Straumann Holding AG

Good morning or afternoon to all of you. Thank you for attending this conference call on the Stroman Group's Healthier Reasons. Please take note of the disclaimer in our media release and on slide two. As usual, the presentation and discussion will include some forward-looking statements. During this conference, we are going to refer to the presentation slides that were published on our website this morning. As shown on the agenda on slide three, I will go through the highlights first. Yang Xu, our CFO, will share the financial details, and then I will provide an update on our strategic progress and outlook. At the end of the presentation, we will both be more than happy to answer your questions. Let's start with our highlights and move directly to slide five. As you have seen this morning in the media release, we signed a definitive agreement to sell our Dr. Smile business to the Impress Group. Sequently, we have restated the numbers to refer to continuing operations, if not mentioned otherwise. With a revenue of 1.3 billion Swiss francs in the first six months of 2024, of which 655 million in the second quarter, we are very pleased with the performance we can report today. Our double-digit revenue growth, namely 16.1% in the first half, reflects the team's continued strong execution, which led to winning new customers and gaining market share in all regions. Due to the specific patient flow dynamic per region, which remained the same as in the first quarter, we grew 14.8% organically in the second quarter, on top of last year's strong comparison period. While the group continued to invest significantly in capacity expansion, education, and digital transformation, the core EBIT margin reached 27.8%, including currency headwinds. As mentioned before, we signed a definitive agreement to sell our doctor-led direct-to-consumer CleoLiner DrSmile business to Impress Group. With the acquisition of DrSmile, Impress Group is well positioned to compete in this market by combining the quality clinical treatment with consumer marketing expertise at scale. I will be happy to give you more details on this later in the presentation. One of our major highlights in the second quarter was the International Team for Implantology World Symposium taking place in Singapore in May. This event was the largest ITI Congress ever, bringing together more than 5,700 participants during four days. We presented many innovations and had numerous education sessions, which I will talk about in the strategic update of the presentation. Last but not least, due to excluding Dr. Smile from the numbers, we update our 2024 outlook to low double-digit organic revenue growth and expect profitability to be in the 27 to 28 percentage range at constant 2023 currency rates. Looking at slide six, overall, the specific patient flow dynamic per region remained the same as in the first quarter. I am very pleased that the EMEA region performed strongly with 12.4% organic revenue growth in the second quarter, with Italy, Iberia, Germany, and Eastern European countries as the main growth drivers. The implant business continued to grow considerably. Also, new innovations such as iXcel in France were pre-launched. In addition, the ClearCorrect orthodontics business continued to perform strongly. North America, the second largest region of the group, showed a positive 5.3% organic revenue growth, showing a sequentially improved performance. The implantology business remained the main growth driver, and the launch of the IXL Implant System showed positive momentum. In parallel, The demand for the digital business and, in particular, intraoral scanner was good. The launch of the custom implant prosthetic service unique, which I will talk about later, started also well. Latin America continued to deliver double-digit growth, despite the heavy floods in the state of Rio Grande do Sul in Brazil, which affected more than 2.3 million people and left thousands homeless. In light of this tragic event, the team focused on supporting the region and, among other measures, sent the new smile expectation, our mobile unit with two dental offices, to serve the people by offering dental care to impacted communities. Despite this, we continue to gain market share in Brazil, the largest and most mature market in Latin America. On top of this, besides opportunities in Central America, We also established a new studio in Costa Rica. The performance in the region was driven by New Zealand and very good double-digit growth of the orthodontic business. Finally, Asia Pacific was the fastest-growing region despite a gradually normalizing baseline in China. As you might remember, in the second quarter last year, the VVP and COVID-19 pent-up demand significantly accelerated patient flow in China and heavily influenced the performance of the region. In the second quarter this year, Antogir and Stroman, as brands, contributed the most to our implant growth franchise in this country. Now, the region excluding China is also developing very well with double-digit organic revenue growth in the second quarter. Growth was significantly driven by Neodent and Antogel in countries such as Australia, India, Thailand, and Vietnam. In most business areas, we have made great progress and intensified our education efforts in this region, supporting the strong performance. Notably, Neodent did focus on their educational activities in Kuala Lumpur, Malaysia, and Chennai, India, through partnerships with renowned universities. Anthogel is heavily investing education in China and is also building its presence in markets such as Vietnam. All these activities grow and are laying a solid foundation for the future. Allied Star, intraoral scanner cells, were encouraging in the countries where it has been launched, and the orthonautics business kept on gaining momentum and contributed positively to the regional performance. And with this, I hand over to Yang to provide additional details on the financials.

