Chief Financial Officer
"For the first time, sales exceeded the CHF 1 billion mark."
Full-year order entry increased by 17.3% to CHF 1,132.9 million (2021: CHF 965.4 million), or by 17.6% in local currencies. On an organic basis, i.e. excluding acquired Paramit for the first seven months of the year, order entry was down by 0.2% in local currencies, compared to the substantial order entry achieved with COVID-related orders in the prior-year period. Order entry for products not related to COVID testing continued to be strong throughout 2022. In the second half of the year, order entry increased by 2.8% in local currencies and was down by 2.4% in local currencies on an organic basis.
Sales for fiscal year 2022 climbed by 20.9% to CHF 1,144.3 million (2021: CHF 946.6 million), corresponding to a growth of 21.3% in local currencies. Overall sales growth also benefited from the passthrough of higher material costs at Paramit that was recorded as part of revenues (around 3 percentage points growth contribution to total revenues). Organic sales increased by 1.8% in Swiss francs and by 2.2% in local currencies, thereby more than offsetting the substantial decline in COVID-related revenues recorded in the prior-year period. Estimated COVID-related sales in 2022 were around CHF 60 million, a substantial decline compared to the estimated CHF 150-170 million in 2021. Growth of non-COVID-related revenues in 2022 is estimated in the mid-teens percentage range in local currencies.
Sales in the second half rose by 13.7% in Swiss francs and by 13.8% in local currencies. Organic sales in the second half of the year increased by 7.8% in Swiss francs and by 8.2% in local currencies with no meaningful contribution from COVID-related revenues (estimated at only around CHF 10 million compared to an estimated CHF 30-40 million in the second half of 2021).
Sales in the Life Sciences Business increased by 1.5% to CHF 492.3 million (2021: CHF 485.1 million) and were 3.3% above the prior-year period in local currencies, despite the high base from the prior-year period, in which revenues increased by 19.0% in local currencies. Sales growth of products in non-COVID related applications is estimated in the mid-teens percentage range in local currencies and was driven by strong demand for non-COVID-related liquid handling and detection instruments as well as service and spare parts revenues. The coronavirus pandemic has structurally reshaped many laboratory processes, leading to higher overall demand for automation in many application areas, from next-generation sequencing (NGS) and other genomics to proteomics and cell biology workflows. Sales growth continued in the second half of the year, with sales increasing by 2.1% in local currencies.
As expected, full-year order entry in the Life Sciences Business was slightly below the prior-year period, compared to the substantial order entry achieved with COVID-related orders in the prior-year period.
The Partnering Business generated sales of CHF 652.0 million during the year under review (2021: CHF 461.6 million), which corresponds to an increase of 41.3% in Swiss francs and 39.7% in local currencies. On an organic basis, i.e. excluding Paramit's sales in the first seven months of the year, sales rose by 2.2% in Swiss francs and 1.1% in local currencies.
With total sales of CHF 334.7 million, Paramit recorded strong sales growth of 22.0% in local currencies when including the pass-through of higher material costs, and growth of 14.4% when excluding this effect (2021: CHF 262.6 million if acquisition had occurred at the beginning of 2021; CHF 113.3 million for the months of August-December).
As expected, the negative “COVID effect” on revenues was more pronounced for Tecan’s legacy Partnering Business compared to the Life Sciences Business due to significantly lower COVID-related sales in the reporting period. Demand for OEM components, on the other hand, was very strong, and sales to customers in other areas of in-vitro diagnostics, which were negatively affected during the pandemic, also showed positive momentum again. Sales growth of these products in non-COVID-related applications is estimated in the high single-digit percentage range in local currencies. In the second half of the year, sales in local currencies increased by 24.1% and by 13.5% on an organic basis.
Order entry for fiscal 2022 grew at a slightly lower rate than sales.
