Straumann Holding AG

Ladies and gentlemen, welcome to the Strauman Group Q3 2025 results conference call and live webcast. I am Valentina, the chorus call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and 1 on your telephone. For operator assistance, please press star and 0. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Guillaume Danielot, CEO. Please go ahead.

Thank you, and good morning or afternoon to all of you. Thanks for attending this conference call on the Stroman Group's Third Quarter Reasons 2025. Please take note of the disclaimer in our media release and on slide two. During this conference call, we are going to refer to the presentation slides that were published on our website this morning. As usual, the discussion will include some forward-looking statements. As shown on slide three, I will start with the highlights for the third quarter. Isabelle will then cover the financial details, and afterwards, I will share strategic updates and our outlook. We will be happy to answer your questions at the end of the presentation. Let's start with our highlights and move directly to slide five. I'm really proud of our teams globally for the great progress they made this quarter and how they are demonstrating agility to adapt to different market dynamics. In the third quarter, our revenue reached 602 million Swiss francs, representing a strong organic growth of 8.3%. For the first nine months, we achieved 2 billion Swiss francs, which is up 9.6% organically. Building on this strong performance, I'm excited to announce the important steps in our orthodontics strategy, which includes new partnerships that will enable us to transform our ClearLiner business and unlock the full potential of our ClearCorrect brand. Later in the presentation, I will explain how we will accelerate innovation increase profitability, and strengthen ClearCorrect's position for sustainable growth, together with our strategic partners, Smarty and Dental Monitoring. On the digital innovation side, one of the highlights of the third quarter was the launch of our new Sirius X3 intraoral scan. This marks another major step in strengthening our scanner portfolio across all price segments, and our digital ecosystem through its full integration in our Stroman Access cloud-based platform. On the operational side, we are very pleased to announce that our new campus in Shanghai is fully operational by now and delivering first commercial products to the Chinese market. With this, we have significantly strengthened our supply chain resilience ahead of the upcoming VVP 2.0, which is expected to be announced end of this year. These achievements strengthen our foundation and create the opportunity for continued growth, supporting our confirmed full-year 2025 outlook of high single-digit organic revenue growth and a 30 to 60 basis point improvement in the core EBIT margin at constant 2024 currency rate. Outerning to slide six and the regional development, I would like to start by highlighting that EMEA has once again achieved an excellent organic revenue growth with 11.2%. This success was driven by a strong execution across all businesses, including double-digit growth in orthodontics and strong traction from our recent innovations in our core implant segment. The Stroman brand continued to gain market shares. while our challenger brands Nudent and Antogear also grew strongly, reflecting our ability to serve different customer segments across different price points. In North America, we delivered solid growth in a still volatile environment. Organic growth accelerated to 5.7%, reflecting strong execution and growing adoption of IXL implant system and our digital solutions. From a general perspective, patient flow remained rather stable during the quarter, even if we could witness some initial pocket improvements. In Asia Pacific, the significant slowdown compared to the previous quarter reflects two very different dynamics. On the one hand, in China, we have seen a significant slowdown due to the initial effect of EVP 2.0. Some patients have started postponing treatments, and distributors reducing inventories. On the other hand, markets outside China continue to grow strongly, especially India, Thailand, Australia, and Japan, driven by robust patient demand and expanded access to care through intensified education activities. Finally, Latin America once again delivered a remarkable performance with 18% showing double teaching growth across all segments. our challenger brand Neodense remains the key growth driver, while the Stroman Premium brand, our orthodontics and digital businesses contributed strongly. Therefore, overall, our regional performance highlights the strength of our strategy and our ability to execute with discipline and agility across markets, with each region contributing with good growth despite varied market conditions. With this, let me now hand over to Isabel who will take you through the financial performance.

Thank you, Guillaume, and hello, everyone. Let's move to slide eight, where you can see the revenue bridge for the third quarter. Our reported revenue increased from 586 million Swiss francs to 602 million Swiss francs, which represents a 2.9% growth. The foreign exchange rate effect of 30 million is still very significant, but lower than in the second quarter. overall organic revenue growth led us to 8.3%. As already mentioned by Guillaume, EMEA, our largest region, was once again the main growth contributor, accounting for roughly half of the total increase in revenue, followed by strong performance of our Latin America region, which contributed more than 20% to the growth growth. Despite the currency effect, which we still expect to have a top line impact of 470 to 490 basis points for the full year, our underlying business remains very strong, reflecting both the strength of our brands and our disciplined execution across regions. Continuing with slide nine, let's talk about our efforts to mitigate tariffs. As you know, new tariff regulations have added cost pressure to the business. To counteract this, we have continuously implemented a set of mitigating measures over the past month. In the short term, we have increased inventory levels in key markets and adjusted logistic flows accordingly to secure continuity of supply chain. Thanks to these mitigating measures, we could sustainably reduce the effect of tariffs to around 20 to 25 million Swiss francs for the full year 2025. For next year, we are increasing the share of locally produced finished products including local assembly and packaging lines, to reduce tariff exposure and improve supply chain efficiency further. For next year, we currently expect a similar impact from tariffs of around 30 million Swiss francs. With this, we are protecting our margins while maintaining excellent service levels. Finally, a quick reminder on our capital allocation priorities on slide 10. Our first priority remains reinvestment in sustainable business growth, followed by maintaining a strong balance sheet and selected M&A to accelerate strategic execution. With continued earning growth, we also aim to maintain or increase our dividend over time. So in short, we invest where the return on capital is highest, also from a shareholder perspective. With that, let me hand back to Guillaume for the strategic update.

