Straumann Holding AG

Good morning, everyone, and thank you for joining this conference call on Froman 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. As shown on the agenda on slide three, I will provide an overview of our current status first. I'm delighted to sit here together with Yang Xu, our new CFO, who is with us for about two months. In this short period, she has been a great support and we are very happy to have her on board. Following my status update, she will share the financial details. After that, I'll update you 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. Then let's start with our highlights on slide five. This quarter, we achieved a strong revenue growth of 11.4%, leading to a 571 million Swiss francs revenue, which was marked by different dynamics in our different regions. This solid performance brings us to a total of 1.8 billion Swiss francs in the first nine months of the year, despite very significant currency headwinds, which represent an organic growth rate of 8.7%. One of the highlights has been once again the implant volume growth achieved in the Chinese market, which has been driven by the continued dynamic patient flow, following the Chinese volume-based procurement process which has been implemented in the first half of this year. The second key highlight is the agreement we signed to acquire AlightStar, an intraoral scanner technology company located in China. This is an important strategic acquisition that will enable us, on the one hand, to offer competitive intraoral scanner solutions in China, and on the other hand, to target additional price-sensitive markets and customer segments in the future in other geographies. Finally, I'm very excited to report the pre-launch of our latest innovation, Stroman IXL, our new performance premium implant system for both bone and tissue-level treatments. This innovation answers important clinician needs providing greater versatility and simplicity for their implant treatments. I'll be happy to share more shortly. Overall, together with our customers, partners and our team, we were able to deliver strong results and make important progress along all our key strategic areas during the third quarter. Once again, I would like to stress that this would not have been possible without our team's commitment and dedication, given the challenging environment. Thus, despite many geopolitical and microeconomic uncertainties, and due to the confidence in our teams, we confirm our full year guidance of high single-digit growth, together with profitability at around 25%, despite strong currency headwinds. On slide six, you can see that patient demand for solutions remains solid, with variations in some regions during the third quarter of 2023. The softer patient flow seen during the first half has been confirmed during the third quarter in North America, which is due to the macroeconomic developments in the region, which have a continued impact on consumer behavior. It has impacted the demand for treatments with an effect more pronounced specifically in the full-arch implant segment and orthodontic case starts. Despite this more challenging market environment, we delivered a solid 5.5% organic growth, leading to additional market share gain in the region. Our biggest region, EMEA, reported a good performance of 6.6%. The main growth contributor was Germany, followed by Iberia, Italy, Turkey and Eastern Europe. The implant business continued to perform well, led by the premium branch Troman and supported by the challenger brands Newdense and Medentica, which are picking up speed. Furthermore, the ClearCorrect B2B segment made a notably positive impact in this region while our direct-to-consumer business experienced a slowdown in the third quarter, which had a negative effect on the overall EMEA regional results. Additionally, in the third quarter, we continued to expand our direct presence in the region by establishing new subsidiaries in the Baltic region through the acquisition of our local distributor. In the Latam and Asia-Pacific regions, we saw strong patient flow through to the third quarter. In Latin America, we achieved 19.1% organic revenue growth, mainly driven by new events and iOS scanners. The main contributors in LATAM were Brazil, Mexico, Peru, and Chile. Asia Pacific was the fastest growing region with a significant organic growth rate of 26.8%. Australia, Japan, and India showed strong growth, while the Chinese volume-based procurement process, which is part of China's broader efforts to enhance healthcare affordability, keeps driving strong positive impact on the implant volume growth in China. And with this, I will hand over to Yang, who will provide additional details on the financials with slide seven.