In Europe, Tecan’s full-year sales increased by 9.5% in Swiss francs and by 13.5% in local currencies. Organic sales development continued to be significantly impacted by a pandemic-related surge in demand in the prior-year period, resulting in organic sales declining by 3.7% in Swiss francs and 0.3% in local currencies. Against this high comparative basis, sales in the Life Sciences business were 8.9% lower than the previous year in local currencies, and with Paramit’s contribution sales in the Partnering Business increased by 9.6% in local currencies. In the second half of the year, sales in Europe increased by 10.7% in Swiss francs and by 14.4% in local currencies (organic +10.2% in local currencies).
In North America, sales grew by 32.0% in Swiss francs and by 27.6% in local currencies. Similar to Europe, organic sales development in North America was impacted by the COVID-related high comparison base, resulting in a 0.5% decline in sales in local currencies and a 3.0% increase in Swiss francs, supported by positive foreign exchange developments. Due to the exceptionally high basis of comparison, organic sales of the Partnering Business segment decreased by 8.2% in local currencies. The Life Sciences business segment, on the other hand, reported a 7.8% increase in sales in local currencies, driven by strong demand for non-COVID-related instruments, more than replacing the significant COVID-related sales in 2021. North American sales in the second half grew by 19.1% in Swiss francs and by 13.9% in in local currencies (organic +5.9% in local currencies).
In Asia, Tecan recorded an increase in sales of 14.7% in Swiss francs and 19.4% in local currencies. On an organic basis, sales grew by 9.9% in Swiss francs and by 14.4% in local currencies. Organic sales development in China was also in the mid-teens percentage range despite the lockdown measures in Shanghai at the beginning of the year. The positive sales development was driven by both business segments, with the Life Sciences business recording growth of 18.0% in local currencies, while the Partnering business grew by 20.7% in local currencies. In the second half of the year, total sales in Asia increased by 5.3% in Swiss francs and 12.6% in local currencies (organic +11.3% in local currencies).
Gross profit increased to 438.1 million Swiss Francs (2021: CHF 408.6 million), which was 29.5 million or 7.2% above the prior-year figure. The increase was driven by the higher sales volumes. Excluding Paramit, the gross profit margin reached 46.9%, in line with the communicated decrease of around 100 basis points expected due to significant inflation effects. Including Paramit, the reported gross profit margin was at 38.3% of sales (2021: 43.2%).
Several factors impacted the gross profit margin level. Main effects contributing:
- (-) Paramit acquisition impact (>500 bps, including purchase price amortization and pass-through of higher material costs without margin)
- (-) Higher material cost
- (-) Higher personnel cost
- (+) Price increases
- (+) Efficiency gains
With +9.2%, operating expenses grew substantially less than sales (+20.9%) and totaled CHF 292.1 million or 25.5% of sales in 2022 (2021: CHF 267.5 million or 28.3% of sales). All costs include the costs of the acquired Paramit Corporation for the full 12 months of 2022 and for the five months from August to December in 2021. Excluding Paramit and following a period of significant growth, Tecan's legacy business returned to a normalized operating cost base of approximately 32% of sales.
Total operating expenses include amortization charges of CHF 32.7m from acquisitions (2021: CHF 20.6m) as disclosed for each line item of the statement of profit or loss in note 21.1 of the Financial Report 2022.
Sales and Marketing increased less than total sales (+10.6%) to CHF 132.8 million (2021: CHF 120.1 million). As a percentage of sales, they reached 11.6% of sales (2021: 12.7%), however increased as a percentage of sales for Tecan’s legacy business with significant channel and e-commerce investments.
At an absolute level, net research and development expenses increased to CHF 77.9 million (2021: CHF 71.9 million). As the Paramit business is less development-intensive, with activities largely funded by OEM customers, research and development costs as a percentage of total sales reached 6.8% (2021: 7.6%). They increased as a percentage of sales for Tecan’s legacy business with continued investments in innovation to position the business for sustained accelerated growth.
