Straumann Holding AG

Ladies and gentlemen, welcome to the Schrauman Group Full Year 2020 Results Conference Call and Live Webcast. I am Sansa, the Chorus Call Operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and 1 on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Guillaume Daniello, CEO. Please go ahead, sir.

Good morning, everyone, and thank you all very much for joining today's conference call. I'm looking forward to sharing insights into the Stroman Group's four-year results for 2020 with you. Let me begin by saying that we hope you and your families are safe and healthy despite the ongoing pandemic around us. We are continuing to take action to keep our people safe and support the fight against COVID-19 in the different communities we serve. And we are grateful to report that we had very few cases within our global organization in the recent weeks. This is also why our headquarters in Basel is still closed to visitors at the moment. As a result, we are not able to welcome you here in person today, but we hope to see you all again soon, as soon as it will be possible. On slide two, you can see our disclaimer. As usual, this morning's presentation and discussion will include some forward-looking statements. Today's conference will follow the usual format. I'll give you an overview of where we stand. Then our CFO, Peter Harton, will share details about our business performance across our regions. After that, I'll provide you with up-to-date information about recent events and our strategic initiatives, as well as our outlook for the future. Of course, we'll both be available to answer your questions after the presentation. Moving on to slide five, you can see our 2020 highlights. Taking a few months back, we know today that we focused on the right priorities, helping to mitigate the impact of the pandemic during this challenging year. I am pleased to report that we kept our bounce-back momentum starting in Q3 with an organic growth in the four quarters of 8%. Overall, our group's organic revenue for the full year 2020 dipped by 6% compared to 2019 to 1.4 billion Swiss francs. Strong currency headwinds widened the gap in Swiss francs to 11%. Looking at profitability for the full year, we have successfully managed to soften the impact of the pandemic and are reporting a core EBIT margin of 23.4%. We remained very close to our customers during this difficult period, which allowed us to stay ahead of the curve. Pursuing our goal of leading the specific immediacy segment, we successfully continued the global rollout of Stroman BLX. Customer reorder Stroman BLX on a regular basis, reflecting the increased benefits provided by this unique implant. Despite the pandemic, we have continued to demonstrate our innovation capabilities, by pre-launching new products such as TLX and Zygoma implants still within this important immediacy segment. In addition, sales of intramural scanners also rose, reflecting the increasing trend in digital dentistry. We also took some important entrepreneurial steps into new areas, exploring attractive growth opportunities across our business segments. Therefore, In July 2020, the Stroman Group acquired Dr. Smile, a leading provider of direct-to-consumer, doctor-led clear liner treatment solution in Europe, investing further into the growth of our clear liner franchise. In 2020, we have also seen important new developments to further improve our clear liner value proposition, such as the launch of the new clear quartz material as well as the nuclear pilot software, which we'll talk about later. 2020 was a challenging year, but we finished it with solid results, and we are cautiously optimistic about the future. Bearing and forcing circumstances, the group aims to achieve organic revenue growth in the high single-digit percentage range. Profitability is expected to improve versus 2020. If we look at the performance by region on slide six, organic growth has returned everywhere during Q4. Asia-Pacific rebounded to 17.9% growth in Q4 and almost reached full-year performance in line with 2019 levels by the end of 2020, led by a strong double-digit growth in China, very close to pre-COVID level. The EMEA region posted organic growth of 6% in Q4, after having rebounded due to a significant pent-up demand in Q3. Our business in North America performed according to expectation, with organic revenue growth up by 5% compared to Q4, 2019. Latin America was the last region to be reached by the pandemic, which has impacted the business through for the second half of the year. Nevertheless, Our performance in this region bounced back in September 2020, continuously improving during the third and the fourth quarter. Looking at slide seven, the world today looks different compared to when the pandemic started. Although it's still influencing our environment, the patient flow came back and dental practices resuming their activity allowed us to grow again in the second half of 2020. You can see the OECD expects a brighter outlook compared to their last report from June 2020, but recovery will be gradual according to the report from December. Progress with vaccines and treatment have lifted expectations and uncertainty has receded. The global economy will gain momentum over the coming two years, with global GDP expected at pre-pandemic levels by the end of 2021. The projection is that recovery will be uneven across countries, with China growing strongly as it was the first country which started to recover and is now controlling the pandemic efficiently. In addition, restoring consumer confidence and the availability of disposable income will continue to be critical. The assessments provided by our country organizations show that currently dental practices are open and patient flow is fairly good in most of our countries, despite the early 2021 semi-lockdown measures taken in Europe. The situation in Latin America is still challenging due to significant restrictions in some of the countries. Let's move on to slide eight. In implant dentistry, the Stroman Group's core market we further strengthened our position in 2020 and outperformed the market. We have extended our leadership and estimate our share of the global influence market to be approximately 27%. The total global dentistry market is estimated to be worth more than 23 billion Swiss francs, and we have built a competitive portfolio that enables us to address half of it. The market has obviously declined in 2020 because of the pandemic, forcing dental practices to close during the second quarter. However, the growth drivers for the mid- and long-term are still valid, including the aging and growing population, increasing prosperity, higher awareness of oral health anesthetics, and innovation for more patient-friendly solutions. The global market for clear aligners is one of the most attractive areas in dentistry because of its dynamic growth and the significant advantages of clear aligners over conventional wires and brackets treatments. We expect growth in orthodontics and implant dentistry to outpace the general dental market. And besides implants and aligner business segments, biomaterials, digital equipment, Custom-made prosthetics also present significant growth opportunity in the midterm, even our market share is still low in those segments. Moving on to slide nine, our global workforce doubled between 2017 and 2020 as we geared up for strong business expansion. Unfortunately, the impact of COVID-19 required us to take difficult decisions about resizing our team. We reduced our global workforce by approximately 660 jobs across all countries and functions. We made every effort to conduct this process in a responsible, timely, and fair manner. I would like to emphasize our deep gratitude for the understanding, professionalism, and solidarity that our team showed during this process. At year-end, our global team totaled 7,340 headcounts, which includes 260 positions added due to the strategic acquisition of DrSmile in Germany. With this highly engaged and talented team, we are ready to keep increasing our customer base and moving ahead with our plans for future growth. And now I will hand over to Peter.