Thank you, Isabelle. Let's now look at the key strategic highlights of the quarter. As shown on slide 12, our total addressable market is estimated at around 20 billion Swiss francs, spanning across implantology, orthodontics, digital equipment, prosthetics, and regenerative solutions. We currently hold roughly 12% market share with this market, which leaves us ample room for further growth, especially with new dedicated opportunities now to play in each segment. Moving on to slide 13, I'm very excited to share important strategic developments, which will transform our OptoNautics business. To reshape our ClearLiner franchise and improve performance, we are focusing on three pillars. First, we are building a very competitive and differentiated ClearCorrect value proposition, delivering a superior customer and patient experience. Second, We are strengthening our manufacturing capabilities to increase profitability. And third, we are prioritizing strategic markets to accelerate future growth and establish a leading position, especially among general practitioners. Innovation remains at the core of our strategy to accelerate growth and improve profitability in this orthodontic segment. To achieve this, We are partnering with Smarty, a global orthodontic leader that will help us bring new solutions to market faster and with greater efficiency. Smarty is a leading clear liner organization with more than 20 years experience. Known for its innovation, quality, and clinical excellence, Smarty is the ideal partner for the next phase of our orthodontics growth. It will increase the clear correct value proposition through expanding indications and product options. This includes new clinical capabilities, such as treatment outcome simulation tool, mandibular advancement functionality, and multiple trim line options to address a broader range of clinical needs and customers. As part of the partnership, Smarty will also take over full clear correct production for EMEA and Asia Pacific regions, two of our largest and fastest growing geographies. This transition will enable faster scaling, higher efficiency, and significantly lower manufacturing costs through Smarty's fully automated state-of-the-art production facilities. The production for these regions is currently based in Marklebe in Germany, which is planned to be phased out by early 2026. This partnership unites the complementary strength of two industry leaders. By combining ClearCorrect's global commercial reach with Smarty's world-class technology and production capabilities, we will achieve the scale cost optimization, and margin improvement needed to build a profitable orthodontics business. Moving to slide 14, in addition to SmartE partnership, we will further strengthen ClearCorrect's value proposition by expanding our long-standing collaboration with Dental Monitoring. We are partnering on a unique AI-powered remote monitoring technology, which is directly and uniquely integrated with the ClearCorrect Dr. Portal. This innovation enables clinicians to monitor cases more efficiently and helps general practitioners manage treatments with greater confidence and convenience. It enhances the overall experience for both practitioners and patients and supports our ambition to drive broader adoptions of clear aligner treatments among general practitioners in our key strategic segments. Building on the foundation of this new value proposition and the more cost-effective manufacturing capabilities for Smarty, we have also implemented a focused go-to-market model designed around the key growth markets. By concentrating resources in high-potential, profitable markets and aligning our ortho organization under one integrated structure, we can operate with greater agility, increased efficiency, and better customer focus. This approach strengthens our engagement with general practitioners and DSOs, enhances execution discipline, and supports sustainable growth. With all these developments, ClearCorrect is becoming more versatile, clinically advanced and efficient, strengthening our competitiveness and supporting our ambition to achieve a leading position in the global orthodontics market in the future. Let's now move from orthodontics to implantology on slide 15, where innovation, education, and visualization continue to drive our leadership. Let's start with our premium brand, Stroman, and its latest innovation, IXL. This high-performance implant system is becoming one of the most successful product launches we had in our recent history. IXL combines four implant designs in one system. with a unified prosthetic platform, a single connection, and a single surgical kit. This unique offering simplifies workflows, reduces inventory, and especially gives clinicians true intraoperative flexibility, enabling design implant changes on the spot during surgery without changing instruments. To further differentiate, IXL is also coming with ROC-Solid and SL-Active, two of our unique and most advanced technologies, enabling minimally invasive protocols and faster osseointegration. We are really pleased to report that we have already sold more than 1 million IXL implants, which is a fantastic milestone that shows the strong confidence clinicians place in this system. This success reflects our innovation and execution strength within the Stroman Premium brand, which continues to drive market share gains and new customer acquisition. One of the greatest examples of a new customer acquisition with IXL is the Malo Clinic in Portugal, which recently chose to partner with us and transitions its portfolio to Stroman. The decision of this highly respected implant-focused DSO highlights our comprehensive solutions and digital capabilities create real value for clinicians and patients alike. Together, these achievements demonstrate how our focus on innovation, digital integration, and close customer partnership continues to translate into that tangible market momentum. Let's move to slide 16. Our comprehensive education activities are key to improving market access, building stronger partnerships, and gaining market share. In the third quarter, we continue to expand our partner education network and deliver hands-on courses, particularly in Asia Pacific. These programs allow clinicians to refine their surgical and restorative skills, gain confidence in immediate protocols, and embrace digital workflows. By investing in education, we not only raise clinical standards, but also reach new customers and strengthen our market share, and with this, further reinforce our leadership in implantology. In addition, we engage with thousands of dental professionals in the third quarter at major events, such as the DSO CEO Summit in Boston, where we held strategic discussions on expanding access to care and driving efficient growth through partnership. In addition, we demonstrated our latest innovation at the EEO Congress in Monaco and the International Aesthetic Days attended by more than 1,400 clinicians. Let's move to slide 17. At this event, we have launched our new Sirius X3 intraoral scanner, which is another very exciting innovation. This new iOS is our new generation wireless scanner that combines exceptional scanning speed, accuracy, and ergonomics in a lightweight, compact design. Positioned in the mid-price segment, Sirius X3 strengthened our iOS portfolio together with the entry-level Sirius and the premium Trios solution by Freeshape, enabling us to serve the different market segments. The first reactions from clinicians have been really, really strong. Early adopters highlight the ease of use and the effortless integration into our digital platform, Stroman Access. This launch further strengthened our position in digital dentistry and marks another important step in expanding our clinician base connected to our Stroman ecosystem. Moving to slide 18, Actually, thanks to our competitive digital portfolio, we are then continuously growing our intramural scanner user base, who are then benefiting from our simpler, faster workflows through the cloud-based human access platform, which will further drive growth. A good example is our fast molar workflow, which is a streamlined, simple three-step approach that helps to restore a posterior case quicker and easier. The solution uses fewer parts and reduces significantly chair time by removing appointments, helping dentists with more efficiency to deliver highly reliable clinical outcomes. Another one is the latest Stromanexact innovation, which supports the digital full-out workflow. It significantly 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 complex process and saves time both for the dentist and most notably for the patient. Turning now to site 19 and our progress in China. As mentioned before, we have seen a significant slowdown due to the initial effect of EPP 2.0 as some patients have started postponing treatments and distributors are reducing inventories. Despite this early impact, we are well prepared for the implementation of EBP 2.0 and have taken proactive steps to strengthen our local setup. First, the ramp-up of our Shanghai campus has been completed, and the site has received all necessary licenses for local production. This milestone allows us to manufacture Stroman and Antogir implants in China, reducing lead times and improving cost efficiency. Secondly, as you know, in the past years, our business in China has been driven primarily by our premium brand and supported by Antogir in the value segment. Now, to be prepared for the VDD 2.0, we are continuing to broaden our implant portfolio to serve all the different price segments. Therefore, alongside our Stroman and Ontogear brands, we are developing a new brand for the echo segment together with a local partner, ensuring we can meet customer needs on the lower price points. In parallel, we continue investing in education and training to support clinicians in adopting digital workflows and building their implantology expertise. This initiative will help shape a sustainable growing environment in plantology market in China, built on clinical excellence and patient trust. With these steps, we are well prepared for VPP 2.0 with the right infrastructure, brand portfolio, and local capabilities to continue growing and supporting our customers in this strategically important growth market despite any VBP 2.0 decisions. Moving to slide 20, we strongly believe that our culture is what truly sets us apart. In an environment that is becoming more complex and volatile, our culture is what enables us to adapt faster, execute better, and stay close to our customers. As a company, our commitment goes beyond business. It was very inspiring to see more than 5,000 colleagues from around the world come together over several months for the Smile Movement, a global employee initiative that unites teams to make a positive impact beyond dentistry. Through local activities, volunteering, and fundraising, the Smile Movement celebrates our shared purpose of unlocking people's lives by creating smiles. This year, our colleagues turned that purpose into action, rising over half a million Swiss francs for the Stroman Group Foundation through their collective energy, a true reflection of passion and dedication that defines our culture. Let's now move to slide 22 to talk about the outlook for the full year. With our diversified portfolio, strong brands, and continued focus on innovation and execution, we are well positioned to keep delivering sustainable and profitable growth. Despite ongoing macroeconomic uncertainties and the impact of tariffs, we remain confident and confirm our full-year 2025 outlook. High single-digit organic revenue growth and a 30 to 60 basis point improvement in the core EBIT margin at constant 2024 currency rates. Before we close, let me highlight our upcoming Capital Market Day, which will take place on November 25 in Basel, Switzerland. This event will give us the opportunity to take a deeper look at our market priorities, our innovation roadmap, and our ambitions. I look forward to seeing many of you there, either in person or online, and to engage in inspiring discussions. And with this, We are happy to take your questions. As usual, we kindly ask you to limit the number of questions to two, in order that each participant can have a chance to pose their questions within the available time. Coris Cole, can we have the first question, please?

