Geratherm Medical AG

Earnings Release • May 23, 2017

GERATHERM AT A GLANCE

Facts and Figures	January March 2017	January March 2016	Change %
Sales revenues	6,189 kEUR	5,428 kEUR	14.0 %
of which export share	5,098 kEUR	4,626 kEUR	10.2 %
Export ratio	82 %	85 %	-3.5 %
Gross result (EBITDA)	1,296 kEUR	724 kEUR	79.0 %
EBITDA margin	20.9 %	13.3 %	57.1 %
Amortisation and depreciation	-292 kEUR	-280 kEUR	4.2 %
Operating result (EBIT)	1,004 kEUR	444 kEUR	>100.0 %
EBIT margin	16.2 %	8.2 %	97.6 %
Financial results	-114 kEUR	-93 kEUR	23.7 %
Result of ordinary activities	890 kEUR	351 kEUR	>100.0 %
Net earnings of the parent company's shareholders in the period concerned	621 kEUR	237 kEUR	>100.0 %
Long-term assets	4,499 kEUR	5,043 kEUR	-10.8 %
Short-term assets	24,427 kEUR	24,926 kEUR	-2.0 %
Balance sheet total	28,926 kEUR	29,969 kEUR	-3.5 %
Equity capital	21,878 kEUR	22,174 kEUR	-1.3 %
Return on equity	11.4 %	4.3 %	>100.0 %
Equity ratio	75.6 %	74.0 %	2.2 %
Cash, cash equivalents and securities	12,331 kEUR	14,148 kEUR	-12.8 %
Earnings per share according to IFRS (EPS)*	EUR 0.13	EUR 0.05	160.0 %
Earnings per share according to DVFA*	EUR 0.13	EUR 0.05	160.0 %
Number of employees at end of period	198	194	2.1 %
Total shares issued * based on total shares issued	4,949,999 4,949,999	4,949,999 4,949,999	0.0 % 0.0 %

Business Performance from January 1 to March 31, 2017

• Sales revenues EUR 6.2 million +14.0 %
• Gross result for Q1 of the year (EBITDA) EUR 1.296 million +79.0 %
• Operating result (EBIT) EUR 1.004 million (2016: 444 kEUR)
• Results from ordinary activities 890 kEUR (2016: 351 kEUR)
• Earnings after taxes (EAT) 621 kEUR (2016: 237 kEUR)
• Earnings per share EUR 0.13 (2016: EUR 0.05)
• Eckenstein-Geigy-Stiftung, Basel, acquires 9.1 % of apoplex medical

Dear Shareholders and Parties Interested in Geratherm Medical,

Geratherm Medical was able to report a strong business performance during the first quarter of 2017. The sales volume increased by +14.0 % compared to the same period last year. Profits exhibited a significantly stronger growth.

After having to offset a strong increase in costs over the course of the last year, including investments in new employees in almost all segments, we managed to generate an adequate performance on the basis of the increased capacities during the first quarter of 2017. The operating result was considerable higher than the level attained last year. The gross margin of the total operating revenue was 68.9 % (2016: 62.5 %).

The EBITDA margin increased to 20.9 % (2016: 13.3 %). The operating result (EBIT) was EUR 1.004 million during the first quarter of 2017 (2016: 444 kEUR). The financial result was -114 kEUR (2016: -93 kEUR). The result from ordinary business activities amounted to 890 kEUR (2016: 351 kEUR). The shareholders' result after taxes was 621 kEUR for the first quarter (2016: 237 kEUR) or EUR 0.13 per share (2016: EUR 0.05).

Facts and figures		I/17	IV/16	III/16	II/16	I/16
(in kEUR)	Sales	6,189	5,059	5,023	5,899	5,428
	EBITDA margin	20.9 %	19.6 %	12.1 %	23.5 %	13.3 %
	EBIT	1,004	680	311	1,104	444
	EPS (EUR)	0.13	0.18	0.07	0.15	0.05
	Cash flow	1,290	656	600	1,184	756

Sales development

Geratherm reported a considerable sales growth in all regions, except for the Middle East. The regions that exhibited the most dynamic development in sales during the first quarter were the USA (+57.1 %) and South America (+53.6 %). Sales on the important European market increased by +9.5 %. Even on the German market, we managed to record a significant increase in sales of +36.0 %. The sales in Other countries rose by + 2.0 %. All in all, 82.4 % (2016: 85.2 %) of Geratherm products were exported.

