Straumann Holding AG

Thank you for joining this conference call about Stroman Group's first quarter results for 2024. Please take note of the disclaimer in our media 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 first give you an overview of our strong performance in the first quarter, and then Yang, our CFO, will share details about the financials. After that, I'll provide you with an update on strategic initiatives and our outlook. As always, we will answer your questions at the end of the presentation. Let's start with our highlights and move directly to slide five. We had a solid start into 2024 with revenue of 644 million Swiss francs, based on a dynamic demand in most of our business segments. We achieved a strong organic revenue growth of 15.1% globally, or 8.1% in Swiss francs, taking into account the significant currency headwinds we again faced in the first quarter. Regional growth dynamics vary, with China being the highlight of this quarter, thanks to an exceptional organic growth, but there is a low comparison base. As a reminder, in early 2023, China still suffered from a lot of COVID-19 cases, and many treatments were postponed also due to the anticipated implementation of the volume-based procurement process. The second highlight of this quarter was the official launch of our new IXL premium implant line in North America in March, which I will come back to later. On the orthodontics side, we are continuing to strengthen our ClearCorrect value proposition with the launch of the new ClearPilot 8.0 software, which now provides clinicians with advanced editing tools. With these achievements, And despite the fact that the following comparison quarters this year will be more demanding, together with remaining microeconomical challenges, we are confident to confirm our 2024 outlook. Moving on to slide six, you can see the regional organic revenue growth rates, as well as the percentage of the regional contribution to the overall revenue of the group. EMEA, our largest revenue contributor, showed a solid 5.2% growth, which built on a strong comparison quarter. Firstly, the implantology business continued to drive good results, gaining market share in both the premium and challenger brand segments. Secondly, we are also very pleased with the performance of our business-to-business orthodontic brand, ClearCorrect, which grew double digits in the region. On the challenging side, we still see headwinds in the doctor-led direct-to-consumer business, namely Dr. Smile. This is due to a macroeconomic environment that continues to slow down demand and our strategy shifts from paid marketing to organic demand generation to prioritize profitability over revenue growth. In North America, we achieved positive growth of 3.7% despite the softening market and against last year's solid results. The patient flow has been slowing down versus the past quarters due to the continuing effect of the high interest rates, which impacted spending. We have seen that the consumer weakness that affected the full-arch treatments in the last quarters started to show in a broader range of implantology indications. While we are facing those increased headwinds from a demand standpoint, we are very pleased that we were able to grow through market share gains in both the premium and challenger brand segments. In orthodontics, the improvement of the value proposition of our ClearCorrect brand is generating further traction in the North American market which is a positive signal for further future growth. Looking at Asia Pacific, China significantly drove the exceptional overall growth of the region for the reasons we mentioned before. Looking at the Asia Pacific region outside of China, we are very pleased that we also achieved double-digit growth in already well-established markets, such as Australia and Japan. In addition, new markets like Vietnam and India are picking up fast, and the orthodontics business also contributed to the strong performance in the region, although on a lower scale. Finally, the region Latin America once again showed double-digit organic growth, building on a strong comparison base. As usual, the implant business with the local challenger brand Neodent was the main revenue driver. I'm very pleased that we maintain our positive momentum in Brazil, the largest country in the region, and we're able to continue gaining market share in this market. We also increased our market share in other Latin American countries, especially in Argentina and Peru. In our politics, The ClearCorrect brand delivered an impressive performance, continuing its good momentum in Brazil and growing strongly in most of the Latin American countries. And with this, I hand over to Yang to provide additional details on the financials.

