Evotec SE (EVO) Q1 2026 Earnings Report, Transcript and Summary

Ladies and gentlemen, welcome to the Evotec First Quarter 2026 Financial Results and Business Update Conference Call. I am Moira, the chorus call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Sarah Fakih, EVP, Head of Global Communications and Investor Relations. Please go ahead.

Thank you, Moira. Good morning, good afternoon, and welcome to today's webcast and conference call. My name is Sarah Fakih, and I'm the Head of Global Communications and Investor Relations at Evotec. Please allow me to introduce today's speakers. Joining me on the call are Christian Wojczewski, Chief Executive Officer of Evotec; and Claire Hinshelwood, our Chief Financial Officer. Our Chief Scientific Officer, Cord Dohrmann, will be available for the Q&A session. Please note that this call is being webcast live and will be archived in the event calendar on our website. Before we begin, a few forward-looking statements. The discussion and responses to your questions on this call reflect management's views as of today, Wednesday, May 6, 2026. During this call, we will make statements and provide responses that state our intentions, beliefs, expectations or projections regarding the future. These statements constitute forward-looking statements within the meaning of applicable securities laws. They are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied. Evotec disclaims any intention or obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances. For further information regarding these risks and uncertainties, please refer to our public filings and disclosures. With this, let me hand over the call to Christian.

Thank you, Sarah. Good morning, and good afternoon to everyone. Thank you for joining today's call. In the first quarter of 2026, we advanced Evotec's value creation levers, most notably with the initiation of the Horizon business transformation, which calibrates the company across the 3 pillars of operational excellence, science leadership and commercial execution. As communicated during our full year 2025 results on April 8, we expected a strong year-on-year comparison for the first quarter, considering onetime revenue in the previous year quarter as well as continued softness in the early drug discovery market. In addition, we have started execution of the Horizon plan, which is designed to put Evotec on a path towards sustainable growth and greater profitability while navigating a still challenging market environment. As such, the quarter's major business highlights were characterized by a strong operational focus, important leadership enhancements and positive commercial indicators that support the next phase of our transformation. Let me start with our Horizon initiative. During the quarter, we moved from announcement into implementation. We're making progress in the formal works council consultation processes across our European sites as well as in the preparation for our footprint and organizational adjustment measures. These steps are laying the groundwork for a more focused operating model, improved cost discipline and better alignment of our resources with strategic priorities. This operational progress was accompanied by targeted expansion of our leadership team to support execution. Following the appointment of Ashiq Khan as Chief Commercial Officer last month, we further strengthened operational leadership with the appointment of Ingrid Muller to the Management Board as Chief Operating Officer. Both roles will be instrumental in moving our transformation forward. On the commercial side, we see early signs of improvement in key leading indicators. Customer engagement has increased, and we have continued to build a pipeline of potential partnerships, which indicates our revamped commercial organization is already making an impact. Turning to the headline quarterly financials. Group revenues came in at EUR 156.6 million, while adjusted group EBITDA was negative EUR 21.9 million. As mentioned before, this was primarily due to a challenging prior year comparison based on a one-off license sale in that quarter. Continued softness in D&PD demand and significant foreign exchange headwinds further enhanced the year-on-year step down. We confirm our full year '26 guidance of EUR 700 million to EUR 789 million or EUR 730 million to EUR 810 million at constant exchange rates in revenues and EUR 0 million to EUR 40 million or EUR 10 million to EUR 15 million at constant exchange rates in adjusted EBITDA. We continue to expect an improvement in both revenue and profitability over the course of the year with performance weighted towards the second half. This improvement is driven by anticipated market and DPD recovery, but also by increasing visibility across our strategic partnership pipeline. With respect to financial leadership, 2 weeks ago, we announced an orderly transition in the Chief Financial Officer role. Paul Hitchin decided to step down from his position effective April 30, 2026, for personal reasons. I would like to sincerely thank Paul for his extraordinary dedication and the skill with which he helped set Evotec on a path of strategic change during a period of transformation. As of May 1, Claire Hinshelwood has assumed the role of Chief Financial Officer. Claire is with us on the call today, and I would like to extend a very warm welcome. Claire will ensure continuity in financial leadership and provide stability as we continue to recalibrate the company. Before I move into the detailed quarterly review, I would like to give Claire the opportunity to briefly introduce herself. Claire, over to you.

