Straumann Holding AG

Bueno, fue más o menos aproximadamente como unos 10 años para atrás. Fui a una clínica dental y empecé a sentir mucho dolor desde entonces. He tenido ese dolor y pues ha sido muy difícil. desagradable o muy duro para mí estar con ese dolor de mis dientes, de mis encías. Todos los días tengo dolor. Algunos días tengo que tomar medicamento para aguantar el dolor o tratar de dormir un poco. Hay veces que no puedo dormir del dolor y cada día se me están cayendo a pedazos mis dientes. Bueno, me siento... Me da vergüenza, me da pena que la gente se te queda viendo y te hacen así como, te ven como alguien que, como que no tienes cuidado con tus dientes, con tu persona.

I met Leti about a year ago through one of our dental assistants, and she told me her tooth hurts. So I asked her to open her mouth, and she had broken teeth on the maxillary arch. She had cavities. She had a large abscess, but mainly she's in pain. Like every single, almost every single tooth on the maxilla is exposed. So I grabbed my phone, I took a couple of pictures of her mouth, and I said, I'm going to nominate you to the Let Them Shine program, and I hope they accept you.

Y él me dijo que él me iba a ayudar para que vuelva otra vez esa sonrisa a mi cara.

Whenever I heard the news, I called my wife immediately. I said, Leti got accepted. And it was like tears and smiles and laughs in the background and you name it. It's a mixture of emotions. So this great person, take the pain away and get confidence to the person. Just expect that. She's just going to bloom. That's how I see Leti after surgery.

Es una felicidad que no se puede explicar porque anteriormente era puro dolor. Pues ahora sonrío todo el tiempo y a toda la gente. Mis amigas dicen... Dice, ¿qué te hiciste? ¿Qué hiciste? Dice, se te mira muy diferente tu cara. Le digo, nada, estoy feliz. ¿Por qué? Le digo, ¿que no me ves mis nuevos dientes? Sí, dice, sí, se te miran muy bonito, dice, bien naturales. Le digo, yo estoy feliz. No tengo palabras para expresarlo.

The true Leti's coming out, the nice, fun, kind, loving, caring, it was all hidden behind her hand, when she put her hand over her mouth.

Well, there's a lot of difference, totally. I couldn't enjoy eating a corn, In the first place, you gave me pain, and now, well, no. Well, before, I couldn't smile. I cried with pain. Today, I cry, but with happiness. I cry because I'm happy. I'm very happy. Y pues no tengo palabras para agradecer. Y esto cambia totalmente la vida de uno. Nos cambia completamente. Y gracias por hacer esto a todos. Y pues que están siempre en mi corazón y en mis oraciones.

Good morning, everyone. Thank you for joining this conference call about Stroman Group's first half-year report for 2022. We are happy to present our results and are looking forward to the questions and answers session at the end of the presentation. Please take note of the disclaimer in our press release and on slide two. 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 three, I will give you an overview of where we stand. Then our CFO, Peter Hakan, will share details about the business performance across our region. After that, I will provide you with an update on key strategic initiatives and our output. Let's start with our highlights and move directly to slide five. Stroman Group revenue reached 589 million Swiss francs in the second quarter and almost 1.2 billion Swiss francs in the first six months of 2022. I would like to congratulate the entire team, especially in these times of uncertainty. All colleagues have done a tremendous job of focusing on customer needs, and delivering on the high level of demand. Overall, organic sales increased by 15.1% in the second quarter, or 20.8% in the first half of the year. The negative currency impact on revenue increased mainly due to the weakening of the euro. The EBIT margin remained high at 27.9%, which is a consequence of the very strong revenue growth as well as fewer expenses due to COVID in some regions at the beginning of the year, and in China during the second quarter. In addition, the demand for products remained strong, and although some delays in the delivery of machinery posed a challenge, running the manufacturing sites at full capacity helped to ease the situation. The implantology business continued its strong momentum, supported by the recently launched immediacy implant solutions, which contribute to customer conversions. As a highlight, physical events started to take place again, such as the second largest European dental congress, Europerio, which was exceptionally well attended. On the orthodontic side, we further developed the doctor-led Cleoliner treatment solutions business in Europe by acquiring Plus Dental. Similar to Dr. Smile, Plus Dental combines unique expertise of direct-to-consumer marketing with doctor-led treatments to ensure quality of the procedure, which is in line with our strategic approach to increase consumer presence. Given the strong first half of 2022, we feel confident to confirm our full year guidance, despite the current microeconomic uncertainty. On slide six, you can see our strong growth continued in the second quarter of 2022, with some differences in the regions. As an example, patient flow in China was affected by COVID lockdowns, which heavily impacted the performance in Asia Pacific. The strong inflation in North America had some effect on patient flow towards the end of the second quarter, while patient flow in Europe and Latam remained very healthy. In the second quarter, EMEA and North America reported organic growth increases of 21 and 8% respectively. Latin America and Asia Pacific reported 5.9 and 40.3% organic growth. This brings us to our first half-year organic growth rate of 15.1% for the group. Let's switch to slide seven. In the first half of the year, economic challenges and COVID had some limited impact on growth at the end of the period. Current inflation has an influence on consumer behavior. However, our activities are rather linked to the employment rate, which are still very low. I would like to move on to slide eight and demonstrate how the Stroman Group is now much more resilient than it was years ago. Today, our company profile is very different compared to during the great financial crisis, which began in 2007. The pie chart on the left on each box show the situation in 2007 and on the right hand side, the situation in 2022. Our geographical revenue growth is much more balanced and our implantology offering covers all price points and is not fully dependent on the premium implant business as before. A growing trend is also the fact that health consumers are much better informed and pay much more attention to their well-being and aesthetics than before. Although we are naturally affected by microeconomical developments, we feel confident that we are in much stronger positions and diversified today, which will help us navigate through more challenging times. On top of the diversified business, we strongly believe in our culture, as the people make really the difference for success. Today, our market position, balance sheet and business model are strong, and even if we face uncertainties in the short and medium term, your company is well positioned to achieve its short and long-term goal. With this, I will hand over to Peter to elaborate further on the financial performance.