Thank you, Guillaume, and good morning, everyone. I'm going to begin by talking about our revenue development at the group level. I then take a close look at each of our four regions before focusing on our businesses. Looking at the revenue on slide 11, we had two consecutive quarters of growth rebounding in the second half of 2020. While this rebound only partially offset the 19% decline in the first half of the year, it's a solid achievement. Both quarters in the second half of the year showed similar growth rates, around 8%. As Guillaume mentioned, our full-year organic revenue decreased by 5.6% and strong currency headwinds, mainly by the Brazilian real, the US dollar and the Euro widened the gap in Swiss francs to 11%. Our full year revenue for 2020 was 1.4 billion Swiss francs. As usual, you see on the right side of the chart the contribution of the regions to the organic revenue decline of 84 million Swiss francs. On slide 12, you can see that we had a second that we had a second consecutive quarter of growth in Europe, Middle East and Africa regions known as EMEA. We also returned to growth in North America in the second half, but in both regions the growth rates in the last quarter were slightly lower than in the third quarter and once again lifted by strong digital equipment business at year end. The third quarter was characterized by pent-up demand And it's important to note that the comparative force, Fortune 19, was strong in both regions. I'll start with EMEA, which contributed 44% to total revenue in Q4 and is our largest region in terms of sales. We achieved full year revenue of 650 million Swiss francs, which is 90% of the prior year level. The EMEA region posted organic growth of 6% in Q4. This was driven by solid performance in Germany, Russia, and Turkey. We also saw an additional lift from the newly acquired business in Romania. Distributed markets in Eastern Europe and Middle East returned to growth, while several large markets were held back by the pandemic, notably France, Spain, the Nordics and the UK. In North America, we achieved full-year revenue of 432 million Swiss francs, which is 90% of the prior year level. In Q4, organic revenue decreased by just 5%, but currency headwinds turned this into a 10% decline in Swiss francs. Both the US and Canada posted solid growth in the last quarter, And growth was fueled by our challenger implant brand Neodent and our digital business, most notably intraoral scanners and 3D printing equipment, while the Stromer brand held its strong position and performed solidly. Let's move on to discuss our Asia-Pacific and Latin America regions. In Asia-Pacific, organic revenue increased from 11% in June 3 to 18% June 4, on top of the very strong growth in the comparative forecast 2019. This impressive performance helped to compensate for the decline in the first half of 2020. For the full year, organic revenue was just half a percentage point below the prior year level. In Swiss francs, revenue contracted 5% to 289 million. China led with dynamic growth in Q4 while we also saw strong increases in Australia, Japan, New Zealand, and Taiwan. South Korea and India continued to battle against the pandemic. In Latin America, COVID had the heaviest and longest impact on our sales and, in addition, faced major currency headwinds driven by the Brazilian real that devaluated 25% during 2020. Full-year revenue was 90 million Swiss francs, which is a decrease of 35%. The organic shortfall was 15%, and the difference in growth rates shows the magnitude of the currency impact. However, our local team successfully achieved growth in the last quarter when organic revenue rose by 3%. We bounced back to strong growth in Brazil, driven by Neodent and digital equipment sales. Argentina and Chile also posted strong increases. ILE, our 3D printing resin business, continued its excellent growth. On slide 14, you can see that all of our businesses closed the difficult year with growth in Q4. Our implant system business grew high single-digit in Q4. Premium implant solutions the largest revenue driver were constrained by the pandemic's impact on affluent markets. Notwithstanding, sales of new products like eStrom's innovative BLX implants were strong and led to share gains in the immediacy segment. Among the group's challenger brands, Neodent and Medentica posted full-year growth and performed well in emerging markets. Our digital and restorative business grew despite the high baseline in Q4-19, especially in digital equipment. Sales of intra-hour scanners were fueled by the increasing trend in digitalization. Biomaterials posted double-digit growth in all regions, except in North America, where sales were softer. Our orthodontics business reported the highest growth which was supported by our doctor-led direct-to-consumer marketing of Dr. Smile in Europe, as well as the launch of our new aligner material, ClearQuartz, and the new software, ClearPilot. Slide 15 lists the non-core items from 2020 and for comparative reasons also from 2019. As usual, This includes the amortization of acquisition-related intangible assets, which amounted to 9 million Swiss francs. It also includes a one-time pension plan amendment gain of 5 million. As a result of the COVID-19 pandemic, we faced net charges totaling 150 million francs, resulting from impairments of financial and non-financial assets, including career tests, dental wings and echinocs. The net cost of restructuring measures that were implemented a few months ago amounted to 15 million francs. If you need further information about any of these items, please feel free to ask a question during the Q&A session. The next slide presents the core financials in a nutshell. After the gross profit margin dropped to 71% after the first six months, E-bounce facts helped to achieve a solid 73% for the full year. This represents a margin contraction of 280 base points. 130 base points are attributed to the strengthening of the Swiss franc. Operating expenses were reduced by 58 million, or 9%, to 705 million francs. Distribution expenses contributed 38 million and administrative expenses 20 million to this decline. The combination of these efforts helped to underpin our core operating result at 333 million Swiss francs. The core EBIT margin contracted 370 base points to 23.4%. 160 base points of the contraction were due to currency headings. Core net profit dropped 23% to 261 million francs, with the respective margin contracting 290 base points to 18.3%. Basic earnings per share stand at 16 Swiss francs and 20 cents, 5 francs lower than in the previous year. For completeness, you will find a year-on-year comparison on a reported IFRS basis in slide 17. followed by the core reconciliation tables in slide 18. You can also find them on page 126 of our annual report. Slide 19 focuses on our core gross profit margin, which remains strong, about 70% despite the pandemic. The group took decisive action to respond to the changing business situation, including adjusting capacity reducing operating costs and postponing investments. These actions helped to protect our profitability by softening the impact of the revenue decline. The gross profit for 2020 was $169 million less than in 2019, and the corresponding margin dropped by 280 base points to 73%. Excluding currency impacts, the contraction was 190 base points. If government subsidies for short-time work that are reported under sundry income below gross profit were allocated to COPs, the margin would be lifted by 50 base points and the organic decline reduced to 140 base points. Looking at core EBIT on slide 20. A combination of strict cost discipline, right-sizing of the organization, and lower business activities due to the pandemic helped to soften the impact on our earnings. Distribution expenses, which comprise salesforce salaries, commission payments, customer events and trainings, were reduced by 38 million or 12% to 283 million Swiss francs. Administrative expenses, which include research, development, marketing and general overhead costs were reduced by 20 million Swiss francs or 4% to 441 million Swiss francs. After an EBIT margin of 70% after the first six months, full year EBIT margin increased to 23.4%, but still 370 base points lower than 2019. Approximately 160 base points of this construction was due to currency headwinds. Slide 21 shows that our net profit margin before non-core items reached 18% for 2020. Net financial expenses amounted to 31 million Swiss francs, or 6 million francs higher than in 2019, mainly reflecting higher currency hedging losses, higher interest payments, and interest on lease liabilities. The share of result of associate is 1.4 million better than in prior year. After income taxes of 40 million Swiss francs, which were 26 million lower than previous year, net profit decreased 23% to 261 million Swiss francs, resulting in a margin of 18%, including the previously mentioned non-core items amortization of acquired intangibles, impairment, restructuring charges, pension plan amendment gains, and their collective impact on income taxes, the reported net result was 92 million Swiss francs with a margin of 6.5%. The normalized group tax rate is around historical levels of 15%. Moving ahead to slide 22. In a difficult year, as we had in 2020, we were able to maintain our strong balance sheet. The group's cash position amounts to very solid 633 million Swiss francs, while none of the available credit lines were drawn. During 2020, two domestic Swiss franc bonds amounting to a total of 480 million were issued, one of them to refinancing a maturing bond of 200 million francs. Overall, our free cash flow for the full year 20 reached 295 million francs, which is 44% higher than in 2019, and the free cash flow margin increased by more than 6 percentage points to almost 21%. The operating cash flow of 377 million Swiss francs was very strong and remained stable compared to 2019, despite the revenue and EBITDA decline. Capital expenditure decreased at 68 million to 82 million trillions. This decrease shows that some of the major expansion projects are close to finalization, but it was also due to some postponements of projects from the second quarter onwards. From a cash perspective, is this decrease almost made up for the pandemic-driven reduction in EBITDA. The net working capital improved by 88 million to 168 million Swiss francs, mainly driven by the reduction of account receivables. The days of sales outstanding reduced from 57 to 47, and by the reduction of the days of supply by 15 days to 160. Despite interruptions related to the pandemic, we were able to progress as planned with our strategic projects to expand our production capacity. At our largest production center in Villere, Switzerland, construction of our new building was only temporarily delayed. We will begin to operate the new building in the middle of this year. Construction of our new factory from Identica in Kalb, Germany, was completed in 2020 as planned. It offers additional capacity and allows us to install various processes which will increase our efficiency. All existing machinery, activities and staff were successfully transferred to this new site from our former location in Renningen. operations began already in the last quarter. CALV is now Medentica's main production center for implant and multi-platform prosthetic solutions, and it is also home to a new education facility. In addition, our new facility in Curitiba in Brazil began operating in 2020. It is now producing Nubu implants for the global rollout of this new brand, as well as clear product for the Brazilian and Latin American market. Based on the results in 2020, our board of directors proposes a stable dividend of five francs and 75 cents per share. This is subject to shareholder approval and will be payable on April 15th, 2021. The board aims to increase the dividend again in the future if solid business performance continues. And one final note. As in 2020, our 21st Annual General Meeting on April 9th will be held without the presence of shareholders because of the ongoing pandemic. And with this final note, I will hand back to Guillaume.

