DGAP-News: Ongoing impact of aap's restructuring clearly reflected in Q3 and 9M sales, earnings, and cash flow

- Sales increased 15% (Q3) to EUR 3.0 million and 29% (9M) to EUR 8.9 million (CER^[1]: 18% (Q3) and 39% (9M))

- Continued positive EBITDA in Q3 and 9M; >+100% increase (Q3) to KEUR 20 and >+100% (9M) to EUR 0.1 million

- Operating cash flow balanced for first time in Q3; +87% improvement to EUR -0.4 million (9M); still clear trend towards black zero

- Promising clinical data for antibacterial silver coating technology

aap Implantate AG ("aap" or the "Company") continued profitable growth with double-digit sales increases and positive EBITDA in both the third quarter and the nine-month period of 2021.
 

Q3/2021 and 9M/2021 - Key results and progress

- Sales by regions: Growth drivers in Q3 especially regions LATAM (= Latin America; >+100%) and APAC (= Asia Pacific; +80%) as well as in 9M LATAM (>+100%), North America distribution business (+35%) and EMEA (= Europe, Middle East, Africa; +18%)

- North America: Sales increase in distribution business in Q3 (+7%) and in 9M (+35%); overall US market continues to grow significantly in 9M (+19%)

- Earnings: Recurring EBITDA improved to black zero in Q3 (Q3/2020: EUR -0.4 million) and to EUR -0.4 million in 9M (9M/2020: EUR -3.3 million)

- Operational trauma business: Positive result (Recurring EBITDA) in Q3 and 9M^[2]

- Gross margin and costs: Gross margin^[3] remains stable at high level of 85% in 9M and with increase in gross margin in absolute terms in line with sales growth key driver of earnings improvement; reduced cost level with declining personnel (-11% in 9M) and other costs (-15% in Q3 and -13% in 9M) as well as significant decrease in one-time effects

- Balance sheet: Equity ratio at a good level of 45% (31.12.2020: 52%)

- Financing: Successful completion of capital increase with subscription rights with significant oversubscription led to net inflow of approx. EUR 4.8 million

- Silver coating technology: Promising clinical results after use of three silver-coated aap plate systems in IIT study and two individual healing trials in patients with particularly severe infections and complex bone fracture healing disorders; start of human clinical study in Q4/2021

- Resorbable magnesium implant technology: Continued talks with technology-savvy investors on financing up to complete sale of technology

Q3/2021 and 9M/2021 - Key financial figures

Sales Q3/2021

^{* In Q3/2020, sales development was still reported for the regions Germany, USA (distributors and global partners), International (excluding USA; Europe (excluding Germany), BRICS countries and RoW). The reclassification has been made in the context of the current financial reporting.}

Sales 9M/2021

Looking at the individual regions, sales growth in the third quarter of 2021 was particularly driven by Latin America (>+100%) and Asia Pacific (+80%). In Latin America, aap was able to grow significantly in all countries after the COVID-19 pandemic subsided and also won an initial order in Colombia as part of a successful distributor change. In Asia Pacific, the Company continues to record a recovery in business and expanded sales year-on-year despite regional lockdowns (e.g. in Thailand and China). The decline in the EMEA region (= Europe, Middle East, Africa; -10%) is primarily attributable to the relatively late end of the lockdown in Germany in June and to business in Spain, which was still severely affected by the consequences of the COVID-19 pandemic, as both markets together account for around 60% of the total sales volume in this region. At the same time, however, aap was able to grow at a double-digit rate again in other markets, such as South Africa. In the first nine months of 2021, the Company realized sales increases in all regions, some of which were significant. Besides Latin America (>+100%), the main growth drivers were North America (+19%) and the EMEA region (+18%), where aap benefited particularly from a revival of business in the Middle East. The Company also recorded sales growth in the Asia Pacific region (+9%).
 

In North America, aap's distribution business continued to grow in the third quarter of 2021 (+7%) and showed a further dynamic development in the first nine months as well (+35%), but at the same time felt the effects of the COVID-19 pandemic for the first time. Thus, COVID-19-related hospital stays increased steadily in the period from the end of July to the beginning of September and surgery appointments were cancelled. In the overall US market, sales development in the third quarter of 2021 stabilized at the prior-year level, as the third quarter of 2020 still included follow-up orders from a large order placed by a global partner in the first quarter of 2020, whereas only consumables were ordered in much lower volumes thereafter. In the first nine months of 2021, aap recorded an increase in sales in North America (+19%) and is thus still clearly on a growth track overall.
 

