Straumann Holding AG

Thank you for attending this conference call on the Common Group's Azure Reasons 2025. Please take note of the disclaimer in our media release and on slide two. As always, the presentation and discussion will contain forward-looking statements. During this conference call, we are going to refer to the presentation slides that were published on our website this morning. Today, it's my pleasure to host our second quarter results presentation together with Isabelle Adel, our new CFO, who has joined us in June. As outlined on slide three of the agenda, I will start by sharing the key highlights of the first half year. Isabelle will then walk you through the financials in more detail before I provide an update on our strategic progress and outlook. At the end of the presentation, we would be very happy to take your questions. Let's start with our highlights and move directly to slide five. First of all, we are really pleased with how the business performed and are excited to share the key highlights with you today. We had a strong first half with revenue reaching 1.3 billion and the second quarter alone contributing 667.5 million Swiss francs, reflecting solid momentum across all businesses. Organic growth reached 10.2% in the first half and 9.3% in the second quarter. While continuing to invest in capacity expansion, education, and digital transformation, we achieved a core EBIT margin of 27.3% or 26.6%, including strong currency headwinds. One of the highlights of the second quarter is our 2025 new product launches, which are off to a strong start, with IXL gaining momentum following a successful rollout in Europe and Australia. Clinicians have responded very positively to our latest influence innovation, highlighted its clinical versatility, which has led to improved clinical outcomes. We will share more on this later in the presentation, including the latest workflow innovations designed to significantly enhance clinical efficiency and productivity, as well as reducing shift time for patients. Another important milestone of the second quarter was the regulatory approval of our Stroman premium implant production in China. This marks a significant step in strengthening our market position and supporting long-term growth in the Chinese market. Building on this momentum, we are pleased to confirm our outlook for 2025, despite the latest tax impact. Looking at slide 6, the patient flow dynamics per region remain consistent with the previous quarter amid ongoing macroeconomic uncertainties. we continue to gain new customers across regions, thus increasing our market share, which reflects our commercial execution strength. Let me highlight once again the remarkable performance of our EMEA business. Despite a persistently uncertain macroeconomic environment, EMEA continues to deliver a solid, consistent growth quarter after quarter. It reflects our clear strategy and effective execution, even with the Easter holidays, which affected the start of the second quarter. Thanks to the successful rollout of launches like ISL, the Access Digital Platform, and the Infrared Scanner Serials, we continue to reinforce Stroman's leadership in EMU. In North America, our performance kept the same dynamic than in the previous quarter, a solid outcome given the continued volatility and cautious consumer spending, particularly impacting out-of-pocket dental treatments. The patient flow stayed stable, but also hasn't shown a meaningful recovery yet. Our digital solutions and our multi-inclined brain offerings continue to perform well and gain market shares while orthodontics overall remains challenging. Asia-Pacific continues to shine with strong double-digit growth, driven by the robust patient demand and the strong performance of both our premium and challenger brands. Especially in China, the value-based procurement process continues to support dental implant treatment awareness and improves affordability. With our recent launches and investment in education, we are expanding our position across both mature and emerging markets in the Asia-Pacific region. Finally, Latin America completed our global performance with a strong double-digit growth, led by our trusted New Zealand brands and adoption of digital solutions. It is important to note that our Scrum and Implant brand also posted very good growth there. Across all regions, our ongoing product launches, regulatory readiness, and go-to-market investments are not just supporting current results. They are continuing to create a strong foundation for sustainable growth moving forward. And with that, I'll hand over to Isabelle, who will take you through the financials in more detail.

Thanks a lot, Guillaume, and warm welcome to everybody from my side as well. I'm beyond excited to be part of this great organization and look forward to contributing to the next chapter of our growth and value creation together with a great team. Let me start with our revenue on slide number eight. As already mentioned by Guillaume, the group's second quarter revenue reached around 668 million Swiss francs, with an organic growth of 9.3%. And in Swiss francs, this corresponds to 1.9% growth in the second quarter, investing continued currency headwinds. Sorry. As 2025 exchange rates, the 2024 second quarter revenue would have been 44 million Swiss francs lower. in this currency effect was majorly due to the depreciation of the Euro, the Chinese RMB, and various emerging market currencies. But as Guillaume already mentioned, if we look at the operational performance, the specific patient flow dynamic we saw in the regions remained broadly the same as in the first quarter, which supported the strong regional performance we saw in the first half of the year. And this includes China as well as the U.S. So the Asia-Pacific region recorded the fastest growth, driven by China's continued strong contribution, and was followed, as already outlined, by the EMEA region, which still is the largest region for the Straman Group. And, of course, I mean, I would like to guide you through a little bit how that translates into profitability. So looking at our gross profit development on slide 9, In the first six months of the fiscal year, the group's strong top-line growth, which is so led to a core gross profit of 972 million Swiss francs, which is a currency-adjusted increase of 91.2 million Swiss francs. And the corresponding margin of this achievement was slightly higher than last year at 72.1%. but with a decrease of 50 basis points due to negative currency effect compared to 2024. So this means the gross margin remains at a consistent level despite significant external pressure, which really underscores the group's robust business fundamentals. So as you said, 50 basis points down due to FX effect, but other one-offs we saw in the first half of the year were most certainly the ramp up of our Shanghai campus and the recently imposed US tariffs, we very effectively managed to absorb by managing very diligently our productivity and our spend. So we saw that supported by favorable product mix, basically due to sustained demand for premium solutions, and significant focus on improvements in manufacturing efficiency and productivity, we managed to show this very strong gross profit. And I think this enhancement really reflects the group's ongoing efforts to optimize operations across the global footprint. But I think what it shows more, and we will see that in the next few slides to come, the resilience of the group's ability to manage volatility in uncertain times, while at the same time continue to invest in strategic growth initiatives, such as innovation, which I saw, but as well as capacity expansion and digital transformation. Moving to slide 10, the core average margin reached 26.6%, which is a currency-adjusted margin decrease of around 40 basis points in those volatile times versus prior years. with currency movements having a negative impact of 90 basis points on the core average. This is majorly, yet again, due to the strengthening of the first rank. Looking at the building blocks beside the gross profit we already talked through, the distribution expenses had a positive impact of 80 basis points, which is due to ongoing investment and focus on how we go to market on enhancing our logistics capacity. But as Guillaume already outlined, we of course increased a little bit our focus on innovation and education, but at the same time digital transformation. We invested into our sales force, our people and talent in general, and this is why we had a slightly negative impact on the administrative costs, which bear all of those investments as well. The same pattern we will see looking at our cash flow on slide 11. So you can see our cash flow slightly declined here and there, but it's yet solid in the first half at 130 million Swiss francs. And the decline was mainly related to 29 million higher CapEx in the first half of the year, still reaching 8.4% of our revenue. What did we invest into? And part of that you've seen already, but we really continue to invest in capacity expansion to really continuously enhance our global manufacturing footprint and our digital transformation externally as well as internally. And that's why capital expenditure for the first six months remained at a high level, totaling 113 million Swiss francs, so coincidentally exactly the same number we posted in terms of free cash flow. So three things to mention here. We're expanding our manufacturing sites. I'll give you a few examples. In Brazil, we are about to build the fifth factory for our Neodent branch to enhance our capabilities and foster the growth we are seeing. In Germany, we opened a new factory for our Medentica branch. And I think most importantly, we are progressing steadily with the development of our new Shanghai campus and training. And this campus will serve as a hub for manufacturing, clinical education, as well as innovation in China. All of those projects I just mentioned are critical to enhancing our production capability, plus strengthening our presence in our global key markets. Having said this, our cash position end of June was at 247 million square francs, so still a very solid performance, especially taking into account that we obviously paid for this. So, concluding, turning to slide 12, let's look at our full financials. I will not go into all the details, so for full clarification, you will find the year-on-year comparison on the reported IFRS basis and the core reconciliation table in the pan mix of this presentation. The two things to highlight, the NAS financial expenses amounted to 24 million Swiss francs, reflecting currency hedging costs and currency losses in the group's main exposures. I think really the counter effect we've obviously seen in the FX result we already talked through. But at the same time, our core net profit amounted to 265 million Swiss francs, so increasing 16% of constant currency year over year, while sustaining a very high margin of 20% of revenue, which led to an ex-adjusted basic earnings per share of 1.66 francs. And having said this, I will hand back to you, Guillaume, for our strategic outlook.

