Chief Financial Officer’s Report

Full-year order entry increased by 12.9% to CHF 965.4 million (2020: CHF 855.2 million), or by 13.0% in local currencies. Following a surge in orders for product lines supporting the global fight against the coronavirus pandemic in 2020, orders were only down 1.5% in Swiss francs and 1.4% in local currencies year-on-year on an organic basis, i.e. excluding Paramit's order entry in the last five months of the year. The effect of the high COVID-related orders in the prior-year period was particularly visible in the second half of 2021. Here, organic order entry was 18.4% below the prior-year figure in Swiss francs and 18.6% in local currencies. Including Paramit, however, order entry grew by 7.2% in Swiss francs and by 6.9% in local currencies in the second half of the year.

As order entry exceeded realized sales also on an organic basis, the order backlog excluding Paramit increased in the low single-digit percentage range to reach a record high as of December 31, 2021. Including orders from Paramit, order backlog even grew at a substantial double-digit rate.

Sales for fiscal year 2021 climbed by 29.5% to CHF 946.6 million (2020: CHF 730.9 million), corresponding to a growth of 29.6% in local currencies. On an organic basis, sales grew by 14.0% to CHF 833.3 million, or by 14.1% in local currencies. Organic sales growth was also driven by a rebound and some pent-up demand for products for non-COVID research and clinical applications. COVID-19-related product lines contributed mainly to sales in the first half of the year, with no meaningful contribution from COVID-related systems and instrument components in the second half of the year. Demand for pipette tips continued at elevated levels throughout the year based on a larger installed base of instruments with broad test menus, including usage for ongoing COVID-19 testing. With a first-time revenue contribution of CHF 113.3 million from Paramit (CHF 105.6 million, excluding a one-off adjustment in revenue recognition), sales in the second half rose by 17.0% in local currencies and by 16.6% in Swiss francs. As expected, organic sales in the second half of the year declined by 9.9% in Swiss francs and 10.2% in local currencies against the strong base in the prior-year period. 

In Europe, Tecan’s full-year sales increased by 27.1% in Swiss francs and by 25.9% in local currencies. Organic sales grew by 16.6% in Swiss francs and by 15.5% in local currencies. The organic sales performance was driven by the Life Sciences Business, which recorded growth of 26.9% in local currencies, while sales in the Partnering Business grew by 1.7% in local currencies. 

In the second half of the year, sales in Europe increased by 17.5% in Swiss francs and by 17.2% in local currencies. Excluding Paramit, sales declined by 2.0% in Swiss francs and 2.1% in local currencies in the second half year. Despite a strong base in the prior-year period, the Life Sciences Business achieved sales growth of 3.8% in local currencies in the last six months of the year, while organic sales in Partnering Business declined by 10.7%. 

In North America, sales grew by 35.9% in Swiss francs and by 38.5% in local currencies in 2021. On an organic basis, full-year sales increased by 11.1% in Swiss francs and by 13.2% in local currencies. Similar to Europe, the organic sales development was driven by strong growth of 22.4% in local currencies in the Life Sciences Business, while the Partnering Business grew by 2.4%. In both business segments, sales development in the second half of the year was significantly impacted by a pandemic-related surge in demand in the prior-year period. Due to the high basis of comparison, sales in the Life Science business declined by 3.6% in local currencies, while organic sales of the Partnering Business segment fell by 39.3%. Including Paramit, sales in the second half grew by 19.6% in Swiss francs and 19.8% in local currencies.

In Asia, Tecan recorded an increase in sales of 23.0% in Swiss francs and 20.6% in local currencies. On an organic basis, sales grew by 19.1% in Swiss francs and by 16.8% in local currencies. Sales development in Japan was particularly strong, while organic sales in China were lower than in the prior-year period due to the high basis of comparison. This was also reflected in the fact that the Life Sciences Business only grew at a rate of 1.1% in local currencies, while the Partnering Business reported strong organic sales growth of 39.5%.

In the second half of the year, total sales in Asia increased by 14.1% in Swiss francs and 12.2% in local currencies, while organic sales grew by 7.0% in Swiss francs and 5.2% in local currencies. Organic sales development in the second half was driven by the Partnering Business with growth of 20.9% in local currencies, while sales in the Life Sciences Business declined by 4.6%.

The reader is referred to the “Life Sciences Business” and “Partnering Business” sections of this Annual Report for a detailed description of the business performance of the individual segments.

Gross profit increased to 408.6 million Swiss Francs (2020: CHF 354.9 million), which was 53.7 million or 15.1% above the prior-year figure. The increase was driven by the higher sales volumes. Excluding newly acquired Paramit, the gross profit margin was only slightly below the prior-year level (2020: 48.6%). Including the impact of the Paramit acquisition, the reported gross profit margin was 43.2% of sales. 