Sales by regions 01/01 - 31/03/2017

In particular, the growth in sales in the Cardio/Stroke and Respiratory segments, which reported an above-average sales trend, contributed to the considerable growth in sales.

The Healthcare Diagnostic segment, which primarily distributes clinical thermometers, blood pressure monitors and women's healthcare products internationally to pharmacies and drugstores, reported a +13.8 % jump in sales. We experienced a strong demand for our gallium-filling clinical thermometers (+21.2 %) and digital clinical thermometer (+17.0 %). The sales of blood pressure monitors increased by 6.7 %. The Healthcare Diagnostic segment accounted for 64.6 % of the overall sales generated by the Geratherm Group (2016: 64.7 %).

Sales by segments 01/01 - 31/03/2017

The Respiratory segment, in which we offer products for testing pulmonary function, also reported a healthy +20.1 % growth. The sales growth was supported by first-time sales on the Chinese market and a good sales performance on the South American market.

Segment sales in the Medical Warming Systems business unit was weaker again for the first three months and posted a 15.0 % drop. Besides Geratherm's good overall situation, this segment's development currently does not meet our expectations. That is due to the new regulatory requirements placed on Medical Warming Systems, which currently prevent the delivery of Geratherm's warming systems. The sales posted by LMT Lübeck, which were integrated in this segment, were not able to offset the decrease.

clinics in Germany in a reasonable period. We will step up our international expansion efforts over the next two years. In this context, we are happy to announce that we were able to gain the Basel-based Eckenstein-Geigy-Stiftung as a new co-partner of apoplex medical on 13 April 2017. The Swiss Eckenstein-Geigy-Stiftung (foundation) assumed 9.1 % of the shares by way of a capital increase in the amount of EUR 2 million and shall noticeably expand the necessary network of contacts in addition to bolstering the company's capital.

Earnings situation

The earnings level increased considerably during the first quarter. With an EBITDA margin of 20.9 % and an EBIT margin of 16.2 % we are currently well above our target margins. We assume that we will be able to maintain this level even over the next few months.

The gross margin of the overall performance amounted for the first three months to 68.9 % (2016: 62.5 %). The increasing sales posted by apoplex had a positive effect here, which due to the large software share has a relatively low material share and thus has a positive impact of the Group's gross profit margin.

The gross profit (EBITDA) was EUR 1.296 million (2016: 724 kEUR). The write-offs increased slightly to 292 kEUR (2016: 280 kEUR).

The operating result (EBIT) was EUR 1.004 million (2016: 444 kEUR). Of the financial result in the amount of -114 kEUR, the interest charges of the Geratherm do Brasil subsidiary accounted for 106 kEUR. The result from ordinary business activities for the first three months amounted to 890 kEUR (2016: 351 kEUR).

Income taxes amounted to 230 kEUR (2016: 108 kEUR). A surplus of 659 kEUR (2016: 243 kEUR) was reported as the consolidated earnings for the first three months.

The net result generated for shareholders of the parent company amounted to 621 kEUR (2016: 237 kEUR) for the first three months of the current business year. The result per share for the first quarter was EUR 0.13 (2016: EUR 0.05).

Net assets and financial situation

Geratherm Medical enjoys a favourable asset situation. The balance sheet total of EUR 28.9 million is essentially formed by equity capital in the amount of EUR 21.9 million. The equity-to-assets ratio as of the reporting date was 75.6 % (2016: 74.0 %). The return on equity amounted to 11.4 % (2016: 4.3 %).

As of 31 March 2017 the company had cash, cash equivalents and securities in the amount of EUR 12.3 million (2016: EUR 14.1 million). Thus, the company has a healthy financial position, particularly in light of the planned growth in sales and possible acquisitions.

The long-term assets amounted to EUR 4.5 million (2016: EUR 4.8 million). Major shifts in the development of long-term assets were not noted. The short-term assets in the amount of EUR 24.4 million increased slightly by +3.3 %. Inventory volumes decreased by -3.1 %. The accounts receivable and other assets increased by +19.0 % to EUR 4.6 million in light of the higher sales. The cash and cash equivalents available as at 31 March 2017 amounted to EUR 8.9 million (2016: EUR 9.5 million).