Thank you, Christian, and good morning and good afternoon to everyone. It's a real pleasure to be joining you today, and I'm genuinely excited to take on the role of Chief Financial Officer at an important moment for the company. I bring more than 30 years of experience in senior financial leadership roles and built much of my professional foundation at Syngenta, where I held a number of finance positions and developed deep experience in global finance, business strategy, performance management and governance within a strongly science-driven organization. Following that, I joined Novartis, where I worked across multiple regions, portfolios and regulatory environments, shaping my deep understanding of capital discipline, financial transparency and decision-making in the big pharma context. Most recently as Group CFO of BMI Group, I led the transformation of the company's financial operations and delivered significant underlying improvements in its financial position during a period of particularly challenging market conditions. That experience strengthened my hands-on experience in managing change, stabilizing performance and creating financial resilience. What attracted me to Evotec is its unique position at the heart of the life sciences ecosystem. This position is built on its well-established scientific excellence, a differentiated partnership-based business model and the potential of cutting-edge technologies such as the highly innovative Just-Evotec Biologics platform alongside a clear commitment to transformation through the Horizon initiative. As CFO, my priority is to ensure continuity and robustness in the financial leadership while supporting disciplined execution of the group's transformation agenda. Looking ahead, my focus will be on strengthening financial transparency, supporting progress towards improved profitability and sustainable growth and working closely with the Management Board and all colleagues across the organization to ensure that financial discipline underpins decision-making at every level. I'm very much looking forward to working with the team and to engaging with many of you over the coming months. And with that, I'll hand back to Christian.

Thank you, Claire. On Slide 6, let me briefly follow with an introduction to Ingrid Muller, who also joined the Evotec Management Board on May 1 as our new Chief Operating Officer. Ingrid joins us from CureVac and brings over more than 20 years of international senior leadership experience in the life sciences industry, including prior roles at Sanofi and Fresenius Kabi, where she successfully managed complex operational environments and large-scale execution and transformation topics. With a strong background across operations, strategy, supply, procurement and R&D integration, Ingrid oversees Evotec's D&PD operations and plays a central role in strengthening cross-functional execution, delivery performance and operational discipline. A key focus of her mandate is the implementation of the Horizon initiative, supporting improvements in quality, productivity, scalability and cost control across the organization. Turning now to Slide 7 and our most recent news flow. We continue to make progress across key partnerships in D&PD that reinforce a consistent theme, our ability to deliver high-quality outcomes at speed and through AI-enabled integrated platforms. This capability is increasingly critical across therapeutic areas and partner types where execution speed, reliability and scientific quality are essential. A good example is our public and global health work. Following engagements such as our collaboration with BARDA on Ebola and Sudan viruses, Preparedness, we received 2 new grants from the Gates Foundation to advance tuberculosis drug discovery and translational research, accelerating progress towards shorter, safer and simpler tuberculosis treatment regimes. Both areas leverage our AI-enabled discovery and translational platforms to deliver rapidly and efficiently. The same strengths show in our medical dermatology collaboration with Almirall, where the joint team nominated a first preclinical development candidate progressing from lead identification to preclinical candidate in just 2 years, significantly faster than typical industry time lines. This milestone validates the efficiency of our AI and machine learning-enabled end-to-end data-driven discovery and preclinical model. The program is now advancing towards IND with continued support through our INDiGO platform. Taken together, whether in public sector engagements, global health initiatives or pharma partnerships, these examples demonstrate the speed, efficiency and quality of our D&PD platforms. With this, let me hand back the call to Claire for an overview of our financial results for the first quarter of 2026.

