Letter to shareholders

Full-year order entry was CHF 1,028.1 million (2022: CHF 1,132.9 million or CHF 1,078.1 million when compared in local currencies), down 9.3% year-on-year, or 4.6% in local currencies compared to the substantial order entry in 2022, when COVID-related orders as well as orders related to the material cost pass-through still contributed to the high order intake. With solid inflow of new orders close to the level of sales, the book-to-bill ratio reached a value of 0.96. Excluding the effects of lower COVID-related orders and orders related to the pass-through of material costs, underlying order entry grew in the low single-digit percentage range in local currencies.

Order entry improved in the second half of the year and was just 1.9% below the previous year's figure in local currencies, after a more significant decline in the first half of the year.

Underlying sales for fiscal year 2023 increased by 6.3% in local currencies, despite a challenging market environment and cautious investment behaviour among many customers. Underlying sales exclude the effects of lower COVID-related sales (estimated net effect of CHF -58.5m in local currencies) and a lower pass-through of material costs compared to the prior-year period (net effect of CHF -19.7m). In the second half of the year, underlying sales increased by 5.5% in local currencies.

Reported sales for fiscal year 2023 decreased in comparison to fiscal year 2022 by 6.1% in Swiss francs and reached CHF 1,074.4 million, including a substantial negative exchange rate effect (2022: CHF 1,144.3 million or CHF 1,089.0 million when compared in local currencies). Reported sales were 1.3% below the prior-year period when measured in local currencies. Reported sales in the second half decreased by 4.9% in Swiss francs and rose by 1.0% in local currencies.
Reported full-year sales in 2023 also include a significant reduction of pass-through sales compared to 2022, sooner and to a much greater extent than anticipated. As these sales do not generate a margin from passing on higher material costs, this is a desirable development.

At CHF 220.6 million, adjusted operating profit before depreciation and amortization¹ (earnings before interest, taxes, depreciation and amortization; EBITDA) was slightly below the previous year's level (2022: CHF 229.9 million), mainly due to lower sales volumes and a negative impact from exchange rate movements in major currencies versus the Swiss franc. The adjusted EBITDA margin nevertheless increased to 20.5% of sales (2022: 20.1%).

Adjusted net profit² increased to CHF 164.4 million (2022: CHF 154.4 million), supported by a one-time positive effect in connection with transitional measures from the Swiss tax reform. Adjusted earnings per share rose to CHF 12.88 (2022: CHF 12.14). Reported net profit for 2023 increased to CHF 132.1 million (2022: CHF 121.1 million), while basic earnings per share grew to CHF 10.34 (2022: CHF 9.53).

Cash flow from operating activities increased by 25.2% to CHF 160.6 million in 2023 (2022: CHF 128.3 million). In the prior-year period, inventories and safety stocks increased to ensure delivery capability in times of tight material supplies. These inventories have now been increasingly reduced again. Thanks to the strong cash flow, Tecan’s net liquidity position (cash and cash equivalents plus short-term time deposits less bank liabilities, loans and the outstanding bond) increased to CHF 112.6 million (December 31, 2022: CHF 41.2 million).

Details on the course of business of the Life Sciences Business and Partnering Business segments and regarding the regional development of sales are discussed in the Chief Financial Officer’s Report.

1. The adjusted operating profit before depreciation and amortization excludes acquisition- and integration-related costs (+CHF 17.7 million) as well as one-time pension plan effects (-CHF 4.4 million).
2. The calculation of 2023 adjusted net profit and adjusted earnings per share excludes acquisition- and integration-related costs (+CHF 17.7 million), one-time pension plan effects (-CHF 4.4 million) as well as the accumulated amortization of acquired intangible assets (+CHF 19.5 million) and they were calculated with the reported Group tax rate of 1.3%.

Tecan accomplished a number of successful new product launches in 2023. A standout example is the Phase Separator^TM, an innovative new pipetting capability available on the Fluent^®Automation Workstation that represents a significant advance in liquid-separation technology. This unique module has advanced sensor handling to detect the interface between plasma and erythrocytes, which is a demand of workflows like cell free DNA sequencing used in Liquid Biopsy and is also applicable in fields such as separating the organic solvent phase in sample preparation for mass spectrometry workflows.

