Carl Zeiss Meditec (AFX) Q3 2024 earnings summary

Executive summary

• Revenue for the first nine months was €1,486.5 million, down 1.5% year-over-year; at constant currency, revenue was nearly flat at +0.1%.

• EBIT dropped 33.6% year-over-year to €162.7 million, with EBIT margin at 10.9% (down from 16.2%); net income and EPS fell 42% to €180 million and €1.32, respectively.

• Organic revenue (excluding DORC) declined 5% year-over-year, reflecting continued pressure from a restricted investment climate and weaker consumer sentiment.

• Book-to-bill ratio stabilized above 1 in Q3, indicating order intake stabilization.

• Strict cost control and transformation initiatives were implemented, with further reductions planned for Sales & Marketing and R&D.

Financial highlights

• Adjusted EBIT for nine months was €161 million (margin 11.2%), down from €253 million (16.8%) last year.

• Operating cash flow declined to €57.4 million from €103.4 million, mainly due to lower earnings and higher tax payments.

• CapEx rose to €116 million, driven by expansion in consumables production and the DORC acquisition.

• Net financial debt stood at €-424.1 million as of June 30, 2024.

• Gross margin was 53.7%, down from 57.3% year-over-year due to lower operating leverage and FX headwinds.

Outlook and guidance

• Full-year 2023/24 revenue is forecast at around €2,000 million, with DORC expected to contribute €100 million in H2.

• Adjusted EBIT guidance revised to €225–275 million, now factoring in PPA charges from legacy acquisitions.

• Management expects to achieve the lower end of the adjusted EBIT range, given a softer summer peak and back-end loaded U.S. sales.

• Further cost savings in Sales & Marketing and R&D are targeted for 2024/25, aiming for low to mid-double-digit million euro savings.

• Mid-term goal is to return to a 20%+ EBIT margin, relying on cost efficiency, top-line growth, and higher consumables share.