GOLDMAN SACHS European Medtech & Healthcare Services Conference London, September 5, 2019
GOLDMAN SACHSEuropean Medtech & Healthcare Services Conference
London, September 5, 2019
SAFE HARBOR STATEMENT
Forward-looking statements involve risks.
This company presentation contains various statements concerning the future performance of STRATEC. These statements are based on both assumptions and estimates. Although we are convinced that these forward-looking statements are realistic, we can provide no guarantee of this. This is because our assumptions involve risks and uncertainties which could result in a substantial divergence between actual results and those expected.
It is not planned to update these forward-looking statements.
LONDON - SEPTEMBER 5, 2019 2
AGENDA
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1. OVERVIEW AND BUSINESS MODEL2. THE IVD MARKET3. FINANCIALS4. OUTLOOK AND STRATEGY
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OVERVIEW AND
BUSINESS MODEL
• Leading OEM player for automation solutions for the diagnostics industry and translational research
• Three decades of experience in highly regulated healthcare markets and growing technology pool
• More than1.200 employees worldwide
More than 50% allocable to R&D
• Production sites in Germany (HQ), Switzerland, Hungary and Austria
• High number of systems installed globally
More than 13,000 medium to high throughput systems
More than 25,000 low throughput systems
• Sales of € 187.8 million in 2018
CAGR sales since IPO in 1998: ~15%
• Dividend payments raised over 15 consecutive years
OVERVIEW AND BUSINESS MODEL
STRATEC AT A GLANCE
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SELECTED PRODUCTS
OVERVIEW AND BUSINESS MODEL
UNIQUE MARKET POSITION STRATEC IN THE IVD VALUE CHAIN
LONDON - SEPTEMBER 5, 2019 6
DiagnosticCompanies
Blood Banks,Laboratories
Patients
STRATEC develops and manufactures fully automated analyzer systems and disposables focusing on the high growth segments in diagnostics
Partners market systems together with reagents and consumables to laboratories, blood banks and hospitals worldwide
Laboratories performing tests and offering service to doctors and patients using reagents from diagnostic companies
Growth drivers:
• Aging population
• Developing healthcare systems worldwide
• Rising prevalence of chronic diseases
• High volume of new tests
OVERVIEW AND BUSINESS MODEL
BUSINESS MODEL
LONDON - SEPTEMBER 5, 2019 7
STRATEC provides instrumentation, consumables, software and automation solutions
OEM development and manufacturing
Around 8,000 fully automated analyzer systems and modules manufactured annually
Wide range of intellectual property rights
Extensive collaboration with partner during design phase
STRATEC: Engineering / automation, software, QM
Partner: System / reagent / market requirements
Systems have long market lifecycles
Product lifecycles typically in an area of 12 to 15 years
Leads to longstanding partnerships
Expanding installed base of systems
Product enhancement and extension drives value
Dev
elopm
ent
and m
arke
t la
unch
of su
cces
sor
pro
duct
OVERVIEW AND BUSINESS MODEL
LONDON - SEPTEMBER 5, 2019
Long-term agreements with partners Milestone payments during development stage
Operating sales during series production stage
Recurring sales from service parts & consumables sales
Minimum volume commitment Firm purchase orders
STRATEC an integral part of partners’ plans
Reliable partnership Shortened development time
Integration of analyzer system and reagents
Agreed development budget & transfer price
High commitment by both partners
SECURING RETURN ON INVESTMENT
INDICATIVE SALES CHARACTERISTICS OF AN ANALYZER OEM PROJECT
8
2 to 4 yearsDevelopment
phase
12 to 15 yearsMarketing phase of the analyzer system
Another 5 yearsof service parts & consumables
Service part & consumables
Sale
s
9
THE IVD MARKET
LONDON - SEPTEMBER 5, 2019
THE IVD MARKET
IVD MARKET SEGMENTS / IVD MARKET: ~ 68 BILLION USD IN 2018
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Market growth CAGR 2018-2023
Total IVD-Market: ~5% p.a.
Molecular Diagnostics: ~9% p.a.
Immunodiagnostics: ~6% p.a.
Point of Care: ~8% p.a.
