Straumann Holding AG

Good morning, everyone, and thank you for joining this conference call on Stroman Group's third quarter results. Please take note of the disclaimer in our press release and on slide two. During this conference call, we are going to refer to the presentation slides, which were published on our website this morning. As always, the presentation and discussion will include some forward-looking statements. Today's conference will follow the usual format. As the agenda on slide three shows, I will provide an overview on where we stand, and then our CFO, Peter Hakon, will share details about the business performance across our region. After that, I'll give you an update on key strategic initiatives and our outlook for the future. Of course, we will both be available to answer your questions at the end of the presentation. Let's start with our highlights. On slide five, you can see that we reached 551 million Swiss francs in revenue in the third quarter of 2022, making a total of 1.7 billion Swiss francs in the first nine months of the year. This leads to a strong organic revenue growth of 12% in the third quarter, leveling off at solid growth rate versus a very strong comparative period. In addition, the negative currency effect seen in the first half continued in this third quarter. One of the highlights was the Roxoli deselective study, which demonstrates strong preclinical evidence of the quality of our premium implants offering versus our key competition. Secondly, the planned investment in SmileCloud was another highlight. This partnership is an important part of our significant efforts to accelerate the digital transformation of our customer solutions and to improve the user experience for clinicians. We continue to work on our strategic priority to develop our consumer presence. We are proud that DrSmile now becomes our single direct-to-consumer marketing aligner brand in Europe, following the successful completion of the Plus Dental acquisition. Together with our customers, partners, and our team, we were able to deliver a very good quarter despite the ongoing microeconomic uncertainty. Based on the continued patient demand for solutions, we raised our expectations for full-year organic revenue growth to the mid-teens percentage range and expect profitability at around 26%, including significant growth investments. On slide six, you can see that our solid growth continued in all regions during the third quarter of 2022. The patient demand remains good, enabling the group to continue its growth from the first half through the third quarter, with the largest contributions to revenue growth coming from the EMEA region with 15% organic growth. As a highlight, Latin America remained the fastest-growing region with organic growth of 21%. Given the macroeconomic developments in North America, we consider the 9% organic growth to be a good performance, and the same applies to Asia Pacific. In China, we see treatment delays on the one side due to the ongoing regional pandemic lockdowns, And on the other hand, in the public sector, due to the tender process, the so-called VBT, that the Chinese government is planning to implement as part of the effort to make healthcare more affordable. Let's move to slide seven. In the half-year presentation, I elaborated on the economic challenges and geopolitical development we are all facing. how we evolved as a company and why we feel confident that we are much stronger positioned and diversified today than during the last recession period, which will help us navigate through these more challenging times. We are also strongly believing in our high performance player learner culture as our people are truly the key to our success. Agility and entrepreneurship guide us to steer activities in the region based on the local situations. Finally, and more importantly, we are operating in an 18 billion Swiss francs addressable market with a market share of only 11%. Thanks to our innovation pipeline for the years to come, this represents a significant growth opportunity to achieve our ambition reaching 5 billion Swiss francs by 2030. With this, I will hand over to Peter to provide additional details on the business and regional performance.