Thank you very much, Isabelle. Then let's talk about our achievements and recent strategic progress, starting directly with slide 14. Within today's uncertain environment, we remain very confident in the strength of our fundamentals. We operate in a large global market with a share of 12.5%, with strong growth opportunity thanks to the limited penetration of our clinical solutions, both in implants and orthodontics. but also in the early 20s. Additionally, we are well positioned to further capture a significant additional share of this market, thanks to our well-diversified multi-brand and multi-price portfolio and a broad geographic presence, which is backed by a global manufacturing footprint. Inflatology, of course, is the cornerstone of our business, where we lead with a 35% global market share. As mentioned in the last quarter, we see considerable growth potential in both developed and emerging markets, driven by increased awareness, more trained patient-facing influence, and improved affordability for patients. Let's move on to slide 15. Our well-established strategy compass is designed to guide us in capturing a larger share of our total addressable market of around 20 billion Swiss francs. At the core of our strategy are three key pillars, innovation, digitalization, and education, each essential to unlock the opportunities ahead. I'm pleased to report that we have made strong progress across all those three areas in the second quarter. First, starting with our premium input segments, iExcel clearly demonstrates the strengthening of our position as the most clinically versatile and efficient solution. In the value segment, Neodent and Ontogear continue to expand their reach. And on the digital side, innovations like Sirius, Unique, the Midas Read Printer new technology, and the Stroman Access platform are transforming workflows, making treatments more efficient and accessible. Altogether, those innovations support both existing and new customer position, reinforce our leadership across the value chain, and position us strongly for continued growth. Now, let's move to slide 16. As we continue to innovate and grow, it is important to stay focused on the challenges clinicians are facing and the true problems we are committed to solving. The premium implant market can be typically split into three segments following implant designs. Paranal wall implants, which now make up about 10 to 15% of total implant volume market. Apically tapered implants, making up roughly 455%. And fully tapered implants, which around 30 to 35%. The trend is clear. Apically and fully tapered designs are growing at a more dynamic pace, driven by immediacy protocols and patient demand for faster treatment, while the classic parallel wall implant segment is declining. Until now, managing different clinical situations required multiple implant systems. To treat different bone densities, clinicians have to choose between parallel wall, apically tapered or fully tapered implants, all with different surgical kits, prosthetic platforms and connections. It is demanding a lot of training, more stock and limits surgical flexibility at your site. When conditions change during a procedure, switching implant designs also meant switching instruments, adding time, complexity and stress for the patient. An additional major pain point remains inventory complexity. Many practices still operate with multiple and fragmented systems, leading to inefficiencies, higher costs, and heavy inventory burdens. IXL changes all of that. It brings together four implement designs in one system, with a unified prosthetic platform, a single connection, and one surgical kit only. This simplifies workflows, reduces inventory, and gives clinicians true intraoperative flexibility, enabling implant design changes on the spot during surgery without changing instruments. Feedback from all first users has been extremely positive. Patients report greater procedural control, streamlined workflow, and very positive clinical outcomes. Therefore, with IXL, we are not just simplifying implantology. We are really setting a new benchmark in premium treatment versatility. Let's move to slide 17. To further differentiate, IXL is coming with RobSolid and SL-ACTIV, two of our most Stroman Group advanced technologies, enabling minimally invasive protocols and faster OCO integration. The combination of its new implant design and the strength of Bronxolid allows clinicians to confidently use a reduced 3.75 diameter in most indications. This not only enables less invasive treatments, but also help preserve bone, supporting better functional and aesthetic outcomes. A key part of our next generation IXL portfolio is the apically tapered C-line made of rock solid and featuring our proven SL-Active surface. The new BNC implant within this line integrates the torque-fig connection already known from our X-line for its high strength and slip abutment designs. BNC also introduces an improved self-taping thread design and extended cutting flutes that eliminate the need for taping and increasing placement efficiency. A major milestone in July was the launch of the RockSolid SLA version of the IXLC line. SLA is our classic surface technology with a proven surface topography that supports reliable bone integration, ideal for standard healing protocols. By offering now this new option, IXL can meet a wider range of clinical needs and cost-conscious customer segment requirements, making it one of the most universal systems in our portfolio. This additional option strengthens our ability to compete wisely across all geographies, supporting broader market penetration and sustainable growth. Let's now move to slide 18 to talk about one of our important R&D focus, ceramic inputs. In July, the Stroman Group acquired full ownership of Maxon Dental, increasing our stake from 49% to 100%. Located in Kensington, Germany, Maxon Dental is one of the most advanced technology centers for ceramic implantology and a developer of the world's first two-piece ceramic implant system using proprietary ceramic injection molding technology. Ceramic implants are more than just an aesthetic alternative. They offer distinct biological advantages that will become increasingly important in clinical practice. According to clinical studies, this includes a reduced risk of inflammation, better soft tissue integration, and a potential lower incidence of oral implantitis compared to traditional titanium systems. To leave this promising field in the future, we have taken another step forward by acquiring maximum dental fluid. This acquisition not only secures a well-advanced and scalable technology platform, but also strengthens the group position as a leader in implant solution innovation. Moving on to slide 19, let's take a closer look at how we deliver excellent customer experience beyond the product, which is closely linked to one of our key success pillars, digitalization. In today's environments, offering high-quality products is no longer enough. What truly differentiates us is our ability to make clinical workflows simpler, faster, and more connected, and that's exactly where our new digital capabilities come into play. Allow us to present a few examples to explain this in practical terms. The FastMolar workflow, for example, is a streamlined, free-stack-only approach that enables to restore quicker and easier posterior teeth. The solution uses fewer plants and reduces significantly chair time, helping dentists work more efficiently and comfortably while still delivering highly reliable clinical outcomes. On slide 20, Let's look at another workflow innovation example, which is supporting the digital full-out workflow, the latest Stroman Exact innovation. It helps clinicians treat patients who need a full set of new teeth by guiding them through each step, from the first digital scan all the way to the final restoration. It simplifies what is usually a very complex process and saves time both for the dentist and most notably for the patient. Now turning to slide 21, let's take a closer look at China, the market with massive long-term potential where education and local capability building play a critical role in accelerating adoption and expanding market access. While implant penetration in China is still low, the introduction of volume-based procurements has significantly increased patient access and awareness leading to a clear acceleration in adoption. However, product availability alone is not enough. To fully unlock the market's potential, investment in clinical education and training is essential. That's why we have made it a strategic priority to build a robust local clinical ecosystem centered around our new education and training center together with the ITI partnership. This facility is equipping more local clinicians with the skills and confidence to deliver high-quality implant treatments, laying the foundation for sustainable long-term growth. In parallel, we have made strong progress in local manufacturing with the phased launch of our new Shanghai Compass, which is now licensed to produce trauma implants. This allows us to manufacture implants locally, improving responsiveness, reducing costs, and importantly, ensuring we are well positioned for future volume-based procurement cycles. With this, Stroman is ready to lead in this high potential market and shape the future of Influential District in China. Let's take a moment now to talk about what sits at the foundation of our consistent performance, our player-learner culture. On slide 22, you will see how our shared mindset and core beliefs shape the way we work and grow. We strongly believe in our high-performance player learner mindset. It's this culture that empowers us to adapt, grow, and stay focused on delivering on our purpose, which is unlocking the potential of people's lives. To show a great example on how our purpose is actionable in our organization, let me highlight our internal Smile Movement initiative. It's a global initiative we launched in March that brings our people together through walking, running, and cycling. Every kilometer is tracked and matched with a donation to the Neustromann Group Foundation, which will help fund dental restorations for patients in need. The goal is to connect at least half a million Swiss francs through a worldwide team challenge. And it is a powerful reminder that together, we can make a real difference beyond our daily work. Finally, let's look at our outlook on slide 23. We have entered 2025 from a position of strength, backed by a down-the-sea-fight portfolio, a strong market presence, and a clear strategic vision. With this foundation, we remain confident in our ability to navigate the complexities of the global landscape and continue expanding our market share, reinforcing our confidence in our long-term ambition for 2030. Our broad geographic presence provides resilience against regional economic fluctuations, while our worldwide manufacturing footprint supports our supply chain flexibility in times of growing geopolitical complexities. It comprises 19 sites worldwide, supporting flexibility and agility. In particular, our strong local manufacturing presence in the U.S. has proven essentials. The majority of our premium implants for static, regenerative solutions and aligners of the U.S. market are produced domestically, safeguarding operational continuity. For value implants, Brazil remains the most efficient production location and we continue to maintain flexibility across our network. Amid the evolving landscape of global trade, including newly imposed tariffs, the group is proactively implementing a range of measures to mitigate its impact. As a result, And despite these external headwinds, we remain confident in our ability to achieve organic revenue growth in the high single-digit percentage range in 2025, along with a 30 to 60 basis point improvement in the core EBIT margin at constant 2024 currency rates. Let's move to slide 24 now. Before we wrap up today's presentation, I am pleased to announce our upcoming Capital Markets Day, which will take place on the 25th of November. The event will be held both in person and online, and we would be delighted to welcome as many of you as possible on site in Basel. The formal invitation with the full agenda and registration details will follow in September, and we hope to see many of you there. With this, we 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 pose their questions within the available time. Can we have the first question, please?