Thank you, Guillaume, and good morning, everyone. I would like to start by talking about our revenue on slide 10. As Guillaume mentioned, Strowman Group's first half-year revenue exceeded the 1 billion mark for the first time, reaching 1.78 billion Swiss francs, which represents an organic revenue growth of 20.8%. At 22 exchange rates, our 21 first half revenue would have been 17 million Swiss francs lower because of unfavorable currency effects that were mostly related to the depreciation of the euro. However, As you might remember, in previous years, currency headwinds were considerably higher. The M&A effect this year added 6 million to our adjusted revenue of 975 million francs, which was largely related to the acquisition of Nihon Implant in Japan. This result was supported by the strong performance of our existing portfolio and, as you mentioned, by the healthy patient flows in most of the countries despite the still ongoing pandemic and macroeconomic challenges. All regions contributed to double-digit growth in the first half, with EMEA providing the lion's share of the group's growth, followed by North America, Latin America, and Asia Pacific. The second quarter reached 589 million Swiss francs in 2022, which happens to be exactly the same revenue as in the first three months of this year. However, organic growth was 15.1% in the second quarter and 27.2% in the first quarter, indicating a softening of the growth rate. Let's move on to slide 11 and have a closer look at the regions. EMEA and North America contributed 259 million and 172 million Swiss francs to group revenue, which represents an organic growth of 21 and 8% respectively. The EMEA region remained the group's largest revenue contributor and overall growth was driven by Germany, Turkey and Iberia. Premium and challenger implant sales remained high and the digital business mainly driven by intraoral scanners, which was remarkably successful. In addition, The fast-growing dental service organization business helped increase revenues in the region, and Dr. Smile, as well as the ClearCorrect orthodontics business, strongly contributed to growth. The North America region reported a solid growth in the second quarter. This is in contrast to the exceptionally high growth rate we saw last year due to the COVID-19 comparison effects. Macroeconomic effects such as inflation started to have an impact on patient flow and the demand for clear aligners. The implant business continues to be the main growth driver led by Stroman and Neodent brands. The digital solutions business grew strongly with intraoral scanners remaining the largest growth contributor. In the second quarter, Stroman Group successfully introduced the new Stroman Access Digital Customer Platform which aims to unite existing and new digital service solutions under one roof. Guillaume will provide you with more information about this exciting launch later. Slide 12 focuses on our performance in Asia Pacific and in the Latin American region. APAC achieved a revenue of 112 million Swiss Francs or 6% organic revenue growth compared to the same period in 21. Japan and Australia performed strongly, while India doubled its business. The pandemic lockdowns heavily impacted growth in China. However, pent-up demand resulted in an increased performance in June following the bounce back when restrictions were lifted. The further delay of the volume-based procurement initiative in China also has an effect on patient flow. Digital solutions and implantology Premium as well as Challenger grew successfully. The On2G Challenger brand has been successfully launched in South Korea, a new subsidiary has been established in Vietnam, and the opening of the office in Malaysia as well as the second office in India were highlights of the second quarter. In the second quarter of 2022, the business in Latin America grew to 47 million francs which is 40% up on the base quarter in 2021. Brazil remains the biggest revenue contributor and showed a strong growth performance similar to the preceding quarter. Robust demand, notably for Neodense, helped to gain market share and onboarding new customers through nationwide education events as well as patient marketing activities supported further growth. The youngest subsidiary, Peru, grew strongly, as well as Mexico, which is leading with its growth in the established markets. Digital solutions are performing very well, with the Virtual Vivo Intra-Oil Scanner gaining momentum. The orthodontics business is contributing well to the regional performance. The two regions, Latam and APEC, contributed 158 million Swiss francs to overall group revenue in the second quarter. Slide 13 will lead us to our performance by business overview. The implantology business performed very strongly, predominantly in the EMEA and North American region. Adapted go-to-market strategies, especially in the EMEA region, are showing momentum, and customer conversions to the entire product portfolio also accelerated our BLT implant sales. In the second quarter, the intraoral scanners such as TRIOS, MEDIT and Virtuo Vivo have shown very strong growth. They are the entry point of the digital workflow for clinicians and critical for generating clinical quality and efficiency gains. With the increased use of intraoral scanners, The demand for 3D-printed models in dental laboratories is also on the rise, and therefore the recent launch of the RapidShape P50 3D printer, a high-volume, high-intensity printing device, started well. The orthodontics business also delivered double-digit revenue increase, while the direct-to-consumer marketing brands drove growth. Macroeconomic effects such as inflation started to have an impact on patient demand for Clear aligners. However, ClearCorrect is further expanding its global footprint by establishing its brand in countries where we are already present and entered into new ones such as Turkey, Chile, Colombia and Romania. The next slide shows an overview of our core financials. Core gross profit rose to 896 million and core EBIT rose to 329 million Swiss Francs with the respective margins reaching 76% and 28% in the first half of 2022. The gross margin improved by 20 basis points while the EBIT margin contracted 30 basis points. The respective FX headwinds took 50 basis points off the gross and 60 basis points of the EBIT margin. Core net profit increased by 18% to reach 269 million francs and the margin decreased by 30 basis points to just short of 23%. As a result, core basic earnings per share increased from 1 Swiss franc and 42 cents to 1 Swiss franc and 69 cents. For full clarity, you will find the year-on-year comparison on a reported IFRS basis on slide 15, followed by the alternative performance measures reconciliation table on slide 16. Looking at gross profit development on slide 17, our gross margin for both core and reported amounted to 76% in the first half of 22. At constant exchange rates, This represents an increase of 20 basis points. This improvement is thanks to the very strong revenue growth, efficiency gains, and running manufacturing at full capacity. All these combined made up for the negative change in portfolio mix. As shown on slide 18, our core EBIT margin reached 27.9%, which is 90 basis points below the same period in the prior year. Compared to pre-pandemic margins in the first half of 2019, this represents a 50 basis points increase. Currency fluctuations, mainly driven by the weakening of the Euro, had a negative impact of 60 basis points on the core EBIT margin. Core distribution expenses rose by 24 million to 210 million Swiss francs in 2022. This reflects direct salesforce expenses and logistics costs. Core administrative expenses increased by 74 million to 358 million francs. This includes research, development, general overhead and marketing costs, especially from the direct consumer business. On slide 19, you can see that the core net profit margin remains stable. Core net financial expenses decreased by 3 million to 7 million Swiss francs. This mainly reflects a favorable currency valuation result, which compensated for higher interest expenses. Income taxes amounted to 52 million, which represents an increase of 6 million Swiss francs at the stable tax rate. Core net profit reaches 269 million Swiss francs, resulting in a margin of 23%. Slide 20 provides a breakdown of our cash flow statement. Operating cash flow contracted by about a third to 165 million Swiss francs and subsequently the free cash flow decreased from 210 to 78 million Swiss francs. The main drivers were on the one hand the further geographical expansion which increased the days of sales outstanding by 10 to 58 days compared to the end of 21 or four days higher compared to last year's first half. On a positive note, long-term receivables have been reduced. On the other hand, days of supplies increased by 12 to 179 since the beginning of the year, which was at the same level as in the first half, 21. The group's CAPEX initiatives required investment of 88 million Swiss francs which is almost 50% higher compared to the first half of last year. On slide 21, you can see some of our ongoing manufacturing expansion projects. To achieve our 2030 strategic aspiration to impact 10 million miles per year, we heavily invest in building up our production capacity to ensure we can cater for future growth in all our franchises and regions. Given the already high investment in the first half of the year of 88 million Swiss francs, we expect CAPEX to be around 200 million by the end of this year. And with that, I will hand back to Guillaume.

