Evotec SE Q3 FY2024 earnings call

Management Statement and Operational Highlights: - Priority reset initiative is on track to deliver €40 million savings. Already implemented over 60% of the targeted annualized impact of the €40 million. - Three major new contracts signed in Q3, including expansion with Sandoz, partnership with Novo Nordisk for next-gen cell therapy, and broadening alliance with BMS. - Just-Evotec Biologics revenues up 74% vs nine months last year. - Successfully closed Orth site and signed divestment agreement for Halle site. - Strategic review in full swing, with new strategy to be unveiled in H1 2025, focusing on pairing scientific excellence with operational excellence.

Segment Performance: Nine months group revenues reached €575.7 million, in line with the same period in 2023. Shared R&D revenue declined from €506.1 million last year to €447 million this year due to a soft market. Just-Evotec Biologics saw revenue increase to €128.7 million (up 74% vs prior year) driven by higher order book in the US and first client projects in Toulouse. R&D spending reduced by 15% vs prior year. Adjusted group EBITDA for nine months 2024 was minus €6 million, with core operations profitable at €0.8 million adjusted EBITDA.

Guidance: - Expect group revenues for full year 2024 to land between €790 million and €820 million. - Adjusted group EBITDA expected to reach €15 million to €35 million for full year 2024. - Q4 expected to see profit uplift from revenue increase and acceleration of cost savings from priority reset. - R&D expenditure targeted to be reduced to €50 million to €60 million for full year.

Risks: - Soft market demand for shared R&D segment impacting profitability. - Fixed cost base offsetting initial cost improvement initiatives. - Balancing cost controls with maintaining investment in new technologies and capabilities to avoid hurting technological and scientific edge.

Q: Can you narrow down when the full strategic update will be?

A: It will be in April.

Q: How to balance cost controls and risk of hurting performance?

A: The reset is balancing costs while retaining technological edge, with investment in R&D and BD efforts to maintain scientific excellence.

Q: How to quantify average contract length compared to previous years?

A: Not looking at split of average contract length specifically.

Q: What's the proportion of revenue growth expected from Just and shared R&D in Q4?

A: Directionally, half from shared R&D and half from Just-Evotec Biologics in terms of absolute amount.

Q: Is there significant additional capacity being added next year?

A: Mainly maintenance CapEx as main investments in Toulouse are complete, focusing on optimizing efficiency and maintaining infrastructure.