Yes, sure. The first question comes from Hassan from Barclays. Please go ahead.

Hi, good morning. Thank you for taking my questions. A couple from me, please. Firstly, can you talk about what you're seeing in North America, particularly the U.S., as you've moved through the second quarter and into the third? Given you continue to expect a better 2025 versus 2024, what are the key drivers for confidence in an improvement here, or is it entirely comp-driven? And then secondly, can you talk about the gross margin strength despite some of the headwinds from the Shanghai campus and your expectations at the gross margin level over the coming year as utilization improves compared to that 50 basis point headwind in the first half? And any color on the key mix elements that drove the offset here would be helpful. Thank you. I think U.S., as you have seen, we have seen a slight sequential quarter-over-quarter growth rate improvement, but it still remains, you know, a market where patient flow is still not very strong. And we have not seen any deterioration. We have seen a stable market environment, which is continuing as we speak. Then when we see U.S. in the limited visibility, I would say, that everyone is having on the current, I would say, effects on tariffs on the U.S. economy and especially the consumption and the patient demand, we see the stability that will continue over the coming two quarters at least. And that's mainly how we see North America. It means that with our current numbers, we are also gaining market share, which is very important for us, because we believe that when the macro will be better, we are going once again to have very strong positions to enjoy markets. a better macro thanks to all the market share gain with IXL. As we are seeing, and we can comment that later, IXL being super well received and making inroads in the U.S. market. But I would say U.S. overall on the market per se, stable and slow still as we speak, but market share gain, strong performance, and innovation very well received in that market. Sure, thanks for your question Hassan.