Thank you, Guillaume, and hello, everyone. I would like to start by speaking about our revenue on slide eight. Stroman Group's second quarter revenue reached 655 million Swiss francs, with an organic growth of 14.8%. Against a strong comparison quarter, or revenue growth of 12.4% in Swiss francs. At 2024 exchange rate, our 2023 second quarter revenue would have been 20 million Swiss francs lower. The currency effect was due to the depreciation of the Euro, Chinese renminbi, and various emerging market currencies. The M&A effect in the second quarter, which is mainly attributed to a light star, The distributors in Poland and the Baltics added 7 million to our adjusted revenue of 570 million Swiss francs. As Guillaume already mentioned, the specific patient flow dynamic per region remained the same as in the first quarter, which supported the strong regional performances. The Asia-Pacific region was growing the fastest despite a gradually normalizing comparison in China, and contributed the largest share to the group's revenue growth in absolute terms, followed by EMEA, North America, and a strong contribution from Latin America with 8 million Swiss francs. Looking at growth profit development in slide 9, the first six months of this fiscal year, the group's strong top-line growth led to a core growth profit of 923 million Swiss francs. which is a currency-adjusted increase of 119 million Swiss francs. The corresponding margin remained solid at 72.5%, despite an unfavorable mix and the VBP dynamics in China. Let's now move to slide 10. The core EBIT margin reached 27.8%, which is a currency-adjusted margin increase of 70 basis points above the prior year period. Currency movements had a negative impact of 190 basis point on the core EBIT, mainly due to the weakened Euro, U.S. dollar, Chinese renminbi, and emerging market currencies. While distribution expenses had a negative 30 basis point impact due to our ongoing investment in go-to market and logistics, we reduced the administrative cost thanks to our continuous operating leverage. which led to a positive impact of 260 basis points on the core EBIT margin. On slide 11, you can see our free cash flow, which remained stable in the first half of the year and stood at 145 million Swiss francs, 3 million higher than in the prior year. The free cash flow reached 11.4% of the revenue. As the group continued to invest in production expansion and digital transformation, capital expenditure in the first six months remained at a high level with 84 million Swiss francs. The dividend payments were the main driver of the cash flow from financing. The cash position at the end of June 2024 remained strong at 334 million Swiss francs. Let's continue with the slide 12. You will see a table with the core financials. Core gross profit rose to 923 million Swiss francs, and core EBIT was 354 million Swiss francs, with the respective margins reaching 72.5% and 27.8% in the first half of 2024. The gross margin declined by 180 basis points, while the EBIT margin increased to 70 basis points, despite the currency headwinds. which took 100 basis points off the growth margin and 190 basis points off the EBIT margin. Core net financial expenses were reduced by 19 million to 6 million Swiss francs. This improvement primarily reflects a stabilizing currency environment compared to last year, notably in emerging markets. Income taxes amounted to 60 million Swiss francs, resulting in an income tax rate of 17.5%, Core net profit reached 282 million Swiss francs, resulting in a margin of 22.2%. Core basic earnings per share increased from 1 franc 59 cents to 1 franc 76 cents compared to prior year. For full clarity, you will also find the comparison on the reported IFRS basis, as well as the core reconciliation table in the appendix of this presentation. and more details can be found in the first half-year financial report. For full transparency, you can see on slide 13 the numbers without and including the discontinued Dr. Smile business. Following the restatement, the group revenue grew 16.1% organically, and core EBIT margin reached 28.9% at 2023 currency rates. including discontinued operations, organic revenue growth would have been 12.9% and core EBIT margin 26% at average 2023 currency rates. Slide 14 leads us to performance by business overview. Strongman's premium and challenger implantology business volumes both performed very strongly with double-digit growth. Premium implantology was primarily driven by the BLT and Strongman's immediacy portfolio. The challenger brands continue to expand their global footprint with strong double-digit growth in all regions. Neodent stood out as the leading challenger brand, sustaining strong growth momentum across the regions. In orthodontics, our clear correct B2B business showed good traction and grew significantly above the market with double-digit growth. We remain dedicated to strengthening its go-to-market activities introducing new solutions, and further increasing our planning and education efforts. Our digital solution business continued with its strong contribution to the group's overall performance and posted double-digit growth, primarily led by the regions North America and Latin America. And with this, I'll give back to Guillaume.