Thank you very much, Peter. Let's move on to slide 23 to talk about recent achievements and strategic updates. Immigrancy is still driving growth in the premium implant business, which, as you know, involves fewer surgical interventions and clinic visits, offering shorter time to teeth treatment options, and enabling clinicians to reduce chair time per patient. Our comprehensive portfolio, which includes the Stroman BLX, TLX, and zygomatic implant lines, increases our addressable market for implant-based restoration as we are now tapping into the edentulous market. This continuing success confirms that these solutions still serve as an entry point for converting new customers and leveraging our entire full product portfolio, including BLE. Our comprehensive portfolio drives overall market share gains, and launches are still ongoing in existing and additional countries. To further promote these solutions and demonstrate their unique benefit, we started to engage in large physical congresses again. As a highlight, more than 8,500 attendees traveled to Copenhagen for the Euroberio Congress, and more than 800 participants joined our corporate forum and hands-on sessions, which was a record. On slide 24, You can see that the group's range of challenger implant brands, such as Nudent and Antogia, continue to establish their presence in countries where they are already available, and at the same time, further expand their global footprint. We are continuously investing in our go-to-market approach and sales capabilities in the challenger segment, which is showing positive returns. The Antogia X3 implant was successfully launched in several European countries, and the education-based launch of the Neodens ZI ceramic implant has been well received by professionals around the world. Medensica, the third challenger brand, showed a very strong growth in Europe in the second quarter, although on a smaller basis. On slide 25, I would like to share the continuous progress we have made with our digital transformation journey, specifically when it comes to our product, services, and solution priority. We further developed our digital approach to support the clinician and patient treatment journey, which you can see on the right-hand side of the slide. As a starting point, we launched the Stroman Access Practice Module which will be the main platform for all our professional customers. In a second step, we will further develop the applications for clinicians. To capture the patient journey, the first step is to build a patient app, which will be connected to the professional platform. This overall customer-centric platform will then provide best-in-class functionality for optimal user experience and treatment guidance, based on one core infrastructure. On slide 26, I would like to take a closer look at the clinician treatment journey and the way our Scrum and Access platform is supporting it. The Infra-Ral scan is the entry point for digital workflows, which is automatically connected to the platform and our various services. This is supporting a seamless integration between the different solutions, eliminating the need for entering patient data manually in different systems along the treatment journey. This will include first patient engagement to diagnosis during pre-treatment, planning, treatment, and monitoring of the post-treatment phase. I'm excited to share that we have launched from Anaxis in our North America region in the second quarter of this year. To start with, The platform supports our smile-in-the-box offering, and as of today already, more than 95% of the cases are going through hormone access, demonstrating the very high adoption rate. Let's talk about our orthodontic business on slide 27, where we have made great progress in further developing our offering. In July, the ClearPilot 4.0 treatment planning software was released. This new version enhances the creation of more effective and customized treatment plans with new tools, such as augmented 3D controls for aligner customization, giving doctors the ability to precisely place engagers, cutouts, and bite ramps directly on the virtual 3D model, as well as in-app translations of comments for improved technician-to-doctor communication. Additionally, this release further expands the clinical features portfolio with the introduction of bite ramps. Now, doctors can feel confident treating deep bites and cross bites in addition to a wide variety of other clinical cases with clear correct aligners, including class II malocclusion. The ClearCorrect Clinic app has also launched in July. This new guided tool was designed to reduce chair time and increase patient conversion. Available in 11 different languages, the app includes a case assessment function, malocclusion education, patient educational videos, and a guided in-app tutorial for patients. Another highlight in the second quarter was the first Global Orthodontics Medical Advisory Board we hosted, which will help to strengthen our medical network and expertise in this field. Let's move on to slide 28. As you know, in the second quarter of this year, we announced the acquisition of Plus Dental to accelerate the international expansions and enlarge our footprint in the doctor-led direct-to-consumer clear liner segment in Europe. In the meantime, we closed the deal in July. Following the review of the future brand strategy, the group concluded it will run its direct-to-consumer clear liner business in Europe exclusively under the DrSmile brand. Moving on to slide 29, I would like to give an update on our progress in sustainability. In 2021, an ESG task force has been created to define the group's sustainability framework, set goals for the various commitments, and sign the Science-Based Target Initiative, known as SBTI, to reduce emissions in line with climate science. We decided to set ourselves an ambitious goal to achieve net zero carbon emissions by 2040, which includes scope one, two, and three, and will submit the targets for validation to SBTI. This is a significant step to become a sustainability role model in our industry. On slide 30, I would like to announce a change in our executive management board. Peter Hackle has decided to leave the company by January next year, to pursue other career opportunities. I would like to highlight that Stroman Group has benefited significantly over the past years from his expertise and his skills. Since Peter rejoined the organization, Stroman has expanded its position as the global leader in implant dentistry, diversified into orthodontics, and entered into the field of consumer presence. During his eight-year tenure as CFO of the Stroman Group, Peter has also been a strong ambassador for culture and sustainability. We would like to thank Peter already today for his commitment and significant contributions and wish him every success for the future. The search for a new CFO is also underway. That brings us to slide 32, where I will share our thoughts about the outcomes. Thanks to the strong performance of the first half of the year, we are confident to face the uncertainties and COVID in the second half and confirm the full year guidance. We are well positioned to anticipate and to mitigate the potential impact of the inflationary environment and uncertain political developments. Thanks to our clear strategy and high-performing team, Full-year organic revenue growth is expected in the low double-digit percentage range, and profitability is expected around 26%, including major growth investments. Now, 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. Correspondent, can we have the first question, please?