So regarding the gross margin development, what we already stressed, we were very pleased to see the development in the first half of the year, because I think this really shows the The strength and what we'll say is talked about earlier. We have a lot of headwinds coming our way, especially when you look at tariffs, when you look at general macroeconomic development. But we have been really able to just, you know, take those challenges and turn them into our strengths by implementing the right measures in the countries so when you look at gross profit there's obviously two sides to that on the one hand side really what do you sell in the countries where do you grow and on the other hand side how do you manage your operations and i think both of them have been played out have played out in our favor very nicely in the first half of the year so we saw strong growth in the straumann branded implants as well as in this challenger brand which of course helps us to have a good pricing a good margin in the markets But I would say equally important, we really strengthened and continued our efforts into having a good production footprint and continuously enhancing, increasing our efficiency, productivity on the shop floor. And both of that really helped. to mitigate the adverse impact we saw from generally macroeconomic development, but then as well from the tariffs that, of course, hit a little bit, and the ramp-up of the Shanghai campus. Since we deliberately asked for the Shanghai campus, and you can imagine it's a huge project for us, so we, as Guillaume said, received the license to manufacture all of the products, and we're planning to go to market with the first products produced there in the coming months. But this will still take a little bit until the factory is fully, you know, fully flashed, fully up and running. So we expect to see, you know, a little bit of impact until second half of 2026, until we will be able to manufacture and deliver all of the products we will need in China in this new facility.

That's very helpful. If I can just follow up on China, and I guess as you see that little bit of impact until the second half of 2026,

What are your assumptions for VBP this year and next year and whether you're already seeing or expect to see some postponement of spend ahead of VBP next year? Well, it's, you know, what we can say on VVP is that, first, it's currently under reflection at the Chinese authorities that there is not so much that we know about what would be the next rules from a formal standpoint. The second thing that we can say is that we believe that Local manufacturing will be an important factor from what we have understood. At least that's what we believe right now. And if it's the case, we will have very favorable positions because we will be one of the very few international companies having ready, approved local manufacturing side for the Chinese market. then that's what we can say as we speak. And we will see potentially in the fourth quarter, then the patients may be waiting a little bit about the VVV side. But as I think there is the expectation that the price will cut will, if any, will not be major. You know, we don't expect it's going to be as significant as it has been in the VDD 1.0. That means a depressed Q4 and very strong afterwards following year. We think it will be much more smooth because this is what we have seen also in all the different VDD 2.0 in the other industries.

Very helpful.

Thank you.

The next question comes from Richard Feldman from Goldman Sachs. Please go ahead.

Thank you. Good morning. A few questions for me, please. The first one is a slightly longer-term one on the U.S. So I'd be interested to know what kind of scenarios for North America you are embedding in your medium-term guidance. And in light of some of the recent weaknesses, your strategy, The second one is on potential for Brazil's U.S. tariffs. Can you help us frame what the potential impact is on your business and also what actions you can take to mitigate that impact? Thank you. When it comes to U.S., the midterm scenario is still having a U.S. which is recovering step by step. And, of course, again, being able to be above market through then constant innovation that we have been placing and that we will continue to place. This is what we are experiencing as we speak. Therefore, U.S. will continue to be a growth provider and a strong contributor for the years to come. But honestly, our scenario, midterm scenario, is also adding strong other geographies, meaning that we are not relying only on North America to be able to deliver on our overall long-term view. When it comes to Brazil, yeah, I think as we speak, again, and we are seeing some significant change from month to month, then the impact of the Brazil tariff is consequent. Then what we have said is that we have been anticipating already this through obviously building up inventories on one side, being able to look at alternatives that we are working on also at the moment from a supply chain standpoint, and then we have time also thanks to the inventory builder that we have the next six months as well to try to put some of them in place. Then that's what we are doing in addition to what Isabelle clearly highlighted and that we are Honestly, very happy and proud of our operation teams with all the efficiency gains they have delivered during that timeframe. The operation improvement and efficiency in the shop floor, that's also supporting very significantly some of the headwinds we started this year.

Thanks very much.

The next question comes from Susanna Ludwig from Bernstein. Please go ahead.

Hi, good morning, and thanks for taking my questions. I have two, please. I guess first, can you maybe just talk a little bit about how the IXL launch is progressing relative to your initial expectations for share gains? You historically had talked about sort of 10% share gains in the tapered categories. To what extent do you think you've delivered on those gains so far? And then the second question is just quickly on FX. Could you give an update on your expectations for the FX headwind to 25 on both the top line and then on margins as well?

Yes, we'll take the IXL side. Isabelle will comment on the FX side. Yeah, we are really pleased with the IXL, then the momentum we are having right now. We have been launching in North America last year. We have started full launch in EMEA then beginning of this year. And if I can share potentially two numbers is to say that right now the IXL portfolio represents already 15% of our total premium implant volume sales. Meaning that it has already paid a meaningful share of our total activity on premium, which is demonstrating the repurchasing. uh aspect of ixl which is always the most important one that you you have when you launch your product is making sure that the people that have tested and tried an innovation are going to stick with it because they see really value from it and that's we're really happy with our very high report rating rate, which is driving already then a significant share for total premium implants, despite having the market less than two years already being launched. The second important numbers is that the major new design is a BNC line, as we tried to explain in the script a bit before. And this new BNC line is, I think, a really universal and very versatile implant, which is, we think, really the best system on the market today. And if we look at all the acquired C-line customers, 25 one-fourths are coming from non-straumann uses then it's not only providing the clinical let's say benefits superiority that we were looking for but it's also delivering on the new customer position that we were planning in order that we can drive the market share that we announced uh then before launch of our ixl system then Yeah, I think we have been confronted into our IXL potential moving forward and that we are executing in line with plan as we speak.