Thank you, Sion, and good morning, everyone. It's my pleasure to speak to you for the first time, and I do look forward to meeting you very soon in person. I would like to begin with our revenue development at the group level, and will then provide an update on the performance of our businesses. On slide eight, you can see that our nine-month revenue reached 1.8 billion Swiss francs, with an organic growth of 8.7%. The negative currency effect in the first half continued into the third quarter due to the strengthening of the Swiss franc, bringing the first nine-month FX impact to 101 million, which leads up to a 3.4% growth in Swiss francs. The M&A effect added 17 million due to the acquisition of Placento and Nihon last year, bringing the adjusted nine-month revenue base for 2023 to 1.64 billion Swiss francs. For completion, there was no merger and acquisition effect in the third quarter. In the center of the chart, you can see that all of our regions reported a very good performance in the first nine months, as mentioned by Guillaume. EMEA and North American contributed to the largest share of the group's revenue growth in absolute numbers. followed by 26 million Swiss francs in both Latin America and Asia Pacific. The resulting Asia Pacific continued to be heavily impacted by China. With a strong third quarter, as noted on the prior slide, our first nine months grew a solid 8.3%. This is great achievement, keeping in mind the significant price cuts we had to manage due to the VBP in China. Slide 9 takes us to an overview of our performance by business segments. Implantology maintained its robusted performance with double-digit growth in the premium and challenger segments. Both segments are expanding geographically while the challenger brands experienced a stronger organic growth. Premium implantology was primarily driven by BLT and our immediacy portfolio. Neodent standouts as a leading challenger brand, sustaining strong growth momentum across all regions. In our orthodontic segment, we significantly enhanced our line of value preparation with new features and software offerings. As a result, we witnessed a double-digit growth in our clear corrective clinician brand. This B2B business remains dedicated to strengthening its presence in existing markets and introducing new solutions. Looking at the direct-to-consumer business, as we discussed before, we have been focusing more on profitability since the beginning of the year. Combined with slower consumer confidence, this led to a negative effect on this specific business segment. Our digital solution business has strongly contributed to the group's performance, primarily driven by the success of our intraoral scanners, as in previous quarters. The remarkable progress of our virtual vivo scanners stand out as a highlight. Intraoral scanners serve as an entry point for the digital workflow for clinicians, playing an important role in enhancing clinical quality and efficiency. Consequently, the penetration of intraoral scanners in the market continues to gain traction in many regions, contributing to the expansion of our global customer base. As you know, this part of the business and its growth is an essential element of our digital strategy. With this, I hand back to Guillaume to provide an overview about our recent achievement and strategy.

Thank you very much, Yann. And let's move on to slide 11 to talk about recent achievements and strategic updates. Let's start with the premium intern portfolio first, and let me provide some context around our major upcoming IXL launch. According to our estimate, the 2022 global dental implantology market value was worth about 5.4 billion Swiss francs, with the premium segment representing around half of it. This market is usually split in three different segments according to implant design. First, the traditional parallel wall implants, making up about 20% of the premium implant market. Secondly, the apically tapered implant representing around 55%. And finally, the fully tapered implant segment representing around 25%. The share of the traditional parallel wall implant segment is shrinking year after year as apically tapered and fully tapered implants that are designed for immediacy approaches are growing faster, offering shorter time to teeth treatment options which are preferred by health consumers. It is in this segment that significant innovation, such as our BLX launch in 2019, is a key driver for market share gain, enabling us to reach around 50% of the apically tapered segments and a high thin share of the fully tapered segments. To keep on this strong dynamic, I'm excited to report the pre-launch of our new Stroman performance implant system, branded Stroman IXL, which includes a full new implant line, namely the BLC and TLC designs. Let's move on to slide 12 to talk about this new C-line, which is representing our new generation of apically tapered implant portfolio, made of our unique rock-solid material, and benefiting from our advanced SL-active surface. The new BLC is integrating with the proven top-seat connection already known from the X-line for its high-strength and slim abutment design. The BLC implant comes with an improved self-taping thread design for faster insertion, extended cutting flutes to remove the need for taping, as well as a slim apex, to preserve patients' limited anatomy, and which allows bone compression in undersized osteotomy. Moreover, the combination of the new design together with the unique oxalate material is enabling clinicians to use the reduced 3.75 mm for most indications, promoting then less invasive treatments but also helping to preserve bone for more functional and aesthetically clinical outcomes. Additionally, the introduction of broader options with 5.5 and 6.5 millimeter implant diameters versus our former BLT aligns with the growing trend of immediate implant placement in the posterior region, especially in the North American region. The shorter 6mm option has been also added, as it can eliminate the need for bone grafting in some procedures, streamlining the treatment process, and increasing patient conversion to treatment. Finally, the new C-line implants combine these advancements with the well-documented benefits of a tissue-level design, reducing the incidence of peri-implantitis and enhancing patient outcomes. On slide 13, you can see the entire new C-line that has been developed with the idea to create a complete high-performance, highly versatile