EQS-News: Q2/2023: Revenue growth in all regions (+8 %) and adjusted earnings improvement (EBITDA +21 %)

• Sales: Q2 at EUR 2.9 million (+8 % yoy) and H1 at EUR 5.9 million (+6 % yoy); all regions in Q2 above previous year with LATAM (Q2: +13 %; H1: +29 % yoy) and North America (Q2: +7 %; H1: +11 % yoy) as main growth drivers
• EBITDA: improvement in Q2 (+21 %) with EUR 0.6 million (Q2/2022 corr.: EUR 0.7 million) and H1 (+13 %) with EUR 1.0 million (H1/2022.corr.: EUR -1.2 million) as a result of sales growth and cost savings
• Silver: Clinical trial resumed with revised study protocol in April; acceleration in patient recruitment visible.
• Outlook H2/2023: Sales expected to increase compared to H1/2023 with sales/EBITDA targets within previously communicated guidance range

aap Implantate AG ("aap" or the "Company") can look back on a good second quarter. The Company was able to increase sales and EBITDA compared to the previous year both in the second quarter and in the first months. The Company's revenues increased by 8 % to EUR 2.9 million in Q2/2023 compared to the same period last year (Q2/2022: EUR 2.7 million). In the first six months of the current fiscal year, sales increased by 6 % to EUR 5.9 million compared to the first half of 2022 (H1/2022: EUR 5.6 million). Regarding earnings, the Company recorded improved EBITDA of EUR 0.6 million (Q2/2022 corr.: EUR 0.7 million) in the second quarter and of EUR 1.0 million (H1/2022 corr.: EUR 1.2 million) in the first six months of 2023, respectively, mainly reflecting revenue growth combined with lower other costs.

Q2/2023 and H1/2023 - Key financial figures

After the publication of the 2022 half-year financial statements, technical errors were identified in the determination of the inventory valuation of work in progress. These errors were corrected and the results of the 2022 half-year financial statements were subsequently adjusted. In the published consolidated interim report as of June 30, 2023, the published figures and the corrected figures are presented for the previous year. In the following, only the corrected figures are compared with the figures as of June 30, 2023 as prior-year comparatives. For further details, please refer to the published interim Group report as of June 30, 2023.

Sales Q2/2023 and H1/2023

Looking at the individual regions, aap achieved in some cases very significant sales increases. Business in the LATAM markets developed particularly strongly, with growth in the second quarter and the first half of the year of +13 % and +29 % respectively. This positive development is due to the continuous expansion of our distributors in important markets such as Mexico and Brazil, the progressing market development by the new distributor in Colombia, and the growing activities in the entire Latin American region.

In the EMEA region, Germany performed well again after a long period of stagnation and grew across the board in the second quarter, resulting in an overall increase in sales of +16 %. As a result of the upturn in the second quarter, Germany can therefore report an increase of +5 % for the first half of the year. In the other central EMEA markets, customers were still reluctant to make new investments and build up inventories due to the continuing difficult economic situation, particularly as a result of severely delayed payment flows from healthcare facilities/systems. Sales excluding Germany declined slightly (Q2: 2 % yoy, H1: 8 % yoy). We expect a catch-up effect here in the second half of the year.

In the North America, aap continued its growth path with +7 % sales growth in the second quarter and thus half-year growth of +11 %. In addition to the growing number of surgeries performed, sales growth was also supported by higher-value fittings.

EBITDA Q2/2023 and H1/2023

aap thus realized an improved EBITDA in the second quarter as well as in the first half of 2023 compared to the same period of the previous year of EUR 0.6 million (Q2/2022: EUR -0.7 million) and EUR 1.0 million (H1/2022: EUR 1.2 million), respectively. The following developments were the main factors here:

• Sales growth (Q2: +8 %; H1: +6 % yoy) and increased total output (Q2: +10 %; H1: +1 % yoy) in Q2 and H1/2023,
• Improved gross margin[1] in Q2 and stable high gross margin (in %) in H1 with increase in gross margin[2] in absolute figures (Q2: EUR +0.5 million, H1: EUR +0.3 million),
• Slight decline in personnel expenses in the second quarter and in the first six months compared with the same period of the previous year,
• Decrease in other costs mainly from decreased costs for external consulting and premises and incidental rental costs mainly due to decreased costs for electricity,
• increased net cost effect[3] from the conduct of the human clinical trial as a result of restarting the study in Q2/2023 under a modified study protocol,
• reduced non-recurring effects that had an earnings-improving impact on EBITDA in the previous year.

Based on the aforementioned developments, - Recurring EBITDA adjusted for non-recurring effects - improved to EUR 0.6 million (Q2/2022: EUR 1.0 million) and EUR 1.0 million (H1/2022: EUR 1.4 million) in both the second quarter and the first half of 2023.