Happy to elaborate a little bit on our margin guidance and the effects we have seen and we're expecting for the second half of the year. Something important note from an operational part is that we just reiterated our margin guidance of an improvement of 30 to 60 basis points for the full year. And as Guillaume already said, you know, this comes from operational leverage, from the investments we have been making and the productivity measures, despite all of the negative impacts we see. But, I mean, obviously, the depreciation of the – the appreciation, sorry, of the Swiss franc and depreciation of all other currencies, this was a little unexpected, especially looking at what happened during April. So if you recall, beginning of the year, we said for the full year, we're guiding a constant currency. I think that's important to stress. We were guiding for an impact on the bottom line of roughly 100 basis points. Even we're already at 90 basis points at the half year. This is, of course, not realistic anymore. So what we currently see in our simulations is that on top line level we expect an impact of 470 to 490 basis points and on the bottom line of 130 to 140 basis points for the full year. Great, thanks. That's very helpful.

The next question comes from David Arlington from J.P. Morgan. Please go ahead.

Morning, guys. Thanks for taking the questions. Maybe firstly just to round out on tariffs. I just wondered if you could quantify the impact on tariffs so far and then where you see opportunities to mitigate or any further risks, particularly Brazil and how you mitigate those risks. And then secondly, I know it's already been asked in terms of China, but maybe in terms of pricing for next year for VBP, do you think you'll continue to grow and do you think it's still being double-digit growth even with VBP next year?

Thank you.

Yes, so to elaborate a little bit on the tariffs, I mean, of course, when you just look at the gross impact we would have seen if we hadn't done anything, it would have been massive. I mean, if you look at the two biggest ones for us, obviously, the 50% we see from all imports from Brazil to the US, which is impacting our news and products. and then partially still imports from Switzerland to the U.S. for the Strauma-branded products from outside in Villerein. I think we have taken a lot of measures, especially looking at enhancing the footprint in the U.S. even more and looking into having more finished products really readily made in the U.S., So having said this, I think we have a lot of very good mitigating measures in place already. We continue to execute on them. But, of course, it's a very volatile thing we're looking at with the tariffs. But all things being equal, if what we currently see stays, I think we really have – we did our homework. We really elaborated on what are the options we do. So we need to execute relentlessly and make sure we really get those measures into place. Currently, I don't see a big risk there. As Guillaume rightfully said, this is what you see in the working capital, too. We really put a lot of stock in the U.S. still in June and in July to make sure we can still deliver and really provide the best experience for our customers while getting a little bit of time to implement the countermeasures we actually defined earlier. And I think we are on a very good way to mitigate the impact to something we can still then, you know, somehow absorb and compensate with other measures we already put in place in terms of productivity and OPEC savings.

China. Oh, yes, yes, yes, sorry. Well, you know, it's saying if we can grow the budget growth in China next year without knowing where the VDP will be, I think it would be a really challenging exercise. But honestly, when we look at the different scenarios, yes, we see, you know, obviously most scenarios will allow us to grow in China significantly because of the fundamentals that we have there. still very low penetration, still the willingness of the Chinese patient to pay and upgrade for treatment, which is still very strong, and we see that again and again in the marketplace, and obviously then adding all the different options and increasing options even on our side to be able to cover the different price points. You know, what worked out very well for us since quite recently a lot of years has been this multi-brand, multi-price portfolio. We believe that whatever the VVP rules, we are – I would say increasing as much as we can the different options we have on the market and being able to grow not only our premium brands, but also our challenger brands. And, you know, I want to remind again that we have not only our Stroman premium brand, but we have Antogea, the challenger brands. We have T-plus as our challenger eco-brand, which is also seeing quite some momentum in the Tier 3 and 4 cities. And I think growing in China is not only in one mode. you need to really have all those different options, like local manufacturing, like capability to have that multi-price points to be able to harvest as much as the opportunities that are going to go there. The last one of the reasons why we are saying that we are expecting VVP and driving different scenarios, but in most of those scenarios, we have a lot of different cards to play. And that's one of the things that I think we are benefiting from all the decisions that we anticipate from the past of adding our manufacturing site ready just for you in information. We were planning to have it by mid-2027. we rush everything possible to be able to have that well ahead of time. And we have been able to make it 10 months ahead of our initial planning to make sure that we can have that as a very favorable scenario for us in a VBP 2.0. And once again, I think it's difficult to have a final answer on what will be the level of growth in China, but we are very confident that we can find paths for growth in China, whatever the VVD 2.0 options will be. Thank you. Maybe just a follow-up on the tariffs. I just wanted to ask whether that requires mitigating impacts. Does that require market tactics in the U.S.? ? And secondly, do you see an opportunity to improve your pricing in the US as one of the medications? Thank you. Yeah, I know we – I think we can even – I can express that even more in detail when it comes to US manufacturing. What we have been anticipating as well is that our Boston premium implant manufacturing was doing a lot of semi-finished products. and some finished product also, but a lot of semi-finished. And what we have done is that we have been able to implement a lot of new processes, and especially the finishing processes in a very limited, in a very small amount of time, as Isabelle was alluded to, and the agility of the operation team, you know, that we can cover a much larger share of finished product in the U.S. market. That means limited capex. But, of course, the impact by being able to cover a very large amount of our premium implant brand there, then no capex has been really used for refurbishing or significantly enlarging our Boston manufacturing. This being said, that's why our capex is still at a pretty high level, because we want to capture for all the very dynamic regions that are Asia-Pacific on one side, obviously, which is then on the premium side, then our China-Shanghai side, but also on the challenger side on New Dance. where you know that we are building another third manufacturing site in order to capture for all the very strong double-digit growth on challenger implants that we are facing now and that we need to have absolutely ready by end of 2026 or latest Q1 2027. to be able to then cater for demand. Then most of the capex you have seen, including some digital investments, have been done mainly for facing the growth that we are still generating, and it has been a lot of adapting our activities and our different technology in the right side, depending on what kind of finishing or finished goods or semi-finished goods that we have been doing. Great, thank you.

The next question comes from Graham Doyle from UBS. Please go ahead.

