadence because this is what the market is expecting. These innovations are mostly incremental. The same is in industry. This is mostly incremental innovation. For example, the GreenLine, which we are doing in industry, has a significant benefit for the customers, but for us, it's an incremental innovation.
It's a material change. This doesn't require new tools or anything. It's a material. But this is what we are really driving on the C and I segment. If you look about what we are doing on the healthcare segment, then this is really something, innovation to drive top line. And these are much more than just incremental innovations. We have some really next-generation developments, which we would like also to show in the course of this year to it, and we could drive the top line. And this is to be, I think, a very exciting topic at our capital market day.
All right. So I take it that for now, there is no mention of focus on healthcare does not really imply any changes to the portfolio?
When you look about inorganic focus, that I have to say this is 90% healthcare. We are really focusing on whatever is inorganic. That's our main focus is healthcare.
And I think, Alessandro, just to add on that capital allocation slide, we wrote "strengthen our balance sheet" for a reason. We need to cut costs and create a little bit of a pool of funds so that we can really start to go back to pursuing this inorganic strategy. So the inorganic strategy will be important, but we have some homework to do, and that's why we need to really focus on the growth and efficiency program this year.
All right. Thank you.
Thank you, Alessandro. I invite you to visit us again. If you have a question at a later stage, just join the audio Q&A again. We are now switching over to the questions from the floor. The first question is from Michael Schulz, JMS. How much of the CHF 30 million cost savings will be reinvested into growth?
Thank you, Michael. I think about the reinvestment of growth, it's a little bit depending also on the opportunities we have, particularly when it comes to inorganic growth. But now, I think in this year, in particular in the next quarters, the main focus is actually in operational efficiency. So the main investments will go into our optimization in Valencia. And another significant part of our investments is going into some innovation projects, particularly in dental. And about the percentage, I think you have more precise numbers, Jenny?
I think it is difficult to say. It depends on the pace of the top line growth that we can achieve because that will drive the bottom line as well. But if you look at our EBITDA percentage over the plan, I mean, we're at 15-15.5% right now. And we target, as you said, to be above 20% by the end of the midterm. So that gives you a range of the net impact we think this program will have.
And 1% point is about what? CHF 5 million? Yeah.
Thank you. We move over to the next question, which is from Patrick Rafaisz, UBS. Follow up on growth and efficiency program related costs. How will they be spread over 2025, 2026? How much will be in the one-offs?
Okay. I think that's something you have, Jenny.
I think if we look at what we're trying to achieve in the two years, then I think two-thirds of the investment should come in the first year and one-third in the second. And then the reverse should be true of the upsides to the bottom line. As I said before, there's really three elements to the invest. Within the margin, it's around automation projects and efficiency projects. So this is some staffing, but also some equipment and other things. So it'll have a CapEx plus an OpEx impact and the COGS impact there. And that's maybe two-thirds of the program is around top line improvements, specifically in C and I, to ensure we keep our competitive positioning and make sure that we can take more profit and cash into our program to pivot to healthcare.
And one-third is around OpEx. And that is more headquarters and support functions, leaning our organization out to the volumes that we have today.
And we have also already started. I think part of it already came in actually last year because we are closing one site, one smaller site during 2024, and their people have already, some of them have been released. All the others are noticed, and of course, these costs came in also in 2023.
Yeah. So you're right, so two-thirds by the end of 2025, one-third by the end of 2026.
Yes.
Yes. Okay. There's another question from Patrick Grattais. Can you detail the remaining impact of the dual source in drug delivery in 2025?
Yes. I think when we look, we are now more than halfway through. It's about a little bit more than 50%. In absolute terms, it will be smaller than what we have seen last year, but it will be still somewhere between 40%-50% of what we have seen.
There is one more question from Patrick Grattais. Cash flow outlook 2025. What's the guidance for CapEx and net working capital?
So the guidance for CapEx is to remain relatively flat to this year, to 2024, in percentage of revenue. I mean, we had that spike at 14% when we had Valencia and Atlanta in parallel. Now we've gone back to 8%-9%, and we'll continue around that level. It could be that there's a little bit of pressure on that because, as I said, we want to launch these automation projects, and we have a strong pipeline of R&D we're working on too. So it will stay at the sort of 9% revenue we expect. In terms of working capital, I'd love to say that we're going to take another massive step change, but I don't think so.
I think we'll stay flat to 2024's levels at best because we did take quite a lot out in our inventory. But this year, we're ramping up in industry surgery and drug delivery in our Atlanta facility. So in terms of the insourcing, it might mean that to make sure we secure our customer deliveries, our inventory actually goes up a little bit. So it depends on the timing of that this year. I would stay pretty flat.
Thank you. At the moment, there are no more questions in the board. And there is also no one waiting in line for our question. So if there are any more questions, raise them now via the board or via the audio Q&A. That does not seem to be the case. Then I hand over for the closing remarks.
Thank you very much. I think also for all the questions, and I would like to thank you also, the operator, to lead us through this presentation. So good. And at the end, also everybody was able to ask the questions. Thanks. And stay in touch and hope that I see some of you soon again. Thank you.
Thank you all for attending this event. We.