EBITDA Q3

EBITDA 9M

With regard to earnings, aap was able to achieve an improvement both in the third quarter and in the first nine months of 2021 and generated positive EBITDA in each case. The background to these developments is, in addition to the increase in gross margin in absolute terms in line with the sales growth as key driver, also a reduced cost level. The positive cost development results on the one hand from the implemented restructuring measures, which are reflected in declining personnel and other costs, and on the other hand from a significant decrease in one-time effects, which in the nine-month period of 2020 were still largely characterized by the restructuring and refinancing as well as the revision of the quality management system. The improvement in EBITDA thus visibly reflects the successes realized as part of the restructuring, which can be summarized as follows:

- Stabilization of gross margin at a high level of 85% and with increase in gross margin in absolute terms in line with sales growth key driver of earnings improvement

- Stabilization of personnel expenses in Q3/2021 at prior-year level (non-significant increase
<1% vs. Q3/2020) and decrease of 11% in 9M/2021 vs. 9M/2020

- Declining trend in other costs (-15% in Q3/2021 and -13% in 9M/2021) with significantly reduced non-recurring expenses

Excluding one-time effects, recurring EBITDA improved to a black zero in the third quarter of 2021 (Q3/2020: EUR -0.4 million) and to EUR -0.4 million in the first nine months of the current financial year (9M/2020: EUR -3.3 million). Overall, this reflects the targeted development: focus on established markets with higher profit margins and sustainable streamlining of the cost structure to improve operating performance. Looking at the development of the pure operating trauma business, aap was additionally able to generate a positive result (recurring EBITDA) in both the third quarter and the nine-month period of 2021. This is again a confirmation for the implemented restructuring and transformation measures, but also an incentive to build up a sustainably profitable trauma business with further growing sales.
 

In connection with its innovative antibacterial silver coating technology, aap was able to achieve promising clinical results in three operations with silver-coated plate systems as part of an IIT study and two individual healing trials in patients with particularly severe infections and complex fracture healing disorders. In all three cases, excellent healing processes were recorded, and no indications of infections were found. In addition, measurements of the silver concentration in two of these procedures showed that there was only a relevant increase in the silver concentration locally in the area of the wound where the antibacterial effect is needed. The overall very good results are a positive indication for the planned multicenter human clinical study that aap will start in Germany before the end of the fourth quarter of 2021 to obtain CE approval. The Company will use the funds from the successful capital increase to equip the first participating clinics with silver-coated implants by the end of the year, which will mark the official start of the study.
 

With a view to securing further financing, aap successfully completed a capital increase with subscription rights in October. The capital increase met with great interest from both existing and new investors and was in the end significantly oversubscribed. All in all, all 1.5 million shares offered were placed at a subscription price of EUR 3.30, so that after deduction of consultancy and other costs the Company received a net inflow of around EUR 4.8 million. aap takes this as a clear appreciation of the performance of the management and the employees in the Company's transformation process in the very challenging times of the COVID-19 pandemic. The Management Board also sees this result as a sign of support for the corporate strategy pursued, both in terms of short-term performance metrics and long-term value creation.

Outlook

The Management Board continues to closely monitor and assess the global impact of the COVID-19 pandemic on aap's business activities and financial results. Based on the third quarter 2021 results, currently strongly rising incidence figures in Germany as well as in many regions worldwide, the visible volatility as a result of COVID-19 and the labor and staffing environment in the healthcare sector potentially hampering an accelerated recovery, the Company now expects sales at the lower end of the guidance range of EUR 12.0 million to EUR 14.0 million. On the earnings side, management expects EBITDA to be in the upper half of the guidance range of EUR -2.0 million to EUR -0.7 million. The above sales and EBITDA forecasts are, however, subject to the condition that the infection situation in the context of the COVID-19 pandemic does not deteriorate further and that corresponding lockdown measures or other restrictions are imposed in the sales regions relevant for aap or that there are temporary production stoppages at the Berlin location or at aap's service providers/suppliers.
^{[1] CER = Constant Exchange Rates.
[2] aap Group excluding development costs for silver coating and resorbable magnesium implant technologies, non-recurring one-time effects and non-allocable central costs.
[3] Based on sales, changes in inventories of finished goods and work in progress and cost of materials / cost of purchased services.}
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aap Implantate AG (ISIN DE0005066609) - General Standard/Regulated Market - All German stock markets -

About aap Implantate AG
aap Implantate AG is a globally active medical technology company based in Berlin, Germany. The Company develops, manufactures and markets products for trauma. The IP-protected portfolio includes besides the innovative anatomical plating system LOQTEQ(R) a wide range of cannulated screws. In addition, aap Implantate AG has an innovation pipeline with promising development projects such as the antibacterial silver coating technology and magnesium-based implants. These technologies address critical and unmet needs in trauma. In Germany, aap Implantate AG sells its products directly to hospitals, purchasing groups, and hospital groups, while at international level it primarily uses a broad network of distributors in around 25 countries. In the US the Company pursues a hybrid distribution strategy with its subsidiary aap Implants Inc. Distribution is carried out both through distribution agents and partnerships with global orthopedic companies. aap Implantate AG's stock is listed in the General Standard segment of Frankfurt Stock Exchange (XETRA: AAQ.DE). For more information, please visit our website at www.aap.de.

Forward-looking statement
This release may contain forward-looking statements based on current experience, estimates and projections of the management board and currently available information. They are not guarantees of future performance. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. Many factors could cause the actual results, performance or achievements of aap to be materially different from those that may be expressed or implied by such statements. These factors include those discussed in aap's public reports. Forward-looking statements therefore speak only as of the date they are made. aap does not assume any obligation to update the forward-looking statements contained in this release or to conform them to future events or developments.
For queries, please contact:

aap Implantate AG; Fabian Franke; Head of Investor Relations; Lorenzweg 5; 12099 Berlin, Germany; Phone: +49 (0)30 75019 - 134; Fax: +49 (0)30 75019 - 290; Email: f.franke@aap.de