Thank you, Christian. Turning now to Slide 8, which shows our condensed income statement for the first quarter of 2026. Group revenues for the first quarter of 2026 amounted to EUR 156.6 million, representing a decrease of EUR 43.4 million or 21.7% compared to the same period in 2025. On a constant currency basis, Q1 group revenues decreased by 16.6% to EUR 166.9 million. Group revenues were impacted by the continuous market softness for early clinical discovery as well as the nonrecurrence of a $25 million license sale to Sandoz in the first quarter of 2025 as well as negative foreign exchange effects for which I will go into more detail on the next slide. Looking at the segments, revenues in D&PD decreased versus prior year by EUR 20.7 million or 14.7% on a reported currency basis to reach EUR 119.9 million, reflecting the mentioned challenging market environment and FX headwinds. Accordingly, at constant currencies, D&PD revenues declined by 10% to EUR 126.6 million compared with the prior year period. Just-Evotec Biologics revenue decreased by EUR 22.6 million or 38% to EUR 36.8 million in the first quarter. The decline was primarily driven by the nonrecurrence of the $25 million Sandoz license sale in the first quarter of 2025 as well as the expected decline in DoW revenues, which were offset by the year-on-year growth of non-DoW/non-Sandoz revenues of approximately 50%. On a constant currency basis, revenues in the segment amounted to EUR 40.4 million. R&D expenses totaled EUR 10.1 million, representing 6.4% of total revenue compared with EUR 14.9 million or 7.5% of total revenue in the first quarter of 2025. While continued investment in our technologies and platforms remains a core part of our strategy, spending in the quarter remained tightly focused on projects most relevant to our partners. Adjusted group EBITDA for the first quarter of 2026 amounted to negative EUR 21.9 million compared with EUR 3.1 million in the prior year period. It totaled negative EUR 18.9 million at constant exchange rates. At the segment level, adjusted EBITDA in D&PD decreased by EUR 2.9 million to negative EUR 9.8 million in the first quarter. At constant exchange rates, adjusted EBITDA amounted to negative EUR 5.5 million, broadly consistent with quarter 1 2025 EBITDA levels despite the aforementioned lower revenues in the segment, reflecting the impact of reductions in our structural cost base and business mix. Adjusted EBITDA in the Just-Evotec segment decreased by EUR 22.1 million to negative EUR 12.1 million or negative EUR 13.4 million at constant exchange rates. The primary driver to the year-on-year change reflects the nonrepeat of the Sandoz license payment. On Slide 9, let me go into more detail on the year-on-year movement in revenues by isolating the main factors that impacted performance in the first quarter. Compared with the first quarter of 2025, the decline in reported revenues was driven by 3 main factors. First, the negative FX effects, which were a meaningful headwind of EUR 10.2 million in the quarter, driven primarily by the U.S. dollar and the British pound. Second, the nonrecurrence of the $25 million or EUR 23.1 million Sandoz license payment that was recognized in the first quarter of 2025 in the Just segment. And third, a continued softness in the D&PD demand, reflecting the expected challenging market environment. When adjusting for these effects, the underlying development is significantly more moderate. Excluding both foreign exchange and the nonrecurring Sandoz license, group revenues declined by 6% Accordingly, at segment level, the Just-Evotec Biologics results showed continued underlying momentum with revenues increasing by 11% when excluding the Sandoz license and currency effects, absorbing the expected decline in DoW revenues. As already stated, in D&PD, revenues declined by 10% on a currency -- constant currency basis. Turning to liquidity and the balance sheet on Slide 10. Total liquidity in the first quarter of 2026 stood at EUR 444.8 million, representing a quarterly decrease of EUR 31.6 million compared with EUR 476.4 million at the end of the fourth quarter 2025. The balance sheet remains solid with the group continuing to hold a net cash position at the end of the quarter. The development in liquidity reflects a number of underlying dynamics. First, we saw favorable year-on-year movements in working capital, which supported an improved operating cash flow compared with the first quarter of 2025. Second, capital expenditure remained disciplined, resulting in lower cash outflows versus the prior year. And third, it is important to note that the reported liquidity excludes the expected gross proceeds of approximately $100 million related to the Gilead acquisition of our EVOequity portfolio company, Tubulis. We expect to receive these cash proceeds in the second quarter of 2026, which will provide a further strengthening of our liquidity position. And with that, let me hand back to Christian.