Thank you very much, Peter. Before giving you an update on recent progress on our three strategic priorities, we want to highlight how the productivity of our entire Scrum & Group team has successfully mitigated the impact of the pandemic. We have taken early steps to keep our people safe and adapted fast to the crisis. We focused on ensuring a strong rebound, leveraging the opportunity to deliver massive online education programs, and provided unconditional support to customers, helping them to navigate through this difficult time. Furthermore, despite the uncertainty, we kept on focusing on our three strategic priorities and have advanced significantly in each of these areas. Moving on to slide 26, as you know, our first priority is to drive our high-performance culture and organization. Reflecting on 2020, I strongly believe that our solid results have been made possible to a huge degree thanks to our high-performance culture. The team has demonstrated agility, took ownership, focused on customers, and created opportunity. Seven years ago, we began our cultural journey and focused on developing the right mindset and behaviors to deliver on our purpose and drive high performance. Slide 27 shows very encouraging results of our last employee engagement survey from Q3 2020. The survey is anonymous, conducted through an online platform, and available in 18 languages. 86% of our employees responded, which is up from 77% in 2019. Our key strengths have been confirmed. Our engagement score is 78, which is four points higher than the global benchmark. Our employees are proud to work for the Stroman Group. They are driven by the meaningful purpose of our organization and are excited about the future. We also received more than 8,000 comments. These are helping us to identify areas for further improvement and development in recognition, inclusion, and communication for which we have already started to take action. On slide 28, you can see the current setup of the Executive Management Board, which has been announced in December. The goal to reshape our EMV has been to support the Stroman Growth Strategy through adding specific new expertise, ensuring a strong focus on all our geographical business opportunities, and to accelerate our company's digital transformation. In this period, Rama Samo will join the Stroman Group in March 2020 to succeed Petra Rumpf as the new executive vice president of the fast-growing dental service organization, Business Unit. Petra Rumpf has decided to pursue non-executive board mandates and is nominated by the Stroman Group board of directors for election to the board at the next shareholders annual general meeting. Secondly, we have announced that we are planning to appoint a chief information officer to accelerate our company's digital transformation, and the recruitment is ongoing. Thirdly, to ensure a strong focus on all geographical business opportunities, Wolfgang Decker's responsibility evolved, adding the Central and Eastern Europe region in addition to the emerging market and distributors. Rob Woolley, the former head of North America, took over from Jens Dicksheimer as EVP sales to Western Europe, and Aurelio Sahagun joined the Stroman Group to succeed Rob Roulet as EVP sales North America. At this point, I would like to express my gratitude to Jens Dicksheimer, who was the head of Europe, and Petra Rumpf, who both delivered exceptional contributions to our organization, and we wish them all the best in their future endeavors. The executive management board features people who have been promoted from within our organization, as well as people who have joined us from other industries. This gives us a good balance between continuity and fresh perspective. Moving on to slide 29, I will share our efforts to accelerate growth in our core implant market and key strategic segments. I would like to start by showing you an overview of the premium implant franchise achievements on slide 30. Pursuing our goal of leading the immediacy segment, we continued the global rollout of Stroman VLX, which gained further market share during the period. The next endpoint milestone is the full market release in Japan after a successful pre-launch done during Q4. Stroman's new Zygoma implant system, which we fully pre-launched through online activities in October 2020 is supporting BLX growth trajectory as well as our innovative TLX implant. The rollout of the TLX implant is planned for the second half of 2021 in Europe and North America. Now, the group has an unparalleled portfolio of fully tapered implants addressing the premium immediacy segment. Therefore, We believe that we should continue to win further market share in the fastest growing implant segment and are well positioned to become the leading provider of immediacy solution in the future, which was hardly imaginable a few years ago when our fully tapered offering comprised just a single non-premium design. This leads me to our challenger brands on slide 31. All our challenger brands enabled us to convert customers from competitors once again during 2020. Exciting news in the field of ceramic restoration will be the introduction of our Neodem Z implant, which is in the market testing phase and will begin the full global rollout in the second half of the year. This epically tapered ceramic implant is designed to broaden the access to ceramic implants and meet the patient's desire for fast, highly aesthetic, and affordable treatment. One additional key attribute of this implant is the cost-effective production technique, which uses ceramic injection molding instead of conventional milling. Suitable for immediate protocols, it features a ceramic screw-retained connection between implant and abutment, and a comprehensive ceramic prosthetic portfolio meaning that there is no contact between metal and the patient's tissue. Furthermore, the launch of our Neodent portfolio in India enabled us to provide high-quality, cost-effective implant solution in this additionally fast-growing country. This is an important step to continue expanding the international footprint of our challenger brand Neodent, further strengthening our position in the emerging markets. To penetrate the market at the lower end of the price scale, we launched our new economically priced implant brand Nouveau. With three different types of implant abutment connections, this versatile system covers a wide range of indications and workflows. The initial launch was in Brazil, Turkey, distributor markets, and in the US towards the end of the year. The rollout in selected European and Asian countries is planned for the first half of 2021. On slide 32, you can see that we are further securing access to ceramic expertise and supply. In Q4 2020, we signed an agreement to acquire the ceramic specialist Oxymatec in 2023. The acquisition will secure our access to expertise and is a strong example of our efforts to secure material sources in our supply chain. The Stroman Group relies on high-performance ceramic technologies to produce aesthetic restorative elements and implants. Moving on to slide 33, peri-implantitis is an infection around implants associated with the formation of an unhealthy biofield. Peri-implantitis remains an important challenge in implant dentistry because it can ultimately lead to implant loss if untreated. We are making strong efforts to find a dedicated solution for clinicians to help manage such cases. Therefore, we are announcing today that we acquired a minority stake in the Norwegian biotech company, Labrida AS, who has developed Labrida BioClean, an innovative professional brush for managing long-term maintenance of implants. This brush is a simple but impactful professional cleaning tool for biofilm removal. It is simple to use and less painful than any other conventional method. Together, Labrida and Stroman aim to expand the distribution agreement to cover more countries besides Europe and North America, mainly in Asia Pacific and emerging markets. Coming to the third priority, I will elaborate about our achievements in creating the leading ecosystem for aesthetic dentistry. Moving on to slide 35, intraoral scanners are a crucial entry point for dentists into the group's digital ecosystem. we have set ourselves the clear strategic goal of becoming one of the leading players in the fast-growing intraoral scanner segment. Our intraoral scanner sales performance in 2020 has been strong and allowed us to significantly increase our user base, thanks to our existing partnership with FreeShape, as well as some local cooperation with CareStream. The recently announced partnership with the South Korean company Medit to distribute the i500 intraoral scanner is complementing our offering and will strengthen our position as the global partner of choice for Intraoral Scanner solutions. Together with our Dontadwings Virtuo Vivo and the Freeshape Trio Scanner, this new partnership is allowing us to cover all the price points of this strategic market segment. Our centralized design service, Mine in a Box, which is one of the services we offer to iOS scanner users, is progressing well. Furthermore, adding to our digital ecosystem. In 2021, we will also launch internationally our new 3D printing resin under the Cosmo brand, which is developed and produced by Healer in Brazil. Slide 36 focuses on the orthodontics business, which grew significantly in the fourth quarter, driven by a large number of clear liner case downs. Almost half of the cases were generated outside the US clear correct market. We also gained regulatory approvals for ClearCorrect in Taiwan and Thailand and plan to launch it in Hong Kong and Singapore in the first half of the year. In 2020, we have significantly invested in order to improve our value proposition. First, we have introduced the ClearPilot software, enhancing convenience and time savings in treatment planning. ClearPilot was very well received by our customers. In August 2020, we launched ClearQuartz, the new material for ClearCorrect aligners. ClearQuartz is a huge step forward in terms of comfort for patients and has proven long-lasting tooth moving forces in addition to a high flat trim line, which improves the aligners retention. The material is property to ClearCorrect and has been launched in the US, South Africa, some Asia Pacific markets, and Latin America in 2020. with rollouts in Europe to follow pending regulatory approvals. Finally, 2020 has seen Bay Matillon obtaining an important patent to protect the innovative CleoLiner Matillon Zendure FLX, strengthening our competitive position and preventing others from copying this technology. Slide 37 is addressing Dr. Smile, our strategic investment in that direct-to-consumer doctor-led CleoLiner treatment which is growing very fast. Dr. Smile tripled its size last year and is active in Germany, Austria, Spain, and France, with France being the latest country Dr. Smile entered. While the first examination to check oral health obtained X-rays and scans, as well as educating the patient always take place in person in a normal practice, Now, treatment can be monitored online through Dr. Smile's new video consultation service. This brings me to the slide 38, where I want to share our thoughts about the outlook for the future. On slide 39, you can see the outlook for the market environment, our revenue and profitability. By the end of 2020, standard practices around the world had resumed normal activities and patient confidence had strengthened. The sharp rise in infection around New Year led to new lockdown measures in key markets. However, visits to dentists for all treatments remain possible in most places. With mass vaccination underway, we do not expect a deterioration in the total market, although economic recession may reduce disposable income and hinder patients from seeking elective non-reimbursed treatments. Overall, we made progress in 2020, reported positive results in the second half of the year, continuously investing into future growth opportunities and our strong innovation pipeline. Therefore, we aim to achieve organic revenue in the high single-digit percentage range in 2021. Profitability, core EBIT, is expected to improve versus 2020. Of course, this assumes that the export situation will remain stable. Let me finish this presentation by repeating once again that I strongly believe that our solid results in 2020 were made possible thanks to our strong high-performance culture. I want then here to thank our talented Strowman group for their patience, resilience, and dedication they are demonstrating every day. Now, I'm going to open the question and answer session. If you have a question, please press star and one on your phone to join the queue. As usual, we ask you to limit the number of questions to two questions per person. This will make sure everybody gets a change to ask their questions within the available timeline. Coruscant, can we have the first question, please?