The first question comes from the line of Patrick Wood with Bank of America. Please go ahead.

Perfect. Thank you very much for taking my questions. Obviously, I'll keep it to two. I guess on the first one, you touched on it a little bit in the prepared remarks, so thank you. Maybe if you guys could put a little bit more detail out there on the sort of, let's say, implied growth in the second half by guidance, because it implies a pretty dramatic slowdown, even adjusting for comps or looking at absolutes. It's a pretty aggressive slowdown. And given the commentary that maybe with the exception of North American aligners, the consumer seems to be, from your perspective, in good shape. Just curious as to what that bridge is and what's driving you to think of such a slowdown in the second half. So that's the first question. And the second question, just on aligners, I'd love any more details you could give around whether it's the cadence of how growth slowed in North America or how North America looks relative to EMEA or the other regions. Just a little bit more details in terms of the kind of growth you're seeing in aligners and how that's changed.

Thank you.

Thank you, Patrick. Yes, I think from a guidance standpoint, well, what we are factored in is much more kind of the risk we have expressed from the gray clouds that we have, let's say, on top of us. We have the inflation, obviously, which we see has created some slight impact in North America, but we see no effect for the time being in Europe. But we know that in the second half, when people will come from holidays and they will start to see the invoice from the – The energy prices, I think we might see some different behavior. Then we would like to take this into consideration. We are taking also into consideration the risk from a growth rate in Asia Pacific because China represents more than half of our overall Asia Pacific business. And COVID is not under control yet. We are hearing here and there still some spike of COVID, and we don't know exactly what will be the situation when the weather will be then going to, let's say, lower temperature, where we know that COVID is developing much more significantly there. And we hope not to see the lockdown that we have seen in April, but this has pretty impacted our business during Q2, as you are seeing from the number in Asia Pacific. And finally, obviously, the VDP in China, which is still, let's say, unclear from a date standpoint, but it seems now that this is going to take place then in September with an application a couple of weeks afterwards, and we still think it may happen. impact Q4 significantly, that it's based on those different gray clouds that we have on top of us that we have decided not to increase the guidance for the time being. This being said, we don't have any immediate kind of translation of those risks that we are seeing on a day-to-day basis, I would say. when it comes to the aligner side um the aligner side we have a very significant we have growth very significant um on the direct to consumer which is really good news and all the uh the plan we had are really unfolding uh very well that's why we are continuing to invest in this area with the acquisition of plus dental And on the B2B side, we have also double-digit growth, where we have been very pleased with all the development in all the different regions, actually, except North America, where we have seen the impact of the inflation, and we have seen some lower results based on our expectations. then I would say that's why orthodontics is doing well, but we have here in North America some effect of the inflation, we believe, that hopefully will resume by the end of the year.

Merci, Guillaume, and Peter, thank you, and I hope everything goes well in whatever you end up doing. Thanks. Thank you, Patrick.

The next question comes from the line of Chris Gretler with Credit Suisse. Please go ahead.

Thank you, operator. Good morning. Peter, Guillaume, thanks for the opportunity. Maybe first, could you indicate how the sales trends kind of was during Q2 and basically what you've seen so far in the summer? And maybe also, I think, you know, you mentioned in the past that, you know, you had something like, you know, six to eight months, you know, in visibility. What do you see, you know, going into the back-to-school season? So that would be my first question.

Yes, hi, Chris. I would love to have a six to eight months of visibility, but we have six to eight weeks. I guess this is what you were wanting to say, which I understand. Yeah, I think the sales trend has been... has been still, I would say positive from our side. uh during uh during summer uh once again we are uh saying that uh what has been impacted most during the crisis has been the uh uh the unemployment rate rising that we don't see that right now uh and uh the consumer confidence dropping has been uh once again impacting more uh the demand on the uh on the clear liner side uh more than the influence side um When it comes, we have seen still at some, then a lot of conversation with clinicians. Some of them are saying that obviously there are some patients rescheduling, that there are, you know, some discussion on treatment planning that are longer, but not any really significant trend that we have been worried about. We just believe that September will be really an important September and October will be important month because this is where especially the major European region will come back to work and get back to school as well. And this is where some of the invoices will come to the household waste that may change the consumer behavior, at least potentially paying attention to spending. So far, so good, I would say, but we are very vigilant on this one. But as a proof that we have been still Rather positive, despite the significant uncertainties that we see around us, we have continued our investment cycle, as you can see on the CapEx side, but also on the headcount side, because we have added 9% more headcount in the first half. versus where we were in December. And we are still kind of positive of what's coming, especially thanks to how we are structured and the profile of the company. But we are also well aware that situation can change quickly in case, you know, you have this inflation that will change significantly consumer behavior in regions where we are strong.

Okay, of course. And of course, I hate to think in weeks, but more in months and quarters. But two other questions I had, maybe quickly. On the pricing side, could you indicate what kind of mitigating measures you've taken on the pricing side to cope with inflation? And then just on ethics, I think your guidance on margin is actually excluding ethics effect and I guess H1 was already negative and the second half will look even more challenged, I guess, given current rates. Maybe if you could update us on what you expect at current rates on ethics impact on margins, that would be great. Thanks.

On the pricing side, Chris, we have increased price at the beginning of the year. We were looking at and we have been always very ready to react if we were needing to increase price during the year in case we would have seen much higher pressure on our cost side, which has not been, you know, the case or not then as high as that would have required us to take action on the pricing side. But obviously, we are going to continue our pricing strategy and increase more in 2023. Then we'll plan another price increase in January 2023 to reflect a little bit the new situation from our cost base in this inflationary side. on the FX rate, and Peter will give you some details here.

Yes, thank you very much for that question, Chris, on the FX. And obviously, we all don't know how the development will look like in the coming months on the FX side. If I look at the absolute top line, then I would expect a similar impact in the second half as we have seen in the first half on the absolute Swiss franc side. If I look at the margin impact, then I would expect also there a slightly bigger impact in the second half because the euro especially declined at the beginning of this year. So that means that average growth rates are coming down in the second half as well as the longer it stays at that level. However, I would still, I'm very confident that we stay within our guidance on the margin side despite the counter-effects development. Thank you.

The next question comes from the line of Daniel Buchter with ZKB. Please go ahead.