Morning, guys. Thanks for taking my questions. Just one on APAC and one on the U.S. In terms of APAC, could you help us just think about the phasing of growth as we go through Q3 and Q4? Just in terms of those comps and then thinking about that potential VBP impact. And then just on North America, Just to clarify, in terms of our modeling, when we think about the kind of phasing through this year as well, if we assume that 2025 is to be better than 2024, sort of as you guys said at Q1, that would imply like 6% growth in H2. Does that still feel sensible or should we maybe think about pushing that further out just as the market takes a little bit longer to recover? Thank you. Debra, thanks for your questions. Then when it comes to China, you know, first, we are not guiding on a ritual base and quite only best. And as you know, the major information I think that we shared this morning is that we are very confident to give guidance. And then this is obviously through all the different opportunities that we are playing in the different regions. Then when it comes to China, we said at the beginning of the year, we have then embedded in our guidance the fact that we have an EDP 2.0 at the end of the year, and that we are seeing Q4 as not having the same dynamic potentially than the first three quarters. Now we are going to see, but we still expect, to have some growth and some interesting growth from China, which is going to drive, again, the overall uplift. the overall growth profile of our second semester. And that's why we're still very positive for China, despite the fact that, yes, I think we believe that some of the fourth quarter can be potentially impacted. But as we see right now, we don't have significant disruption or inflection point in our growth rate when you look at the Chinese business. Second thing I would like also to highlight is that Asia-Pacific is not just limited to China, and we have super strong results in very important markets, such as Japan, which is, you know, very, very solid and with a strong contribution to Asia-Pacific. We have a country like India, like Thailand, that also starts to contribute very well. We have quite a good balance of geographies in Asia-Pacific that are also supporting a potential, then a bit slower, growth profile of China during the fourth quarter. That's why our confidence is coming from as well is that we are not only then depending on one country performance. When it comes to North America, then, you know, North America, once again, it's very difficult to predict as we speak as everyone is trying to see what is going to be the tariff. than policy impacting the demand and the future inflation. They already debate about how to read inflation if we read core inflation and not overall inflation to really see what is going to be the outcome from, for example, the dental impact as this is completely out of pocket from spending from patients. Are we going to see when we express in Q1 that we would see 2025 better than 2024, we were not all those tariff discussions. It was by far not at all at those levels. Obviously, it is impacting some of our perspectives. Do we believe it's still possible? Yeah, I think it will depend on our capability to leverage steel innovation. It's our capability also to make sure that we can do better with regard to a lower count. But, you know, if you are factoring in the potential inflation effect, that would be a headwind. And obviously, this is putting some question mark on this side. Then what we are seeing when I see North America, and I've expressed before, is that we see our performance stable quarter of the quarter to slight improvements, which should help us to have, again, a very strong confidence in achieving our overall guidance for the year. That's where we see. We see the current development also being positive from a stability standpoint and expect to be able to drive this growth profile as we speak as soon as inflation is not going to come in the way. That's really helpful. Totally fair. Just a quick one to follow up on VBP. It's harder for us to ascertain, but would you expect the surgeon fee to be sort of slightly cut again this time as well to unlock a bit more volume? Is that logical to assume? Honestly, I don't know. Yes, I would say it's a lot depending on what the Chinese authorities are wanting to do. Do they want to favor, again, patient affordability? Do they want to sustain still a very strong clinical ecosystem? Because as you know, and we expressed that a couple of times, the current level of pricing for clinicians it's pretty low for their own operations, especially because the price are mainly related today to public hospitals, and we need a private site where you have a lot of competition, could even sometimes go lower on the patient fee for the infant placement. I would be careful here saying we don't know, but what I would say is that I would not expect a lowering fee for the practitioner when it comes to implants in 2025 in the VVP, but I can be proven wrong because I have no facts to back this up. Thank you very much.

I appreciate it, guys. The next question comes from . Please go ahead.

Yes, good morning. Thanks for taking my question. I'd like to start with the reiteration of your 2030 growth outlook, as is put in the presentation. Remembering the last capital markets day, the clear aligners were actually stressed as a very important part of getting to that target, as I recall. And I was wondering whether this has changed, whether you're surprised about the influx trends and whether you think you can actually get there as well, if the orthodontics are not going to grow the way that they were initially anticipated. And my second question is a bit of a housekeeping question. Could you please provide us some expectation for the next announcement for the full year, you know, given with the hedging and FX losses? And then just, you know, more conceptually, if we think about a five-year, 10-year horizon, where do you see the biggest growth opportunity for the Stravan Group. Thank you.

Thank you, Maya. You know, you are trying to steal the thunder for the Capital Market Day. Because that's, of course, all those that we are going to address there. And we hope to see you on November the 25th together with everyone. What we can say is that our Go5 review confirms our commitment to the ortho side. There are ways of doing it, also a little bit differently on our side, or with a focused approach. We've also then, we are considering to improve our technology. This is what we are considering doing, and that we are confident uh in what we do at the moment and once again our auto franchise uh despite the low base is still growing at the moment then that's why it's getting us confident that we have a way to continue having auto as a driver for our growth contribution in the short but also in the long term now Was it in line with our then 2021 capital market day when we were sharing that Porto will be a very, very big contributor for our $5 billion at 2021 exchange rate? It is, at the moment, lower than what we have anticipated. And are we being surprised by implement growth? Surprise might not be the right term. I think we have played all the opportunity in front of us, which has delivered really strong results, stronger than planned, but not surprising based on the fact that our market is very underpenetrated. And we have to, talking about five to ten years horizon, and we will be able to, you know, comment that deeper in the Capital Market Day. The dental implant is still incredibly underpenetrated. When we see the number of missing teeth around the world, the capability of patients able to pay, and especially the clinicians being trained to address those needs and being able to deliver the implant procedure, which is really the standard of care for replacing a tooth, we are very, very confident with our capability and opportunity to grow in the future. Just to illustrate that with facts already today, we are very often asked about the The consistency of our EMEA results, and besides the capability to say that, yes, we have a strong execution, I think we have done the right thing at the right moment, the strong demonstration of the standard of care for replacing a tooth being an implant is really demonstrating in EMEA as a lot of general practitioners are placing implants now, and this is very often what is needed in the other regions. A lot of the GPs are still doing free mid-bridge or are also very often doing nothing. And this is detrimental to every patient's health. And systemic health, if you are not able to have good oral capabilities, then this is why we believe that we have a very strong opportunity and company profile in the future, but more at the capital market day, November 25th. For the ethics, then, Isabelle, please.

Let me comment on the net financial expenses a little bit, and especially on the financial results we're showing. So I think systematically there's no big difference compared to prior years. We basically still hit our foreign currency exposure, and we still make sure we have a good coverage. We still believe we're on a good way in the way how we handle this. Although, of course, what happened in the second quarter was a little unprecedented. So what is the number we actually see higher than what we've seen the year before? Well, two main influencing factors. Obviously, especially after what happened in April, the cost for the currency hedging itself went up. quite significantly. This is what we see here. And then obviously due to IC loans, we have a little bit more unrealized currency losses. But I think it's worth mentioning it's unrealized. We don't expect this to come through. So having said this, what we expect to see in the second half of the year so far, and I think really in line with our expectations for the FX in general, is very similar to what we've seen in the second half of tri-year.