Thank you, Guillaume. Good morning and good afternoon, everyone. Let's move directly to slide eight, where we can see the breakdown of the revenue development. We deliver a solid quarter with 15.1% organic growth. Revenue in Swiss francs was impacted by a negative currency development, mainly related to Euro, US dollar, Japanese yen, Chinese renminbi, and other emerging market currencies, which amounted to 43 million Swiss francs. The M&A effect, which comes from acquisition of distributors in the Baltics and in Poland, as well as a light star, added 7 million, bringing the adjusted revenue base to 559 million Swiss francs. In the center of the chart, you can see how the regions contributed to the overall growth. EMEA showed solid growth in the first quarter, with our B2B business continuing to perform and gain market share. The overall performance was partially offset by our doctor-led direct-to-consumer business in the region. As already mentioned, we were able to grow and increase our shares in North America despite a softening market. Our overall growth was boosted by performance in Asia Pacific. The region contributed to 70% of overall group growth in this quarter. The Latin American region kept growing double digit, building upon a very high growth base in the prior year. Slide 9 leads us to our performance by business overview. In all B2B areas, the good momentum continued. In premium implantology, we achieved double-digit growth, driven partially by the strong performance in China. The challenge of brands continued to expand with the strong growth across all regions and all brands. with Neodon standing out as the largest contributor, followed by good performance of both Antogia and Medentica in their respective markets. In orthodontics, the two dynamics continued. Our B2B brand, ClearCorrect, once again grew double digits thanks to its enhanced value proposition, as well as training and educational efforts across various markets. Our doctor-led, direct-to-consumer business, Dr. Smile, continue to face headwinds. We have changed our strategy from paid marketing to organic demand generation to practice profitability over revenue growth. Our other direct-to-consumer business, Anxin, a Japanese concierge service which helps to raise awareness of implant treatments and connects patients with clinicians, is performing very well. Our digital business also contributed to the group's overall performance and grew double-digit, supported by our broadened products and services offerings, and enhanced by our latest acquisition, AlightStar. And with this, I give back to Guillaume.

Thank you, Yang. Let's talk about our achievements and strategy and move directly to slide 11. As a reminder, our existing addressable market grew to more than 19 billion Swiss francs in 2023, and our strategy compass, together with our key focus on innovation, education, and clinical evidence, will help us to unlock those opportunities. A critical aspect of the implantology segment is the fact that it is still significantly underpenetrated. This is visualized on slide 12, where you can see the penetration rates of selected countries in different regions. With many surgically trained dentists and a high DSO presence, Spain is a good benchmark to evaluate the average penetration of implant treatments. Looking at Europe, Germany, France, and Italy are seen as the major markets and still have low penetration rates compared to Spain, while the UK is even significantly lower, highlighting the important growth opportunity that remains in this region. In the US, the critical market, the penetration rate is only about half of the Spanish market, which confirms also its huge yet untapped potential. And finally, looking into APAC, China still remains heavily underpenetrated, even though the patient flow significantly increased following the recent introduction of the volume-based procurement process. While we see penetration increasing in many geographies, we keep on improving education and access to care, This is an important way to transform those under-penetrated market opportunities into real growth. Now, let's move on to slide 13 to elaborate on the focus area of innovation. During the Academy of OCO Integration Congress in March, we introduced iXcel, our new high-performance premium implant system in North America. This launch underpins our consistent innovation dynamic, which has been in the DNA of the Stroman brand for the past 70 years. IXL combines four implant lines in one system with a unified prosthetic platform and a single connection supported by one instrument set. This increases the clinical performance of our customers and, in the meantime, simplify processes and inventories in dental practices. We received very positive first feedback from clinicians who have already started to use our new IXL implant system. I am confident that this innovation will continue to expand our leading position in the premium segment and help size opportunities in the field of apically and fully tapered implants. On slide 14, I would like to speak about our challenger brands, which continue to expand in existing markets and also entered new countries. Antogea, who is strongly in China, benefiting from the VVP effect and also entered new markets like Turkey and Vietnam. On the other hand, Neodent, as the leading global challenger brand, grew strongly across all regions and continued to tap the huge market potential in Asia-Pacific. The new education center, which we recently opened in Malaysia, will be an important support to increase market penetration in those geographies. Looking at the growth potential, Asia-Pacific goes far beyond China. We believe there is plenty of growth opportunity in major markets like Australia, as well as in under-penetrated markets such as India and Southeast Asia, where challenger