The first question comes from Christoph Gretler from Credit Suisse. Please go ahead.

Thank you, operator. Good morning, Guillaume, Peter. I have maybe two questions. One relates to your margin outlook. In the second half, according to my calculation, you had a core EBIT margin in the high 20s. So maybe going into 21, could you maybe be a bit more specific about the level of you think, you know, is reasonable also maybe relative to, you know, kind of your 2019 level. And in this context, maybe also discuss your headcount plans, you know. I thought that, you know, kind of in the second half, you know, headcount, you know, grew already a bit, you know, again after, you know, adjusting for the Dr. Smile acquisition. And the second question relates to Dr. Smile, you know. you know, first of all, you know, if I understood correctly, you said, you know, kind of it's triple sales, you know, in 2020. So maybe if you could, you know, give an absolute run rate, you know, sales for that business and what are the further plans, you know, to roll that concept out, you know, internationally and particularly to the US, you know, whether you had any plans, you know, there too. That would be great. Thank you.

Thank you, Chris, for these questions. Let me start with the first one on the margin development. First of all, I would like to mention that also in 21, I expect once again a headwind on the currency side, which based on today's exchange rates might be in the order of around 40 to 50 million on the top line. And obviously, that will also have an impact on the margin, which I expect in the order of potentially a bit less than 1 percentage point. So please take that also in consideration. Then you are right. In the second quarter, in the second half 2020, we achieved the margin in the high 20s. However, I would also caution you to extrapolate that going forward for different reasons. One of the reasons is that we were still in a situation with a bit substitute business activities compared to the normal level, especially on the Congress side and the promotion side. We were not traveling. There was not that many training and education events held as we would like to be able. And I expect during 21 that the situation hopefully goes a little bit back to normal so that we can also once again invest further into the growth. Our underlying strategy is not changed and has not been changed due to the pandemic. We will once again also invest incremental part of the incremental margin and profit into the further expansion of the business. That stays the same. Nevertheless, I would expect in 2021 an improvement of the underlying margin and EBIT versus 2020. When it comes to the headcount question, you are right. We have consolidated in the second quarter Dr. Smile, which adds about 250 FTEs to our headcount base. And also in 21, in some selected high growth markets, we have started to add cautiously some additional headcounts to our FTE base.