Sure. The first question comes from Julien Dormois from Jefferies. Please go ahead.

Hi, good morning Guillaume, good morning Isabelle. Thanks for taking my questions. I will limit myself to two. Starting with China, it's obviously the key topic investors have been focused on in the past few months. So just wondering if you could try and quantify what's been the magnitude of the decline in China in the quarter and how we should think about Q4 because this will obviously have an influence probably a starker influence, I guess, on the development in Q4. So interesting to hear your thoughts on that. And second one is on the U.S., wondering, you have mentioned stable patient flows in the country with some pockets of improvements. how do you see that playing out in the fourth quarter and into 26? I know you had previously commented that you were expecting maybe stronger growth in 2025 versus 2024. How do you think about this guidance at this point? Thank you.

Yeah, thanks, Julien. Then I would say, first, the third quarter in China, I think you have more than two questions, even with Q3, Q4, and 2026, but we'll try to cover that. We have seen a significant slowdown in China due to an early and initial impact of EBP 2.0, as we said. ahead of the potential lower pricing of infant treatment by the Chinese government that will be setting that potentially by the end of the year. We know that patients are starting to postpone treatment, and distributors have started reducing inventories. And even a little bit earlier than planned, meaning that in Q3, China has been around flattish. What does it mean for Q4? It means that as the VBP 2.0 effect will increase, obviously more patients will be posted in treatment and distributors will be continuing the stocking, meaning that obviously the China and APAC will be moving in the negative side in the fourth quarter. Now, when you look a little bit further, despite the fact that we will have, obviously, a bit more in China, in APAC, more challenging quarter Q4, Q1, while then the VVP will be implemented. We believe that there are quite, for 2026, reasons to be positive about China moving forward. First, because we are the only international premium brand with local manufacturing. All licenses and equivalents obtained for both our Stroman brand, also our Antogir brand, and our partner brand. Meaning that if there is any aspect of the VVP that will somewhat support local manufacturing, I don't think there is any other company best placed than we are. Thanks to our four brands positioned also at the different price points. We don't know exactly how the price will be played in the VPP 2.0, but we believe that we will have all the different brands and portfolio to be able to benefit from any of the faster growing segment moving forward. Finally, we also think from the fact that the pent-up demand from Q4, Q1 will also support the rest of the 2026, and that China is still something that we need to keep remembering. It's a very, very under-penetrated market, and we still believe that there is a lot of potential growth that needs to be unlocked moving forward. not only by the price effect that the authorities are trying to play, but also through education that we are significantly continuing to invest on. Then, obviously, we see China as a future back-loaded 2026, but still as being growing moving forward. Now, when it comes to NAM, North America, we have been very pleased with what we have seen in the first quarter, and I would unpack that in three points. The first one is that the market indeed is remaining stable, even though we see some patient segment that have been willing to go for treatment more than we have seen in the past quarters. One of the aspects is also because, and that's the second point, having the DSO making more investments to create patient traffic as we have been alluded to in the past quarter, then driving faster patient flow and faster growth in this customer segment. And this is a significant area of development versus the past quarter. And we are pretty well positioned on the DSO side in North America. And thirdly, this is also important to note that we have also improved some aspects of our sales execution, which is delivering continued market share gains. And it's a lot about leveraging our strong innovations, such as IXL, where we see, you know, higher growth. And we have also our differentiated workflow, which is supporting significantly practice efficiency that has been driving new customer acquisition. then I would say there is a part of the market which is a little bit coming better, but also some improved execution on our side that we're seeing as sustainable. And how is it going to be 2026? I think at this moment in time, obviously, it's not easy to express because we have seen that very volatile. But we see two positive things from our side. The first is that we have innovation that will keep us delivering above market growth, not only on the implant side, but also, obviously, on the digital side with our serials X3 and future capability to scan full arch with a very high precision that I think will be very appealing with the specialist segments. Our IXL will continue to deliver growth, especially because it's going to be supported by additional portfolio line extension, like BNC 4.0 that has been requested by the North American market, also new prosthetic line with specific laser technology to texture the surface differently that will continue to significantly differentiate IXL as the best-in-class system out there. And I would say that finally, as you have heard, everyone expects another 25 rate cuts in the next meeting by the Fed. that while it will not change yet completely the market dynamic, because it needs an additional, I would say, 75 basis points, then it will send a positive message that should influence consumer confidence, as we have seen that has been one of the effects that has slowed down the market in the first half. Then all in all, yeah, we believe that if it continues like this, we have a lot of very good dimensions for expecting a better NAM moving forward. Sorry for the long answer, but I hope it covered all the different points that you were asking for.