Okay, thank you very much.

The next question comes from Valiant Yellowscan from ZKB. Please, go ahead.

Yeah, good morning as well. Just one left on the IHL, which you share with us is 15% of the premium implant sales. I mean, where can that number go, let's say, until the end of the decade? you know, is it 50% or actually why should, let's assume I'm a dentist, why should I take PLT and not PLC or, you know, is this PLT still sticky and there are little switches and so on and so on, just to get kind of a ballpark fear would be nice, thank you. Very good question, Daniel, and I would say three points here to answer. Our goal is obviously to have this number the highest possible as IXL volume share of total premium implant sales. Then when we are seeing possibility to go to 70, 80% moving forward when we look at the long term. Why do we think it's possible? Because it's the best system, really, even in our portfolio, and that it really solves a lot of the challenges that many implant clinicians are having. Why this is important for us? Because on the one side, we are still able to make up better ASPs thanks to innovation. And this is what is very, very important. And we are still having a higher ASP with iExcel versus the legacy line. The second thing is If we can continue to streamline portfolio in the future to support operations, being able to increase, again, gross margin as they are able to do, at least maintain gross margin despite all the different headwinds we are having on this side, being able to then streamline portfolio and get rid of some of the legacy line will be very important. And one of the factors that will help this will be, of course, registration in all the different geographies. For the time being, of course, the BNC line will be registered only in 18 months from now in China. we are still waiting to have also in all critical Asia-Pacific countries such as then Japan. And as soon as it will be available everywhere, I think we will have that ability to, yeah, I think a majority of our premium implant volume being ISL than implant.

Okay, very clear. Thank you.

The next question comes from Vicky Chopra from WF. Please go ahead.

Oh, good afternoon, and thanks so much for taking the question. Two for me, please.

So I guess the first one, you know, you maintain your guidance, and my question was specifically on your eBIS guidance. Maybe just talk about what gives you confidence in achieving this guidance range and what gives you the low end versus the high end of the 30 to 60 basis points, and then adequate follow-up, please.

Yeah, thanks for your question. So I think why are we confident to maintain this guidance? And I think to stress again, we're guiding at constant currency. So having said this, of course, I mean, what we cannot do is absorb this 130, 140 basis points in terms of headwinds we get from events. But I think why are we still confident, besides everything that has happened, especially with the tariffs, Well, I think this really comes back to all of the measures, all of the investment we have put into place. Then really what I can say, only being with the company for a couple of weeks now, it's really this player learner culture and being very agile in reacting to what is being thrown at us. So especially the operations team, they have done an amazing job to mitigate the tariffs. put in place additional productivity efficiency gains. We managed our logistics capabilities really well but then very diligently looked at what do we actually spend money on and is it strategically important because I think what we really want to maintain is this big resilience we see in the company and this capability to still keep on investing. Because, you know, you can really advance more and beat your competition when the weather is tough. And I think this is what we've shown in a very, very good way in the first half of the year. That we really know how to take the curveballs thrown at us and compensate for this. And this is why I said building blocks. in a nutshell, will be the operational leverage, obviously, so to really absorb the growth in an efficient way and continue to focus on investing in the right things that will bring benefits in the long run, but at the same time taking all of the quick wins and implementing all of the measures we can to improve productivity efficiency month by month.

I would thank you, Isabelle. I would summarize three things. Top line, we need to drive growth for operational leverage, as just Isabelle said. Secondly is mitigation measures executed, and I think we have anticipated this. That's why we are very happy where we are, and that's why we are confident on the guidance. OPEX discipline that have been also strongly executed by the team and where we see a lot of adherence to it because, and related to the culture that we have been discussing about, everyone is really trying to achieve a company result and everyone is really feeling being on the same boat. And all of this being executed flawlessly should help us to be where we want to be at the end of the year. Okay, thank you very much. So my follow-up question is for Isabel.

I guess maybe, you know, you haven't been here that long, but I'm just curious as to some of the lessons that you've learned from your time at your previous company that you think you can apply at Starman. Thanks for taking the questions.

I mean, looking at where I previously worked, I think it was a very similar environment to what I find here at Strauman. So I spent a lot of my time in either China or private equity before I joined Strauman. And I think this is what I was exactly looking for, you know, the fast decision-making, the fast pace. And I mean, when you look at my CV, I will not repeat all of that, but I've been in finance all of my professional career, very different positions, exposure to very different projects. So what I'm really looking forward to bringing in is this experience in finance transformation and digital transformation, since I've done that a couple of times already. And I think, I mean, Straumann has a proven track record in showing that we can reinvent ourselves quite quickly and we can really adjust quickly. And this is what I'm really much looking forward to, to driving together with a fantastic team I found here in finance and in Straumann in general.

The next question comes from Veronica Dubajova from CT. Please go ahead.

Hi, guys. Good morning, and thank you for taking my questions. I will keep it to two, please. I just want to circle back to tariffs, obviously. Congratulations. You've done a fantastic job mitigating it this year. I'm just trying to think through what 2026 looks like. I think if I just do the rough math given the disclosure that you've given us, I think at current rates, we'd be sort of looking at somewhere between the 20 and 30 million headwinds. from tariffs next year if there is no mitigation. So maybe we can talk through kind of fundamentally, so not this year through inventory, but as we move into 26 and 27, what's the proportion of that 20 to 30 million headwind that you think you can offset through changes to the manufacturing of printed pricing and sort of, you know, how should we think about tariffs next year and beyond, assuming that we stay at the current rates? And I know that's a big if. And then I wanted to kind of ask a question about clear aligners, but sort of slightly different. Obviously, we've had some pretty downbeat commentary from some of your peers in the market about folks switching to wires and brackets. And so I guess two parts to that. The first one is, are you seeing that in your business? And if you're not, why do you think that might be the case? And then a sort of a second bigger picture question is, I think in the past we've seen sort of clear aligners being a precursor to weakness elsewhere in the dental market, if I think through what happened after 2022, certainly clear aligners slowed down first before we saw a slowdown in broader dental implant procedures and broader dental. I'm just curious if you think that's a risk here or if you think that this is very specific to clear aligners at this point in time. Thank you so much.