When it comes to Dr. Smile, I think something which is interesting to see here is this is one of the strong trends we have seen based on COVID. I believe that one of the effects of COVID is the fact that health consumers have been more often confronted with their self-image, and they have also more time to take care of themselves. And thirdly, less spending options. And I believe this has fueled a lot direct to consumer activities, even though this is Dr. Lead on the Dr. Smile side. Then, yes, the Dr. Smile business model has been significantly successful and has delivered some very significant growth ahead of the plan that we were having when we have done the acquisition. From an investment or development standpoint, we are then developing Dr. Smile expansion within Europe, as you have seen, in many of the different most important European countries. And we have no plan yet to implement this specific model in the U.S., as the space is already very crowded in the U.S., and we see that then the health consumer access is very costly with all those different players. There might be parallel business model that we can implement in the future, but it would be different from what Dr. Smile is doing.

Okay, very clear. Thank you.

The next question comes from Tom Jones from Birnberg. Please go ahead.

Good morning. I had two questions, hopefully one for each of you. Peter, just on the kind of margin outlook for 2021, I'm not sure 2020 is the greatest comparator because things are all over the place. So maybe you could give some comments regarding 2021 margins versus 2019. My thinking being that you reported, I think, 27.1% in 2019. But then you had 160 basis point FX headwind on that. This year, you're talking about another 90-odd basis points in 2021. So if we adjusted that 20 to 19 baseline, should we be thinking of something in the sort of 24, 25 range as the sort of FX adjusted baseline for 2021? And then in that context, where do you think margins can end up for 2021? And then the second question is really for William. On the deferred acquisition, what was the rationale behind deferring the purchase of this asset for two years? Obviously, it's something you want in the business, but you don't want it now. Is this just too early a stage business to acquire? Was there something going on with the sellers? It's a slightly odd structure to have a deferred acquisition in this way, so I just wonder what the rationale was for it.

Yeah, I can start with this one for the Oxymatectom. That was a seller requirement, and they were wanting to still lead and be in control for the next two years. And having afterwards the retirement coming in, then it gives us two years to be able to learn all the very high-level expertise that they are having on ceramics and take the control of the organization afterwards. And that's the only reason for differing that acquisition and the control of the acquisition in 2023. Okay.

Has the price been fixed or is it dependent on performance between now and 2023?

It's depending about performance, but there is a very small variable part. It's more about knowledge transfer and knowledge acquisition. Okay, perfect.

On the first part of your question on the margin, Tom, I share your thoughts around the ethics calculation that versus 19, we will see an impact of based on two days' insights of 2.5 percentage points less margin compared to 2019. However, as I said, the underlying strategy has not really changed. In the past, I said if you're able to generate a good double-digit growth rate, then I see a realistic margin expansion of around 30 base points. And with the guidance of high single-digit growth in 21, you see that I would think more in the order of 24% margin in 21 and not in the area of 25% margin.

Okay, and so that 24% core EBIT margin in 2021 that you're thinking of, that's fully loaded, that's with FX, everything else involved?

I said in that area, yes. I mean, I don't commit, obviously, to 24%, but I think that that's a reasonable area around 24%, given the margin of 23.4% that we generated in 20 years.

Okay, perfect. That's very, very clear.

The next question comes from Patrick Wood from Bank of America. Please go ahead.

Perfect. Thank you very much for taking my questions. I have two, please. I guess on the 2021 revenue guide and the high single digit number, you know, you guys were obviously, you know, Q3 maybe had some backlog effects. But, you know, Q4, you were already there, I guess, versus 2019. So I guess my question is, do you think that the world doesn't get sequentially better as we move through 2021 relative to where we were, let's say, October to December of the back end of last year? Or is it just that it's the sort of macroeconomic concerns from you guys you're trying to factor those in? I'm just trying to understand why you wouldn't feel that 21 sequentially would be a better setup than the 4Q of 2020 and maybe the 3Q as well. So that's the first question. The second question, also just kind of curious on the gross margin side for the second half, it was a lot better than I would have thought given the mix was heavily shifted towards the value implant side. and equally, you know, on the digital and math side of things, plus you had FX. So I guess, you know, what's going on with such a strong gross margin in the second half, and how should we think about that as we move forward into next year? Thanks.

Yeah, I think I – thanks, Patrick, for the question. I will take the guidance part. I think I agree with your statement. We also see that things could go incrementally better as the year goes. Now we have also seen some effects at the beginning of the year with those extreme cautious about government going back to semi-lockdown very quickly and wanting to protect very significantly their population. And we still see in major areas some concerns about the potential constraints to come in. Then I would say as we speak today, I think we can see that things are getting better, especially vaccines coming in. But all those stories about variants and not having the possibility potentially to control them, as we have seen the situation in the U.K., and the U.K. has been, well, significantly impacted by the new variant, and it has been also significantly impacted from a business standpoint since the beginning of the year because of the constraint. We still have some areas of uncertainty that is driving this cautious top-line approach. This being said, if we see the situation then improving sequentially, then we believe that we can also achieve stronger in 2021.

So coming to the part of your question on the growth margin, I agree with you, Patrick, that the colleagues in all the different plants around the globe have done an excellent job in the second half. to mitigate the impact on the revenue decline, to increase the efficiency in the plant, and at the same time also to ramp up operations after the temporary interruption in the second quarter. On the gross margin, however, we also see in 21, The change in the product mix, which has, as commented already in the past, a negative impact on the gross margin because the lower margin businesses such as digital and auto are growing faster than the higher margin business of the implant business. And in the past I said I would expect there on a year-to-year basis a decline of the gross margin around 20 to 30 base points and I still stick to that comment also in 21. At the same time we also, I commented that some of our capacity expansion projects are coming to an end. That means we are ramping up the activities that require some investments in 21 as well and obviously the depreciation of these will also kick in in the first half of 21, which is also a certain headwind on the gross margin. So in 21, also we are not guiding on the gross margin level. I would expect somehow a certain stable gross margin development versus full year 2020. Very helpful. Thank you for taking my questions.

The next question comes from Michael Jungling from Morgan Stanley. Please go ahead.

Great, thank you, and good morning. I have two questions, please. Firstly, on Zimmer Dental, do you foresee interest in this business? It appears it's for sale. And what would be the strategic rationale if you showed interest? And secondly, when you value your CGUs in the annual report, can you comment why you would assign a terminal growth rate to Neodent at 4.5%? I'm referring to page 152, so Neodent 4.5% and clear correct. 1.5%. As a matter of fact, all these features use 1.5%, but 4.5% are near then. Are you planning something special or so with your value brand that will allow you to grow so fast in perpetuity? Thank you.

Thank you, Michael. When it comes to Zimmer Dental, we have been evaluating this asset already in the past. And we have looked at its development on the marketplace. And what we have seen is obviously nothing exceptional, to say the least. And we believe the innovation pipeline is very limited or empty. And the brand asset has been really deteriorating significantly over the years. as much as they are customer-based. And we don't believe today's email dental is representing an opportunity for us from an M&A activity standpoint.