Yes, indeed it did. Thank you very much.

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

Great. Thanks. Good morning and thanks for the questions. I have two, please. I guess just following up on China, could you share whether this is more patients holding off on procedures or whether it's more of a reduction in inventories and then How many months of inventory do the distributors typically hold in China? And then second, the partnerships within orthodontics, I guess, can you share more of that for thoughts on potential economic impact? You previously noted that more scale was needed to get to profitability in that business, I guess, with these new partnerships. Where do you see sort of the potential for the orthodontic profitability moving?

When it comes to China, I think we have seen both effects playing at the same time. And this is what we have seen also in the past VDD 1.0, where you have really this combination of effects. At the beginning, it starts by the patient starting to postpone some treatment step by step. And then, obviously, when the distributors are deciding to reduce inventories, this is where it accelerates significantly because this is where they are obviously stopping ordering at the same rate, and this is obviously what is having the biggest impact at the end. um uh then the uh this is what we have seen at the end of the quarter uh uh of this third quarter and that's what we believe we are going to we are going to see uh increasing on the fourth quarter uh because this is what we have seen also in 2022 q4 that has significantly impacted our last quarter of 2022. um the the the the inventory they are carrying generally speaking it's a freeman inventory uh then this is what we are in the channel uh need uh then uh um q3 and this is what will uh decrease significantly uh during the fourth quarter when it comes to the to to our uh orthodontic partnership uh we are obviously very excited by this um you know we have said a couple of times that we were needing to invest significantly in increasing our value proposition, as we are seeing also new competition coming in. And we have especially expressed a couple of times that we were needing to reach scale in order to be able to drive sustainable, profitable growth in the future. Then that's why we are really, really excited to announce the Smartie partnership, because it will really help us to progress on both sides that are critical for the future of our orthodontic franchise. As expressed a little bit in the presentation, the first point of the Smartie partnership is to significantly improve our value proposition. This volume proposition is going to be increased through the Smarty technology that will allow us to have new clinical capabilities. And I think those new clinical capabilities are really significant. They are major ones. We will have, for example, CVCT integration in our planning. We are going to have different streamlined options. We have a flat trim line at the moment, which are high and low, but we are going to have a scalloped trim line in the future, which is one of the major expectations of a lot of clinicians we met, because this is what they are used to. We are going to expand indications in the mandibular advancement functionality as an example. which is also going to allow us then to go to more advanced users that we were not able to do before. And finally, something which is important to increase conversion rate and supporting GPs to convert patient case, we are going to have that modern treatment outcome simulator, which is very important obviously to present to the patients what should be the clinical outcome. Then if you put all of this together, we are going to have a very unique differentiated value proposition that should allow us to really accelerate significantly our shares in this segment. And the second aspect that we have really significantly highlighted is that Smarty, with being one of the leaders in this field, and especially in the Chinese market, is really helping us to gain scale. then we can then benefit from their scale and their automated manufacturing side in order to significantly lower our manufacturing costs. And this is what will help us, obviously, very quickly in the next then 12 months. to reduce our costs on our existing volume, especially in EMEA in Asia Pacific, but also for all the different new customers and new business we are going to do, it will be at this new profitability side. And that's where when you combine those two, it's a very kind of exciting transformation of what we do that will bring both top line and bottom line some significant developments.

Great. Thanks so much. The next question comes from David Ellington from JP Morgan. Please go ahead.

Hi, guys. Thanks for the question. Sorry to focus on China again, but maybe just a slightly bigger picture. There's a lot of moving parts for next year with respect to surprising headwinds, but volumes, you can have some pent-up demand and potentially restocking. Maybe a bigger picture, do you think you can grow both the China business and APAC next year or do you think it's going to be a year of consolidation? And then secondly, in terms of impact on margins from the shift to Chinese production, obviously lower cost of production in China, but you are going to be left with some potentially stranded costs at your Swiss facility. Just wondering how we should think about capacity utilization there, whether you can reduce that capacity in Switzerland to offset that production utilization. Thank you.

Yeah, I think, David, and two point yes, we believe we will grow in China next year. I think at the moment, this is what is our assumption and our belief. Now, once again, as you know, there is no VVP rule out there yet. Then it will a lot depend on what VVP 2.0 then will be designed. and you know how they will set new price and how they will try to define this new policy then that's the first point and i would say it's still assumptions because as we have seen the rules of the vdp 1.0 are really significantly reshape the market then we can only talk about what we assume some of the VDP 2.0 could be. And from our assumptions, the price cut should not be significant. It has been very significant in the round 1.0. we don't expect then the authorities to do another major cut because it will also significantly challenge the profitability of clinical practices directly, and it would potentially be counterproductive to what the Chinese authorities are trying to achieve, which is more access to implant therapy. The second aspect, if price are just adding a small cut, it's a lot about how volume obviously should grow. And we still believe that there is significant market potential in China. There is a lot of patients expecting implant treatment. And there is a lot of dentists that are trained and are able to deliver it. And that's one of the important reasons as well from that very under-penetrated nature of the China market that we believe after the rules have been then published that we will see patient flow getting back to a good state. than dynamic and a good level, and that would allow us to grow in China. And based on those assumptions, we believe China and APAC will grow in 2026. And when it comes to your questions on our Shanghai manufacturing, our assumptions right now, and the calculation is showing that we should have a 20% lower COGS on our China campus versus our Switzerland manufacturing site. That would be one of, of course, very good then the consequence of getting started now with this manufacturing site. And secondly, something which is obviously important those days, it's helping us to edge our Swiss francs exporter by, you know, shifting a significant part of those manufacturing costs from Swiss francs in Chinese RMB.