The gross cash flow for the first three months amounted to EUR 1.290 million (2016: 756 kEUR). The cash flow from business operations was 9 kEUR (2016: 202 kEUR). The cash flow from investments amounted to -351 kEUR (2016: -954 kEUR).

Research and development

Our research and development activities focused primarily on Warming Systems, Respiratory and apoplex.

Staff

The Geratherm Group had a staff of 198 persons in total as of 31 March 2017 (2016: 194) with 177 employees in Germany.

Outlook

We anticipate for the 2nd quarter that the Geratherm Group will continue to develop favourably. The new product areas push Geratherm to a new level of profitability and higher sales. The measures necessary for boosting productivity at the location in Thuringia have been taken.

This year's annual general meeting will take place on Tuesday, 6 June 2017, at 1:30 PM in the "Grandhotel Hessischer Hof", in Frankfurt am Main. We are looking forward to maintaining dialog with our shareholders.

Geschwenda, May 2017

Dr. Gert Frank Chief Executive Officer

Consolidated profit and loss statement from 1 January 2017 to 31 March 2017

	January- March 2017 EUR	January March 2016 EUR	Change
Sales revenues	6,188,707	5,427,913	14.0%
Change in inventory of finished products and work in process	-292,902	-5,660	>100.0%
Other capitalised own work	36,403	24,886	46.3%
Other operating income	128,253	200,774	-36.1%
	6,060,461	5,647,913	7.3%
Cost of materials
Cost of raw materials, consumables
and goods for resale	-1,614,436	-1,790,998	-9.9%
Costs of purchased services	-271,709	-326,164	-16.7%
	-1,886,145	-2,117,162	-10.9%
Gross profit or loss	4,174,316	3,530,751	18.2%
Personnel expenses
Wages and salaries	-1,281,096	-1,188,989	7.7%
Social security, pension and other benefits	-292,377	-258,185	13.2%
	-1,573,473	-1,447,174	8.7%
Amortization of intangible assets and depreciation of tangible assets	-291,623	-279,916	4.2%
Other operating expenses	-1,305,383	-1,360,034	-4.0%
Operating results	1,003,837	443,627	>100.0%
Dividend income	0	0	-
Income from securities trading	0	0	-
Amounts written off for securities	0	0	-
Securities-related expenses	-1,585	-1,639	-3.3%
Other interest and similar income	2,111	1,127	87.3%
Interests and similar expenses	-115,006	-92,043	24.9%
Financial results	-114,480	-92,555	23.7%
Result of ordinary activities	889,357	351,072	>100.0%
Income taxes	-230,025	-108,218	>100.0%
Consolidated profit for the year	659,332	242,854	>100.0%
Net earnings of non-controlling shareholders in the period concerned
	38,494	6,223	>100.0%
Net earnings of the parent company's shareholders in the period concerned	620,838	236,631	>100.0%
Gross result (EBITDA) for the first quarter	1,295,460	723,543	79.0%

