Straumann Holding AG

Good morning or good afternoon to you all. Thank you for joining this conference call about Stroman Group's two-year results for 2021. I very much hope that you, your families and your colleagues are well. We are meeting online today, but we hope to be able to hold this event in person again soon. We are continuing to take action to keep our people safe and are grateful to report that we had very few cases within our global organization in the recent weeks. Please take a note of the disclaimer in our media release and on slide 2. During this conference, we are going to refer to the presentation slides that were published on our website this morning. As usual, the presentation and discussion will include some forward-looking statements. The conference will follow the usual format. As shown on the agenda on slide 3, I will first give you an overview of our group performance. Then our CFO, Gitter Hakon, will share details about the business performance across our regions. After that, I'll have an update on strategic initiatives and on our outlook for the future. Finally, we will both be available to answer your questions at the end of the presentation. Let's start with our highlights and move directly to slide five. In 2021, while the pandemic was, of course, still present, Dental practices were largely able to keep operating with strong patient flow, which was naturally positive for our businesses. Schroemann Group's revenue reached just over 2 billion Swiss francs in 2021. This is an outstanding result, which was only possible because of our entire team, who did a tremendous job of focusing on customer needs and delivering on the high level of demand. Revenue increased organically by 21.7% in 2021 compared to the previous year. Q4 2021 was our strongest quarter in revenue ever. The group sold sales of 520 million Swiss francs, and this was up 21.1%. Premium and value in plantology performed very strongly in 2021, being the core of our business, while orthodontics is making great progress in building its value proposition. In 2021, we achieved a core EBIT margin of 27.4%, an operating margin which was inflated by fewer than usual travel and marketing expenses during the first half of the year. Investing in sustainable growth was our focus, and it will remain so going forward. Tromantou impacted 3.7 million smiles in 2021, on our road to achieving 10 million smiles by 2030, fulfilling our purpose to unlock the potential of people's lives. This is one of our most important goals that we laid out in our evolved business strategy and new sustainability framework at our latest Capital Market Day in December. One of the main contributors to our 2021 commercial success was the strong performance of our leading region, EMEA, which grew 41.3% organically. The region accounted for 892 million francs in revenue thanks to healthy patient flows and a strong performance in Germany, the UK, France, and Spain. Highlights were also the strong growth in Russia, Turkey, as well as the significant growth contribution from our Dr. Smile business. In general, we gained market share by improving our volume proposition in the different business areas, growing the existing customer base, and winning new customers across all regions. In addition, we expanded our education efforts and geographical reach. We are very pleased that our employee engagement score was 80 in 2021. People and culture are key factors for success, which is reflected in our results. In order to strengthen this further, we have developed a new cultural architecture, which we will talk about later. Looking at our guidance for 2022, we see the future positively. We aim to achieve a low WG revenue growth against a strong comparative error, and including investment to support growth, we expect profitability to be around 26%. This is in line with our long-term ambition to achieve revenue of 5 billion Swiss francs by 2030. Let's move on to slide 6. The strong performance in 2021 was driven by all regions, each growing at least 40%. When looking at the growth rate, please note that the base year 2020 was, of course, heavily impacted by the pandemic. Overall, patient growth remained healthy around the world in 2021, with a tailwind for specialty dental treatments that supported growth. our customers kept reporting that they saw patients prioritizing healthy and specialty treatments over other expenses. As already mentioned, our EMEA region, which is the largest revenue contributor, was leading very strongly with organic growth of 41.3%. North America reported fuller organic growth of 40%, and Asia Pacific and Latin America saw organic growth of 40.6% and 56.8% respectively. Overall, the strongest global performance in 2021 leads to a very solid two-year acreage of 16.3% for the group. Moving on to slide 7, we now have purchased over 9,000 people through to the world, adding more than 1,600 people compared to 2020. Most of those new positions were in production and sales-related functions. The group invested in large expansion programs at its Inflate and Clearliner manufacturing sites to meet the growing demand. And with this, I will hand over to Peter to provide more detail about our business performance.