Thank you, Guillaume, and good morning, everyone. As usual, I would like to begin with our revenue development at the group level and will then provide an update on our four regions as well as the performance of our businesses. On slide nine, you can see how well our nine-month revenue developed with an organic growth rate of 18%. The negative currency effect in the first half continued in the third quarter due to unfavorable exchange rates development and almost doubled since the half-year results. The impact amounted to 32 million Swiss francs on our nine-month revenue. The effect of merger and acquisitions added 16 million Swiss francs bringing the adjusted nine-month revenue base for 21 to 1.46 billion Swiss francs. The M&A effect in the third quarter was mainly due to Nihon and Clustenthal, which we consolidated as of January and July 22, respectively. In the center of the chart, you can see that all of our regions reported double-digit growth for the nine-month period, leading to 18% organic growth in group revenues. This was mainly driven by EMEA and North America, which contributed a combined total of more than 70% of overall growth, as you can see on the right of the main chart. Slide 10 shows the EMEA and North American regional growth. EMEA remains the group's largest revenue contributor and reported 219 million Swiss francs in the third quarter of 22, with strong organic revenue growth of 15% compared to 2021. Premium and challenger implant sales remained high, and the digital business was successful, mainly driven by intraoral scanners. This was supported by the fast-growing dental service organization business in the region. The Dr. Smile grant grew strongly, while the ClearCorrect orthodontics business contributed to regional growth. The largest revenue contributor was Germany, followed by strong organic growth in Turkey and Eastern Europe, which includes Hungary, Czech Republic and Romania. In the third quarter of 2022, the North America region showed a solid organic revenue growth of 9% to reach 170 million Swiss francs. This growth was supported by the strong implant business led by the Neodent brand. In addition to the growth of the Strauman and Neodent brands, CASDAQ, a cloud-based practice management software which will offer clinicians a seamless end-to-end treatment management experience, has been launched. Macroeconomic developments in the region continue to influence patient demand for aligners. Also, the effects had a lower impact than in the second quarter. On slide 11, you can see that Asia-Pacific continues to grow while Latin America is leading organic growth across all regions. In the third quarter of 2022, the Asia-Pacific region achieved revenue of 114 million Swiss francs, which is a 9% organic sales growth compared to the same period in 2021. As Guillaume mentioned, this lower growth in China due to ongoing governmental price regulation discussions around the VBP and the ongoing pandemic lockdowns had an impact on the result. However, the strong performance of the rest of the region, led by Australia, Taiwan, India, and Japan, largely offset the sales impact of the continued challenging situation in China. Digital solutions and implantology, premium as well as challenger, are successfully contributing to regional growth. With the regulatory approval of ClickCorrect in China and the opening of the new subsidiary, we continued to invest in the Asia-Pacific region. Latin America was an absolute highlight in the third quarter. The region grew to 48 million Swiss francs, up by 21% on the base quarter in 2021. Regional growth during the third quarter of 2022 was therefore very strong. Patient flow is good. and we continue to gain market share in this region. Brazil remains the biggest revenue contributor in Latin America with robust demand, notably for its leading implantology brand Neodent. In addition to Brazil, Mexico, Colombia and Peru showed good growth. As a highlight, the new innovative ceramic implant Neodent ZI was launched in Brazil And the virtual vivo intraoral scanner remains the largest growth contributor to digital solutions. In addition, the orthodontics business is contributing well to the regional performance, expanding to Mexico, Colombia, and Chile. Turning to slide 12, we can look at our performance by business. Implant sales once again contributed the largest share of our growth. The group's premium BLX and immediacy solutions continued to be an important growth driver, as well as our BLT implant sales, which grew double digits. Value implant growth outpaced the premium business again. Medentica was the strongest growing challenger brand, followed by Neodent, which was the largest contributor in absolute sales figures in this segment. Our digital and restorative business saw growth in the high teens, with the largest share coming from EMEA and North America, while Latin America impressed with Rio de Janeiro sales, which almost doubled. The trend of digitalization in dentistry is continuing, and the majority of the revenue contribution was especially supported by our intraoral scanner segment. On a group level, our biomaterials business performed in parallel with the premium implant business. We saw solid growth in EMEA and good momentum in Asia-Pacific due to the introduction of Synograph. Orthodontics was the fastest-growing franchise, strongly supported by our doctor-led direct-to-consumer marketing expansion in Europe, which is progressing very well. Also, our B2B clear aligner business in Asia-Pacific contributed strong growth. The macroeconomic situation in the U.S., influenced consumer confidence, and impacted the performance of the clear correct home market. However, the slowdown in the U.S. was offset by Europe and the progress of our consumer activities. And with this, I will hand back to Guillaume.

