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Operator: Ladies and gentlemen, welcome to the Straumann Group Q3 2025 Results Conference Call and Live Webcast. I am Valentina, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Guillaume Daniellot, CEO. Please go ahead.
Guillaume Daniellot: Thank you, and good morning or afternoon to all of you. Thanks for attending this conference call on the Straumann Group's Third Quarter Results 2025. Please take note of the disclaimer in our media release and on Slide 2. 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 3, 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 5. 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 CHF 602 million, representing a strong organic growth of 8.3%. For the first 9 months, we achieved CHF 2 billion, which is up 9.6% organically. Building on this strong performance, I'm excited to announce the important steps in our orthodontic strategy, which includes new partnerships that will enable us to transform our clear line of 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, Smartee and Dental Monitoring. On the digital innovation side, one of the highlights of the third quarter was the launch of our new SIRIOS X3 intraoral scan. These marks another major step in strengthening our scanner portfolio across all price segments and our digital ecosystem through its full integration in our Straumann [ 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 VBP 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 rates. Now turning to Slide 6 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 Straumann brand continued to gain market share while our challenger brand, Neodent and Anthogyr 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 iEXCEL 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 2 very different dynamics. On the one hand, in China, we have seen a significant slowdown due to the initial effect of VBP 2.0. Some patients have studied postponing treatments and distributors reducing inventories. On the other hand, markets outside China continued 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-digit growth across all segments. Our challenger brand Neodent remains the key growth driver, while the Straumann premium brands, 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 Isabelle who will take you through the financial performance.
Isabelle Adelt: Thank you, Guillaume, and hello, everyone. Let's move to Slide 8, where you can see the revenue bridge for the third quarter. Our reported revenue increased from CHF 586 million to CHF 602 million, which represents a 2.9% growth. The Franc exchange rate effect of CHF 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 group's 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 9, let's talk about our assets 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 months. 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 effects of tariffs to around CHF 20 million to CHF 25 million 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 CHF 30 million. 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 selective M&A to accelerate strategic execution. With continued earnings growth, we also aim to maintain or increase our dividend over time. So in short, we invest where the return on capital is higher also from a shareholder perspective. With that, let me hand back to Guillaume for the strategic update.
Guillaume Daniellot: 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 CHF 20 billion, 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 orthodontics business. To reshape our clear aligner franchise and improved performance, we are focusing on 3 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 partitioners. 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 Smartee, a global orthodontic leader that will help us bring new solutions to market faster and with greater efficiency. Smartee is a leading clear aligner organization with more than 20 years experience, known for its innovation, quality and clinical excellence. Smartee is the ideal partner for the next phase of our orthodontic growth. It will increase the ClearCorrect value proposition through expanding indications and product options. This includes new clinical capabilities such as treatment outcome simulation tool, mandibular advancement functionality and multiple streamline options to address a broader range of clinical needs and customers. As part of the partnership. Smartee will also take over full ClearCorrect 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 Smartee's fully automated, state-of-the-art production facilities. The production for these regions is currently based in [indiscernible] Germany, which is planned to be phased out by early 2026. This partnership unites the complementary strength of 2 industry leaders. By combining ClearCorrect's global commercial reach with Smartee's world-class technology and production capabilities, we will achieve the scale, cost optimization and margin improvement needed to build a profitable orthodontic business. Moving to slide 14, in addition to Smartee partnership, we will further strengthen ClearCorrect's value proposition by expanding our long-standing collaboration with y DentalMonitoring. We are partnering on a unique AI-powered remote monitoring technology, which is directly and uniquely integrated with the ClearCorrect Doctor Portal. This innovation enables clinicians to monitor cases more efficiently and help 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 adoption of clear aligner treatment among general practitioners in our key strategic segment. Building on the foundation of this new value proposition and the more cost-effective manufacturing capabilities for Smartee, we have also implemented a focused go-to-market model design 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 support 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 digitalization continue to drive our leadership. Let's start with our premium brand, Straumann and its latest innovation iEXCEL. This high-performance implant system is becoming one of the most successful product launches we had in our recent history. iEXCEL combines 4 implant design in one system with a unified positive 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, iEXCEL is also coming with [indiscernible], 2 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 iEXCEL 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 Straumann premium brands, which continue to drive market share gains and new customer acquisition. One of the greatest example of a new customer acquisition with iEXCEL is the [ Mayo Clinic ] in Portugal, which recently chose to partner with us and