Growth drivers
Aging world population
Rising prevalence of chronic diseases
Expansion in healthcare systems, especially in emerging markets
New technologies broadening scope of IVD applications (e.g. oncology, personalized medicine or non-invasive prenatal testing)
Increasing automation
Source: Kalorama: “The worldwide market for In Vitro Diagnostic Tests, 10th Edition”, Aug 2016MarketsandMarkets: “In vitro diagnostics market – forecast to 2023”, Dec 2018
Total instrumentation market ~ 8.9 billion USD
THE IVD MARKET
OUTSOURCED VS IN HOUSE INSTRUMENTATION MARKET
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Total instrumentation
market~ 8.9 billion
USD
In House~ 60 %
Outsourced~ 40 %
In House73 %
Outsourced27 %
2010 2018
Source: Own estimates based on historical market data and recent industry trends
Trend of outsourcing towards specialized players set to continue, due to:
Engineering of automation solutions often not core competence of diagnostics companies
Shorter development timeframes due to already existent technology pools
Guaranteed project budget and firm transfer prices
Keeping up with regulatory developments easier for specialized players
Structured processes in order to address end customer needs, such as ease of use, user experience, workflow efficiencies, remote access, serviceability and preventive maintenance
THE IVD MARKET
A SELECTION OF STRATEC CUSTOMERS
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Source: IVD News / non-public companies estimated / non-reported sector sales estimated
… AND OTHER GAME-CHANGING COMPANIES
(acquired by Bio-Rad in January 2017)
STRATEC customer
Not a STRATEC customer
GLOBAL TOP 20 IVD COMPANIES Sales 2017 (USD billion)
1. Roche Diagnostics 10.2
2. Abbott Diagnostics 7.3
3. Danaher 5.8
4. Siemens 5.0
5. ThermoFisher 3.5
6. Sysmex 2.4
7. bioMerieux 2.1
8. Ortho Clinical Diagnostics 1.8
9. BECTON DICKINSON 1.4
10. BIO-RAD 1.4
11. Hologic 1.2
12. CH Werfen 1.0
13. Grifols 0.8
14. Agilent 0.8
15. Diagnostica Stago 0.7
16. Qiagen 0.7
17. DiaSorin 0.7
18. Perkin Elmer 0.6
19. Fujirebio 0.4
20. Immucor ~0.4
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FINANCIALS
FINANCIALS
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KEY FIGURES - TRACK RECORD
Sales in € millionCAGR ~12%
EBIT in € millionCAGR ~9%
1 Figures adjusted for comparison; adjusted for depreciation and amortization from purchase price allocation for acquisitions, related integration expenses and other extraordinary effects. Reconciliation to IFRS figures can be found in the respective annual report.
6176
102116.6 122.7 128
144.9 146.9
184.9
207.5
187.8
0
50
100
150
200
250
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
11.2
14.7
17.6
21.8
15.6
19.5
24.1
26.9
32.3
36.4
26.2
0
5
10
15
20
25
30
35
40
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
1
1
1
FINANCIALS
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KEY FIGURES - TRACK RECORD
Net income in € millionCAGR ~9%
Dividend per share in € CAGR ~9%
8.2
11.713.0
15.3
12.4
15.5
19.8
22.1
25.4
28.9
20.2
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
0.35
0.450.50
0.55 0.560.60
0.700.75 0.77
0.80 0.82
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
1
1
1 Figures adjusted for comparison; adjusted for depreciation and amortization from purchase price allocation for acquisitions, related integration expenses and other extraordinary effects. Reconciliation to IFRS figures can be found in the respective annual report.
1
FINANCIALS
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SALES BY OPERATING DIVISIONS
56% 55% 49% 49%
26% 29%32% 33%
18% 15% 18% 16%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2015 2016 2017 2018
Systems Service parts and consumables
Developement & services Others
In % of total sales
As of December 31
Continuously growing share of service parts and consumables sales
• At 33% of total sales in 2018 versus 26% in 2015
FINANCIALS
LONDON - SEPTEMBER 5, 2019
• Sales up 24.1% yoy to € 110.4 million; +21.7% at constant currency (H1 2018: € 88.9 million)
• Adjusted EBIT margin up by 130 bps yoy to 11.5% (H1 2018: 10.2%)
• Successful market launches by our partners
LIAISON® XS by DiaSorin and FACSDUET™ by Becton Dickinson
• Substantial progress with negotiating additional development agreements
• Number of employees up 8.7% organically in the light of strong project pipeline
• Successful “go-live” of new ERP system and completion of first construction stage of capacity expansion at HQ
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H1/2019 AT GLANCE
H1/2019 FINANCIALS AT A GLANCE1
FINANCIALS
LONDON - SEPTEMBER 5, 2019
bps = basis points
1 For comparison purposes, adjusted figures exclude amortization resulting from purchase price allocations in the context of acquisitions and the associated reorganization expenses, as well as other non-recurring effects.
2 Retrospectively restated to reflect the classification of the nucleic acid preparation business as a discontinued operation in accordance with IFRS 5. Not retrospectively restated for IFRS 16.