system combined with the BLX-TLX line called the Spromann AXL dental implant system. Altogether, it offers a unique clinical flexibility of four distinct implant designs with the simplicity of one single implant system. One surgical kit, one prosthetic connection, and therefore one single prosthetic platform. As the new C-line implants seamlessly integrate surgical kits and prosthetics with BLX and TLX, it empowers surgeons to select the ideal implant during surgery. At the same time, restorative clinicians benefit from a streamlined process with a single prosthetic connection and a consistent platform, regardless of the implant diameter. By maintaining a single prosthetic platform across all implant diameters, customers can also efficiently reduce their stock of prosthetic components, simplifying inventory management. On slide 14, I would like to talk about ClearCorrect. Our focus remains on enhancing our value proposition And to achieve this, we are committed to optimizing the overall customer experience. In October, we were proud to introduce new software and features that have advanced significantly again. A key aspect was ClearPilot 7.0, our clear, correct treatment planning software. This software empowers clinicians to address even more advanced cases with a comprehensive set of new updates. Among the notable features of CLEAR Pilot 7.0 is the bike jump simulation. This feature allows clinicians to visualize the expected alterations in occlusions, which is particularly valuable for planning and evaluating the results of techniques such as surgery and elastics. Additionally, as part of the geographic expansion, We are actively promoting the ClearCorrect brand through initiatives such as the ClearCorrect World Tour, where we engage with clinicians to present our brand and its offerings. These efforts highlight our dedication to further strengthening the ClearCorrect brand overall. Moving on to slide 15, I would like to speak about digital transformation, which is changing the dental industry. While exceptional products remain at the core of our mission, we understand that customer experience is equally critical for solution differentiation and overall success. We clearly know that intraoral scanners are the entry point for every case in the future, which will allow for a seamless connection into our cloud-based ProMan access platform. On the platform, our software suite, such as Codiagnostics, ClearPilot, and SmileCloud, are going to be accessible to support our clinicians with treatment planning. We are continuing to make substantial investments to ensure the seamless integration of these digital solutions to ensure we can reach as many clinicians as possible, regardless of their specific needs. On slide 16, I would like to share more about our latest strategic move, iLightSTAR. I'm very excited about the agreement we just signed to fully acquire this company over the next eight years, which perfectly aligns with our strategic intention to increase access to our Sproma digital platform of services and solutions. It will enable the group to offer competitive intraoral scanner solutions in China, and in additional price-sensitive markets and customer segments in the future. The AlightStar scanner portfolio is going to be seamlessly connected to the Stroman Access platform, which will also be launched in the Asia-Pacific region in 2024. As part of the Stroman Group, AlightStar will continue to serve various customer groups through parallel distribution channels. We are delighted to welcome soon the Alight Star team to the Stroman Group as they share our commitment to building entrepreneurial businesses with a strong focus on customer centricity. As we move on to slide 17, I would like to emphasize the importance of execution and bringing our brand closer to our customers, clinicians, and partners. We successfully showcased our brands at various customer events, including the International Aesthetic Days in Baden, where we had the opportunity to introduce our major portfolio innovations, such as Galvo Surge, IXL, to over 600 participants through a pre-launch event. Additionally, at the EAO event in Berlin, which aims to enhance patient care by bridging the gap between science and clinical practice, We reached a large audience and provided insights into our solutions and therefore reinforcing our brand presence. On the orthodontics side, we unveiled our latest advancements at the ClearCorrect Speaker Summit in Prague. This event led a robust foundation for the ClearCorrect speaker community. With this, I would like to move to slide 18. As I mentioned already, digitalization transforms all aspects of the dental industry, from patient communication and practice management to diagnostics and treatment. While digital transformation seems to be a very technology-focused topic, it is actually all about people. We believe that fostering a digital mindset in our organization will help us become the digitally powered oral care company we aspire to be. We have just launched EdgeUp, which is an initiative we designed in Stroman Group to help our organization embrace the opportunities presented by the digital edge. We are providing an education platform for employees to engage and improve their skill set across all teams worldwide, and are running specific workshops to develop further agile working methods inside our organization. With this, let's move to the full year outlook on slide 20. The current geopolitical and microeconomic uncertainties, which influence the patient flow observed in the third quarter, I expect it to continue generating different dynamics in our different regions. Thanks to our differentiated value proposition within the strategic segments we are active in, combined with strong execution from all our team members worldwide, we remain confident that we will continue to gain market share within our estimated global addressable market of 19 billion Swiss francs. In the meantime, we will continue to invest in growth and transformation to maintain our competitive edge in the coming future. As a result, we confirm our full-year outlook despite the macroeconomic and geopolitical uncertainties and expect organic revenue growth to be in the high single-digit percentage range and profitability at around 25%, including growth investment. Now, I would like to open the question-and-answer session. If you have a question, please press star and 1 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?