Coming to the other part of your question on the terminal growth rate in our feature use model, a good catch, Michael, thank you for pointing that out, but I would not over-interpret that. That basically comes mainly, or one of the key drivers is that Neodents is growing strongly also in some of the emerging markets, which tendentially have a higher inflation rate than one of the more established countries in Western Europe and North America. And that's the reason why the terminal growth rate for the Neodem business is slightly higher than for the other business units.

Great. Thank you.

The next question comes from Daniel Yellowstone from Mirabeau. Please go ahead.

Yeah, good morning. On the capex side, I'm not sure if you have already commented on, but can you guide us what capex will be for 20 years? I guess it will be significantly higher than the low 20, and maybe also for the next two, three years. What kind of capex you expect? And the second question is, it was within Elmira, it was quite the opposite in Q4 versus Q3. So you mentioned Germany was solid, and in Q3 it was actually moderate, with a moderate increase, while Spain and France, you mentioned, were healthy. But in Q3, Spain and Italy was, you formulated it like it rebounded strongly, so Was that only the pandemic or, yeah, that's the question.

Yeah, thank you, Daniel. Yeah, good question. We have seen, actually, that's where we have seen some different trend within EMEA. And to take Germany as an example, Germany has been fighting or navigating very well the crisis since the beginning. they are never completely really closed down the nodal practices, then they have been able to do really well or well versus the circumstances in the second quarter. Then the third quarter did not see a huge pent-up demand for them because they were, you know, navigating at close to 2019 level. And Q4, because we started to reinvest in the business, looking at the opportunity, then they also continue to deliver really good results. When it comes to Spain, France, and Italy, who have been the countries most impacted during the crisis, the acute phase of the crisis, then we have seen a very significant pent-up demand during Q3, and a lot about... patients that having been, let's say, interrupted within their treatment have been rescheduled. And then coming into Q4, we have seen the second wave that has been impacting, well, Spain, France, and Italy to some extent, less than in Q2, but still slowing down a little bit the recovery. And that's why we see some different movements within the European countries or the Western European countries.

Just on that, sorry. So that means that Germany in the fourth quarter was just pure demand and not really pent up. So it was good demand, right?

Correct. Correct. I think it was regular patient flow, we would call it.

Yes. Thank you. On the CAPEX side, Daniel, CAPEX in 2020 were 82 million, significantly lower than the record CAPEX level of 140 million in 2019. In 21, I would expect, again, a higher CAPEX level compared to 2020 in the triple-digit million area, but definitely not at 140 as in 19, more somewhere in the middle between 20 and 19.

And to complement Peter's input in the next three years, we will continue to have investment from a CAPEX side as beside the development of our footprint on the manufacturing side that we will continue in some specific areas. They are also on everything which is technology related and as we express the fact that we want to continue and accelerate our digital transformation. there will be some investment to make sure that we will be able to face the needs of the new business model, especially related to direct-to-consumer doctor-led treatments.

Excellent. So it can also remain triple-digit in 2020 and 2023, right? That's correct.

Yes, correct. Okay. Many thanks.

The next question comes from Julia Dormois from Exxon BNP. Please go ahead.

Hi, good morning, Guillaume. Good morning, Peter. Thanks for taking my questions. I have two. The first one is coming back, and I'm afraid on the guidance you gave for sales in 2021, just making some very basic assumptions. If we assume that in the first half of this year, you only reversed the 20% organic sales decline that you recorded last year, This would basically mean about flat growth in the second half of this year. So that seems probably extremely cautious, I would say, and especially considering the full pipeline you have. You indicated that you plan to launch TLX and also Neodem Zirconia in the second half of this year. So just so you get a sense, let's say, of the phasing of growth, we should expect it in 2021. And the second question relates to clear liners. Just wondering if you could give us an indication of what was the growth, the organic growth rate in that business when you fully exclude Dr. Smile because the comment in the press release was a bit misleading to me. You said that the orthodontics business achieved very high organic growth, actually the highest increase in organic growth across the group. But that was followed by a comment about the contribution of Dr. Smile in Germany. So just trying to assess what was the growth excluding Dr. Smile in clear line industries.

Yeah, I think when it comes to overall guidance, well, we are missing in the second half, we are missing something like a month sales. That's what we have been evaluating when we were looking at the overall year. And if we continue on our trend, and again, and if we see, as discussed before, an incremental improvement about the overall micro situation, then we think that we can be optimistic about 2021. This being said, again, we want to make sure that all the different lockdown measures and all the different risks related to variants in all the different geographies are going to be lifted, which is not what we see as we speak. Then we have some upside potential, fully agree with you, Julien, and we believe that we will be more than focusing on playing it. This being said, we need a bit more visibility to remove all those different circumstances when it comes to the pandemic control in the different key geographies, especially Europe and North America. This being done, I think we can also then remove some of that cautiousness. This is also in line with the way we have been producing guidance over the years. looking at the clear liner yes i think that that's a good point um a doctor smile is uh is uh also a strong uh way to uh to drive um case growth within our auto business uh this is coming from acquisition but uh well now not only because we have made we are making significantly investments especially in the second half, in order to drive the business on our own and accelerate the growth. But if we remove Stop to Smile, then we would be more in the single-digit growth area if we take all the different geographies together.

Okay, great. Thank you very much for that.

The next question comes from Veronica Dubaiogor from Goldman Sachs. Please go ahead.

Yes. Hi there, guys. Good morning. Two questions for me, please, if I can. The first one is just trying to understand a little bit better the margin commentary, Peter, because if I look at the second half of the year, obviously, you had very, very significant margin improvement on core basis year on year. And I appreciate, obviously, some investments were not there. Some of the promotional activities weren't there. But presumably, half of the year looks fairly similarly to So I'm just kind of confused around that 24% margin. Why should it be that you go back to 24% when in the second half of the year you were at 28%? Frankly, over 28%. So if you can help me think through what are the headwinds to profitability, currency aside? Because I understand these, but ethics aside, what is it that's going to drive that 300-point margin compression? Firms can have 20, 21. That would be helpful. That's my first question. My second question is just on the mix between value and premium implants. Obviously, very strong performance and value for you guys in the final months. Do you think we're starting to see the market get to what we observed after 2008, 2009, when value inflated for a period of outside growth above what we have seen, or premium will return to the demand dynamics as long as we're through the pandemic that we're there for? Just kind of curious what you're hearing and seeing from customers and Is value versus premium shift just a temporary impact, or do you think there's something changing in the end market? Thank you so much.

Do you want to start with the note?

Yeah, let me start with the marketing question. I don't want to repeat what I have already said, Veronica, but I think another aspect that also makes me a bit cautious is 421 is also that in 2020, obviously in the second half, we were also very cautious in terms of our spending, not only because business activity was not rebounded to normal level, but also because we didn't know how the pandemic is going to develop in the near future, and therefore we were also cautious in our spending behavior, and hopefully we return to a more normal level in terms of business activities in 21, and we can also increase our spend rent in order to further growth our business. And then I also want to stress the comment that Guillaume has made in terms of investing and improving our digitalization and our our digital ecosystem that also requires not only on the CapEx side some investments, but also on the UPEX side some investments to prepare the future and generate further growth in that respect.