Cash flow

aap's operating cash flow decreased by 17 % year-on-year in H1/2023 to EUR 1.5 million mainly due to the reduction of operating and other liabilities following the capital increase. Cash flow from investing activities showed an outflow of EUR 0.1 million in H1/2023 and was attributable to investments in development projects of EUR 59 thousand (H1/2022: EUR 67 thousand) and property, plant and equipment of EUR 93 thousand (H1/2022: EUR 249 thousand). In the area of financing activities, there was a cash inflow totaling EUR 2.8 million for the first half of 2023 (H1/2022: cash outflow of EUR 0.2 million), which was primarily due to the payment from the capital increase of net EUR 3.3 million EUR, taking up a shareholder loan in the amount of EUR 0.1 million, repayment of financial liabilities and shareholder loans in the amount of EUR 0.5 million (H1/2022: EUR 0.3 million), and payment of interest in the amount of EUR 80 thousand (H1/2022: EUR 130 thousand). As a result, cash and cash equivalents increased to EUR 1.4 million at the end of the second quarter. Net debt (total of all cash and cash equivalents less all interest-bearing liabilities) was EUR 1.5 million on June 30, 2023 (December 31, 2022: EUR 3.0 million).

Silver coating technology

In the field of silver coating technology, aap was able to successfully resume the recruitment phase in the ongoing human clinical trial with an adapted study design in the first half of 2023 and, after only a short time, enroll more patients with the new study protocol than with the previous study protocol. During the reporting period, the focus was on the resumption of the human clinical study and the provision of a sufficient number of test samples for the new study design and the corresponding infrastructure in the clinical study centers required for this purpose. In addition, discussions continued on possible co-funding of the human clinical trial and further cooperation opportunities.

Outlook

Not included in the following forecast statements:

• A significant tightening of sanctions against Russia or a change in the interpretation of existing sanctions,
• An expansion of the conflict situation outside Ukraine,
• Further additional significant increases in energy and commodity prices above currently foreseeable levels or restrictions on the Company's ability to operate due to partial or total cessation of gas and/or energy supplies due to, among other things, the war in Ukraine,
• Financial risks from ongoing interest rate increases in various markets and their impact on government finances in healthcare.

In the second half of 2023, in addition to stabilizing aap's financial position, the focus will be on expanding the human clinical trial for the innovative antibacterial silver coating technology to all planned clinic centers and preparing for the currently planned MDR audit in Q4.

Based on the aap share price loss, the conversion of the remaining amount of the convertible bond will become due for repayment and will thus burden liquidity by around EUR 0.5 million. Depending on the economic development of aap in the second half of the year as well as the further macroeconomic development, this may lead to an early refinancing of the Company, which was planned in the Annual Report 2022 only for the financial year 2024. The Management Board is currently evaluating various options in this context.

On the revenue side, the Executive Board plans for an increase in the second half of 2023 compared to the first six months and expects the planned revenue level of EUR 12 million to EUR 14 million for fiscal year 2023. For EBITDA in fiscal year 2023, the Executive Board expects a value of EUR 2.5 million to EUR 1.7 million, considering the full project costs for the further implementation of the human clinical trial for the antibacterial silver coating technology.

-------------------------------------------------------
aap Implantate AG (ISIN DE0005066609) - General Standard/Regulated Market - All German Stock Exchanges -

About aap Implantate AG
aap Implantate AG is a globally active medical technology company headquartered in Berlin, Germany. The company develops, manufactures and markets products for traumatology. In addition to the innovative anatomical plate system LOQTEQ®, the IP-protected portfolio includes a wide range of cannulated screws. In addition, aap Implantate AG has an innovation pipeline with promising development projects such as antibacterial silver coating technology and magnesium-based implants. These technologies address critical problems in traumatology that have not yet been adequately solved. In Germany, aap Implantate AG sells its products directly to hospitals, purchasing groups and group clinics, while at international level it primarily uses a broad network of distributors in around 25 countries. In the USA, the company relies on a hybrid sales strategy through its subsidiary aap Implants Inc. This involves sales both via distribution agents and as part of partnerships with global orthopedic companies. The aap Implantate AG share is listed in the General Standard of the Frankfurt Stock Exchange (XETRA: AAQ.DE). For further information, please visit our website at www.aap.de.

The figures presented in this press release may be subject to technical rounding differences which do not affect the overall presentation.

Forward-looking statements
This release may contain forward-looking statements based on current expectations, beliefs and projections of the Management Board and currently available information. The forward-looking statements are not guarantees of future performance or results. 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. These factors include those discussed in aap's public reports. Forward-looking statements therefore speak only as of the date they are made. We assume no obligation to update the forward-looking statements made in this release or to conform them to future events or developments.

^[1] Gross margin in % = (sales revenue +/- change in inventories of finished goods and work in progress - cost of materials / cost of purchased services)/ sales revenue

^[2] Gross margin absolute = sales revenue +/- change in inventories of finished goods and work in progress - cost of materials / cost of purchased services

^[3] Cost of conducting the clinical trial less grant funding