Let me now turn to Horizon and provide an update on the progress we made during the first quarter, shown on Slide 11. Horizon is designed to accelerate growth and promote agility by streamlining the organization around the 3 core pillars: operational excellence, scientific leadership and commercial execution. Since its announcement on March 10, Horizon moved from planning into active implementation with progress on the people and footprint-related measures. These actions are central to establishing a streamlined operating structure and improving cost base, centralizing technologies and strengthening capabilities critical to our strategy. In the United States, we are progressing well with the exit of the Framingham site as we are consolidating our U.S. operational footprint. Across Europe, implementation is progressing, and we expect the majority of legally mandated works council consultations to be completed mid-2026. First personnel adjustments in Europe are expected to start within the third quarter of this year. In the first quarter of 2026, we recorded EUR 75 million of reorganization cost provisions directly attributable to the Horizon restructuring measures. These mainly reflect personnel measures, including severance payments as well as impairment losses on property, plant and equipment and are based on estimates that are regularly reviewed and refined as implementation progresses. As previously communicated, we continue to expect structural run rate savings of approximately EUR 75 million by the end of 2027, with around 20% to 30% of these savings expected to materialize in 2026. Building on the strategic recalibration established through Horizon, we're taking a broader look at the group to ensure that our structure and positioning reflect the intrinsic value of our platforms and portfolio. Horizon fundamentally transforms how we operate, allocate capital, execute scientifically and commercially and compete more effectively in our markets. With this optimized foundation in place, it's the right time to conduct a strategic evaluation to assess how the value being created through this transformation is most effectively realized within the corporate structure of the company. This includes our portfolio, capital structure and ownership framework. As customary in such processes, the evaluation is being conducted with the support of experienced external advisers. There is no predefined outcome time line or commitment to pursue any transaction, and we will provide further updates if and when appropriate. Let me now turn to Slide 12, which provides a perspective on commercial momentum in the D&PD business. The first quarter of 2026 shows a continuation of positive signals we began to observe already in the second half of last year. Importantly, selected indicators are stabilizing or improving compared to early 2025. Starting with delivery stability, the decline in negative change orders we saw throughout 2025 and into early 2026 continued through the end of the first quarter, reaching levels below those recorded at the end of Q4 2025. This points to an increasingly stable delivery environment and higher customer confidence and investments. Moving down the funnel, proposal activity in discovery and preclinical development reached the highest level of the past 12 months at the end of the first quarter. This suggests improvement in commercial outreach and higher levels of customer engagement over the past year. These upstream indicators are complemented by continued progress in our execution metrics. Proposal turnaround times in discovery and preclinical development improved further and reached levels below the average number of days in 2025. This improvement reflects increasing efficiency in internal processes and better coordination between commercial teams. At the end of the funnel, net sales orders in the first quarter of 2026 remained broadly stable compared with Q4 2025. And viewed in combination with the reduction in negative change orders, the overall trend is positive. At the same time, net sales orders increased by approximately 15% year-on-year. Given Evotec's business model, revenues are influenced by strategic partnerships and milestone-driven activities, which by nature can lead to timing-related volatility rather than linear quarter-to-quarter progression. We're seeing a range of activity and maturing discussions, spanning collaborations with pharma partners on opportunities around the out-licensing of differentiated biological targets as well as access to our molecular patient database. While these discussions are at different stages, their breadth reinforces our confidence in the strength of our D&PD platforms and supports a more positive outlook as the year progresses. Overall, the commercial transformation is progressing as planned. While it's still early, these metrics give us increased confidence that we are seeing initial signs of stabilization. Before we turn to your questions on Slide 13, let me briefly summarize the key takeaways from today's presentation. As expected, our financial results in the first quarter of 2026 fell significantly compared with the same quarter last year due to a number of factors that we do not expect to persist into the rest of this year. As we begin the implementation of Horizon, we expect to begin seeing impacts in the latter half of 2026 with 20% to 30% of the estimated structural run rate savings of EUR 75 million being realized in 2026. We have already taken significant strides in implementing Horizon by strengthening our leadership in key commercial and operational roles, progressing our footprint reduction plans and improving our commercial execution. Relevant to this last category, we have seen multiple leading indicators trending positive and expect to see the downstream effects of that early activity in future quarters. Our recent progress in drug discovery and preclinical development collaborations reinforces a consistent theme, the ability to deliver high-quality outcomes at speed through AI-enabled integrated platforms. Whether in partnered programs such as dermatology with Almirall, global health initiatives supported by the Gates Foundation or public sector engagement with BARDA, we continue to demonstrate that our D&PD capabilities can be applied across therapeutic areas and use cases where speed, reliability and execution quality are critical. With a strong plan for transformation that is being implemented at pace, leading indicators showing increasing business activity into the second half of 2026 and the strengthened leadership team that is focused on putting Evotec on the path to strong sustainable growth, we expect to see consistent improvements in our financial results across the coming quarters. With this, I would very much like to open the call for your questions.