Several factors impacted the gross profit margin level. Main effects contributing:

• (-) Paramit acquisition impact (including CHF 13.6m amortization of acquired backlog)
• (-) Higher freight, logistics, inventory-related and material cost
• (+) Price
• (+) Product mix

With +14.3%, operating expenses grew substantially less than sales (+29.5%) and totaled CHF 234.0 million or 28.3% of sales in 2021 (2020: CHF 234.0 million or 32.0% of sales). All costs include the costs of the acquired Paramit Corporation for the five months from August to December 2021.

Sales and Marketing increased by 13.4% to CHF 120.1 million with continued investments in the market units (2020: CHF 105.9 million). As a percentage of sales, they reached 12.7% of sales (2020: 14.5%).

At an absolute level, net research and development expenses increased to CHF 71.9 million (2020: CHF 62.0 million). R&D expenses increased at a higher rate than organic sales. As a percentage of total sales including Paramit, they reached 7.6% of sales (2020: 8.5%). 

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 decreased to CHF 9.3 million (2020: CHF 15.3 million). Gross R&D was at CHF 86.8 million or 9.2% of sales (2020: CHF 78.5 million or 10.7% of sales).

General and administration expenses increased to CHF 75.5 million (2020: CHF 66.0 million), mainly related to corporate development activities. As a percentage of sales, G&A cost decreased to 8.0% of sales (2020: 9.0%).

Reported operating profit before depreciation and amortization (earnings before interest, taxes, depreciation and amortization; EBITDA) rose by 28.6% to CHF 204.6 million in the fiscal year 2021 (2020: CHF 159.1 million). Reported EBITDA includes all transaction and acquisition-related costs in connection with the Paramit acquisition (CHF 7.3 million). The reported EBITDA margin accordingly reached 21.6% of sales (2020: 21.8%). Adjusted EBITDA increased by 37% to CHF 214.5 million (2020: CHF 156.5 million) and excludes all transaction and acquisition-related costs and one-time pension plan effects. The adjusted EBITDA margin increased by 130 basis points to 22.7% of sales (2020: 21.4%). This increase was mainly driven by benefits of scale due to the significantly increased volumes and total operating costs that grew at a lower rate than sales, a favorable product mix of instruments as well as a higher contribution from consumables and spare parts.

Excluding Paramit, i.e. on a comparable basis with the updated outlook of August 18, 2021, the EBITDA margin increased to 23.1% (also excludes the Paramit revenue contribution). Tecan thus met its communicated outlook of expanding the EBITDA margin to “at least 23% of sales” on a like-for-like basis. 

The reported profit before interest and taxes, EBIT, increase by 19.9% to CHF 145.5 million, (2020: CHF 121.4 million). The EBIT margin reached 15.4% of sales (2020: 16.6%). Reported EBIT includes all transaction and acquisition-related costs in connection with the Paramit acquisition and also the accumulated amortization of acquired intangible assets which significantly increased due to the Paramit acquisition.

Reported net profit for the year 2021 rose by 17.3% to CHF 121.7 million (2020: CHF 103.7 million). This figure includes all transaction and acquisition-related costs in connection with the Paramit acquisition as well as the accumulated amortization of acquired intangible assets. Reported net profit increased less than operating profit (earnings before interest and taxes; EBIT) as a lower financial result was recorded due to currency hedging losses that were partly related to the Paramit acquisition. 

Reported basic earnings per share increased by 14.5% to CHF 9.95 (2020: CHF 8.69). Adjusted earnings per share reached CHF 12.89. Adjusted earnings per share excludes transaction and acquisition-related costs (+7.3 million), one-time pension plan effects (+2.7 million) as well as the accumulated amortization of acquired intangible assets (+24.6 million) and was calculated with the reported Group tax rate of 11.8%.

Shareholder’s equity at December 31, 2021 increased by 67.0% to CHF 1’224.9 million, mainly driven by the consolidation of the acquired Paramit Corporation (2020: CHF 733.7 million). Correspondingly, Tecan's equity ratio reached 61.4% as of December 31, 2021 (December 31, 2020: 66.2%).

Including effects from the Paramit acquisition, cash flow from operating activities reached CHF 169.9 million (2020: CHF 208.3 million), corresponding to 17.9% of sales (2020: 28.5%).

To partly refinance the USD 1.0 billion (CHF 920 million) acquisition of Paramit Corporation, Tecan successfully raised CHF 250 million debt through the issuance of a fixed rate domestic straight bond. The bonds bear a 0.050% coupon and have a duration of 4 years (final maturity October 6, 2025). The bonds are listed and traded on the SIX Swiss Exchange (ISIN CH1137122755). Despite the debt financing, Tecan’s net debt position only stood at CHF 9.2 million (cash and cash equivalents plus short-term time deposits minus bank liabilities, loans and bond debt). On December 31, 2020, Tecan was in a net liquidity position that had reached CHF 467.7 million.