Thank you. And will the Chinese future be just for China, or will you look to export from China elsewhere?

Yeah, that's a good question. For the time being, we are really looking at China for China. But in the future, as, you know, depending on how the different supply chain will play and the different also trade deals will be implemented, I think this is also something that we could consider for the future to serve other markets in China. Thank you.

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

Thank you. Good morning. Two questions from me, please. So first of all, a more general follow-up on margins. And I suppose any early thoughts that you can share on some of the moving parts of margins into 2026? You called out tariffs on the call. We know we've got VBP. Maybe there's some offsets from growth from China manufacturing and the changes to orthodontics that you've announced this morning. So any early thoughts on how you're thinking and planning for margins in FY26, please? And then the second one is another follow-up on China. Could you just remind us where your market share is in China today and how that's evolved since the first round of VBP being implemented? Thank you.

Well, it's a bit early to talk about 2026. We have our capital market day for this, but we can allude to, I think, the big margin effect has been for us Obviously, the geographical mix, and we believe that geographical mix will be then a tailwind next year, because we expect North America then to be better, while China will be obviously more on the lower side when it comes to growth contribution. Then that would be a positive effect. The second thing is from a manufacturing standpoint, we are also then improving thanks to then the manufacturing site in China, which is also another positive effect. We are expecting – well, we are expecting a very positive effect starting by the implementation of our partnership with Smarty on the auto side and also the fact that we are going to significantly prioritize the high-growth market. then we have significantly, let's say, be weighted on the negative side by our profitability, negative profitability of our auto business. And we are going to start seeing a significant transformation already in 2026 and even better in 2027 as we add a high double-digit million profit. of losses on our auto business in the past or until now, and this is going to change significantly. Finally, we hope also that on the tariff side, We can see some improvement if it could turn on the positive side for us. We know that there is some positive discussion in between Brazil and the Trump administration, which would be one of the most important part of our tariff for next year at Isabel Express, which is, you know, around 30 million, but I would say something like a big chunk of it is coming from our Neodent import, that would also significantly help. And that's why we believe that 2026 could be really interesting by driving some significant margin development on this side. Isabelle, you want to? at anything on this side, or?

No, I think perfectly covered, yeah.

And the second question was, sorry?

Market share in China. What market share do we have?

That's an interesting question. Because as the market has evolved very, very significantly and there is no official data in China, what we know is that we have very significantly increased our share when we see the different development of many companies around us in China. We are leading by far what we could call the premium segment, and we progressed fast. also on the challenger side, but still, on the value side, we represent a very, I would say, a pretty low share still. I think Korean companies are still having the lion's share of the challenger segment, together with some of the growing Chinese companies, but this is one of the way where we also expect through this very interesting new portfolio that we're developing with our Chinese partner, the possibility to have a very important in-road in this segment where we are underpenetrated.

Great. Thank you. Very helpful, Carlo. Appreciate it.

The next question comes from Daniel Yellow Khan from Circa Cantonal Bank. Please go ahead.

Yeah, good morning as well. I'm not sure actually if I haven't heard. It has a smart collaboration. Does that include any financial engagement by you? I'm not sure if I'm here on or fully up to date. And the second question, your DSO CEO Summit in the U.S., can you put a bit more flesh on the bone for your key takeaways? which you have observed. Yeah. Basically, that's it.

Yeah. Thanks, Daniel. I think actually, yeah, very good question. Yes, this is a strategic partnership, and we have taken, an undisclosed share, which is, I would still say, a small share on Smarty from an equity standpoint. We want to demonstrate our commitment to this partnership. This is going to be, of course, a very important part of our ongoing strategy on the clear line of business. Then, yes, this is coming with a financial equity participation in Smarty. The second side, when it comes to our DSO CEO Summit, yes, I think this is a very, very important meeting for us. First, to still be very, very close to this critical target group for dentistry in general and for us in particular, as we believe that we are here trying to be much more than just a solution provider, we are really wanting to be a true business partner in supporting them achieving their goal. Then what we can say here on the DSO side is, one, it will significantly going to continue gaining share from provider care standpoint. They are continuing investing. in technology, then they are the target group which is really supporting digitalization of dentistry because they see the significant benefit they can get from an efficient workflow, being able to help their dentist, enlarging their indications, and doing that also in a faster manner, still delivering high-quality outcomes. then they are a strong partner for increasing the digital penetration of dentistry. Secondly, they are also one of our strategic partners for growing the pie. They are the ones being convinced about the fact that implant treatment is the gold standard of tooth replacement, and then they are doing all the necessary advertising and patient communication that are helping us to still bring implant as the preferred solution, and increasing not only patient flow, but also treatment acceptance when they are there. And we are developing tools to help them in this perspective. And third, I would say this is also, and we see more and more, very important customers that are expecting a very high-level B2B service level, meaning that it's all about how we can implement a very connected and interlinked supply chain. They are also expecting very strong cybersecurity capabilities when it comes to being able to link our platforms. Then DSO will continue to put barrier to entry to small organizations. Because when I see the investment you need to do to be a preferred partner to ensure not only high-quality clinical outcome with clinical evidence, but a lot in the background to support the efficiency of their supply chain, the security of their IT setup. This is really something that small organizations or local or regional organizations cannot do. And that's one of the reasons we are close to them developing what it takes to lead the ESO segment and will help us to really be seen as the best potential partner for helping them achieving their goal.

That was very in-depth. So the DSO segment in the US is actually growing faster than your mom and pop, let's say, venti. Is that correct?

That's correct.

Thanks so much.

And by leaps and

Ladies and gentlemen, please hold the line. The connection with the speakers has been lost. What? Now we can hear you again.

So far. Okay. Next question. Hello? Yeah, next question.

The next question comes from Oliver Metzger from AutoBHF. Please go ahead.