[Operator Instructions] The first question comes from the line of Swayampakula Ramakanth from HCW.

Just a couple of them. As you're keeping your full year guidance, and it looks like there is a -- if you maintain that, it looks like there needs to be a ramp-up in quarterly revenues from here onwards from the second to the fourth quarter. How confident are you that you can gain that ramp going forward? And the second question is on the strategic review on the Horizon, just trying to understand how you're going to sequence it. Do you need to get on the Horizon completely implemented when you're thinking about the strategic review of the group? Or is that going to be parallel?

Okay. All right. Thank you. I'll start with the second question. I hand over to Claire for the first and maybe take it back afterwards. On the Horizon topic, the answer is no. We know what we're executing against and what our plans are. As I said earlier, Horizon is upgrading our operating model, reducing complexity and making us more agile. We know precisely what we have to do. We are not required to wait. First question, Claire?

Okay. So on the full year guidance then, as Christian mentioned, as we were going through the introduction, the revenue, of course, is not linear because of the significant impact that we see from milestones and strategic deals. And if I take you back to a slide that Paul shared during the year-end presentation a couple of weeks ago, on that slide, he split down the dynamics that we were expecting for both half 1 and half 2. And on that slide, it outlined that for half 1, we would see, of course, the onetime negative impact from the Sandoz deal. We would expect to see underlying growth in the -- Just business, excluding the impact of DoW and Sandoz and which is what we've seen. We've seen up to roughly 50% underlying growth there. And we also highlighted that we would continue to see a challenging but improving situation in the D&PD environment, and we would have a negative FX impact. If you actually look at what the Q1 results show, it's very much in line with what that half 1 trajectory was expecting. Then when you look into half 2, we start to see the impact coming through on the strategic partnerships, and that's where we'll see the upturn. And then we'll also start to see the recovery of the D&PD underlying business. And it's the dynamic of those large strategic partnerships and the milestones that are making the difference between what you see in the first quarter and when you look at the full year outlook. But everything was in line with what we shared in that slide during the year-end presentation.

That was fantastic. Can I do a quick follow-up, please? So if you look at the gross margin, which was negative 1%, it's kind of striking initially. But underneath it, I'm imagining certain things which Claire just talked about, whether it is the FX effect or the Sandoz effect. How much of that is true? And is there anything else that we should be thinking about? And what needs to get done so that our gross margin gets back into the positive territory?