Yes, thank you very much. Two questions from ISAT, please. The first one, you just mentioned the topic already a little bit, Peter, on the core EBIT margin guidance. I mean, you had a very pleasing first half on cost base, still a little bit below normal. But for me, at least, it was a bit surprising that you didn't raise the guidance here to at least, say, 26.5 or maybe even around 27. because with the 27.9 in the first half, you could basically go down to 24 in the second. And if I combine that with what Guillaume just said, that at least for the next six to eight weeks, the picture doesn't look so bad. So why not a little bit more confident here on that side that it's more than just around 26%. And then the second question maybe to you, Guillaume, on the volume-based pricing in China. I mean, you indicated that there is the release to come in September and this could clearly negatively affect the fourth quarter. I mean, based on what you get at least indications for, I mean, how will the regulation look like and how would you, as chairman, respond to that? Thank you very much.

Thank you for that question on the margin development for the second half and the full year. I mean, we stick to our strategy that we invest a considerable part of the incremental margin and profit into the growth of the company, also in these times of uncertainty. Be it the growth in further rollout our orthodontics offering on the B2B as well as the direct-to-consumer side, be it the further build-up of our value portfolio, investment in R&D, and geographical expansion also in the second half. So we stick to that strategy. The second point is in the second half year, we usually have a lower margin compared to the first half year because we also partly generate a bit lower absolute amount of sales in the second half year due to the summer break and the short months in December. And on top of that, People who are joining us in the first half are not on the full time on the payroll in the first month, but they are fully on the payroll in the second half, which also leads to higher, slightly higher OPEX in the second half. And then at the beginning of this year, due to the COVID situation, we were rather restrictive with investments, especially in the first quarter. And we see a higher business activity rate, respectively, in the second half. quarter of this year. And if you compare the margin development and margin profile with last year, then we had also a first half year where we generated a slightly higher margin than this year, even with 28.3%. And we ended up the year exactly within our guidance of good 27%. So you also see the analogy of the development compared to first half year. That's the reason why we are sticking to our guidance of around 26% for the EBIT margin for the full year.

Yeah, now when it comes to the VDT, I think there are then a couple of things to consider. The first one is that the China authorities took much more time because they decided to include now all the different universities and national hospitals, which is different than what was announced at the beginning because they were wanting to take 10 provinces. Now they want to take all the provinces and all the different national hospitals and university hospitals, meaning that it's going to be the total hospital business and public business that it's going to be affected. We were, you know, disclosing last time when we talk about the VVV that it was around 15 to 20% of our total business. Now that we include the entire national hospital in all provinces, it's going to play with 30, 35% of our total business, which is what we are doing with public hospitals. The expectation is obviously that ASP in those national hospitals and on this part of the business will go then significantly down. This is when we look at other industries and like orthopedics or then it's going to be a decrease around 50% as an example, 50 to 60%, which is very significant. And obviously, there is a way to then to absorb some of this cost or to, I would say, mitigate the effect. is to apply this to only a part of our portfolio and this is too early to say at the moment because there is not the document specifying specifying exactly how the vbp is going to be structured then what kind of implant category how we are going to be able to bid then this is unknown and we should have that information in the very beginning of September, it's planned to be. The second also mitigation is the fact that distributor were taking a significant part of the margin and distributor will be much less important afterwards in that bidding process, then a part of this ASP impact is going to be absorbed by the distributor side. And the third approach is that volume will obviously be going up very significantly because the goal of this VBV by the Chinese authorities is obviously to increase accessibility of implant treatment, which is pretty expensive in China. I think pricing in China is still rather high when it comes to the patient. And then we believe that volume will go significantly higher. And last but not least, which is good news for us, we just got this month the approval of our latest implant line that we have developed Then with T+, which is our Taiwanese partner and subsidiary in China, which is the Starline, which is the one which is with the internal connection, exactly mimicking what is very much used in China on the Challenger segment, which is like the Korean brands, that will give us another option also to bid on the VBP. and leveraging a lot of our challenger brands and potentially not having the Stroman brand, at least for all the parts of the portfolio affected. Then this is all the different, you know, playing points that we are going to manage in order to have the lowest potential impact from an ASP standpoint and being able to drive a growth overall thanks to volume gain.

Okay, wow. pretty complex and probably not an easy topic. Thank you very much for the comprehensive answers.

You're welcome.

The next question comes from the line of Julien Dormois with BNP. Please go ahead.

Hi, good morning, Guillaume. Good morning, Peter. Thanks for taking my questions. The first one is just a follow-up on China. Just curious to know what was the growth rate in China or the decline rate maybe in China in Q2 because of the lockdowns. because I would suspect this also implies some pent-up demand, so I would be also curious to know what you have budgeted in the second half, because obviously VVP will prove a headwind, but you could have some pent-up demand, and as you highlighted, maybe some volume up in the region. So all in all, are you planning for growth in China in the second half, or are you planning for a decline in the local business? And the second question relates to clear liners. You've provided a nice update on your slides and notably highlighted that you have just launched the ClearPilot 4.0 software. I think in the past you referred to as your ClearLiner business being potentially addressing around 70% of cases, if I recollect well. Could you just update us on when you stand at the moment and whether the launch of the new software allows you to target a broader base of cases?

Yeah, thank you, Julien. When it comes to China in the second quarter, obviously, well, then the lockdown had some significant impact. We had a significant number down in April and May because, as you know, then both Shanghai and Beijing has been then impacted, which is the 70% almost of our business and the industry also activity is done there. But June has been actually pretty strong with a lot of the pent-up demand being absorbed, meaning that, let's say, it has been almost kind of flat when you look at the overall Q2 perspective. And on this side, I think it has been kind of a wash in between the different months. And when we look at what's coming during summertime, I think there is growth back, not to the extent of what we knew in 2021, but still something which is positive, showing that activities are still there and demand is obviously very important in this part of the world. And I would say, yeah, that's where when you do your about how do we plan China in the second half, then that's where it's obviously very difficult. We have seen up and down during the whole first half. Then we believe it's going to be the same in the second half. We still expect uh to see potentially some uh some growth uh in china if covid uh is obviously uh not impacting the business but you know vvp will have some effect in in the in the fourth quarter but uh from our perspective the biggest threat is uh covet if kobe is coming down and they are doing lockdown as they are done in second quarter then this is an immediate sanction to what we can be doing uh we will see uh let's say the biggest effect of um of VBP will be 2023, but with some potential impact in Q4. But honestly, with the VBP, I think we will still be able to grow, and we can have, you know, decent growth in China if COVID is not hurting the region during, let's say, wintertime. When it comes to ClearCorrect, ClearCorrect, yes, I think we are very pleased with the development of the software. This is rather fast how the team has been able to develop that. We have added a lot of the things that were requested by advanced clinicians. The capability to keep, let's say, the control in the hands and being able to manipulate the software the way they want to have the treatment. which was not at all the case before. Then with 4.0, we are giving a part of this flexibility and capabilities to clinicians, which has been very well accepted on the 4.0. Then this is not about increasing our coverage on this one. This is just making sure that clinicians can keep control of the treatment. And let's say the progress is very significant on this side, and our 5.0, which is going to come then during the end of our Q1 2023, will have then the capability for clinicians to do the entire treatment by themselves. Then good progress on this end. And the second side is, of course, bringing the capability to do more indications. This is what has been the case with then adding, for example, the bite ramps, which are helping then to do cross bites and deep bites, and obviously trying to go to class two malocclusions. And this is also here another progress. of additional indications and on our road to be able to tackle the specialist orthodontist. We always said that we are significantly investing there because we want to play also in the specialist segment and not only in GP and direct to consumer. We think we are going to be there by the second half of 2023 and we are for the time being in line with our expectations. when it's based on the software development.