Consolidated balance sheet as of 31 March 2017

Assets	31 March 2017 EUR	31 December 2016 EUR	Change
A. Long-term assets I. Intangible assets
1. Development costs	349,670	303,696	15.1%
2. Other intangible assets	210,439	246,343	-14.6%
3. Goodwill	75,750	75,750	0.0%
	635,859	625,789	1.6%
II. Tangible assets
1. Land, land rights and buildings	1,183,973	1,202,108	-1.5%
2. Technical equipment and machinery	1,814,146	2,001,863	-9.4%
3. Other equipment, factory and office equipment	312,550	322,578	-3.1%
4. Construction in process	129,735	50,519	>100.0%
	3,440,404	3,577,068	-3.8%
III. Other assets	270,000	270,000	0.0%
IV. Other long-term receivables	152,869	275,659	-44.5%
V. Deferred taxes	0	0	-
	4,499,132	4,748,516	-5.3%
B. Short-term assets
I. Inventories
1. Raw materials and supplies	2,395,629	2,400,900	-0.2%
2. Unfinished goods	1,089,810	1,125,026	-3.1%
3. Finished goods and merchandise	4,033,922	4,234,564	-4.7%
	7,519,361	7,760,490	-3.1%
II. Receivables and other assets
1. Trade receivables	4,090,303	3,288,213	24.4%
2. Tax receivables	147,288	161,560	-8.8%
3. Other assets	338,935	396,414	-14.5%
	4,576,526	3,846,187	19.0%
III. Securities	3,397,500	2,529,800	34.3%
IV. Cash and cash equivalents	8,933,023	9,517,644	-6.1%
	24,426,410	23,654,121	3.3%
	28,925,542	28,402,637	1.8%
Equity and liabilities
A. Equity capital
I. Subscribed capital	4,949,999	4,949,999	0.0%
II. Capital reserves	11,035,367	11,035,367	0.0%
III. Other reserves	6,568,284	5,275,788	24.5%
Assignable to the shareholders of the parent company	22,553,650	21,261,154	6.1%
Shareholders of minority interest	-675,621	-704,252	-4.1%
	21,878,029	20,556,902	6.4%
B. Non-current liabilities
1. Liabilities to banks	1,067,481	1,051,766	1.5%
2. Accrued investment subsidies	343,620	365,745	-6.0%
3. Other long-term liabilities	977,337	1,051,829	-7.1%
	2,388,438	2,469,340	-3.3%
C. Current debts
1. Liabilities to banks	1,228,907	1,375,182	-10.6%
2. Payments on accounts	245,605	337,245	-27.2%
3. Trade accounts payables	1,059,014	1,782,780	-40.6%
4. Tax liabilities	871,759	673,611	29.4%
5. Other short-term liabilities	1,201,118	1,154,905	4.0%
	4,606,403	5,323,723	-13.5%
D. Deferred tax liabilities	52,672	52,672	0.0%
	28,925,542	28,402,637	1.8%

Consolidated statement of cash flows from 1 January to 31 March 2017

	January- March 2017 kEUR	January- March 2016 kEUR
Consolidated profit for the year	659	243
Other non-cash expenses	18	61
Dividend income	0	0
Interest earnings	-2	-1
Interest expenses	115	92
Decrease in deferred taxes	0	51
Income tax expenditure	230	57
Depreciation of fixed assets	292	280
Income from securities trading	0	0
Loss from securities trading	0	0
Amounts written off for securities	0	0
Amortisation of public grants and subsidies	-22	-27
Loss from disposal of fixed assets	0	0
Gross cash flow	1,290	756
Decrease/Increase in inventories	241	-69
Increase in trade receivables and other assets	-608	-124
Decrease in current liabilities and other liabilities	-701	-100
Cash inflow from dividends	0	0
Cash inflow from interest	2	1
Cash outflow from interest	-115	-92
Cash outflow from taxes	-100	-170
Cash flow from operations	9	202
Cash outflow for investments in fixed assets	-165	-634
Cash inflow based on financial assets	0	0
Cash outflow based on financial assets	-186	-320
Cash flow from investments	-351	-954
Dividend payments	0	0
Cash inflow from taking out loan liabilities	60	73
Cash outflow for repayment of loan liabilities	-190	-133
De/increase in long-term liabilities	-74	10
Cash flow from financing activities	-204	-50
Change in cash and cash equivalents	-546	-802
Cash and cash equivalents at beginning of fiscal year	9,518	9,683
Exchange rate difference	-39	-106
Cash and cash equivalents at end of fiscal year	8,933	8,775

