Evotec SE(EVO)2024-08-14 16:36Financial Data and Key Metrics Changes - In H1 2024, group revenues increased by 2% to EUR 390.8 million compared to EUR 383.8 million in H1 2023 [7] - Total shared R&D revenues decreased by 7% to EUR 302.4 million, while revenues from Just - Evotec Biologics increased by 50% to EUR 88.5 million [12] - Adjusted EBITDA for H1 2024 was close to breakeven at minus EUR 0.5 million, impacted by a high fixed cost base and slow market demand [13][14] Business Line Data and Key Metrics Changes - Just - Evotec Biologics saw a significant revenue increase driven by a higher order book in the US and initial client projects in Toulouse [12] - Shared R&D business declined due to persistent market challenges, with a revenue drop from EUR 324.8 million in H1 2023 to EUR 302.4 million in H1 2024 [12] - The gross margin in shared R&D improved from 12.8% to 15.4% despite lower revenues due to cost optimization efforts [15] Market Data and Key Metrics Changes - The market environment remains challenging, with stagnation in early R&D spending in biotech and cautious decision-making in the pharmaceutical industry [7][8] - The sales order book in the Discovery business continues to grow, indicating a healthy level of closed sales despite revenue not following the same trend [8][19] - The company expects a broader market recovery to occur no earlier than 2025 [7][8] Company Strategy and Development Direction - The company is focusing on profitable growth and has initiated a reset of priorities aimed at delivering EUR 40 million in gross savings by 2025 [11][32] - A strategic review is underway to optimize the company's portfolio and footprint, with ongoing adjustments to capacity and operations [35][60] - The company aims to leverage its differentiated offerings to achieve faster growth once the market recovers [36] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenging market conditions and the need for adjustments in workforce capacity to align with revenue profiles [9][31] - There is a commitment to investing in R&D while reducing expenditures to safeguard sustainable growth [13][32] - The company is optimistic about its partnerships and the potential for future growth despite current market pressures [20][21] Other Important Information - The company has identified non-core business areas, such as the gene therapy business in Orth, for separation and winding down operations [14][30] - A revolving credit facility of EUR 250 million was successfully completed to strengthen the balance sheet [18] - The company is committed to enhancing its operational capabilities and has made significant investments in technology and capacity [10][25] Q&A Session Summary Question: Weakness in shared R&D - The weakness is attributed to delays in existing customer projects and fewer new projects starting, with longer-term projects translating into revenue over the next 12 to 18 months [39][41] Question: Cost savings ramp-up - Cost savings are expected to ramp through H2 2024 and be fully realized by 2025, with around EUR 10 million activated in 2024 [39][43] Question: Contribution from business segments in 2024 guidance - The guidance reflects a delayed market recovery, with shared R&D and Just - Evotec Biologics both contributing to the revised EBITDA expectations [44][46] Question: Market trends and large pharma spending - There is a prioritization of R&D spending in clinical phases, with pressures on research spending due to economic factors and the IRA [44][48] Question: Long-term growth outlook - The company is prepared for potential prolonged market challenges and is focusing on strategic adjustments to optimize performance [50][51] Question: Capacity ramp-up in Toulouse - The company is accelerating the existing capacity ramp-up in Toulouse without immediate plans for expansion at the Redmond site [55][57]