Carl Zeiss Meditec (AFX) Q3 2024 earnings summary

Executive summary

• Revenue for the first nine months of 2023/24 declined by 1.5% year-over-year to €1,486.5m, with currency-adjusted growth nearly flat at +0.1%.

• EBIT dropped 33.6% year-over-year to €162.7m, with EBIT margin at 10.9% (prior year: 16.2%), mainly due to lower revenue and unfavorable product mix.

• EPS fell 42.4% to €1.32, impacted by lower EBIT, reduced FX hedging, and higher interest expenses.

• Book-to-bill ratio stabilized above one in Q3, indicating some order intake recovery.

• Cost-cutting and transformation initiatives were implemented, with further reductions planned for FY 2024/25.

Financial highlights

• DORC contributed €52.7m in Q3 revenue; excluding DORC, organic revenue was down 5%.

• Gross margin declined to 53.7% (down from 57.3%) due to less operating leverage, unfavorable mix, and FX headwinds.

• Adjusted EBIT margin was 11.2% (prior year: 16.8%), excluding DORC-related effects and special items.

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

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

Outlook and guidance

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

• Adjusted EBIT guidance revised to €225m–€275m, now including PPA charges from legacy acquisitions.

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

• Further cost savings in Sales & Marketing and R&D are targeted for 2024/25.

• Mid-term goal is to return to a 20% EBIT margin, relying on cost efficiency, top-line growth, and transformation initiatives.