Consolidated statement of change to the shareholders' equity as of 31 March 2017

				Other reserves
	Subscribed capital	Capital reserve	Market assessment reserve	Currency conversion reserve	Accumulat ed earnings	Assignable to the shareholders of the parent company	Non control ling interests	Equity capital
	EUR	EUR	EUR	EUR	EUR	EUR	EUR	EUR
As of 1 January 2016	4,949,999	11,035,367	865,252	116,856	5,540,983	22,508,457	-569,240	21,939,217
Dividend paid to shareholders	0	0	0	0	0	0	0	0
Transactions with shareholders and member partners	0	0	0	0	0	0	0	0
Consolidated earnings in period concerned	0	0	0	0	236,631	236,631	6,223	242,854
Unrealized profits and losses from revaluation of securities	0	0	37,435	0	0	37,435	0	37,435
Currency translation in the Group	0	0	0	-23,629	0	-23,629	-21,527	-45,156
Total consolidated income	0	0	37,435	-23,629	236,631	250,437	-15,304	235,133
as of 31 March 2016	4,949,999	11,035,367	902,687	93,227	5,777,614	22,758,894	-584,544	22,174,350
as of 1 January 2017	4,949,999	11,035,367	52,504	-5,504	5,228,788	21,261,154	-704,252	20,556,902
Dividend paid to shareholders	0	0	0	0	0	0	0	0
Transactions with shareholders and member partners	0	0	0	0	0	0	0	0
Consolidated earnings in period concerned	0	0	0	0	620,838	620,838	38,494	659,332
Unrealized profits and losses from revaluation of securities	0	0	682,450	0	0	682,450	0	682,450
Currency translation in the Group	0	0	0	-10,792	0	-10,792	-9,863	-20,655
Total consolidated income	0	0	682,450	-10,792	620,838	1,292,496	28,631	1,321,127
as of 31 March 2017	4,949,999	11,035,367	734,954	-16,296	5,849,626	22,553,650	-675,621	21,878,029

Consolidated statement of comprehensive income as per IFRS for the period from 1 January to 31 March 2017

	January - March 2017 EUR	January - March 2016 EUR
Consolidated profit for the year Income and expenses directly recognised in equity, which are reclassified to profit or loss under specific conditions:	659,332	242,854
Profits and losses from revaluation of securities	682,450	37,435
Difference resulting from currency translation	-20,655	-45,156
Income and expenses directly included in equity capital	661,795	-7,721
Total consolidated income	1,321,127	235,133
of which assignable to shareholders of minority interest	28,631	-15,304
of which assignable to shareholders of parent company	1,292,496	250,437

Group segment report for the period from 1 January to 31 March 2017

Based on product groups 2017	Healthcare Diagnostic Jan.-Mar. kEUR	Respiratory Jan.-Mar. kEUR	Medical Warming Systems Jan.-Mar. kEUR	Cardio/ Stroke Jan.-Mar. kEUR	Consolidation Jan.-Mar. kEUR	Reconciliation Jan.-Mar. kEUR	Total Jan.-Mar. kEUR
Segment sales	4,537	1,152	562	388	-450	0	6,189
Operating results	850	16	-22	170	17	-27	1,004
including:
Amortisation of intangible assets and depreciation of tangible assets	223	13	29	12	-10	25	292
Segment assets	10,695	1,733	3,074	1,070	0	12,354	28,926
Segment liabilities	5,587	282	600	526	0	0	6,995

Healthcare	Respiratory	Medical	Cardio/	Consolidation	Reconciliation	Total
Jan.-Mar. kEUR	Jan.-Mar. kEUR	Systems Jan.-Mar. kEUR	Jan.-Mar. kEUR	Jan.-Mar. kEUR	Jan.-Mar. kEUR	Jan.-Mar. kEUR
3,932	1,003	601	238		0	5,428
451	100	-138	33		12	444
210	7	29	5		34	280
10,602	1,853	2,899	443		14,084	29,881
6,078	449	759	509		0	7,795
	Diagnostic		Warming	Stroke		-346 -14 -5 0 0

By region	Europe	South America	Germany	Middle East	USA	Other	Total
2017	Jan.-Mar. kEUR	Jan.-Mar. kEUR	Jan.-Mar. kEUR	Jan.-Mar. kEUR	Jan.-Mar. kEUR	Jan.-Mar. kEUR	Jan.-Mar. kEUR
Sales revenues	3,344	658	1,505	251	319	562	6,639
Elimination of intragroup sales	0	-36	-414	0	0	0	-450
Sales revenues on third parties	3,344	622	1,091	251	319	562	6,189
Gross profit or loss	2,234	429	754	168	213	376	4,174
Operating results	553	76	187	42	53	93	1,004
including:
Amortisation of intangible assets and depreciation of tangible assets	172	3	58	13	17	29	292
Amortisation of public grants and subsidies	13	0	5	1	1	2	22
Acquisition costs of fixed assets for the period	0	2	163	0	0	0	165
Segment assets	0	1,908	26,824	0	194	0	28,926