Thank you, Guillaume, and good morning or afternoon, everyone. Looking at slide nine, you can see the revenue development. At 2021 exchange rates, our full-year 2020 revenue would have been 20 million Swiss francs lower, mainly because of unfavorable currency effects that were mostly related to the depreciation of the US dollar, the Turkish lira, and the Brazilian real. The favorable development of the Chinese renminbi only partly offset the negative currency effects. However, as you might remember, in previous years, currency headwinds were considerably higher. The acquisition effect in 21 added 21 million to our adjusted revenue base of 1.4 billion francs. This was largely related to Dr. Smile. In the middle of the chart, you can see that all our regions reported more than 40% organic growth for the full year. The absolute organic growth of 595 million Swiss francs was mainly driven by EMEA and North America, which remain our biggest regions. On slide 10, you will see that EMEA accounts for 44% of the group's full-year revenue and North America, 29%. In absolute terms, EMEA contributed 892 million and North America... 591 million revenue in Swiss francs. The variation in the growth per quarter and the huge spike in Q2 in both territories can be ascribed to the pandemic. Starting with EMEA, in the fourth quarter, the region delivered revenue of 244 million Swiss francs with organic growth of 25.8%. Germany, UK, France and Spain were the leading markets. Russia showed strong growth, with BLX performing well and the immediate and free-shape intra-hour scanners being launched. In addition, the registration of our digital solution Vietro Vivo was submitted in the fourth quarter. Orthodontics grew rapidly across the entire region in 2021, supported by the strong growth of Dr. Smile. Both quarter revenue in North America amounted to 151 million Swiss francs, with organic growth of 15.1%. Both the US and Canada posted solid double-digit growth, with the latter growing at a higher rate. The performance was driven by our premium implants, such as BLX, as well as the Challenger implant brands, with Neodent growing strongly, supported by the dental service organization business and the group's full portfolio of intraoral scanners driving uptake in digital solutions. On slide 11, you see the quarterly growth for Asia-Pacific and Latin America. Asia-Pacific accounted for 20% of group revenues and contributed 409 million risk ranks over the full year. Market share gains were led by China, Japan, and Australia. The Romans' premium BLX solution was rolled out in Australia, Japan, and South Asia. In the fourth quarter, total revenue in Asia Pacific contributed with 109 million Swiss francs, which is an organic growth of 17%. One of the fourth quarter highlights was the BLX regulatory approval in China. The Latin America region contributed 130 million Swiss francs in 2021, which was up almost 57% compared to the previous year. Latam is the smallest but fastest growing region with revenue of 36 million in the fourth quarter. The high rate of growth in Q4 can partially be explained by the fact that COVID-19 hit the region later in 2020. All countries in the region enjoyed at least double-digit growth in 2021. Brazil remains the biggest market and enjoyed strong growth, so other territories in the region grew even faster. Neodent's strong presence in its home region is proving to be an asset not only in implantology, but also in orthodontics, where high levels of brand recognition are driving customer acquisition. The strong virtual vivo growth in Brazil and other lifetime countries demonstrates the ongoing digitalization in the region. Turning to slide 12, we can take a look at our performance by business. In-plant sales showed solid growth and once again contributed the largest share of our revenue. The group's premium immediacy solutions continue to be an important growth driver. You will hear more about this exciting development from Guillaume later. Our Challenger implant franchise growth outpaced the premium business. Neodent continues to show strong growth in North America, while Ontagir shows fast growth in EMEA. Our digital and restorative business saw high double-digit growth, with a particularly impressive contribution from North America. The trend for digital is continuing and supports our intraoral scanner sales. Our biomaterials business saw particularly high demand in Asia, so all regions grew by double digits. Sales in orthodontics grew strongest of all our business segments in the fourth quarter. ClearQuartz and the updated software ClearPilot 2.0 drove the growth. Growth for Dr. Leth direct-to-consumer clear aligner solutions was higher than the business-to-business channel. On slide 13, you will see the non-core items from 21 and for comparative reasons also from 2020. As usual, this includes the amortization of acquisition-related intangible assets, which amounted to 8 million Swiss francs. In the first half year, the estimate of contingent consideration payable to the sellers of Dr. Smile was increased by 49 million, which is posted below the operating result. Turning to slide 14, we can take a look at our core financials. Core gross profit rose to 1.54 billion and core EBIT rose to 553 million Swiss francs. with the respective margins reaching 76.2% and 27.4% over 21. The gross margin improved by 360 basis points, while the EBIT margin gained 450 basis points. The respective FX headwinds took 20 basis points off the gross and 50 basis points off the EBIT margin. Core net profit increased by more than 74% to reach 456 million francs and the margin improved by 420 basis points to 22.6%. As a result, basic earnings per share increased from 16.2 to 28.45 Swiss francs. For full clarity, You will find the year-on-year comparison on a reported IFRS basis on slide 15, followed by the core reconciliation table on slide 16. More details can be found in the annual report. Looking at gross profit development on slide 17, our gross margin for both core and reported amounted to 76% in 21. This improvement was due to the fact that we reached full capacity and gained efficiencies in our operations, which