transitions its portfolio to Straumann. The decision of this highly respected implant-focused DSO highlights how 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 tangible market momentum. Let's move to Slide 16. Our comprehensive education activities are key to improving market access, building stronger partnerships and gain market share. In the third quarter, we continued 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 raised clinical standards, but also reached new customers and strengthened our market share and with this further reinforced our leadership in implantology. In addition, we engaged 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 EAO 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 SIRIOS 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, SIRIOS X3 strengthened our iOS portfolio, together with the entry level of SIRIOS and the premium TRIOS solution by 3Shape 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, Straumann [ AXS ]. This launch further strengthens our position in digital dentistry and marks another important step in expanding our clinician base connected to our Straumann ecosystem. Moving to Slide 18. Actually, thanks to our competitive digital portfolio, we are then continuously growing our intraoral scanner user base who are then benefiting from our simpler, faster workflows through the cloud-based Straumann [ AXS ] platform, which will further drive growth. A good example is our fast molar workflow, which is a streamlined, simple free step approach that helps to restore a posterior case quicker and easier. The solution uses fewer parts and reduce significantly chair time by removing appointments, helping dentists with more efficiency to deliver highly reliable clinical outcome. Another one is the latest Straumann EXACT innovation, which supports the digital full-arch 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 Slide 19 and our progress in China. As mentioned before, we have seen a significant slowdown due to the initial effect of VBP 2.0 as some patients have studied postponing treatments and distributors are reducing inventories. Despite this early impact, we are well prepared for the implementation of VBP 2.0 and have taken proactive steps to strengthen our local setting. 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 Straumann and Anthogyr 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 Anthogyr in the value segment. Now to be prepared for the VBP 2.0, we are continuing to broaden our implant portfolio to serve all the different price segments. Therefore, alongside our Straumann and Anthogyr implants, we are developing a new brand for the [ eco ] 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. These initiatives will help shape a sustainable growing environment -- implantology market in China based on clinical excellence and patient trust. With these steps, we are well prepared for VBP 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, the global employee initiatives that unites team 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 turn that purpose into action rising over CHF 0.5 million for the Straumann 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 at currency rate. Before we close, let me highlight our upcoming Capital Markets 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 road map 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 2 in order that each participants can have a chance to put their questions within the available time. Can we have the first question, please?
Operator: The first question comes from Julien Dormois from Jefferies.
Julien Dormois: Yes. I will limit myself to 2. 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 your -- 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 '24? How do you think about this guidance at this point?
Guillaume Daniellot: Yes. Thanks, Julien. Then I would say, first, the third quarter in China, I think you have more than 2 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 VBP 2.0 as we said, ahead of the potential lower pricing of implant 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 regency 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 FX will increase, obviously, more patients will be postponing treatment and distributor will be continuing destocking, 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 a -- obviously, a bit more in China and APAC, more challenging quarter, Q4, Q1, while then the VBP will be implemented, we believe that they are quite, for 2026, reason 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 than our Straumann brand, also our Anthogyr brand and our partner brand, meaning that if there is any aspect of the VBP that will somewhat support local manufacturing, I don't think there is any other company best place than we are. Thanks to our 4 brands, position also at the different price points. We don't know exactly how the price will be played in the VBP 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 underpenetrated market, then 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 backloaded 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 third quarter. And I would unpack that in 3 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 aspect is also because -- and that's the second point, having the DSO making more investment 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 innovation such as iEXCEL, where we see 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 are seeing as sustainable. And how it's going to be in 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 2 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 general side with our SIRIOS X3 and future capability to scan full launch with a very high precision that I think will be very appealing with the specialist segment. Our iEXCEL will continue to deliver growth, especially because it's going to be supported by additional portfolio line extension like BLC 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 iEXCEL as the best-in-class system out there. And I would say that finally, as you have heard, everyone expect 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 effect that has slowed down the market in the first half. Then all in all, yes, 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.
Operator: The next question comes from Susannah Ludwig from Bernstein.
Susannah Ludwig: I have 2, 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 a reduction in inventories? And then how many months of inventory do the distributors typically hold in China? And then second, on the partnerships within orthodontics, I guess, can you share more about your 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?