Okay. Merci, Guillaume. I appreciate the call on all that. And, Peter, special thanks for all the help throughout the years and wish you all the best in your new endeavors. Thank you very much, Julien.

The next question comes from the line of Veronika Dubayeva with Citi. Please go ahead.

Hi. Good morning, and thank you guys for taking my questions. I will keep it to two, please. One is, and I apologize this is slightly pedantic, but I'm just curious, Peter or Guillaume, if you can comment a bit on the exit growth rate at the end of Q2 and how that's kind of translated into Q3 in terms of what you've seen quarter to date relative to the 15% that you reported in Q2. What was actually the June number and has July kept pace with the accelerated or decelerated growth? So that's my first question. And my second question is just kind of conceptual. Congratulations on the plus dental acquisition. Just curious what drove the decision to rebrand everything under the Dr. Smile brand and what your appetite is for further M&A in the aligner space in particular. My two questions. Thank you, guys.

Hello, Veronica. Yeah, I think first on the Q2 side, and we are obviously not really commenting, let's say, the last week or the last month kind of growth rate. What, again, you have to, and I'm sure you understand that, that there is a lot of up and down based on all those regional effects. Then on one side, you are going to have a COVID impact, and on the other side, you are going to have the pent-up demand kicking in. Then I would say, if I look at China based on, you know, the last month of Q2, I will tell you, wow, we are going to have a really, a very strong second wave. But we know that there is a lot of local effect and regional effect. which has been the case also in North America. Then, you know, I think, as I said just before, we have not seen any significant impact yet of the inflation, except in North America on clear liner. But the rest, you have, of course, some input here and there about some of the clinicians saying that they see that a bit more difficult than some rescheduling. But honestly, nothing that would then let us think that the Q3 would be a disaster, let's put it this way. then we need to have more visibility again in the period where Europe will get back to work, because I think this is where we see also some inflection points in the past. And that, I think, will be something we will be able to say much more, I'm sure, when we will develop and present our Q3 number. When it comes to the direct-to-consumer Yeah, I think Dr. Smile is yet a much bigger brand than Plus Dental already when we have done the acquisition. And as you know, developing a brand in the consumer side is very, very costly. Then from that marketing standpoint, it was very important that we were defining one brand to focus on. We have done a lot of analysis on the brand perception in the different European market in between Plus Dental and Dr. Smile. And it was a clear decision in further nurturing the Dr. Smile brand for the future and then applying that and all our direct-to-consumer clear-liner activities all across Europe. and he's actually working progress. Execution is rather fast. We are pleased with the progress of the integration of Plus Dental and having a combined operations, which are really going to continue the very strong achievement that this team is doing in this field.

And any appetite to do more M&A in the space, or are you happy now with the footprint that you have?

We are anyway very active on the M&A side. We have different targets in different fields. Consumer presence is, as we said, one of the fields that we are looking at. There are always some opportunistic approaches, especially in those uncertain times. We are seeing, of course, some interesting opportunities. But obviously, consumer presence is not the only area where we are looking at. We have done a very, very exciting acquisition in partnership with CareStack, as you know, during the first half. And when it comes to clinician experience, digital workflow, and all our digital transformation, there are also ways there where we are looking at opportunities. Our M&A is still trying to look at the different strategic assets that will help us to deliver on our strategic compass to get to our Go5 target.

Understood. Thank you so much, Guillaume and Peter. All the best.

Thank you, Veronica.

The next question comes from the line of Oliver Metzger with Oddo. Please go ahead.

Yes, hi, good morning. Thanks for taking my questions. The first one is a very quick follow-up just because it helps you for my next question. So, have I understood you correctly that orthodontics in North America were already in the negative territory in Q2?

Well, no, this is not what I said overall. If you look at the, because we have not, we have, you know, we have Orto where we are doing also our B2B side with our Bay material and so on. But I think if we look at our Clear just then ClearCorrect, and because you said ClearLiner, then we have Orto as a franchise. and we have then clear correct as a brand, then the brand clear correct, yes, does not behave on the positive side during the second quarter. Okay, okay, great, thanks.

Then the question on the end of Q2 performance in North America. As you commented, the slowdown and the vast majority comes from the clear liners. If you look for the implants, have you perceived any shift, offers any shift between premium and the challenger brands that you've seen higher growth at challengers which looks different to your previous dynamics. That's number one. Number two is on the orthodontics presents in North America. Many quarters ago, you have basically more or less ruled out that you have a direct-to-consumer offering in North America. Just you said, okay, acquisition prices are much too high. And also, if you do it organically, the lead costs are much too high that you can make any profit. So if you think now that the dynamics have changed, let's say multiples might have come down just because we are facing a different phase if we look on your business also over some some decades you have acquired in the past more counter counter cyclical as prices were a little bit more attractive even in harsher times so if you look now on potential targets or also the organic entry, do you think it has become more attractive than some quarters ago?