When it comes, Veronika, on the mix, premium versus value, yeah, that's an important question. That's also one of the free learning that we have from the pandemic. First one being that health consumer movement. Second one being the acceleration of digitalization. The first one is just current significant geographical differences from how the different regions have rebounded and faced the pandemic. Then while Asia-Pacific and emerging markets have rebounded strongly, and we have seen the impact of the pandemic being almost like past, and I would say China is a good example, but also Russia, also Turkey. We have in our more what we could call old economies like Europe and North America, which have been much more impacted, especially by the second wave, which has not been so present in the previous seated country. LATAM is still struggling to control the COVID that we know, but it's playing a smaller part. then the switch from premium to value is not so much a cannibalization of one versus the other, it's much more the consequences of the current geographical shift in the business that we have been seeing. They are in those emerging markets, the China, being Russia, Turkey, much more and almost 90% or 80% sales of value, which grew significantly, was premium has been impacted by the fact that North America and Europe have been slower than the rest of the world. And this is the major effect that is driving this difference in the mix. Now, this being said, we still see in some areas than some of the premium being switched to value. But honestly, this is very seldomly the case, and we are not seeing such a trend that we have seen in the post-financial crisis in 2010-2012 period.

Okay. That's very helpful. Thank you both.

The next question comes from Maya Pataki from Kepler. Please go ahead. Yes, good morning.

I have two questions. One, Guillaume, could you provide us a bit of a qualitative statement about growth of the various business lines for the full year as you've done for Q4? It would be very helpful to understand which businesses performed how relative to group growth. And then my second question about group core EBIT margin and, you know, not focusing on 2021, but focusing on the next three to four years with all the expansion opportunities that you have, all the growth opportunities that you mentioned in analyst and investor presentations. Shall we think that the next three to four years, based on the planned investments that you take, assuming a normalized growth, that the next three, four years will be a path back towards what we've seen in 2019? Or do you think you can actually grow and achieve your targets by lifting or exceeding the 2019 margin maybe in two years? Thank you for that.

When it comes to the different business line, I think we have a little bit to this, but when it comes to influence, we have seen that premium have performed lower than our global company performance, impacted especially by Europe and North America being, well, the region the most impacted by the pandemic. We have seen a growth versus 19 about our value in plant business and demonstrating the strength and the vitality about also this part of the business linked mainly, as I said before, because of the geographical mix of country being performing. But this is still something very important to notice. This is the results. of the strategy that has been defined then some years ago after the financial crisis to make sure that we can cover all the price points of the marketplace. And this is really bearing the fruits then as we are speaking today. We see then growth also on our digital business pushed by intraoral scanner sales. And our digital business has been progressing very well. We have been very pleased with this. And we believe that it will continue in 2021 as digitalization will continue its acceleration based on the new habits that dentists have taken. And Horto has been by far the fastest growing business we had with the investment we made on the different business models that are really a clear differentiation of this specific market segment. then that would be the way our different product lines have evolved. Having biomaterials also having been impacted in the kind of same way than the premium business, because they are very often sold together. Martin, could you, Maya, could you repeat again your Martin questions to make sure that we are spot on when we answer you?

Yes, sure. I mean, we've been focusing now a lot. The questions have been focusing a lot on 2021 versus 2019 margins. You know, why are we going to be around 24 and not around 27 or 28? But my question is more like, if we think about your investment path over the next three to five years and your margin development over the next three to five years, Are we to assume that we're going to have like a bump up and we're going to go back to 2019 margins and from there on we're going to be, you know, you're going to be spending to achieve your target and we're going to see the 2030 BIPs margin improvement? Or are we, you know, should we take 2021 levels and from there on you're going to be investing and we're going to see a gradual margin recovery to the 27, 28% over the next five years?

Yeah, yeah, thank you. Thank you for repeating the question. First of all, Maya, we should not forget the ethics impact on the margin that we already have been discussing. So getting back to 27 with today's ethics exchange rate would be significantly above the 27 margin that we generated in 2019. But I would go more for the second option that you mentioned. Take the 20 margin, 21 margin, and as long as we can generate good growth rates in the coming years, and we firmly believe into that, we will also incrementally increase our margins within that period. But I would not expect a bump back to 19 level in 22 or 23.

Right, Peter?

But a gradual increase of the margin over time.

Okay, so we prioritize growth projects over short-term margin improvement, just to get that right.

Yes, that is correct. That is correct. As we have done in the past as well, and we stick to that strategy, Maya. That's correct.

Perfect.

Thank you. The next question comes from Oliver Metzger from Commerzbank. Please go ahead.

All right. Good morning. Thanks a lot for taking my questions. Both are on the orthodontics business. So the first one is on the technological progress you've achieved. So a few years ago, as you acquired ClearCorrect, you stated that ClearCorrect is behind the line from a product solution offering. Given, now over the last years, some introduction, the digital innovations we saw, as well as the acquisition of Dr. Smiles, Where do you stand right now with regards to your competitive positioning and how much time does it take from now really to compete with Align head-to-head? That's the first question. The second one is a very quick one just for clarification. So Dr. Smile, is it correct that Dr. Smile Grove is accreted from an underlying perspective compared to ClearCorrect and should we assume that also for 21?

Yeah, thanks for the question, Oliver. Yeah, when we took over ClearCorrect, we knew that there was a heavy lifting to do in order to make it competitive on the marketplace for the long run. And I think we took the task by the bullhorn, and we have made significant improvement. I think when it comes to materials with the launch of ClearQuartz, we are now having the best-in-class material, which is at least at par with, let's say, the market leader line, and it's really developing all the benefits that a top-notch thermoplastic material can provide. The second aspect is the software side, and on the software side, we have done already some significant improvement with the ClearPilot software, 1.0 that has been launched then in october we are expecting a clear pilot 2.0 during the second quarter and we are expecting a clear pilot 4.0 potentially in q4 we are working significantly and doing a strong investment on both indication coverage and also into a user interface to really drive usability and quality and accuracy of our treatments to the next level. That would be very competitive in the marketplace. Then that's one of the very strong development areas for the ortho in particular, but for the group also, generally speaking, looking at the huge growth potential that ClearLiner franchise is having. And the third one I would say is still the manufacturing side and treatment planning side. In order to cope with the growth that we're having, which is very significant, coming from the B2B or the B2C2B business models, Then we have a buildup, then extended capacity in Europe and in Latin America on top of the one that we were having in North America. But we are evaluating still some additional increase moving forward that would be a potential plan and project that we will share with you very shortly within 2021. Now, coming to your second question, yes, we believe that in 2021, with the expansion that we are doing, Dr. Smyth should be delivering a higher growth rate than the B2B business even though we currently see an acceleration of our B2B business based on the latest innovation that we just launched Q4 and that are not fully launched geographically because our new material is not yet in Europe, as you know, and we still have to register clear correct in China and get started with this specific brand and material also in those key countries.

Okay, great. Thank you very much.

The next question comes from Falco Friedrich from Deutsche Bank. Please go ahead.