Guillaume Daniellot: When it comes to China, I think it's -- we have seen both effects playing at the same time. And this is what we have seen also in the past VBP 1.0 where you have really this combination of effect, then you have -- at the beginning you asked, 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. Then this is what we have seen at the end of the quarter -- of this third quarter, and that's what we believe we are going to see increasing on the fourth quarter because this is what we have seen also in 2022 Q4 that has significantly impacted our last quarter of 2022. The inventory they are carrying, generally speaking, it's a 3-month inventory. Then this is what we had in the channel mid than Q3, and this is what will decrease significantly during the fourth quarter. When it comes to our orthodontic partnership, we are obviously very excited by this. 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. And that's why we are really, really excited to announce the Smartee 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 Smartee partnership is to significantly improve our value proposition. This volume proposition is going to be increased through the Smartee 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, CBCT integration in our planning. We are going to have different streamline options. We have a flat streamline at the moment, which are high and low, but we are going to have a scale up streamlined 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 the 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 Smartee, 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 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 an exciting transformation of what we do that will bring both top line and bottom line some significant development.
Operator: The next question comes from David Adlington from JPMorgan.
David Adlington: 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 obviously surprising headwinds but volumes, you're going to have some pent-up demand on potential restocking? Maybe sort of bigger picture, do you think you can grow both the China business and APAC next year? Or do you think is going to be a year of consolidation? And then secondly, in term 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?
Guillaume Daniellot: Yes. Thanks, David. And 2 points, 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 VBP rule out there yet. Then it will a lot depend on what VBP 2.0 then will be designed and 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 VBP 1.0 are really significantly reshaped the market. Then we can only talk about what we assume some of the VBP 2.0 could be. And from our assumptions, the price cut should not be significant. It has been very significant in around 1.0. We don't expect then the authorities to do another major cut because it will also significantly challenged 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 than the cut, it's a lot about how volume obviously should grow. And we still believe that there is a significant market potential in China. There is a lot of patient 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 reason as well from that very underpenetrated 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 -- 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 side. And secondly, something which is obviously important those days, it's helping us to hedge our Swiss franc exposure by shifting a significant part of those manufacturing costs from Swiss franc in Chinese RMB.
David Adlington: And will the Chinese facility be just for China? Or will you look to export from China elsewhere?
Guillaume Daniellot: Yes, that's a good question. For the time being, we are really looking at China for China. But in the future, as 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.
Operator: The next question comes from Richard Felton from Goldman Sachs.
Richard Felton: 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 on margins into 2026. You called out tariffs on the call. We know you'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 FY '26, 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?
Guillaume Daniellot: 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. And then that would be a positive effect. The second thing is from a manufacturing standpoint, we are also then improving, thanks to 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 Smartee on the ortho 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 ortho business and we are going to start seeing a significant transformation already in 2026 and even better in 2027 as we had a high double-digit million of losses on our ortho 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 -- a little bit improvement if it could turn on the positive side for us. We know that there is some positive discussion in between the Brazil and the Trump administration, which would be one of the most important part of our tariff for next year as Isabelle express which is around CHF 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 add anything on this side or...
Isabelle Adelt: No, perfectly covered Guillaume.
Guillaume Daniellot: And the second question was, sorry?
Isabelle Adelt: Market share development in China. Since we repeat [indiscernible] what market share do we have?
Guillaume Daniellot: Yes. That's an interesting question. We have -- because as the market has evolved very, very significantly, and there is no official data in China. What we know is that we have a 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 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 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 are developing with our Chinese partner, the possibility to have a very important inroad in the segment where we are underpenetrated.
Operator: The next question comes from Daniel Jelovcan from Zürcher Kantonalbank.
Daniel Jelovcan: I'm not sure actually if I haven't heard, has a Smartee collaboration, does that include any financial engagement by you? I'm not sure if I am clear on -- 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? Yes, basically, that's it.
Guillaume Daniellot: Yes. Thanks, Daniel. I think actually, yes, very good question. Yes, this is a strategic partnership, then we have taken a nondisclosed share, which is, I would still say, a small share on Smartee 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 aligner business, then yes, we -- this is coming with financial equity participation in Smartee. 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 dentists enlarging their indications and doing that also in a faster manner, still delivering high-quality outcome. Then they are a strong partner for increasing the digital penetration of entity. Secondly, they are also one of our strategic partner for growing the pie. They are the one 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 than 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 investments 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 organization or local or regional organization cannot do. And that's one of the reasons we are close to them, developing what it takes to lead the DSO segment and will help us to really be seen as the best potential partner for helping them achieving their goal.
Daniel Jelovcan: That was very in depth. So the DSO segment in the U.S. is actually growing faster than your mom-and-pop, let's say, dentist, is that correct?
