• Group Revenues: EUR575.7 million for the nine months, in line with the same period in 2023.
• Shared R&D Revenue: Declined to EUR447 million from EUR506.1 million due to a soft market.
• Just Evotec Biologics Revenue: Increased by 74% to EUR128.7 million from EUR74.1 million.
• Adjusted Group EBITDA: Minus EUR6 million for the nine months.
• R&D Spending: Reduced by 15% to EUR41.1 million from EUR48.4 million.
• Gross Margin: Improved from 8.6% in Q2 to 9.8% in Q3.
• Free Cash Flow: Positive EUR16.7 million in Q3, compared to negative EUR80 million in Q1 and Q2.
• Liquidity: Increased to EUR303 million in Q3 from EUR299 million in Q2.
• Financial Liabilities: Totaling EUR467 million, with 95% carrying fixed interest rates.
• Guidance for 2024: Group revenues expected between EUR790 million and EUR820 million; adjusted EBITDA expected to reach EUR15 million to EUR35 million.
• Priority Reset Savings Target: EUR40 million annual savings by end of 2025, with 60% of the run rate savings already implemented.

• Warning! GuruFocus has detected 5 Warning Signs with EVOTF.

Release Date: November 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Evotec SE (EVOTF) reported strong revenue growth in its biologics segment, with a 74% increase compared to the previous year, driven by partnerships with companies like Sandoz.
• The company has successfully implemented over 60% of its targeted annualized cost savings, aiming for EUR40 million in savings by 2025.
• Evotec SE (EVOTF) has expanded its strategic partnerships, including collaborations with Novo Nordisk and BMS, enhancing its R&D capabilities and market position.
• The company has made significant progress in its liquidity position, with a positive free cash flow of EUR16.7 million in Q3, aided by cash proceeds from partnerships.
• Evotec SE (EVOTF) is on track to achieve its 2024 guidance, expecting group revenues between EUR790 million and EUR820 million, and adjusted EBITDA of EUR15 million to EUR35 million.

Negative Points

• The company faced challenges in its shared R&D segment, with revenues declining due to a soft market and high fixed costs.
• Evotec SE (EVOTF) has not fully recovered from the impact of a cyber attack in 2023, particularly affecting its development business.
• The market environment remains challenging, with persistent pressures in the biotech and pharma sectors, impacting demand for Evotec SE (EVOTF)'s services.
• The company is undergoing a significant transformation, which includes headcount reductions and site closures, potentially affecting its operational capacity.
• Evotec SE (EVOTF) has not provided specific guidance for 2025, citing uncertainties in market conditions and ongoing strategic reviews.

Q & A Highlights

Q: Can you narrow down when the full strategic update will be provided in H1? Will it be at the full year results in April or a separate event? A: The strategic update will be provided in April. - Christian Wojczewski, CEO

Q: With only seven weeks left in the year, your guidance range remains wide. Can you provide some insights into what might lead to the bottom or top of that range? A: We have a clear path towards achieving our guidance ranges. Revenue is based on signed order books and short-term revenue pipelines. For EBITDA, profits from revenue upside in Q4 and cost savings from the priority reset will play a significant role. - Laetitia Rouxel, CFO

Q: Could you give an update on the broader biotech and pharma market conditions and your expectations for 2025? A: We still experience a challenging market environment, particularly in the biotech sector. However, we see first signs of recovery as stronger players continue to invest. The pharmaceutical industry is also restructuring, creating gaps that Evotec can fill. We are optimistic about future growth, especially in biologics manufacturing. - Cord Dohrmann, CSO

Q: How do you balance cost control measures with the risk of cutting too deep and affecting technological and scientific edge? A: We are striking a balance by adjusting capacity in shared R&D while maintaining our investment in differentiated technologies. Our R&D guidance remains between EUR50-60 million for 2024, focusing on technologies that enhance our competitive edge. - Craig Johnstone, COO

Q: Can you clarify the order book composition for the J POD and how concentrated it is among large customers? A: The order book includes significant pre-booking of capacity with Sandoz, particularly for commercial manufacturing in the long run. However, current revenues are exclusively from discovery and development. - Christian Wojczewski, CEO

Q: Is the old business model of Evotec up for an overhaul, and could there be a reduction in the pipeline size? A: We are not dumping or reducing the pipeline. It remains a healthy part of our strategy, and we continue to see it as a key area for value creation. - Christian Wojczewski, CEO

Q: What are your expectations for 2025 and beyond, particularly regarding market recovery and strategic initiatives? A: The market recovery is uncertain, but we are confident in our mid-term growth prospects. Project reset is on track, and we expect significant contributions from commercial manufacturing and strategic partnerships in 2026 and beyond. - Christian Wojczewski, CEO

Q: Is there any change in the importance of Sandoz for 2025, particularly regarding potential opt-ins? A: The decision on potential opt-ins is ultimately up to Sandoz, and we recommend addressing this question during their analyst calls. - Christian Wojczewski, CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.