Thank you, Veronica. Also, interesting questions. I think When it comes to tariffs, I think it's around those kind of numbers that we see also playing with with regard to some of the remaining effects of Brazil and some of the remaining effects on – and if those tariffs are staying there, which – You know, nobody knows right now. And how much will remain and how much we think we will compensate with some measures, you know, this is too early to say for us at this moment in time because there are some mitigation measures that we are assessing right now and we don't know if they will be possible or not, if they will be realistic or not. that's why we have been able to gain significant time with increasing inventory, then I think it would be really difficult to tell you in which proportion we can absorb that from just simple operation mitigation measures. But what we know is that through our volume development and so on, we will anyway be able to absorb most of this with all the different elements that Isabelle was mentioning before. That was namely a lot of operational leverage, a lot of gross margin efficiency from a pure business. um shop floor uh efficiency and also obviously for some activities that we're doing on the side potentially a price increase which is going to be a reality in some market in some aspect and one of the fact is that we don't need to increase pricing for example only in the us but it's about increasing also pricing and our pricing strategy for 2026. then those are a lot of different levers that we can pull for this, and we will tell you more when we are going to guide for 2026. When it comes to clear-liner about what we are seeing, I think, first, we cannot comment on, you know, competitors' situation because we don't know that from the inside. And the only thing that we can say is that we don't see too much that coming back to braces and brackets, especially because, first, we are not really adding a lot of specialists. As customers, as we expressed, we are focusing on the GPs, and generally speaking, few GPs are doing prices and brackets anyway. Then one of the aspects of this is that I don't think that our market penetration today is allowing us to have a strong stance on whether this is true or not. Now, this being said, we still see significant development on the GP activity on our side and also with some specialists. Then we still need to realize the market is a very interesting segment. As a market today, we have seen that there are different companies with different performance. some with strong development, some with then more challenging situation. And we are really happy to keep playing in this field because we believe that there is really growth opportunity for us as a company. Yeah, can we conclude something versus total dental versus clear liner movement? I personally think that it's a no, because the clear liner market, when you were seeing in 21, for example, 22, with that incredible growth, If you remember, a lot was coming also for significant advertising pressure from direct-to-consumer companies. There were direct-to-consumer companies everywhere. Then in the U.S. with Candid and with Smile Direct Club. In, of course, Europe, as we know, with Dr. Smile and a lot of different also local providers with a lot of millions of dollars and euros invested into social media advertising, TV advertising, and so on. But I think This has also very significantly inflated demand on the aesthetic side, and those are the cases in a stationary environment, on lower macroeconomic situation. Those cases, or at least a large part of those cases, have disappeared. Most of the cases that are staying are still very much on the functional side. Kids, as an example, and we see it's still a very healthy adult treatment who are doing that for really being able to have a better functional side. And you have seen some aesthetic anterior treatment, but those are the ones that are depending, I would say, for the micro side. then this is, I think for me, a lot of the explanation of that big difference when it comes to the total macro clear liner 2021 versus now. And I don't see the same approach being done on dental because the rest of dental treatment is a lot functional versus being aesthetic. And that has been one of the reasons we many times expressed that the implant treatment has been very significantly resilient in those more difficult times versus clear liner because of the natural side of the functional need of replacing teeth instead of making the smile being beautiful. And that's just my take on what has happened in those past three years on that clear liner segment.

That's very helpful. Thank you so much.

The last question for today's call comes from . Please go ahead.

Thanks, Beth. So just one question, because we haven't spoken about Sirius or Midas that much. So you had a comment about ESO adoption, and could you maybe reflect on how that clearly is a value proposition, how it's landing right now, and if you're seeing traction as a bundle or more on the Sirius side, and how would you kind of think about that ramping from here?

Wow, thanks a lot, Dylan. I think that I really appreciate the question because this is one of the areas of the conference that we have not been touching about digital. And the one thing that, you know, I will take as an opportunity to express is that we are doing double digit role on digital. And despite this kind of big challenging macro period where we are saying maybe Dentist will not invest in CapEx, our iOS sales are doing very well with the combination of FreeShape on the premium side with a very, very good technology and Serious as a cost-effective system, which is also super appreciated by our customers. And the Serious is one of those recent launches which is also making the difference. Then we are looking at the second half of the year with being the peak period for iOS, and we believe that Serious will have quite a lot of things to support when it comes to growth rate also for the company. And Cereos as a standalone is really a success since the acquisition of Allied Star. And we are seeing that as combining this with latest technology in 3D printing with Midas being one of the winning combination in the marketplace on the prosthetic side. And now coming specifically to Midas and the Cereos in combination, yes, it has been attractive. then we are still, you know, it's a very new technology. Then we are still seeing the very early adopter then trying to use this. And what we can say is that for the practitioner that are really looking at efficiency gain and that are really looking at doing posterior prosthetic right now in a very lean approach, the solution has been very appealing. Now, we are just, you know, we just installed the first systems. Then it's a bit too early to say if it's going to be, you know, like the tornadoes on the Pacific side, because we know also that this is a pretty conservative environment. You know, we see new technologies being adopted step by step. I think when you look at the antiviral scanner, I think it took, you know, something like 10 to 15 years to be where it is today. But it was also a cost challenge. And how here with MIDAS, the cost is not the topic. It's how much we can make sure that the final outcome, which is the crown, are going to deliver on expectations. Then I think the technology is there. We are implementing it customer happy. Then we just need to see how much they are going to be happy with the restoration, the final crown, and how much it will deliver on expectation from, let's say, the length of the treatment, how much it will stay in mouth, how much is the aesthetics. And it will be a very important topic on the Matillon side. And for this, our partner, Sprintrade, is also doing a very good job in innovating on the Matillon side and giving a portfolio of indication for Sprintrade to be just a no-brainer from a GPHR side technology. and we are just at the beginning of it, we are very confident about this. We are very excited to partner with Sprint Rail, which is also having a mindset of customer-centricity, innovative, fast decision-making. Then, yeah, we are at the beginning, and we will be able to share more about the first uses of this combination, you know, especially at the capital market day and at the end of the year when we would have something like six months behind our belt. Excellent. Thanks a lot. Yeah, thanks, Dylan. And thank you all for joining us today and for your continued interest in Stroman Group. We look forward to seeing you again soon and wish you a pleasant rest of the summer. Have a nice day and goodbye from a sunny and warm Basel.