Thank you very much, Yang. Let's talk about our achievements and the strategy update starting directly with slide 60. You might remember our three key pillars to success, which are innovation, education, and clinical evidence. In May, the Scientific Association International Team of Implantology, or ITI, which counts more than 25,000 members worldwide, held its World Symposium in Singapore. It was the largest dentistry congress ever, with more than 5,700 dental professionals attending more than 100 countries. I am delighted that we were able to support the event as a leading partner, organizing many scientific and educational activities, and presenting our latest innovation. Among many innovations, such as IXL and Falcon, the team presented our new Sirius intraoral scanner for the first time. The new scanner provides high accuracy, high scan speed, is easy to handle, and is integrated into a Stroman Access platform, which helps to process the digital information in an efficient way, improving the overall clinical workflow. Stroman Serious, with its compelling value proposition, complements our global iOS offering in the mid- to entry-level segment. Over the past 24 months, we have more than doubled our intraoral scanner base, and with Stroman Therios, we aim to further grow significantly. The importance of ITI for our growth is not limited to the congresses that take place every few years. ITI is a true strategic partner driving clinical education and research. In the U.S., now more than 2,000 dental professionals have an ITI membership. And in China, ITI has recently been recognized as an accredited dental training institution, which will be crucial to accelerate access and implant adoption to meet the significant demand in this specific country. Moving to slide 17, I would like to emphasize that we continue to build the infrastructure of our global platforms for access which supports dental professionals gaining efficiency across the treatment journey through a fully digital end-to-end workflow. Thanks to an open architecture with high data security standards, new Sproman Group services such as Smile in a Box and Unique can be integrated and added on a step-by-step basis. For now, North America is the first region to offer those solutions directly on Stroman Access. When the platform is launched in the other regions in early 2025, it will help improve efficiency and quality of patient care broadly. Now let's move to slide 18. I would like to give you more color on our recent unique launch in North America. Our cloud-based on-demand service which allows dental laboratories to outsource planning, design, and manufacturing of patient-specific implant prosthetics. Our enhanced offering includes custom abutments not only for all Stroman Group implants, but also for third-party brands, and in the second quarter, we added screw-retained bind bridges to our portfolio. What I like most about UNIQ is that we design it as a truly customer-centric solution. It provides great flexibility, predictable results, and a state-of-the-art customer experience thanks to an end-to-end digital workflow with an intuitive interface based on our Stroman access platform. It is challenging for dental laboratories to cope with fluctuation in demand, and depending on the location, to find well-trained technicians. With Unique, customers can grow their business significantly without investing in additional resources or equipment, as they can outsource the work to us. The launch in North America already showed good momentum in the second quarter, which is promising as Unique addresses an important part of the CAD-CAM prosthetic market. On slide 19, we move to IXL, which we launched in the first quarter of this year in North America. IXL is our new innovative premium implant system, which offers the unique benefit of four distinct implant designs with the simplicity of one single implant system for both bone and tissue-level treatments. The feedback from clinicians who have tried it already is very positive. They highly appreciate the flexibility delivered within the clinical procedure and the simplicity through the reduction of the stock-keeping units needed for all influence indications. IXL also got a lot of attention at the ITI World Symposium, which was an important introduction milestone of future launches to come, like the pre-launch in France as the first European country in May this year. Moving on to the business-to-business field of orthodontics on slide 20, the clear-liner market is estimated to be 5.3 billion Swiss francs, providing ample opportunity for us to grow. To size these opportunities, we will first strengthen our presence in existing markets by continuing to drive education. In the second quarter, ClearCorrect participated in international congresses and other education activities across all regions and more and more in Asia Pacific. Secondly, we expand our customer segment and begin to also focus on orthodontic specialists, which is starting to show some initial traction. Also in the second quarter, ClearCorrect further improved its services and technology. We strengthened our doctor-facing platform for a more efficient practice management and