had a 360 base points and brought our margins close to the level achieved in 2019. As a consequence of a change in our portfolio mix, we saw a decrease in our margin of 40 basis points, which was largely overcompensated by productivity improvements. Without the FX headwind, our margin would have been 20 basis points higher. As shown on slide 18, our ethics-adjusted core EBIT margin expanded by 450 base points to 27.4%. This was mainly due to operational gearing and lower expenses in distribution and administration because of fewer on-site activities such as customer and education events as well as reduced business travel activities, especially for the first half year. No government subsidies were requested in 2021, which explains the impact on other income. Unfavorable currency movements cut the improvement of our margin by 50 basis points. Moving on to slide 19. Core net profit improved to almost 23%. Net financial expenses amounted to 22 million Swiss francs, reflecting interest on lease liabilities, interest payments and currency hedging losses. Results of associates increased by 8 million Swiss francs, which was mainly driven by a higher valuation of our stake in an associate following a capital increase. After income taxes of 81 million Swiss francs, Net profit increased 75% to 456 million Swiss francs, resulting in a margin of just under 23%. Basic core earnings per share increased 76% to 28.45 Swiss francs. Slide 20 provides a breakdown of our cash flow statement. Operating cash flow increased almost 50% to 560 million Swiss francs, while the free cash flow increased from 295 million to 441 million francs. The group's production expansion, acquisitions and strategic digital transformation initiatives required investments of 175 million Swiss francs, 21% higher than in 2020, mainly driven by CapEx. With a cash position of 880 million Swiss francs at the end of 21, the group is 376 million Swiss francs cash positive, considering all debts, which is more than triple the equivalent figure in 2020. The group's balance sheet amounted to 3 billion Swiss francs versus 2.5 billion Swiss francs at the end of 2020. Moving on to slide 21. You can see some of the locations of future investments to expand our business and manufacturing capacity. The Arlesheim site near Badel will be a new group technology and innovation center and the China campus in Shanghai will help us ramp up our capacity in this fast-growing market in the coming years. To ensure future demand for our solutions can be accommodated, we will construct a new CAD-CAM milling facility in Mansfield in the US and increase capacity in other manufacturing sites. Overall, the group made investment decisions of over 300 million Swiss francs in 2021 for the coming years. Moving on to slide 22. The board is proposing a dividend of 6 Swiss francs and 75 cents which represents an increase of one franc or 17% on the dividend paid out in 2021. This is in line with our aim to keep increasing the absolute dividend amount steadily if business performance allows. The board is also proposing a fair split of 1 into 10 shares. As a company with a strong focus on corporate culture and social responsibility, The group would like to give the opportunity to all private investors and employees to buy shares at a more affordable price. Both proposals will be voted on at our AGM on the 5th of April, which will once more take place online. And with that, I'll hand back to Guillaume.

Thank you, Peter. Let's move on to slide 24 straight away. Our purpose and vision that you see here guides us every day. As explained at the Capital Market Day in December, our purpose is to unlock the potential of people's lives, and we envision a world where oral health is a source of comfort. To achieve this, we consider our company culture our number one priority, and in 2021, we took further steps to sharpen our culture architecture. Moving on to slide 25, you see our core beliefs. We know that our culture has defined us over the years and brought us to where we are today. In 2021, we evolved our core beliefs to take us to the next level. Our beliefs drive behaviors, Behaviour drives culture, and we strongly believe culture drives results. These beliefs are what allow every employee to feel empowered to tackle any challenge and opportunity they may face. We are convinced that keeping our culture sharp will be the key to ensure we achieve our 5 billion Swiss francs in revenue ambition by 2030. On slide 26, you see the results of our employee surveys. With our high employee engagement score of 80, we belong to the top 25% of companies globally. This score is one of the few metrics consistently associated with business success, and I'm convinced this high result is reflected in our strong financial performance. 74% of our employees told us they have good opportunities to learn and grow. which was up from 69% the previous year, despite COVID-19 challenges and a whole lot of work. Another important metric is that today, 40% of leadership positions are held by female. It is up from 35% in 2020, and we committed to a 50% of leadership positions held by females by 2026. Slide 27 shows our mission and evolved strategy compass, which has customer centricity at its heart, meaning we are always thinking about how to make clinicians and patients' lives easier. Executing on this strategy will make sure we fulfill our mission to be the most customer-focused and innovative oral care company in the world. We estimate that in 2021, our market share in implantology rose from 27% to 29% globally, and we aim to further expand our leadership in our core business. Orthodontics showed high double-digit growth in 2021, remaining an exciting growth story for us. While we will keep growing our core businesses, we invest in short trends which you can see on the right side of the compass. Answering trends of consolidation, we focus on winning strategy target groups, which mainly include dental service organizations, CSOs, and group purchasing organizations. We will achieve this by being a strong and reliable business partner, offering customized services and solutions beyond product to help