3 Results from continuing operations.
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€ 000s H1/2019 H1/20182 Change
Sales 110,369 88,931 +24.1%
Adjusted EBITDA 17,343 12,227 +41.8%
Adjusted EBITDA margin (%) 15.7 13.7 +200 bps
Adjusted EBIT 12,723 9,060 +40.4%
Adjusted EBIT margin (%) 11.5 10.2 +130 bps
Adjusted consolidated net income3 10,284 7,455 +37.9%
Adjusted basic earnings per share (€)3 0.86 0.63 +36.5%
Basic earnings per share IFRS (€)3 0.46 0.24 +91.7%
FINANCIALS
LONDON - SEPTEMBER 5, 2019
SALES
H1/2019 sales up 24.1% yoy to € 110.4 million
• Positive effects from foreign exchange rates of 2.4 percentage points
sales up 21.7% yoy at constant currency
• Increased development and services sales due to achieved development targets
• Higher call-up numbers for established systems and increasing sales contribution of recently launched products
Sales in € million
19
69.1 70.078.0
100.7
88.9
110.4
0
20
40
60
80
100
120
140
H1/14 H1/15 H1/16 H1/17 H1/18 H1/19
As of June 30
FINANCIALS
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SALES BY OPERATING DIVISIONS
0
10
20
30
40
50
60
Systems Service partsand consumables
Developmentand services
Others
H1 2018 H1 2019
+8.9%
+80.5%
-41.6%
Sales in € million
15% 21%
34% 30%
47% 47%
0%
20%
40%
60%
80%
100%
H1 2018 H1 2019
Systems Service parts and consumables
Development & services Others
In % of total sales
+22.9%
As of June 30
FINANCIALS
LONDON - SEPTEMBER 5, 2019
H1/2019 EBIT up 40.4% yoy to € 12.7 million
H1/2019 adjusted EBIT margin at 11.5%
Margin expansion of 130 bps yoy
(+) Economies of scale
(+) First results from earnings improvement initiative
(-) Increased expenses related to high development activities
(-) Sales mix
EBIT EBIT margin
EBIT in € million EBIT margin in %
As of June 30
ADJUSTED EBIT AND EBIT MARGIN
21
11.212.0
12.6 12.8
9.1
12.7
4%
6%
8%
10%
12%
14%
16%
18%
20%
0
2
4
6
8
10
12
14
H1/14 H1/15 H1/16 H1/17 H1/18 H1/19
FINANCIALS
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SEGMENT PERFORMANCE
Instrumentation
In € million H1/2019 H1/2018 Change
Sales 82.0 63.0 +30.1%
Adjusted EBIT 11.5 8.5 +35.4%
Adjusted EBIT margin (%) 14.0 13.5 +50 bps
Smart Consumables
In € million H1/2019 H1/2018 Change
Sales 5.9 6.1 -2.3%
Adjusted EBIT -2.1 -1.6 nm
Adjusted EBIT margin (%) -35.2 -26.8 -840 bps
Diatron
In € million H1/2019 H1/2018 Change
Sales 20.7 16.9 +22.2%
Adjusted EBIT 3.3 2.0 +69.1%
Adjusted EBIT margin (%) 16.2 11.7 +450 bps
Others
In € million H1/2019 H1/2018 Change
Sales 1.8 2.9 -39.9%
Adjusted EBIT 0.0 0.2 nm
Adjusted EBIT margin (%) -1.2 7.8 -900 bps
Due to rounding, percentages presented may not precisely reflect the absolute figures.