So I mean, all of what -- I won't repeat what I just said a second ago. I think the other thing that you're going to see coming through is as Horizon is implemented, then clearly, there's an under-absorption that we see today in some of our sites that's having a drag effect on the margin. And as we move forward with the Horizon implementation, then you'll start to see that significantly reducing, and that will then have a positive impact on the margin going forward.

The next question comes from the line of Charles Weston from RBC Europe.

Two topics, please, for me. The first is on D&PD and guidance. I think, as you said, your guidance anticipates an improvement in the underlying D&PD market in the second half. But additionally, you have visibility on your strategic relationships. So could you just help us understand your visibility in each, particularly as the language you used, I think, in Q1 to describe the market seems a tad more cautious than the full year results. And sorry for the length of the question. But as part of that, could you give us some additional color on the order book? You talked about the number of proposals, but could you also talk about the value of them?

Thanks, Charles. And maybe starting with the first topic. When you look at the D&PD business, the way that you should obviously think about this is what you see in the first quarter revenues is the result of sales orders that were basically done or negotiated 9 to 12 months ago, right? So we've been consistently talking about a soft market environment last year. Now that's a result of last year. Going forward, I think the indicators I didn't mention here. First, on the not strategic business, fewer cancellations gives us more confidence that the biotech market is also recovering because there is more confidence in investing into projects. Secondly, when you look at the sales orders, we've now seen actually the third quarter in a row better performance compared to what we've seen in Q1, Q2 last year. So Q3 was better than Q2, Q4 was better than Q3 and the first quarter was also in line with the fourth quarter. That takes a bit of time to materialize, obviously. But these indications for us are strong signals that we're moving in the right direction. With regard to strategic relationships and partnerships, usually, obviously, that's more digital events, right? So you negotiate and either you do a deal or not or you do the deal now or you do it 6 months later. So there's no real KPI behind that. But we see that a lot of these discussions have been picked up again. When they ultimately will be executed is -- you can't put it precisely into one quarter, Charles. And maybe to put it also a little bit into perspective, when you look at the Q1 results, when I look at the D&PD business, the last couple of quarters and this is all published. So quarter-by-quarter revenue swings last 2 years were easily in the range of EUR 10 million to EUR 20 million. Why is that also partially because of our business model, strategic deals, milestone payments, license payments. So Q4 '25, for example, versus Q3 was 12% up. Now you look at Q1 versus the Q4 quarter was 13% down. The quarterly picture is not necessarily indicative of the full year results. The same is true for Just. There's even bigger swings, as you can imagine. Now with regard to the order book, that's not a number that we publish. But obviously, you should assume that we have in 2025, consumed order book that was built in 2024. We're now starting to rebuild the order book, and there will be an inflection point in the second half where the order book is also starting to grow. Sorry, lengthy answer, but I hope it gives some flavor.

Yes, it does. I did actually have one other topic, but this is a much quicker one, please. Probably one for Claire. Can you help me understand the underlying profitability and a gross margin level at just please, negative gross margin? I think you mentioned there were some cost phasing issues. So how do we strip that out for an underlying view? And will those numbers actually reverse in Q2 and Q3 for a tailwind?

I'll hand this over to Claire in a second, but maybe let me give you 1 or 2 sentences upfront, Charles. I just gave you the volatility swings in D&PD. When you look at Just quarter-by-quarter, just high level, the last 8 quarters, revenues EUR 35 million, EUR 40 million, EUR 60 million, EUR 60 million, EUR 40 million, EUR 40 million, EUR 115 million, EUR 37 million. So you see on a quarterly basis, because of the business model, license payments, prepayments and so forth, it's a quite volatile profile. And that also is true for the profitability, right, depending on how we actually spend in preparation of a new deal, whether we actually get paid on a milestone basis or license basis. So there is volatility. The Q1 is not necessarily very, very conclusive, but Clair?