Good morning. Thanks for taking my questions. First one is also on North America, also in addition to the previous question. So obviously, you also reported some patient flow improvement. You talked a lot about the supply side with the DSO situation is improving. How do you see it from a demand side? Can you see that actually also there is more flow coming from patients demanding single tooth replacement versus more complex procedures? Second question is on your strong performance in Europe. You highlighted the IXL launch and respect to success of that. Can you just give us a comment about how does patient volume has behaved in Europe in your view? Thank you.

Good morning, Oliver. Now, as we expressed, the patient demand has been rather stable. And I think on all the indication, it has been the same. We see then the single cases being done on a regular basis. But once again, not more, not less than the previous quarter. We have seen a little bit more of large indications being done in the third quarter. But once again, nothing that would support that we would say that we see a significant change in patient flow. It's still significant. but it's a little bit improving because I believe that the fear of inflation is reducing among consumer. then it's not so much that we see for the time being, for example, a better eligibility to patient financing. We don't see that yet significantly because the rates are still not changing enough in order to open that yet. But we see a better confidence for patients to engage in the treatment in some areas. then that's the only thing that we have witnessed in the third quarter that's why we are still uh you know cautious in saying that we will develop from a pure market standpoint however we think that what is sustainable on our side is a really improved execution on our side but also uh all the significant traction we are getting with our innovation we we see IXL having very significant higher growth rate than the rest of our portfolio and as we are launching some additional portfolio extensions, we believe it will continue sustaining this very interesting then market share gain and new customer acquisition. Twenty percent of the IXL customers are new customers that have never been customer from Stroman. And that's one of the aspects that we can really see that it helps delivering over market performance. When it comes to Europe, I think Europe has been really still delivering at a very, very remarkable growth rate. And when you look at the reason for this, we expressed in the past the fact that there is first the affordability of implant treatment in Europe is much higher than in North America. The price level are, you know, twice less than U.S. Again, twice for an implant plus crown in the U.S., it's going to be between $4,000 to $5,000, whereas in Europe, it's going to be around, you know, 2,000 to 2,500 euros. And I think affordability is higher. There is more support from a reimbursement standpoint. from either private insurance or social security, from national public support, then that's a lot of explanation to explain why Europe is behaving better than North America in a more kind of challenging environment. And additionally, we have to say that IXL is participating also here as gaining superior tractions than the market. And all the different businesses are growing very significantly. Orthodontics, CleoLiner, Foodus. The synergy we have with our core business around GDP target group is also growing. Digital is also growing significantly. Then we have all the different aspects of our portfolio, which is supporting the Europe performance. And finally, something which is also important to consider, that's why we believe it's a sustainable capability to grow, is all the different geographies are participating to that significant growth. as much as much of a market like Scandinavia, Germany, UK, Spain, for example, in the third quarter, but also very significantly Eastern Europe with Poland, Baltics, Romania. And I can also list the distributor market that has been also very strong in the third quarter. Then it's not only one place which is doing well that may fade. It's the entire geographies which is really supporting this very, very strong development.

Okay, all right. Very helpful. Thank you.

The next question comes from Brandon Vasquez from William Blair. Please go ahead.

Hi, everyone. Thanks for taking the question. I'll ask two of them up front here. The first one is just going back to the partnership with Smarty. Guillaume, you had mentioned that you're kind of in the operating losses right now. Can you talk to us, given, of course, this partnership is in part to improve profitability in this segment, what does operating losses profit or loss look like in 2026? As you flip that business over to smarty? And then the second question is maybe a little bit more about North America. Encouragingly, it looks like North America actually improved a little bit, despite the fact that consumer sentiment here has been pretty weak. Still, I know you've talked a lot about investments from DSOs. And maybe I'm curious if you could talk a little bit about what are those investments from DSOs that are improving North America results, you know, somewhat Cautiously, I would say that the problems here are a little bit more macro, less commercial strategy, but it sounds like the partnerships that you guys and what you're seeing from the DSOs is that improving commercial strategy alone might improve North America. Thanks for taking the questions.

Yeah, when it comes to then, the SMART-E partnership, and I think something that is to make it clear, because we had also one of the question is, we will recognize revenue, obviously, because it's a distribution partnership and a manufacturing partnership, because they will do that for two major regions of us, which is then Asia Pacific and EMEA. Then, yeah, we had very significant, you know, operational losses because we have been investing very significantly on our technology, but also on the manufacturing side. And what we have seen that with our scale, it's very, very difficult to be able to go to profitability. Then, you know, when we say we had a very significant double-digit million losses from an operational standpoint on our auto business. We expect this to be divided by two already by 2026, and we expect to be breakeven in 2027, which means that and obviously afterwards creating very positive then the profitability moving forward, thanks to what we're putting in place. not only in manufacturing but also on growing demand with technology and adding a very sharp and go-to-market approach where we are now very structured in a clear business unit approach that will allow us to have speed but also efficiency, which means that from a profitability standpoint, we expect a significant effect in the next 18 to 24 months that should be seen on the bottom line as well. When it comes to NAMM on the DSO investment side, yes, they are doing, I would say, three kinds of investment. The first one is then growing their network. It's still, from a DSO standpoint, a way to grow inorganically. Then it's creating new practices. There are some DSOs that are doing that by acquisition, but we see a lot of DSOs that are also creating de novo clinic because it allows you to implement all the processes and all your strategy in exactly the same way than all the rest of the network. Then you don't lose time to convert than the existing clinicians to your own processes that are not used to potentially use this kind of brand of material or whatsoever, then you can standardize your approach very efficiently by creating de novo practices, and we see a lot of this ongoing, and not only in North America, but also in other geographies. The second investment they do then is on the organic road this time and being able to invest into new patient flow. They are doing then advertising, and in North America we have seen then new campaigns that have been launched to create this patient demand that has been much less the case in the first half, not knowing how the U.S. economy will evolve and with a big fear of inflation that would reduce the capacity for patients to pay. It seems that this is the risk of significant inflation is starting to reduce significantly even though no one knows exactly but that's the perception that we have then there is an increased investment done in direct to patient communication for bringing them to the office and of course being able to drive patient acceptance the third investment they do in standardization and digitalization of the entire network being able to drive then all intraoral scanning, driving workflow that will drive efficiency, and especially one way of doing a procedure is helping them to have a very clear perception of the cost of one procedure and being able to have more an analytical perspective of their performance. Then we see that their investment in digitalization is now increasing. and we believe that we will be able to benefit from this. There is a free kind of investment we see from DSO in North America, but also in other geographies that could help us making sure that it supports growth moving forward.