By region	Europe	South America	Germany	Middle East	USA	Other	Total
2016	Jan.-Mar. kEUR	Jan.-Mar. kEUR	Jan.-Mar. kEUR	Jan.-Mar. kEUR	Jan.-Mar. kEUR	Jan.-Mar. kEUR	Jan.-Mar. kEUR
Sales revenues	3,054	406	1,148	413	203	551	5,775
Elimination of intragroup sales	0	-1	-346	0	0	0	-347
Sales revenues on third parties	3,054	405	802	413	203	551	5,428
Gross profit or loss	1,975	267	534	267	131	357	3,531
Operating results	238	50	65	32	16	43	444
including:
Amortisation and depreciation of fixed intangible and tangible assets	168	2	46	23	11	30	280
Amortisation of public grants and subsidies	17	0	4	2	1	3	27
Acquisition costs of fixed assets for the period	0	3	406	0	0	0	409
Segment assets	0	1,521	28,292	0	68	0	29,881

Notes on Interim Consolidated Financial Statements for the Period from 1 January 2017 to 31 March 2017

Accounting and Valuation Methods

The interim consolidated financial statements of Geratherm Medical AG were prepared for the three months of the 2017 business year in accordance with the rules of the International Financial Reporting Standards (IFRS) valid on the date of the financial statements and in consideration of the guidance provided by the International Financial Reporting Interpretations Committee (IFRIC), as is mandatory in the European Union.

The accounting, evaluation and consolidation principles were maintained, as shown in the Notes to Consolidated Financial Statements for 2016 Fiscal Year.

The valuation of assets and liabilities is based in part on estimates and/or assumptions about future developments. For instance, the statements on economic useful lives for long-term intangible and tangible assets are based on estimates and assumptions. In addition, the assessment of the recoverability of deferred taxation allocated to the losses carried forward, the long-term decline in value from the fair valuation of assets available for sale and the impairment tests of the cash-generating units and the assets is based on the corporate planning, which of course involves uncertainties such that the actual values may deviate from the made assumptions and estimates in individual cases. Estimates and the underlying assumptions are regularly checked and evaluated with regard to possible impact on accounting.

Consolidated Group

No changes occurred in the consolidation group as at 31 March 2017:

Company	Share quota 31/3/2017	Share quota 31/12/2016
GME Rechte und Beteiligungen GmbH, Geschwenda, Deutschland	100.00 %	100.00 %
apoplex medical technologies GmbH,
Pirmasens, Germany	58.76 %	58.76 %
Geratherm Respiratory GmbH, Bad Kissingen, Germany	65.27 %	65.27 %
Geratherm Medical do Brasil Ltda.,
Sao Paulo, Brazil	51.00 %	51.00 %
Sensor Systems GmbH, Steinbach Hallenberg, Germany	100.00 %	100.00 %
Capillary Solutions GmbH, Geschwenda, Germany	100.00 %	100.00 %
LMT Medical Systems GmbH, Lübeck, Germany	66.67 %	66.67 %
Subsidiary of LMT Lübeck
LMT Medical Systems Inc., Ohio, USA	100.00 %	100.00 %

Equity capital

The development of the equity capital is shown in the consolidated statement of change to the shareholders' equity. The subscribed capital of Geratherm Medical AG amounts all in all to EUR 4,949,999 as at 31/3/2017 (2016: EUR 4,949,999) and is divided into 4,949,999 (2016: 4,949,999) share certificates issued to the bearers. The subscribed capital has been paid in full. As of the reporting date there were no own shares held by the company.

COMPANY CALENDAR 2017

Annual general meeting in Frankfurt am Main,	6 June
"Grandhotel Hessischer Hof"

Quarterly report Q1/2017	23 May 
Interim report on the first half of 2017	23 August
Quarterly report Q3/2017	23 November

Geratherm Medical AG

Fahrenheitstraße 1 98716 Geschwenda Phone: +49 36205 980 Fax.: +49 36205/98 115 e-mail: info@geratherm.com Internet: www.geratherm.com