Yes. And really just to build on what you said there, Christian, it really is a factor of the phasing between the cost and investment that we have and then when we're able to recognize and receive the revenue from whether it be the milestone payments or other income. So it's really a factor of that phasing of investment versus revenue recognition. And therefore, you see the volatility in the margin movement across the quarters.

The next question comes from the line of Christian Ehmann from Berenberg.

I would like to linger a bit on the H2 performance or guidance of that, if I may. So would it be fair to assume that because you mentioned something about the impact of strategic partnerships and milestones and royalties and so forth. Would it be fair to assume that in your expectations to reach your guidance over the next couple of quarters for the full year, you would say that you see an improvement, so up from minus 10% underlying now to the low single digit you have given us for the reported number for the full year? So would it be fair to assume to say, okay, we would expect an improvement of -- or a turnaround to slight growth rates over the couple of, let's say, in the beginning of H2? And to top it off, we would expect a partial contribution from milestones. Just want to get an idea how significant or how impactful those milestones would need to be to achieve the target? The second question is in regards to the net sales order progression. Is there a seasonal pattern? So when you say you have quarter-over-quarter flat development Q4 to Q1, is this a usual pattern because we -- there's obviously a downturn compared to the recovery we saw in the quarters before? And the last question would be in regards to the new efforts from AI-first companies. So do you plan on giving us or the market more color on this, i.e., with a Capital Markets Day or maybe an Investor Day?

Christian, number one, yes, it's fair to assume that we are assuming a slight underlying growth in the D&PD business towards the end of the year. It's also fair to assume that we're assuming strategic deals to contribute to that. It's also fair to assume that we have a list of opportunities here we're working on. So all of your statements are correct. And then basically, given that we have confirmed guidance, you can basically calculate what it means for second half growth. On the second topic of order progression, can you shed a bit more flavor or light on what your question is behind there?

So you mentioned to us that Q3 was better than -- so year-over-year, Q3 was better than '25 was better than '24. Q4 was better than Q4 '24. And now Q1 is flat compared to the Q4 '25, if I heard it correctly. So it indicates to me a delay of improvement or recovery or at least a flattening of the curve. Is that correct?

I see. Okay. And then I think the second part of your question was seasonality, right?

Yes, is there a pattern here.

See, first of all, when I look at Q1 order intake in D&PD versus a year ago, we are double digit up. So that tells you that it has been a good quarter in terms of new sales, but it was also a good quarter for us in the fourth quarter last year. I think from a revenue profile perspective, the events around milestones have a bigger impact than the seasonality. So there is some seasonality. We've seen in the last couple of years that usually the fourth quarter is a strong quarter, and that is probably the last 3 years. But I would also not overemphasize the seasonality. And the last topic was an AI-related topic. So please also specify a little bit the question around the companies that you mentioned.

You've given us some information about the increase of demand, let's say, for first companies. Also in our last earnings call in the full year results, you mentioned in a side note that you've seen some improved demand of this type of customer base. Just to get an understanding and to give a little bit more meat on the bone of the potential impact of this kind of customers towards your long-term growth expectations, maybe. Is there plans or are you entertaining the possibility to give us more details about how these kind of offerings that you give those customers might impact your forecast or your expected growth in the future? So can we get more of an insight idea how this actually could play out in the future?

I understand, Christian. Usually, we are not offering kind of an AI service line. Usually, it's part of our drug discovery capabilities and platforms. So it becomes part of it. In the very specific case, and I think we talked about it last time where AI companies come to us. What I can tell you is that, for example, our Cyprotex business has benefited from that most recently, and we expect this to further benefit. But it's not a number that we usually can single out because it's part of a package of a larger offering.

[Operator Instructions] The next question comes from the line of Fynn Scherzler from Deutsche Bank.