The next question comes from Hassan Al-Waqil from Barclays. Please go ahead.

Morning. Thank you for taking my questions. Two, please. Following up on China and particularly 26, Guillaume, when we met last month, you commented that you see double-digit growth in revenue in China as possible in 26 given low penetration. Is this your current base case? How are you thinking about share gains in the mix and what's the current price assumption? on the decline. And then secondly, can you talk about IXL performance in the U.S. particularly? How much did it contribute to growth given you call out the particular strength in India? I think last quarter you highlighted that IXL was 15% of implant sales. How is this trending overall and by region in Q3, please? Thank you.

Yeah, thanks, Hassan. Once again, I will express that China 2026, I think it will a lot depend of the VVP rules. And what we are looking at this, we have different scenario, obviously, as we have been in then the 2023 to prepare what the VVP can come up with. then one of the positive scenarios is obviously still having low double-digit growth that could come out from China in case we see limited price cut, which is around 5% to 10%, and adding obviously significant volume growth with a pent-up demand coming from a low Q4, low Q1 2026. And having afterwards the three quarters of the year that we'll see a healthy patient flow and having the capability for us to keep gaining market share by having our four different brands, Stroman, Ontogeer, T-Plus, and our new Medentica line on the eco-segment. that would be able to take share, and also potentially being favored by local manufacturing. Then we have a lot, again, as options to be able to play what the rules will be from DVD 2.0, but now being able to say we will grow double-digit in China and Asia Pacific 2026 is too early to say, and we will be able to express that in our guidance based on when we will be able to say that early 2026, when the VVP rules will be out, and we will have much more visibility on how we are going to play this new regulation. But once again, there are options for us to grow low-double-digit. There are options also to have a lower growth rate based on what will be coming. On the IXL side in North America, yeah, I think what we can say globally and without having a first specific North America prism, this is representing – IXL is representing already 20% of our implant green premium cells. Then this is really a testament on the – the loyalty, the traction that we are getting with this system and the repurchasing that we're having with this. North America is also around those numbers. We have a very strong penetration about our existing users and our new users that are also being captured in North America. And one of the major reasons why we are growing faster than the market is the new customer position that is done fully excelled on the premium segment. We benefit also on new customer position on the Challenger brand with Neodense, but I think we are still growing faster and we see in constant market share gain in North America on the premium side that we can really monitor on a regular basis and that we can confirm once again. The second thing which I think I will highlight here that will help or that will continue to support the growth of IXL is that all the evolution and innovation on the processing side will be available only with the IXL connection, which is the new toxic. That means if you would like to benefit from our new ungulated screw channel on customized abutment as an example, or if you would like to benefit from our new laser textured value base for easy and efficient restoration, and especially if you would like to benefit on our new workflow, which is the one I presented, the fast smaller with an anatomic healing abutment, which is allowing you to do the restoration with one appointment with the patient, you have to use IXL because it all comes with a new connection. Then there is a lot of our strategy from future innovation that will also drive the penetration of IXL and then making our customers benefiting from the latest technology.

Very helpful. Thank you.

The next question comes from Juliano Duer, Bank of America. Please go ahead.

Hi, good morning. Thanks a lot for taking my questions. The first one I mean, thanks for all the call on China, but it's just me being picky with my modeling. But you mentioned sort of back-end loaded growth for next year. I just wanted to confirm it because 1Q26 is likely to remain negative for the market. I believe the VEP implementation at public hospitals may start only in 2Q. And also you mentioned you talk about the shanghai campus benefits from local production and this cost advantage probably fully upsetting the the price cut for next year uh but given the the let's say the full ramp up is expected for 3q could we see some gross margin pressure in h1 and a big more like back and loaded recovery um second question is on clear liner You mentioned the ambition to achieve leading position in this market. I think today you have 3% market share. Competition is pretty fierce. What's your mid-to-long-term ambitions for ClickCorrect? And do you fear aligners are becoming a kind of like commodity products and a price war could maybe slow down a little bit the margin expression target that you just set with the new partnership? Thank you.

Right, that's four questions, but I'm going to be happy to answer the first one, Q1 2026, China. You know, I think here we cannot express phasing in 2026. It's too early from exactly Q1. When we say backloaded, it is obviously first when you look at comparison base. We are going to have a very high com base in the first half and a very low com base in the second half. And first, obviously, from a growth rate standpoint, mathematically, you are going to be backloaded anyway. The second aspect also is that the Q1 will depend a lot about the Chinese authorities' communication about the magnitude of the change and especially when they are going to finally give results, which is not fully clear at the moment. If the GDP results will be given, when I say results, it means that they will, present the rules in December, the companies have to do their bidding about what kind of pricing they want to do, and then afterwards they are publishing results of who is then selected, who is not selected in the different category. If they are able to express it fast enough and the implementation of the new rules are going to be done during January, then the first quarter can benefit from the pent-up demand directly. If the information about the results of the GDP 2.0 will be done later in the year, which has been done a little bit the case in implementation, it has been done after the Chinese New Year in 2023, meaning that we have started to see everything being executed by the beginning of March, then that's where... you have a Q1 which is rather weak because still then waiting for all the new price to be available. Then I think this is a lot depending on how this is going to be played out, and that's why it's difficult to answer exactly your Q1 perspective. But we are expecting at the moment from an assumption that Q1 will anyway be weak. We are going to have a Q4 and Q1 that are going to be weak because it's going to be frozen by the VDP effect, and that we will benefit from those new rules moving forward. When it comes to the Shanghai Compass, yeah, I think we don't expect and we'll see the price decrease being bigger than our, the COGS gains that we are going to. This is one of the reasons why we believe that the price cut would not then affect significantly profitability of our China business. thanks for providing everything mainly from China. But this needs to be confirmed with the VVP 2.0 rules. When it comes to clear liner commodity, I actually don't think so. There is already a very significant competition that we see out there But as we expressed, without scale, it's pretty challenging to play in this environment. Then what we have seen in the past, we have seen a lot of small companies trying to come in and play in the clear liner business and actually being wiped out because of the lack of scale and the lack of capability to gain significant market share. Then, yes, there will be price competition that we are seeing at the moment. Yes, it will continue to become a pretty competitive market, but we still believe that I would not go to commoditization because of all the technology which is going to go with it, and we have a mid-term perspective to be able to reach 10% of this market in order that we can really start to become a significant player and being able to deliver the growth that we're looking for.