Oliver, when it comes to your first question about shift in between then the premium and challenger, we do not see that at the moment clearly. We see a significant growth on premium, growth on challenger, but we have not, you know, we have not felt a kind of change in clinician behavior to try to switch from premium to challenger. And that's not something that we are seeing at the moment. When it comes to the direct-to-consumer clear-liner space, There is in North America, there is something that is still very important for us to reiterate. We are always keeping the clinician in between. Then we are having acquired Dr. Smile and Plus Dental because they were doing a doctor-led treatment, and there is not so much such asset in North America because you know that, you know, Smile Direct Club is doing everything direct. without having a clinician in the loop. They are changing a little bit, so trying to pivot in some of the, you know, SmileDirect Pro or some other competitors are doing so, but this is not really the way they are structured. And that means that for us, this is not in line with the way we see ClearLiner being done, where we absolutely think that you need to have a doctor visit in order to validate your eligibility for the treatment. meaning that we are still evaluating always the direct-to-consumer, doctor-led capability in North America. We still believe that it's still a very expensive approach to implement, and that the B2B side is, for the time being, a better way to create value for shareholders than to starting investing into a direct-to-consumer in this part of the world. But obviously, as you said, I think that there could be change in this microeconomical environment that is making it better. But we have seen that at this moment in time, the demand for clear liner in North America, especially for simple case, have been quite challenged by the inflation when you look at the different companies' reasons for the second quarter in this field.

Okay, great. Thank you very much.

Do you want to come?

The next question comes from the line of Maya Pataki with Kepler Shriver. Please go ahead.

Yes, good day. Also, two questions from my side. Guillaume, just apologies. I am trying to really understand the development in North America. And understandable, you've been talking about the clear aligner side. You've talked about negative growth for clear, correct. But can you tell us whether you've seen a meaningful change feedback or deceleration in the feedback from dentists when it comes to the implant site? That's just my first question. And I'm going to give it another shot trying to get out of you with Veronica didn't succeed. But can you tell us whether you've seen a meaningful deceleration in group growth going into July, August. And you have been kind enough with Q2 results after Q1 results, you know, kind of giving a bit of an understanding where growth has been moving to. So maybe to make it easier for you, can you tell us whether over the last six weeks growth remained in the double digits for the group or whether we have entered single-digit growth territory? Thank you.

Thank you, Maya. On the influence side for North America, no, we have not seen, let's say, enough noise from clinicians to let us think that there is a deceleration in implant cases. At least we don't see that in the booking yet. It's not, again, as packed as it has been during the first half, I would say it like this. But this is still healthy when it comes to patient flow for implants. And once again, I think if you look at our North American numbers, you have to look at absolute value for 2021. I think we have been growing 135%. in the second quarter 2021, obviously, versus COVID-affected Q2 2020. But our second quarter has been the largest in absolute value in all 2021 in North America, which is pretty unusual. Because, generally speaking, the second quarter is at the same level than the first quarter, and the Q4 is the strongest one. Q2 is a very, very high comparison base for North America, and the 8% has pretty solid. When it comes to the growth rate, and of course, we are not, you know, disclosing our growth rate from a month standpoint, and I think I'm sure that you guys then will be excited to know what Q3 will be when we will announce that in October. But I can tell you that we have not seen an overall significant, let's say, negative changes in our growth rate on the group side, even though being impacted from a very local situation and regional situation, which is making, of course, quite some up and down in the different regions. That's what we're seeing. But once again, as I expressed, we are not worried for the third quarter for the timing with the numbers that we are seeing coming.

Okay, that's fine. But, you know, it would be helpful to understand when you would start to be worried. Is it when you would drop to the single-digit range? Would it be when you start to drop into the negative territory, just to get an understanding of your tolerance when it comes to growth?

Low to mid-single-digit growth, we would start to be worried, I would say. Low single-digit growth would not allow us to have the same investment capabilities you know, in the negative side I would be more than extremely worried because we don't have the structural cost which is done for this. I think that's the way then if I want to help everyone then to see our reasoning. We are still believing into our capability to grow strongly. Then we have kept our investment cycle, meaning that we are rather, you know, confident if what we're able to deliver in the months to come. Then not being worried means as soon as we can finance our investment cycle and being able to still deliver a bottom line that would make everyone happy even though we want potentially to reinvest some of our growth into some significant uh uh development on the digital transformation side on the capex side for manufacturing as a teacher presented then you know uh in in in the way we are creating value for our shareholder uh midterm we are really happy about what we are doing and with the performance we are delivering If we start to go in the area where growth rates are starting to be very low and allowing us to do our significant investment the way we are doing that to achieve our goal five, then obviously we will have to revise the way we are investing, and that would be a very different ballgame here. then being worried means not being able to finance the current investment we are doing. And as soon as we are, you know, in the growth rate which will be allowing us to do this, then we are fine.

Understood. Thank you very much for that.

The next question comes from the line of Graham Doyle with UBS. Please go ahead.

Hi. Thanks for taking my questions. Firstly, just on Latin America, we obviously had a very strong quarter and it had a very similar comparison to the US. I was just wondering, and this is slightly different, were there any one-offs within that that we should be thinking about that maybe unwind through the second half? Or maybe you could point to what was particularly strong. And then, I know it's a slightly tricky question, but around 2023, and it kind of follows up from what Maya was just saying there, we can see some of the clear headwinds around China VPP. You've got pressures on clear aligners. and maybe pressures elsewhere on premium implants. What are the areas that you're confident on that still have tangible visibility that you think are drivers to sort of outstrip those headwinds for next year at this point? Thank you.

Yeah, I think Latin America, yeah, Latin America very strong. We are really, really excited by what the team is doing there. They are continuously winning share in Brazil, despite the very high market share that they are having. Secondly speaking, we are also benefiting significantly from all the investment we have done in creating subsidiary in all Latin America. As you know, we have subsidiary now in almost all the different Latin American countries. then Chile and the latest one were Peru, Colombia, then we are having our destiny in our hands and are really bearing some of the fruits there as well. And thirdly, during the pandemic, The second half of 2021, we had also then some very high demand for Neodent worldwide, and we have been also trying to push very significantly the high-priced countries, such as Western Europe or such as Europe. North America, which means that some of the supply went there, and Brazil was also really needing to support its internal demand with more stock, which is exactly what's happening now there since the second quarter as well. We have a manufacturing capacity which is allowing us now to fulfill all the different needs, including the domestic market. When it comes to 2023, yes, I think there are, of course, some pressure that we are all seeing on the, you know, the China side with EVP. Well, the clear liner side is the inflation, you know, growth rate is continuing. But we know that some forecast of inflation are planning some decrease, especially, for example, in North America for 2023. And I think we hope that the inflationary pressure is going to be lower. And at the end, you know, we are very confident on our capability to grow for the same strength that we are benefiting and developing right now. The first one is all about innovation and adding a differentiated value proposition. We have nothing comparing on the premium side on our immediacy side, and we are you know, taking the benefit every day and still investing in promoting our BLX, TLX, Zygoma, and we will come with additional innovation in the premium side by the second half of 2023. Then we will continue to nurture the growth on this side. On the challenger side, this is a very, very strongly business thanks to the investment we are doing not only on product innovation, but especially on the go-to-market side. We are keep investing with new feet on the ground as we speak, meaning that we are still planting the seeds for future growth. And we are very confident and I'm personally very confident of the future growth of Challenger in all the different geographies. And when it comes to clear aligner, I think we are going to then get in the weeks to come then our registration in China, meaning that we will have another area to develop and the different innovation that we have just launched. with ClearPilot 4.0 and the ClearPilot 5.0 that we are developing for next year will allow us to tap much more into the ClearLiner segment. And honestly, I think without mentioning, sorry, the digital side and having also a very good plan there to further expand our intraoral scanner, but also specific services which will help us to continue gaining DSOs. Then honestly, when we look at our strategic compass, we are making strategic progress in all the different fields. Of course, some of the macroeconomical environment will be headwinds, but we believe that the engine of the boat is very strong and will allow us to keep delivering growth from our perspective.