FINANCIALS
LONDON - SEPTEMBER 5, 2019
CASH FLOW AND NET DEBT
• Cash flow from operating activities up by 8.4% yoy to € 12.9 million (adverse effect from high cash tax payments)
• Higher investment spending due to significant capacity expansion at HQ (construction projects) and high development activities
• Investment ratio1 of 12.7% for the first six months within full year target corridor of 12% to 14%
• Higher net debt position attributable to first time adoption of IFRS 16 and financing of capex investments
23
€ 000s H1/2019 H1/2018 Change
Cash flow – operating activities 12.9 11.9 +8.4%
Cash flow – investment activities -14.8 1.0 nm
Cash flow – financing activities -1.5 -9.7 nm
Free cash flow -1.9 12.9 nm
€ 000s H1/2019 FY/2018 Change
Cash and cash equivalentsat end of period
20.4 23.8 -14.3%
Equity ratio (%) 51.0 55.3 -430 bps
Net debt 74.8 53.1 +40.9%
1 Total investments in intangible and tangible assets in % of sales
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OUTLOOK AND STRATEGY
OUTLOOK AND STRATEGY
LONDON - SEPTEMBER 5, 2019
FINANCIAL GUIDANCE 2019
• Group sales are expected to increase by at least 12% (at constant exchange rates)
Several new product launches
• Adjusted EBIT margin of around 14% to 15% (2018: 13.9%)
Positive scale effects
First positive impact from already defined earnings improvement measures
Adverse effects from continuing high development activities
• Investments in tangible and intangible assets of around 12% to 14% of sales
Ongoing construction measures for significant capacity expansion
Investments due to high number of development projects
After significant increase in 2018 and 2019 investment ratio will likely decline considerably from 2020 onwards once construction projects for capacity expansion have been completed
25
OUTLOOK AND STRATEGY
LONDON - SEPTEMBER 5, 2019 26
FOCUS IN 2019
• Reaccelerate top-line growth and reduce earnings volatility across business units
• Sign several new development and supply agreements
• Prepare path to efficiency gains following successful ERP system implementation
• Achieve significant number of product launches
Two systems for partners were launched in H1 2019
Further expected launches within 2019 among others include a blood banking instrument, a proprietary analyzer platform and various stand-alone modules
• Drive results from defined earnings improvement initiative
• Expand development capacities including significant expansion of buildings
• Enable customers and STRATEC to grow sustainably above the long-term market average
Focus on high growth areas of application within in-vitro diagnostics and healthcare research
Secure and further boost expertise and technology portfolio with intellectual property rights
• Broadening of product/value offering without entering into competition to partners
Organically and via selective M&A transactions
Widen offering in areas not perceived as core for/by our customers
• Increase proportion of service parts & consumables
Utilize tailwind from increasing system complexity
Further expand smart consumables business (microfluidic chips, cartridges, etc.)
Utilize combined product offering of instruments, software and consumablesto increase proportion of recurring sales
• Drive customer diversification
Utilize extended platform offering
Extend components business
Accelerate diversification (e.g. veterinary, translational research)
OUTLOOK AND STRATEGY
LONDON - SEPTEMBER 5, 2019 27
STRATEGIC PRIORITIES
28
APPENDIX
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APPENDIX
29
KEY FIGURES AT A GLANCE1
1 Figures adjusted for comparison; adjusted for depreciation and amortization from purchase price allocation for acquisitions, related integration expenses and other extraordinary effects. Reconciliation to IFRS figures can be found in the respective annual report.
2 From continuing operations
LONDON - SEPTEMBER 5, 2019
IFRS (€ million) 2014 2015 2016 2017 2018
Sales 144.9 146.9 184.9 207.5 187.8
Adjusted EBIT 24.1 26.9 32.2 36.4 26.2
Adjusted EBIT margin (%) 16.6 18.3 17.4 17.5 13.9
Adjusted Consolidated net income2 19.8 22.1 25.3 28.9 20.2
Adjusted Earnings per share (€) 2 1.68 1.87 2.14 2.43 1.70
Dividend per share (€) 0.70 0.75 0.77 0.80 0.82
No. of employees 544 583 976 1,086 1,228
Total assets 137.8 158.9 258 264 275
Equity ratio (%) 81.3 82.0 55.7 59.8 55.3
Free cash flow 32.9 17.3 -70.4 14.4 1.2
APPENDIX
LONDON - SEPTEMBER 5, 2019
Consolidated net incomeEBIT
ADJUSTMENTS
30
€ 000s H1/2019
Adjusted EBIT 12,723
Adjustments:
Transaction-related expenses and associated restructuring expenses
-1,285
PPA amortization -4,535
EBIT 6,903
€ 000s H1/2019
Adjusted consolidated net income from continuing operations
10,284
Adjusted earnings per share from continuing operations in € (basic)
0.86
Adjustments:
Transaction-related expenses and associated restructuring expenses
-1,285
PPA amortization -4,535
Current tax expenses 350
Deferred tax income 722
Consolidated net income from continuing operations
5,537
Earnings per share from continuingoperations in € (basic)
0.46
APPENDIX
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SHAREHOLDER STRUCTURE(AS OF: JUNE 2019)
SHARE
IPO Aug. 1998Number of shares 12,012,795Share price (08/16/2019) € 64.40Market capitalization € 774 million
Fixed and family ownership(incl. their investment companies)
Free float
Institutional investors > 3%:Allianz Global InvestorsAmeriprise FinancialBNP Paribas Investment PartnersOppenheimerFunds
41.1%
58.9%
STRATEC SEGewerbestr. 3775217 BirkenfeldGermany
Phone +49 7082 7916-0Fax +49 7082 7916-999www.stratec.com
CONTACT
THANK YOU
FOR YOUR
ATTENTION
CONTACT
Marcus WolfingerCEO
Jan Keppeler, CFAHead of IR & CC
Phone +49 7082 [email protected]
32LONDON - SEPTEMBER 5, 2019