So I heard your earlier comments on the Q1 performance and that we should view the lower profitability during Q1, probably as more investments, maybe in anticipation of upcoming contracts and so on and so forth. So if we summarize all your comments, is it fair to assume that Q1 was now the trough in operating performance? So if we think about the second quarter that both in terms of revenue and adjusted EBITDA generation, we should see first slight improvements. This would be helpful. And then my second question on the strategic review that you now initiate. Was there any specific trigger for you to consider this now? I mean, as a company, you've been approached in the past, we read about individual shareholders stepping up more recently and proposing some changes? Or is it linked to simply operating performance? Any sort of thoughts you could share with us here would be very helpful.

Thanks, Fynn. So first of all, your first question, I think I just tried to lay out a little bit that the quarterly view is not always helpful with the swings also with the profile that we have in terms of milestone payments. So I'm not sure I want to guide on individual quarters. We've never done that before. Important message is we stick to our guidance for the full year, which means that the first quarter will be even out over the next 3 quarters. With regard to the strategic review, I can say that this was not initiated in response to any inbound interest. It's a very logical timing when you think about what we're doing. We are resetting the company mid last year. We've revised our long-term view, vision for the company towards tech and scientific leadership, our positioning, the competencies that we need. In March, we've announced Horizon, which basically defines our operating model to deliver that business strategy. That's now the next logical step.

We have a follow-up question from Charles Weston from RBC Europe.

Now I was listening to your previous answer where you said you weren't going to give quarterly guidance, but I'm going to ask perhaps again anyway, in particular, around Q4. So Q4 is often a Q4 weighted year just traditionally. Also, you've got your market improvements expected. You've got the strategic revenues coming through and you've got the Horizon savings. So could you perhaps give us some color on how Q4 weighted to EBITDA could be? Looking back at the last couple of years, it was a loss for the first 3 quarters and a substantial profit in the fourth. Could that be the same or exacerbated even more? And perhaps I just wondered if you'd like to provide any color around what we might expect in Q2, whether there are any puts and takes in the comp that we might want to bear in mind for our modeling.

Thanks, Charles. And I think we iteratively approach actually move from year-to-quarter. And I won't do the quarter view, but I won't actually help you with a half year view. As you probably will remember, we've done that last time. It's really the dynamic difference here between H1 and H2 that Claire was explaining. When you look at the changes for the second half, we did mention that we expect a further negative impact from the JEB licensing versus 2025. However, a positive impact from JEB growth, actually in the range of double-digit growth, excluding DoW. Then there is a positive impact from underlying D&PD growth, where we said low single-digit growth in the base business and then strategic partnerships will add on top. But we also said that the FX effect will persist. So that's our view. And we're not breaking it down further by quarter, knowing exactly why because the quarterly volatility is not helpful.

We will now take a text question coming from Brendan Smith from TD Cowen, saying, I appreciate all the color on your end markets here. I wanted to first ask about the continued softness you mentioned in preclinical speeding. Qualitatively, what do you think needs to happen for customers to really round the corner? We've continued to see pretty steady biotech funding recovery, some albeit early signs of AI efficiency gains across the sector. So I guess I'm wondering if there's just a timing consideration here or if...

Okay. So the sentence stops halfway, but I guess I get the question. We think it's a timing topic, as alluded to earlier, there's obviously 2 ways of looking at it. The funding situation seems to have stabilized in the last couple of actually months from a biotech perspective, that's the external view. The internal view, I alluded to cancellations have come down quite significantly. Now some of the cancellations were more scientific and strategic nature in the past, but some also where biotech companies have pulled off for other reasons. We've seen this decline also in the context of more confidence of biotech companies in funding. So that's the internal view. And as alluded to earlier, we do not see AI as a structural or disruptive challenge to our business model because we are applying AI in order to accelerate drug discovery. So we see this actually as a supporting tool in our toolbox.

That was the last question. I would now like to turn the conference back over to Sarah Fakih for any closing remarks.

Thank you, Moira. With this, we would like to conclude today's conference call. Thank you for your participation, and please feel free to reach out to the Investor Relations team should you have any further questions. Thank you, and goodbye.