Great. Thank you very much for your answers. I really appreciate it.

The next question comes from the line of Grace Lee with Jefferies. Please go ahead.

Thank you for taking my question. Two questions, please. One on China. Could I just confirm, first of all, could I just confirm, do you now expect 30% to 35% of total business expected versus previous 15% to 20%? And then with that, Could you also comment a little bit about some treatment deferrals that you mentioned at Q1 in regards to the private dentist that you highlighted? How is that developing in Q2 and in summer? And then my second question is just on general on implant down trading across the region. I think someone asked the question earlier, but I missed it all. I couldn't quite hear. But is there sort of implant down trading that you are seeing either in NA or other regions? Thank you.

Yes, as expressed, indeed the VBP will now, you know, include all the different provinces and all the different national and university hospitals, which is taking the entire then the public business of implant in China. Then it's going to be 30 to 35% of our total business will be then the affected by the VBP. We have seen treatment deferral when the VBP has been announced because patients were wanting to benefit from that lower treatment cost. However, seeing the the delay in implementation and some of the different data that have been pushed back, we have seen less of that treatment default that we have seen during the second quarter, at least at the moment. We see treatment that are more ongoing than patient waiting, but we'll see what's going to happen when the the official documentation of the VBB will be presented because I think there will be more formal dates that might drive a little bit of that frozen demand, but we will see that in the first two weeks of September. When it comes to implant down trading, we have not seen that in any geographies yet. We have a significant growth on premiums, significant growth on challengers, And we have not seen any effect of cannibalization of challenger for premium in the last month and the last week.

Thank you. But could I just quickly follow up on that? Are you expecting that chart down trading to sort of observe that behavior into sort of second half as we see that macro headwind that you highlighted? Thank you.

Well, we are, again, we are not expecting that to come if the inflation is still controlled. If we were having a strong recession coming, then obviously it would be a different perspective. But for the time being, we don't believe it will have a severe impact as it had in the previous crisis, because we don't see unemployment rate increasing. And when you are unemployed, that's where we have seen a lot of pressure on price on the implant side, that we are not seeing that at this moment in time.

Great. Thank you.

You're welcome.

The next question comes from the line of Falco Friedrichs with Deutsche Bank. Please go ahead.

Thanks very much. Good day. The first question would be on general market share developments in the first half of this year and how those developed for you, especially in dental implants. Any update there would be much appreciated. And then secondly, on competition in dental implants. Is there anything on the innovation side, your competitors, that you're watching very closely at the moment because it could potentially be a threat to those market shares that you currently have? Thank you.

Yes, we have a gain market share on the premium side and we have also, we believe, on the challenger side, even though challenger side is more difficult to evaluate because there is not a an official, let's say, combination of volumes that are sold by the different manufacturers, because you have a lot of small local players that are not sharing numbers, then this is, in that sense, it's a little bit more difficult to say, but with the wind we add on the DSO side in different geographies, we also believe that we gain shares. And finally, when you look also overall at some of the numbers that have been displayed by some of the companies in our field, I think we can also evaluate that market share has been gained on the implant side. When it comes to innovation from competition, we are obviously monitoring that carefully. We don't see, as of today, something that would prevent us to continue gaining market share and expand our leadership from any of the premium of challenger that we are playing with, then that's why we are still confident that we are going to be able to grow with the market together with additional market share gain within the period to come.

Perfect. Thank you. And, Peter, all the best to you.

Thank you, Volker.

The next question comes from with . Please go ahead.

Hello. Thank you for taking my question. I have two. First one would be on working capital and cash flow from operations. What are your thoughts for the full year? Will there be additional investments, especially in working capital, in order to drive growth in H2? Or will we see a significant improvement or even reversal in the working capital area? And then the second one would be regarding the acquisition of Plus Dental and the purchase price of 135 million. So will it be fully paid in 2022? Is there a contingent consideration that you agreed on? And have you already done the PPA? And so could you maybe give an indication on the goodwill and the intangibles and the yearly PPA amortization that we can expect? Thank you.

Thank you for that question on the net working capital. Let me share some thoughts on the cash flow developed in the first half. Usually we generate or we have a much stronger operating cash flow in the second half compared to the first half due to various reasons. If you compare cash flow in the first half of 2022 with 2021, then in 2021 we had a very strong operating cash flow in the first half and we were benefiting also from the reduction of some elevated receivables at the end of 2020, which were still due to the lockdowns and the pandemic in that year. So we were able to reduce the days of sales outstanding in the first half of 21. If I compare now the net working capital, half year 22 with half year 21, then I think we are pretty much in line. We have a little bit higher day sales outstanding, which does not come from unfavorable development in the country itself. It's more a mixed effect that some countries with longer outstandings are growing over proportionally faster than some countries with shorter outstandings. That's the main reason for the non-favorability development. But I would expect a stable development in the second half in terms of relative net working capital and respective days of net working capital versus half year 2022. on the acquisition costs for plus centiles that will be fully paid in this year and the PPA is still ongoing and it's too early to really disclose some aspects of the PPA at that point in time.

Okay. Thank you very much.

Thank you. Then with this, I would like to thank all of you for your questions and for joining us today. We look forward to seeing you again soon and wish you, your colleagues and families, the best of health and a good start after the summer break. Have a nice day and goodbye from Basel.