Perfect. Thank you very much.

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

Good morning, and thank you for taking my questions. I'm going to try to keep it to two. One, Isabel, I was hoping to circle back on the tariff commentary that you made at the beginning of the call. I think on the first half conference call, you sort of expressed the hope that tariffs would be mitigated fully this year, and then you'd have an impact as you move into fiscal 26th. I know you mentioned the $20 million to $25 million number for this year. So should we understand that as you are no longer expecting that to be mitigated fully or at all? Is this something that's appearing in the P&L? And I guess that's a pretty meaningful headwind, obviously, in terms of basis points. So I'm just curious where you are finding other opportunities to offset this. to maintain the margin guidance for the year. So if you can talk through that and then sort of the 30, 35 million number for next year, I guess, you know, is there any mitigation or is that including the mitigation effort? So if you can talk through that, that would be helpful. And then I'll ask my second question because it's for Guillaume after that. Maybe we can just get the financial bit out of the way first.

Yeah, for sure. And I'm happy to elaborate on that. I think excellent question. So earlier we said We will mitigate all of those tariffs and it will not change our guidance. And given we just reiterated our guidance, we still stand by this. So the effect of 20 to 25 million still to be shown has been mitigated this year. On the one hand side, of course, we mitigated the full impact of the tariffs through all of the supply chain route changes we put into place through, you know, transfer of production activities of finished products to the U.S. for especially the Strahm & Green products. But then what we're currently preparing for packaging and finishing lines for our Neoderm products as well to be prepared for next year. And I think as you remember from the call we had for the half-year results, we already shipped more or less all of the demand we have for this year in July and August. So we have some time to implement those mitigating measures. How are we mitigating? On the one hand side, of course, by implementing this. But then on the other hand side, by looking at different other measures to improve our profitability in terms of production, but then in terms of OPEC savings, where we had very strict guidelines and reiterated them for the remainder of the year. So all of this impact can be mitigated. Same holds potentially for next year as well. As you can see, the number we are looking at, the 30 million, the ballpark number we gave you, is very similar to the amount we have for this year. although we will see a full year impact. So this 30 million is, I would say, the worst-case assumption in case everything remains as it currently is. So major factors behind the 50% tariff on all imports from Brazil and the 39% tariff for all imports from Switzerland. And having said this, why is the amount very similar? Because we put all of those mitigating measures into place already. So the finishing lines for Neodent plus the acceleration of transferring trauma-branded products faster than expected to our campus in Andover, close to Boston. And having said this, we expect very similar mitigating results for next year when we'll see this year.

Okay, so the way to think about the $30 million is that's the gross impact and the net impact in terms of what we have to think about in the P&L is going to be substantially lower? Yeah, potentially. Okay. Okay, potentially. Okay, that's very helpful. Thank you for that. And then my second question is for you, Guillaume, and I guess just your confidence in the China midterm growth rate. I know I see you have a ton of uncertainty in the short term, but I'm just curious, kind of once we're through VBP, how are you thinking about that sort of growth rate in China? on an underlying volume basis? I think, you know, we've gone this year from volumes growing double digits to single digits to not growing at all. Are you confident that is just the implementation of VBP? Is this a market that's maturing? And I would love to get your thoughts on how you think about China volume growth on a three to five year basis and what underpins that confidence. Thank you, guys.

Well, the confidence in China is just based on the fact that On the one hand, you have a very underpenetrated market that will continue to grow. I think this is the most important foundation of the growth expectation that we have. And the second side is that we believe that we are one of the companies, the best place to be able to benefit from that increased market penetration. because we are having a strong offer on the premium side that will continue to be, I think, interested and being the only one being localized once again. There is no other premium competitors that will have local manufacturing which received license and equivalence, meaning that if there is a condition in Germany, the VVP to support local manufacturing companies, I think we will benefit from this. And the second aspect is that we have set now additional portfolio for then the value segments where we are significantly underpenetrated and where we should be able to also meet some significant demand growth. Then I would say that's those two aspects. On the one side, I think the market has the significant capability to grow, and secondly, we are well-placed to be able to take a fair share of this growth, which is making us confident about that development. Now, it will obviously, again, depend of the export factor, which are the VBP on the one side, which are the macroeconomic sector factor on the other side. But if we would like to look more on the midterm, And we are going to talk now in a three-year time frame because this is the kind of VDP period which is going to happen every third year. We believe that for the 2026-2028 period, we are expecting something which is low double-digit growth, something around 10% to 12%. That's a little bit the perspective on how we are looking at it.

Got it. Thank you so much.

Last question comes from Tira Lee from UBS. Please go ahead.

Hi. Good morning, both, and thank you for taking my questions. Just standing in for Graham this morning, we have a super quick one. On North America, just given the green shoots that you guys have seen in Q3, would you expect the U.S. to be sequentially better in Q4? Thank you very much.

I think this, you know, it's very difficult to be very clear or precise on this question. We expect a good growth rate in North America in Q4. First, because we see really good development. Second, because we believe that the market conditions are ending a little bit also macro, at least from a consumer confidence standpoint. And third, we have also then – than comparison-based, which are helpful here, then I would say we expect North America to be a significant growth provider in the fourth quarter. Is it going to be better than 2.3? At least we expect the trend to continue. Then to be at least equal or better is what we're expecting.

Okay. Great. That's very clear. Thank you.

Thank you for joining us today and for your continued interest in Schuman Group. We look forward to seeing you again soon and wish you a pleasant rest of the day. Have a nice day. Goodbye from Basel.

Ladies and gentlemen, the conference is now over. Thank you for choosing Coral School and thank you for participating in the conference. You may now disconnect your lines. Goodbye.