Thank you very much. I have two questions left, please. Firstly, are you able to provide a little bit more color on Q1 now of 2021? How did January and February kick off sequentially versus your exit rates in December? And are you seeing further sequential improvements to your growth rate so far this year? And then secondly, on M&A, you commented on Zimmer Dental, but could you share a bit more color on which other areas could be of interest to you over the next few months?

Well, Q1 2021, or let's say the first month, I think I've demonstrated so far that the positive trend is solid, is very solid. We have been pleased with our Q1 January, with our January, sorry, performance, in line in what we have delivered in a sequential growth in Q4. And we see start of February, it's also demonstrating that the pandemic is very well controlled in Europe. And we see that the defocus in North America because of COVID all the the political topic is really uh coming down and letting everyone focusing on business then we see a significant refocusing on business activity in north america and uh providing a solid growth rate versus q4 and we see asia pacific uh you know uh yeah continuing uh the uh gradual improvement uh to get back to uh to a pre-covid level and i would say uh very encouraging initial stance of 2021. When it comes to the second question, sorry, once again, that was, yes, the acquisition, the M&A side. Yeah, we, you know, we are having still M&A important topics for us, which are based on a then what kind of technology that we can see out there that will continue to help us fueling our innovation power. We still believe, especially in premium, but value included, that on the implement side, innovation equals differentiation equals market share gain when you are small in a commercial execution. This has been a formula that we have leveraged very well in the past, and we see that still working with BLX and with our value brands that are providing innovations. And we are having a couple of projects in this area. On the other side, it's all about developing our footprint and geographical expansion. As you can see that this has delivered huge dividends in a crisis mode because all those emerging markets and fast-growing markets are critical for continuing to allow us to have above-market, significantly above-market performance, then we are always looking at those opportunities. And finally, also in the new business model areas, you know, we believe that this developing an activity towards the health consumer and making sure that we can lead them to the right doctor is also critical in the way forward. And this is an area where M&A activities is also, well, evaluating projects. because we believe that there are things that are better done outside than what our current capabilities as we speak.

Perfect. Thank you.

The next question comes from Daniel Buchter from TSKB. Please go ahead.

Yes, thank you very much, gentlemen. Two last questions from my side. The first one on margins again. I mean, I don't want to elaborate on the trends for 2021. But I think, as you mentioned as well, Peter, a driver for the storm margin in the second half were lower costs for marketing, travel, and these things. With customers now also being more used to videoconferencing and all that stuff, do you think that parts of these expansions from the past are not going to recover to the full amount anymore in the future? I mean, at least some business travels could be saved and also marketing could be done more cheaply online, for example. And then the second one on the ceramic implant business. I mean, that is the business you're talking about since a couple of years now. I would assume for the whole group and also for the implant business, it is still very minor. How can we expect that to develop going forward? And when can that become more meaningful for the group? I mean, you acquired Z-Systems also in the past, now another acquisition to come. What is missing here for that business to become more critical for the whole group? Thank you very much.

Thank you, Daniel. Also a very good question. When it comes to how we are connecting with customers, you're totally right. We are doing more video conferencing and are getting really agile in the way we communicate with customers, but it will not replace the physical meetings, but it will increase the frequency on the way we interact with customers and the efficiency. Actually, We are doing some pilot about also remote selling and hybrid selling, and we see some very interesting approach here on how to drive efficiency in what we do. Then we might see some savings here due to new way of working, including less travel here on our site. This being said, looking at the potential that we have in front of us from a market growth standpoint, then we are more about reinvesting those savings that we would generate from our operational activities into area of growth and making sure that we can keep adding some growth points to our top-line performance than just trying to maximize margin, as Peter said a little bit earlier. When it comes to the ceramic implants, you are totally right. the ceramic implant segment has not yet been cracked. And one of the reason is because the ceramic implant is not in its usage as volatile as titanium implant. If you want to communicate to the health consumer about ceramic implant, you will still be obliged to carve out a lot of potential patients because you don't have all the solutions in your arsenal. I am giving that example because you need to have regular large and narrow diameter implants. Narrow diameter implants are important for all the front teeth, and that's where aesthetic is critical. And as we speak, there are no reliable narrow ceramic implants for the front teeth, two-piece screw retainer available in the marketplace. And that's one of the big missing points. And you have some that are one piece that are not versatile because you cannot adapt in the prosthetic side. Then in a nutshell, the product portfolio is not yet at the level of expectation of clinicians for wide usage. The technology acquisition that we are doing and actually the launch of that new manufacturing way of ceramic implant with Z from Neodent is opening up that opportunity for us with a very strong hope that during the second half, we would be able to bring a narrow diameter implant, meaning a 3.75 two-piece screw retain to open up this segment. But if we don't have this opportunity, small diameter implants, it will still remain confidential for the time being.

The next question comes from Marcus Gola from Stiefel.

Please go ahead. Great. Hi, and thanks for taking my questions, both on business lines. My first question is on the BLX. Can you share with us actually a ballpark figure, how many BLX units you have sold in 2020? And related to this, have you noticed any slowdown or even reversal of share gains in markets where Alvista's N1 is already available? My second question is on your clear liner business in the U.S. It seems that this market is becoming more and more competitive, now Align launching a new product line. We see the Spark Aligner gaining traction. So can you provide some color? How much scope do you still see for further market check-ins in the U.S.? Thank you.

Yes, when it comes to PLX, well, we had a significant growth in 2020 versus 2019 despite the pandemic. And as you can see how relative to premium implant performance, which has been a lower performance than our global company, then you see how much PLX has improved. still then gain traction on the marketplace despite the fact that it was more difficult for us during the first half to connect with new potential customers. Then it has been a strong double-digit growth for BLX versus 19 without disclosing exactly the volume because we are not doing this. We are not at our initial 2020 objective But we have been really in the right direction, making that we are still confident that this is the right implant to allow us to claim market leadership on fully tapered in three to four years from now. We have not seen any, you know, reverse share from any initiatives from any competitors versus the BLX campaign that we are launching. and we are doubling down right now because we are believing that this is the right moment to accelerate once again on our BLX development. When it comes to the second question, on the clear liner, yes, I think this is becoming much more competitive. You are totally right. On the other side, this is still a very under-penetrated market. then the growth of the market is still very significant. Then we believe that on the one hand, we will have the tailwind to grow our clear liner in the U.S. by still more product adoption, especially when it comes to the GP side. And secondly, we believe that we will be able to gain market share because of our further innovation that are going to be launched, especially on the software side. then investment is still there for us on our auto franchise, and North America is still a market for us of very significant growth moving forward from our perspective.

Very clear. Thank you.

This is the last question. Okay. Thank you to all of you for your attendance and for your questions. If you need further information, you will probably find it on our annual report, which is published online today. And of course, you are welcome to contact our colleagues in investor relations and corporate communication. That concludes our conference today. We look forward to e-meeting you at one of the upcoming financial conferences or during our virtual roadshow meetings, which are outlined on slide 42. Thank you once again for joining us, and have a great day.