Further launches included the Uno Single-Cell Dispenser. The Uno is a valuable tool for isolating single cells, enabling researchers to delve into the biology of individual cells, helping to understand their specialist functions, what triggers disease, and which treatments might restore them to health. MCA 96, a pipetting arm with 96 channels for the Fluent liquid handler, was launched together with an easy-to-use software, and was met with high demand across all key applications of genomics, proteomics and cellomics.

With the launch of new products in the Resolvex line, Tecan added unique solutions to its broad automation portfolio to address unmet workflow needs for proteomics and bioanalytical processes, nucleic acid purification and food safety workflows.

Among the various partnerships entered into in 2023, Tecan and Oxford Nanopore build an alliance to create automated, seamless and fully compatible nanopore sequencing library preparation for any-length fragments of native DNA/ RNA. As well as concluding several new partnerships, Tecan supported various customers with product launches and the start of commercial supplies in all business areas of the Partnering Business. This includes customized OEM systems, OEM components as well as contract development and manufacturing services. The project pipeline for new development and manufacturing projects remains rich and the broad OEM offering with strong synergies between the individual projects and solution offerings is well received.

In 2023, Tecan continued to scale its global production and operational footprint. The series production of Cavro components has been successfully transferred from San Jose, California, and is now established in Tecan’s facilities in Morgan Hill, California, and Penang, Malaysia. Additionally in 2023, as a step in executing the strategy to serve local customers in China even better and meet their specific needs, Tecan opened a new assembly facility in the Shanghai Free-Trade Zone (SFTZ), where liquid handling and detection products can now also be locally manufactured to advance Tecan’s business in China.

Tecan’s commitment to sound management of its social and environmental impacts was evidenced further in 2023, with an outstanding participation rate of 92% in Tecan’s first fully global employee survey, and the achievement of Great Place to Work^TM certification in Germany and the U.S., to add to re-certification in Switzerland.

Tecan submitted greenhouse gas emissions reduction targets to the Science Based Targets initiative in 2023, and received validation of these and confirmation that the planned emissions reduction plans are credible. Tecan has set an absolute emissions reduction target and commits to reach net-zero greenhouse gas emissions across the value chain (scopes 1, 2 and 3) by 2050. The related targets are set out in the 2023 Sustainability Report and include a commitment to purchase 100% renewable electricity by 2025. The 2023 Sustainability Report was published as part of the Annual Report 2023 on March 12, 2024 and can be found here.

Based on the solid underlying sales growth and an increase in profitability, net profit and cash flows for the full year 2023 and on the basis of an ongoing positive business outlook, the Board of Directors will propose at the Company’s Annual General Meeting on April 18, 2024, an increase in the dividend from CHF 2.90 to CHF 3.00 per share. Half of the dividend, i.e., CHF 1.50, will be paid out from the available capital contribution reserve and is therefore not subject to withholding tax.

Tecan initiated its short-term outlook and guidance for the full year 2024 and expects reported sales to increase in the low single-digit percentage range in local currencies. As the previous disruptions in the supply chain have normalized, we do not assume any further sales from the pass-through of material costs in this outlook (CHF 8.1 million in 2023).

Tecan expects an adjusted EBITDA margin excluding acquisition- and integration-related costs of at least around 20% of sales, including an assumed negative effect from foreign exchange rates of around 40 basis points.

The outlook 2024 does not take account of potential acquisitions during the course of the year.

The expectations regarding profitability are based on an average exchange rate forecast for full year 2024 of one euro equaling CHF 0.95 and one US dollar equaling CHF 0.85.

Tecan also reiterated its mid-term outlook, in which the company expects to continue to outperform the average growth rate of the underlying end markets and thus to return to average organic growth rates in the mid to high single-digit percentage range in local currencies, while continuously improving profitability.

On behalf of the Board of Directors and the Management Board, we would like to thank Tecan teams around the world for their dedicated effort and engagement, demonstrating Tecan’s values and bringing our corporate purpose to life. We would also like to express our deep appreciation of the trust placed in us by our customers and shareholders and the valued support they continue to provide.

Männedorf, March 7, 2024