Overall R&D activities and gross expenses (“gross R&D”) were also higher compared to the prior-year period, including capitalization of development costs and customer funding of OEM projects. Capitalization of development costs increased to CHF 11.6 million (2021: CHF 9.6 million), while amortization from capitalized development costs increased to CHF 10.4 million (2021: CHF 8.1 million). Gross R&D was at CHF 94.0 million or 8.2% of sales (2021: CHF 86.8 million or 9.2% of sales).
General and administration expenses increased to CHF 81.4 million (2021: CHF 75.5 million). As a percentage of sales, G&A cost decreased to 7.1% of sales (2021: 8.0%), mainly related to corporate development activities and the respective higher costs in the prior-year period that led to the Paramit acquisition.
Reported operating profit before depreciation and amortization (earnings before interest, taxes, depreciation and amortization; EBITDA) rose by 5.0% to CHF 214.9 million in the fiscal year 2022 (2021: CHF 204.6 million). Reported EBITDA includes all integration-related costs in connection with the Paramit acquisition (CHF 13.6 million).
*Adjusted EBITDA for 2020-2022
Reported operating profit in this segment (earnings before interest and taxes; EBIT) reached CHF 87.1 million (2021: CHF 103.7 million). The operating profit margin amounted to 17.1% of sales (2021: 19.9%).
Following a period of significant growth, Tecan made increased investments in research and development as well as in the sales and service organization and support functions that support the larger installed base of instruments and scale of the business, resulting in a more normalized operating cost base. However, supported by sustained price increases, gross profit margin remained stable compared to the prior-year period despite substantially higher material costs.
Reported operating profit in this segment (earnings before interest and taxes; EBIT) increased by 25.5% and amounted to CHF 74.4 million (2021: CHF 59.2 million), while the operating profit margin reached 11.4% of sales (2021: 12.8%). The integration costs (CHF 13.6 million; CHF 7.3 million in 2021) and amortization of acquired intangible assets in connection with the acquisition of Paramit (CHF 18.9 million; CHF 20.0 million in 2021) were recognized for the Group in the Partnering Business segment and had a notable effect on the reported operating result for the segment. Other factors negatively impacting segment margins were lower volumes for diagnostic instruments with corresponding negative economies of scale, and the pass-through of higher material costs without margin. At the same time, these effects, as expected, could not be offset by price increases, as price adjustments for the instrument business are contractually regulated and only took effect at the beginning of 2023.
Adjusted net profit amounted to CHF 154.4 million (2021: CHF 152.1 million).
Reported net profit for 2022 was CHF 121.1 million (2021: CHF 121.7 million). This figure includes integration-related costs in connection with the Paramit acquisition (CHF 13.6 million) as well as the accumulated amortization of acquired intangible assets (CHF 23.5 million).
Reported basic earnings per share reached CHF 9.53 (2021: CHF 9.95). Adjusted earnings per share reached CHF 12.14 (2021: CHF 12.35). Earnings per share decreased more than reported net profit due to the higher average share count in 2022, mainly related to the newly issued shares in September 2021 to partly refinance the Paramit acquisition.
*Adjusted earnings per share for 2021 and 2022
Shareholder’s equity at December 31, 2022 increased by 10.8% to CHF 1,357.7 million (2021: CHF 1,224.9 million). Correspondingly, Tecan's equity ratio increased to 64.2% as of December 31, 2021 (December 31, 2021: 61.4%).
Cash flow from operating activities reached CHF 128.3 million in 2022 (2021: CHF 169.9 million). Increased inventories and safety stock to ensure delivery capability in times of tight material supply, as well as higher income tax payments, had a negative impact on cash flow. After a short period of net debt to partially refinance the Paramit acquisition, Tecan has already restored its net liquidity position to CHF 41.2 million (cash and cash equivalents plus short-term time deposits less bank liabilities, loans and the outstanding bond).
Chief Financial Officer
CHF 1'000 / unaudited
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