Merck : Q1 24 Earnings Presentation

Off to a Good Start

Merck KGaA, Darmstadt, Germany

Q1 2024 results

Belén Garijo, CEO

Helene von Roeder, CFO

May 15, 2024

Disclaimer

Publication of Merck KGaA, Darmstadt, Germany. In the United States and Canada the group of companies affiliated with Merck KGaA, Darmstadt, Germany operates under individual business names (EMD Serono, Millipore Sigma, EMD Performance Materials). To reflect such fact and to avoid any misconceptions of the reader of the publication certain logos, terms and business descriptions of the publication have been substituted or additional descriptions have been added. This version of the publication, therefore, slightly deviates from the otherwise identical version of the publication provided outside the United States and Canada.

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This communication may include "forward-looking statements." Statements that include words such as "anticipate," "expect," "should," "would," "intend," "plan," "project," "seek," "believe," "will," and other words of similar meaning in connection with future events or future operating or financial performance are often used to identify forward-looking statements. All statements in this communication, other than those relating to historical information or current conditions, are forward-looking statements. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond control of Merck KGaA, Darmstadt, Germany, which could cause actual results to differ materially from such statements.

Risks and uncertainties include, but are not limited to: the risks of more restrictive regulatory requirements regarding drug pricing, reimbursement and approval; the risk of stricter regulations for the manufacture, testing and marketing of products; the risk of destabilization of political systems and the establishment of trade barriers; the risk of a changing marketing environment for multiple sclerosis products in the European Union; the risk of greater competitive pressure due to biosimilars; the risks of research and development; the risks of discontinuing development projects and regulatory approval of developed medicines; the risk of a temporary ban on products/production facilities or of non-registration of products due to non-compliance with quality standards; the risk of an import ban on products to the United States due to an FDA warning letter; the risks of dependency on suppliers; risks due to product-related crime and espionage; risks in relation to the use of financial instruments; liquidity risks; counterparty risks; market risks; risks of impairment on balance sheet items; risks from pension obligations; risks from product-related and patent law disputes; risks from antitrust law proceedings; risks in human resources; reputational issues related to ESG matters or our inability to reach our ESG aspirations; risks from e-crime and cyber attacks; risks due to failure of business-critical information technology applications or to failure of data center capacity; environmental and safety risks; unanticipated contract or regulatory issues; a potential downgrade in the rating of the indebtedness of Merck KGaA, Darmstadt, Germany; downward pressure on the common stock price of Merck KGaA, Darmstadt, Germany and its impact on goodwill impairment evaluations as well as the impact of future regulatory or legislative actions.

The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included elsewhere, including the Report on Risks and Opportunities Section of the most recent annual report and quarterly report of Merck KGaA, Darmstadt, Germany. Any forward-looking statements made in this communication are qualified in their entirety by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us or our business or operations. Except to the extent required by applicable law, we undertake no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

This presentation contains certain financial indicators such as EBITDA pre adjustments, net financial debt and earnings per share pre adjustments, which are not defined by International Financial Reporting Standards (IFRS). These financial indicators should not be taken into account in order to assess the performance of Merck KGaA, Darmstadt, Germany in isolation or used as an alternative to the financial indicators presented in the consolidated financial statements and determined in accordance with IFRS. The figures presented in this statement have been rounded. This may lead to individual values not adding up to the totals presented.

2	Merck KGaA, Darmstadt, Germany Q1 2024 Results Presentation | May 15, 2024

Agenda

Executive summary

Financial overview

Outlook & Guidance

3	Merck KGaA, Darmstadt, Germany Q1 2024 Results Presentation | May 15, 2024

Executive summary

01

Highlights: Positive order development in PS, Strong HC and EL

Operations

Group Financials

Life Science:

• Sales down -13% org. compared to prior year, when destocking was not yet fully visible
• Solid start to year with order intake up QoQ and YoY in PS; confirming sales inflection in H2

Healthcare:

• Sales up +10% org. with strong China effect YoY, due to prior year COVID-19 effects; Wave 1 launches up +15% org.
• Largest growth contribution to Group

Electronics:

• +6% org. sales growth as market conditions gradually improve
• Semi materials driving growth, with 3rd quarter of sequential sales growth

Q1 organic sales: -1.2%

Q1 organic EBITDA pre: -5.2%

2023 Sustainability Report published

Guidance:

Net sales: €20.6 bn to €22.1 bn

EBITDA pre: €5.7 bn to €6.3 bn

EPS pre: €8.05 to €9.10

Net financial debt to EBITDA pre:

1.3x on March 31, 2024

5	Merck KGaA, Darmstadt, Germany Q1 2024 Results Presentation | May 15, 2024	Acronym(s): PS = Process Solutions; HC = Healthcare, EL = Electronics

Strong HC and EL performance largely compensate for LS

Q1 YoY Net Sales	Organic	Currency	Portfolio
Life Science	-12.6%	-1.2%	0.0%
Healthcare	10.1%	-2.6%	0.0%
Electronics	6.3%	-3.2%	-0.1%
Group	-1.2%	-2.0%	0.0%

Total

-13.8%

7.5%

3.1%

-3.3%

Q1 YoY EBITDA pre

€1,587 m				€1,454 m
	-5.2%	-3.2%	0.0%
Q1 2023	Organic	Currency	Portfolio	Q1 2024

• Life Science: Down -13% org. against strong Q1'23 comparable, across PS (-19% org.), SLS (-7% org.) and LSS (-17% org.); hovering around the trough in PS, but sequential order uptake
• Healthcare: Sales growth of +10% with positive contribution from all franchises. Established portfolio growing +9% amid softer China comps, compensating fading competitor stock-outs
• Electronics: Semiconductor up +8% org., driving sector growth; Display up +4% org.; Surface up +2% org.