Thank you very much, Peter. Let's move on to slide 14 and take a look at our recent achievements and the group's strategic updates. At the AIO Congress in September, we were proud to present the rock-solid SL-active preclinical study outcome that highlights on strong surface performance versus on key compiler. In this controlled preclinical study, the effect of implant surface and implant geometry on crystal bone formation and osteointegration were investigated by Professor Shaquille Shaddad and all. Crystal ball formation is a crucial aspect for the aesthetic and biological success of dental implant cases. And therefore, the scientific community continues discussions about the best possible solutions. For the first time, we have a study showing that OCO integration was significantly improved with our oxalate material and SL active surface at eight weeks, compared to a major implant competitor. This is particularly important as the crystal ball formation is one of the key aspects to reduce the risk of peri-implantitis, which is one of the major risks associated with dental implants. Moving on to slide 15, we have been very active in the third quarter on the sales and marketing front as we continue to invest in many local activities together with customers. Implantology performed very well in the third quarter, premium as well as challenger. Amongst many other events, we continued to position Neodense in Europe, launched our innovative ceramic implants, Neodense ZI in Brazil, and held a big Antochia X3 customer event. As mentioned, One of the highlights was the EAO Congress, which took place in September in Geneva. There, to continue promoting our immediacy portfolio, we hosted a Zygoma expert meeting, and more than 750 participants registered for the corporate forum, where we also presented the RockSolid SL active study. With this, let's move to slide 16, where I would like to tell you more about our latest investment in SmileCloud, which I believe will be an important milestone in developing our digital dentistry offering. The dental environment continues to be transformed by digital innovation, and we aim to be at the forefront of providing an exceptional customer experience for dental workflows in both orthodontics and implantology. This is why we are always looking at innovations that provide a platform-based approach with seamless connectivity to our services and solutions, knowing infrared scanners are the entry point to each and every case in the future. SmileCloud is a young and dynamic company focusing on smile design and centralized collaboration platform developed by a dentist for dental professionals. It allows clinicians to design virtual mock-up smiles for patients with the support of 3D biometric smile libraries using AI technology to support the most realistic simulation and best possible treatment outcome for patients. SmileCloud is enabling seamless collaboration amongst dental professionals and allows them to improve patient interaction by easily visualizing their future potential smiles. The solution is already available to all dental professionals in Europe for the time being, and we are focusing on integrating it into all our Stroman workflows and solutions to drive efficiency and simplicity. I'm very excited about this new strategic partnership, which will drive our digital dentistry offering forward in order to fulfill clinicians needs. Our investment also enables SmileCloud to further develop its innovative technologies to improve the patient and patient treatment journey. Moving on to slide 17. I'm proud to share more about the latest ClearPilot 5.0 software release, which the team delivered as promised in October. This new version was released with additional functionalities to support the orthodontist specialist expectations to achieve the best possible treatment outcome for the patient. One of the most requested additions for detailed treatment planning is the new Bolton Insightful Analysis Tool. It is a scientifically-based medical analysis for determining discrepancies between the upper and lower jaw, which helps with treatment planning. The new tool also includes collision management, which helps to determine if there is enough space between the teeth to allow for movement as well as an improved predictability functionality. This release is an important step towards addressing our autonomous needs in their daily work. On slide 18, you can see that we are also working on the geographical expansion of ClearCorrect. In August, we have received the ClearCorrect regulatory approval in China and started to produce in our new production facility in Beijing, which helped us prepare for the launch next year. This is an important next step in the geographical expansion of our orthodontics business. On slide 19, I would like to give you an update on our consumer presence development. Following the successful completion of the PLUS dental acquisition and 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 Dr. Smile brand. As a result, the group combined its capabilities in several areas, particularly medical expertise in the orthodontic space, to ensure high-quality care can be offered to health consumers. Talents from the presidential organization across different functions and levels decided to join Dr. Smile. In particular, we are pleased that the Chief Medical Officer from Plus Tantrum is now part of the Dr. Smile team to further upgrade medical excellence. In addition to further develop the capabilities of the brand, Dr. Smile has also expanded its business to Portugal and is present now in 11 countries in Europe today. This brings us to the full year outlook on slide 21. While the patient flow was not as dynamic as in the previous quarter in some regions, the demand for dental treatment remains good, which enabled the group to continue its growth from the first half through the third quarter. In addition, our innovative solutions and strong execution drove growth in the third quarter and led to continued market share gains. As always, we'll seek to anticipate and mitigate any potential disruptions coming from geopolitical developments. Based on the continued patient demand for solutions and the confidence in our high-performing team, the group raises the four-year guidance for organic revenue growth to the mid-teens percentage range and expects profitability at around 26%, including significant growth investments. Now, I would like to open the question and answer session. 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. Coris Paul, can we have the first question, please?