brands like Neodent grew strongly. Let's move to slide 15. In the first quarter, our intraoral scanner AlightStar was launched in China in a phased approach. To boost our commercial execution, we built a dedicated digital sales team and added several distributors to the existing channels. With this launch, we are now able to offer our customers in China a competitive intraoral scanner solution. As a reminder, intraoral scanners are of strategic importance for our customer journey as they are the entry point of the digital workflow. In the near future, all our scanners are going to be seamlessly connected to our cloud-based digital platform, Stroman Access, which I would like to talk about on slide 16. Digital transformation is changing the general industry, which is why we are continuing to invest heavily in building the global customer platform from an access. In the first quarter, we made significant progress on the infrastructure side. I'm pleased to report that we achieved the ISO 27001 certification for Stroman Access Platform, the world's best known standard for information security management. Our platform adheres to many security and privacy standards, including the General Data Protection Regulation in the EU, and the Health Insurance Portability and Accountability Act, called HIPAA, in the US. Those certifications underscore our commitment to maintaining the highest quality standards and ensuring the protection of sensitive information. The Stroman Access platform is now technically set up for all regions except China, fulfilling a broad spectrum of digital regional requirements to support customer needs. With this, Stroman solutions and services are being added to the platform in a phased approach to prepare for the launches in the different regions. Now let's have a closer look at our orthodontics business to business on slide 70. As mentioned, we strengthened our presence in existing markets and achieved double-digit growth with our ClearCorrect brand. I am delighted that more and more specialists are trusting our improved treatment platform expertise and our upgraded software capabilities. To drive future growth, We further invested in the following three dimensions to be successful in the ClearAligner segment. Technology, services, and commercialization. Firstly, ClearCorrect further improved its aligner value proposition by launching the ClearPilot 8.0 software, which provides clinicians globally with new advanced editing tools that allow them to better visualize potential treatment outcomes. Secondly, we invested in services and expertise. The new Shared Services Center in Costa Rica, which reflects the rapid growth of ClearPract, ramped up and offers treatment planning for customers in both Latin America and North America. Thirdly, we invested in commercialization. We strengthened our distribution team and launched a global auto sales academy introducing an agile learning framework for all our ClearCorrect 3.3 managers. With this, let's move to slide 18. In early 2024, we continued to make considerable investments in future growth. Firstly, we invested in additional capacity at our various sites, from Andover in the US to Villeray in Switzerland. We are also making good progress at our China campus in Shanghai, which will host manufacturing, education, and innovation teams. The construction work was completed in only 18 months, and we have already started preparations and test runs for registration purposes to match the production start schedule for early 2026. Secondly, We also made important investments in technology. We continued building the infrastructure of Troman Access, as mentioned earlier, and continued to improve the customer experience workflow by seamlessly connecting our new intraoral scanner, Ally Star, to the platform. Further, we continued to invest in people as they are the key to success and the ultimate lever to deliver performance. We strengthened our distribution channel in all regions and hired people in manufacturing. In addition, we are convinced that investing in internal training and developing new skill sets for our team members worldwide lays a solid foundation for the future. This is why we continue the series of cultural programs and our edge-up initiatives with the objective to foster a digital mindset in our organization globally that will help us to become the digital power oral care company we aspire to be. And that brings me to our 2024 outlook on slide 20. On the one hand, we expect macroeconomic uncertainties to continue to impact consumer demand in different geographies, which will lead to different regional dynamics in upcoming quarters. Nevertheless, Thanks to our differentiated value proposition, combined with the strong execution power from all teams worldwide, we are confident that we will continue to gain market share within our global addressable market of more than 19 billion Swiss francs. Geographically, we are more diverse than ever. We cater to all price points, and thanks to our continued education efforts, more and more clinicians are able to perform implants and orthodontic procedures. Last but not least, we continue to invest in growth and transformation to maintain our competitive edge in the future. As a result, we confirm our outlook for 2024, which is organic revenue growth in the high single digit percentage range and profitability at around 26% at constant 2023 currency rates or between 24 and 25% including expected ethics headwinds. And with this, I would like to open the question and answer session. If you have a question, please press star and one on your phone to join the queue. As usual, we kindly ask you to limit the number of your questions to two in order to give all the participants a chance to ask their questions within the available time. Can we have the first question, please?