launched a new version of the ClearCorrect app. It offers clinicians an expanded range of features to easily start, review, and manage cases, and allows them to access ClearPilot software directly via the app. Going forward, and with selling DrSmile, we will focus even more on our B2B orthodontics business by increasing our investment in this area to keep strengthening our go-to-market approach. On slide 21, I would like to dive deeper into the sale of Dr. Smile. We signed a definitive agreement to sell the Dr. Smile business to Impress Group and will receive a minority shareholding of 20% on a fully diluted basis in the company. Founded in 2019 and headquartered in Barcelona, Spain, Impress Group is a leading provider of clear liners in Europe and operates a network of clinics in countries such as Spain, the UK, Italy, and Portugal. With the acquisition of Dr. Smile, Impress Group is well positioned to compete in this market by combining quality clinical treatment with consumer marketing expertise at scale. IMPRESS Group covers the end-to-end patient journey from the initial consultation to the clinical results, which will greatly enhance the patient experience. Through the combination with Dr. Smile, IMPRESS Group will benefit from a larger geographical footprint by adding Germany, France, the Netherlands, and Sweden. They commit to ensure the continuing support of all Dr. Smile patients currently undergoing treatment while we will continue to be a major supplier of clear aligners for Impress Group moving forward. The transaction is expected to close in due course. Moving on to slide 22, let me introduce you to recent transitions in the Executive Management Board. First, I'm delighted to announce that Sarah Dalmasso will join Stroman Group on August 19 as head of the Dental Service Organization which is a critical area for our organization. She has held several leadership positions at OmniCell and General Electric Healthcare and has a proven track record of growing franchises. She led diverse teams toward sustainable growth and brings a strong expertise in digital transformation. Secondly, Our chief people officer, Alastair Robertson, has decided to retire by the end of 2024 after an impressive career across different industries and five years at Stroman Group, where he made his mark as an exceptional culture leader. I am pleased to have Arnaud Middel succeeding Alastair Robertson in early August as chief people officer, with Alessandro supporting the transition until the end of the year. Arnaud joined us from the Siegfried Group, where he was Chief Human Resources Officer. Over the past 12 years, he supported the company growth from an HR perspective. Before this, he was instrumental in building strong global HR functions at Syngenta, Excel Instruments, and Balwa's Instruments. Also in July, we merged our data and tech team and the digital platform and technology departments, a key function for digital transformation success. Thomas Frieser, which Troman booked for the past two years, was appointed to lead the combined team as chief technology and information officer. Thomas looks back to more than 70 years of leadership experience in building high-performance teams and digital platforms. Together with his team, he built, among other achievements, the seamless, high-quality customer experience platform Stroman Access through integrated and automated digital dental workflows. Christian Ulrich, who was Chief Information Officer at Stroman Group since 2021, left the group in July to pursue opportunities outside the company. I would like to thank him for the significant contributions he has made over this period. Finally, as announced in July, Mathias Schupp, our head of Latin America, will leave Sproman Group by the end of October to become CEO of Medartes. In the last 17 years with the group, Mathias has significantly developed the LATAM region, supporting the new internet expansion to become a global challenger brand. I want to thank Mathias for all his accomplishments over the many years. The recruitment process for a successor is ongoing. Let's now have a closer look at our updated outlook. On slide 24, you can see our updated outlook reflecting the new situation. While we remain cautious looking at the challenging geopolitical and microeconomic uncertainties, We are confident that we will continue to gain market share within our addressable market of more than 19 billion Swiss francs. We believe in our strong execution ability, the innovation solutions that capture to different price points, and our geographic diversification. On our journey towards the 2030 ambition, we will focus even more on B2B orthodontics go-to-market activities continue to invest in growth and drive digital transformation. With this, we are confident to update our outlook for 2024 for continuing operations to achieving an organic revenue growth in the low double-digit percentage range and profitability in the 27 to 28 percentage range at constant 2023 currency rates. 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 questions to, in order to give all the participants a chance to ask their questions within the available time. Can we have the first question, please?