• Life Science EBITDA pre down -30% org. mainly due to lower volumes, idle / start-up capacities and negative mix
• Healthcare EBITDA pre up +28% org. driven by higher sales and regaining full Bavencio rights
• Electronics EBITDA pre up +4% reflecting volume leverage, with support from positive mix
• Moderate foreign exchange burden on EBITDA pre

6	Merck KGaA, Darmstadt, Germany Q1 2024 Results Presentation | May 15, 2024	Acronym(s): LS = Life Science; HC = Healthcare; EL = Electronics
Totals may not add up due to rounding

Financial overview

02

Q1 2024: Overview

Key figures

[€m]	Q1 2023	Q1 2024	Δ
Net sales	5,293	5,120	-3.3%
EBITDA pre	1,587	1,454	-8.4%
Margin (in % of net sales)	30.0%	28.4%	-1.6pp
EPS pre	2.36	2.06	-12.7%
Operating cash flow	853	1,035	21.4%
[€m]	Dec. 31, 2023	March 31, 2024	Δ
Net financial debt	-7,500	-7,498	0.0%
Net working capital	5,093	5,711	12.1%
Employees	62,908	62,345	-0.9%

Comments

• Sales down -3% with slight FX headwinds and slight organic decline
• HC and EL sales growth largely compensate decline in LS
• HC EBITDA pre growth only partially compensates lower sales and EBITDA pre margins in LS
• EPS pre declines more than EBITDA pre and mainly due to higher regular D&A
• OCF up, with lower NWC outflow and bonus payments
• Net financial debt stable with continuing investment for future growth

Acronym(s): OCF = Operating Cash Flow, NWC = Net Working Capital; D&A = Depreciation & Amortization;

FX = foreign exchange; LS = Life Science; HC = Healthcare; EL = Electronics

Totals may not add up due to rounding

8	Merck KGaA, Darmstadt, Germany Q1 2024 Results Presentation | May 15, 2024

Q1 2024: Reported figures

Reported results

[€m]	Q1 2023	Q1 2024	Δ
EBIT	1,035	931	-10.0%
Financial result	-23	-32	42.1%
Profit before tax	1,012	899	-11.2%
Income tax	-213	-200	-6.1%
Effective tax rate (%)	21.0%	22.2%	1.2pp
Net income	796	694	-12.8%
EPS (€)	1.83	1.60	-12.6%

Comments

• EBIT declines, driven by lower LS sales and EBIT margins, compensated partially by EBIT growth in HC and EL
• Unfavorable financial result mainly due to pensions and bonus provisions
• Effective tax rate increased to 22%, in the middle of the guidance range due to additional pillar 2 expenses
• Net income and EPS profile reflect lower EBIT, unfavorable financial result and higher taxes

		Acronym(s): LS = Life Science; HC = Healthcare; EL = Electronics
9	Merck KGaA, Darmstadt, Germany Q1 2024 Results Presentation | May 15, 2024	Totals may not add up due to rounding

▪ Science & Lab Solutions: -7%org. sales YoY decline, driven by weaker pharma spending, alongside govt. funding delays in the US; Q1'23 not impacted by these effects; 2nd quarter of sequential growth

▪ Life Science Services: -17%org. sales decline with unfavorable CDMO project phasing and the streamlining of a CDMO customer's supply chain

Life Science Q1: Sales down v.s. strong comps and COVID-19non-repeats

Life Science P&L

[€m]	IFRS	Pre
	Q1 2023	Q1 2024	Q1 2023	Q1 2024
Net sales	2,487	2,144	2,487	2,144
M&S	-568	-551	-569	-545
Admin	-105	-112	-94	-95
R&D	-104	-95	-104	-95
EBIT	672	377	689	404
EBITDA	884	585	-	-
EBITDA pre	901	611	901	611
(in % of net sales)	36.2%	28.5%	36.2%	28.5%

Comments

Net sales bridge

	€2,487 m					0.0%	€2,144 m
				-12.6%
				-1.2%
								+0.0%
		Q1 2023	Organic	Currency	Portfolio		Q1 2024
EBITDA pre bridge
	€901 m					0.0%	€611 m
				-30.3%	-1.8%
		Q1 2023	Organic	Currency	Portfolio		Q1 2024

▪ Process Solutions: down -19% org. sales compared to strong Q1'23; YoY ▪ Lower M&S YoY reflecting cost programs and efficiencies

decline driven by destocking, COVID-19non-repeats and China market ▪ Lower R&D expenses YoY mainly due to project phasing slowdown

▪ EBITDA pre down YoY mainly on lower volumes with negative mix effects amid underutilization impacting the gross margin

▪ LS EBITDA pre margins improving by 220 bps QoQ driven by positive mix effects and cost control

10	Merck KGaA, Darmstadt, Germany Q1 2024 Results Presentation | May 15, 2024	Acronym(s): M&S = Marketing and selling expenses, R&D = Research & Development,
CDMO = contract development and manufacturing organization; Totals may not add up

due to rounding