them achieve their own objectives. Very important and support our future products. Let's turn to slide 28. Looking at our core business in plantology, we moved strongly in 2021, making progress, especially in the emergency segment. Innovation in our premium range was driving market share gains. With T-ELIX and T-ELIX, we further penetrated the emergency segment. T-ELIX was globally launched at the ITI symposium in September and is already available in many countries, while the Bialik implant, which has been launched more than two years ago, is still in its extension phase. Key highlights were the launch of Bialik in Russia in the fourth quarter and the regulatory approval we received in China in December. There is still a significant opportunity to grow in the premium implant market. The darker blue on the right-hand side shows Stroman's share. The brand has a big share in the traditional parallel world segments, but the fully and adequately tailored implant market, which represents 80% of all implants, still presents a huge potential for us and for our business, and therefore, we have plenty of space to grow. Slide 29 shows our multiple challenger brands, which we offer in the value segment. They all grew strongly in 2021, as our unique multi-brand strategy allowed us to cover all price points, and expand geographically. On the right side of this slide, you see that we estimate 24 million value implants are placed annually. So even after our good growth path in the past few years, the group still has a big potential to grow. Moving on to slide 30, our strategy in digital solutions is to offer clinicians frictionless workflows that integrate with the group's products and solutions. In 2021, we continued to focus on intramural scanners because they represent the entry point and generate additional clinical efficiency. We relaunched the virtual vivo and introduced Medit further, focusing on the connectivity of all our scanners. With our range of offerings, we now have a portfolio that covers all price points, which was a key driver for revenue in digital solutions. Once a clinician invests in this equipment, it makes their workflow more efficient and offers patients a much more convenient experience. On slide 31, you can see how we improved our orthodontics value proposition. We significantly invested in new software development during 2020, where new features are now available in order to increase treatment capabilities. On top of that, our scanners now integrate with our orthodontic software, driving convenience and efficiency at the clinician side. The adoption was fast and led to close to 90% of case tests now submitted digitally by clinicians. Other important innovations were the launch of the new Cleolider material, ClearQuartz, in most geographies, allowing to move teeth more predictively thanks to the attentive three-layer technology. In order to further advance our support for clinicians and strengthen our educational offer, we also rolled out the Orto Campus in October 2021. This is a comprehensive collection of tools and curricula for professionals to ensure treatment success. With our geographic expansion continuing, our orthodontic solutions are available now in 46 countries, and we have three manufacturing sites across three continents. Slide 32 shows how we are accelerating on our strategic courage to build our consumer presence due to the trend I described before. Consumers take ownership of treatment decisions. That's why we want to make sure that we are present at the moment when customers are taking their decisions within their oral treatment. We aim to do so by raising awareness of our brands and their related solutions with healthcare consumer with the ultimate goal to drive customers to clinicians. We first adopted this model in our Clearliner business via Dr. Smile and then by acquiring Smile Link in Latam in August 2021. Dr. Smile is now present in 10 countries, having entered six further ones during this year. Moving on to slide 33, We are also developing the consumer presence in implantology to further expand the market. In January, we finalized the acquisition of Neon Implants in Japan, a conserved service that connects patients with clinicians and refers patients for implant treatment to specialty clinics. The clinicians benefit from a customer acquisition path which reduces practices marketing activities. This business model helps raise awareness of implant treatment and drive customers to clinicians. On slide 34, you see our sustainability commitments related to our sustainability strategy. Sustainability is a business priority and will ensure our future growth as we are convinced financial success can only be achieved in a sustainable way. we have extended the scope and coverage of our reporting of the ESG metrics that we have in the annual report, and I would encourage you to go to page 39 to read more. And with this, let's move to our outlook directly to slide 36. We think 2021 was an exceptional year in many ways, and we are very pleased with the results. In general, we can say that for the moment, fortunately, COVID-19 is not affecting our operation significantly. We did hear reports from some customers in Q4 that they had to deal with employee shortages, which translated into shortened working time. However, in 2022, patient flow is now expected to be not significantly impacted by the pandemic should the situation remain stable. The group will seek to anticipate and mitigate supply chain disruption inflationary and geopolitical developments and their potential impact on consumer behaviors as well as implications for treatment prices. With our able strategy and high-performing team in place, organic revenue growth is expected in the low WG percentage range versus the strong competitive year. Profitability is expected to be around 26%, including major growth investments. And with this, I would like 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 kindly ask you to limit the number of your questions to two in order to give other participants a chance to ask their questions within the available time. First of all, can we have the first question, please?