Guillaume Daniellot: That's correct. And by leaps and... [Technical Difficulty]
Operator: [Operator Instructions] Now we can hear you again.
Guillaume Daniellot: Next question?
Operator: The next question comes from Oliver Metzger from ODDO BHF.
Oliver Metzger: First one is also on North America also in addition to the previous question. So obviously, there's a turn to the better, 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 iEXCEL launch and with respect to success of that, can you just give us comment about how does patient volume has behaved in Europe in your view? Thank you.
Guillaume Daniellot: As we expressed, the patient demand has been rather stable. And I think on all then 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 stable, but it's a little bit improving because I believe that the fear of inflation is reducing in -- among consumer. And 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 cautious in saying that it will develop from a pure market standpoint, However, we think that what is sustainable in our side is really improved execution on our side, but also all the significant traction we are getting with our innovation. We see iEXCEL 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 market share gain and new customer acquisition. 20% of the iEXCEL customers are new customers that have never been customer from Straumann. And that's one of the aspects that we can really see that it ends delivering over market performance. When it comes to Europe, I think Europe has been really -- still delivering 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 twice less than U.S. Again, price for an implant plus crown in the U.S., it's going to be between $4,000 to $5,000 whereas in Europe, is going to be around EUR 2,000 to EUR 2,500. Then I think affordability is higher. There is more support from a reimbursement standpoint from either private insurance or social security from a national public support. Then that's a lot of explanation to -- to explain why Europe is behaving better than North America in a more kind of a challenging environment. And additionally, we have to say that iEXCEL is participating also here as gaining superior traction than the market. And all the different businesses are growing very significantly. Orthodontic clear aligner through the synergy we have with our core business around GP target group is also growing double digit. 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 with all the different geographies are participating to that significant growth. As much as mature market like Scandinavia, Germany, U.K., 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.
Operator: The next question comes from Brandon Vazquez from William Blair.
Brandon Vazquez: I wanted to -- I'll ask two of them upfront here. The first one is just going back to the partnership with Smartee, 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 profit or loss look like in 2026 as you flip that business over to Smartee? 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? Somewhat cautiously, I would say, 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?
Guillaume Daniellot: Yes, when it comes to the Smartee 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 2 major regions of us, which is Asia Pacific and EMEA. Then yes, we had very significant 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 when we say we had a very significant double-digit million losses from an operational standpoint on our ortho business, we expect this to be divided by 2 already by 2026, and we expect to be breakeven in 2027, which means that -- and obviously, afterwards, creating very positive profitability moving forward, thanks to what we are putting in place. Not only in terms of manufacturing but also on growing demand with technology and having a very sharpened go-to-market approach where we are now very structured in a clear business unit approach that would 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 NAM on the DSO investment side, yes, they are doing, I would say, 3 kind of investments. 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 the existing clinicians to your old 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 growth this time and being able to invest into new patient flow. They are doing than advertising. And in North America, we have seen 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 the [ ultra-high ]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 the 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.
Operator: The next question comes from Hassan Al-Wakeel from Barclays.
Hassan Al-Wakeel: 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 is possible in '26 given low penetration, is it 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 iEXCEL performance in the U.S., particularly? How much did it contribute to growth given you called out the particular strength in EMEA. I think last quarter, you highlighted that iEXCEL was 15% of implant sales. How is this trending overall and by region in Q3, please?
Guillaume Daniellot: Yes. Thanks, Hassan. Once again, I will express that China 2026, I think it will a lot depend on the VBP rules. And what we are looking at is, we have different scenarios, obviously, as we have been in the 2023 to prepare what the VBP can come up with. Then one of the positive scenario is obviously still having a 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 adding up to the 3 quarters of the year that we'll see a healthy patient flow and having the capability for us to keep gaining market share by adding our 4 different brands, Straumann, Anthogyr, T-Plus and our new Medentika 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 VBP 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 VBP 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 digits, there are options also to have a lower growth rate based on what will be coming. On the iEXCEL side in North America, yes, I think what we can say globally and without having a first specific North America prism, this is representing -- iEXCEL is representing already 20% of our implant green premium sales, then we -- this is really a testament on the loyalty, the traction that we are getting with the system and the repurchasing that we're having with this. North America is also around those numbers with 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 through iEXCEL on the premium segment. We benefit also on new customer acquisition on the challenger brand with Neodent, 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 simple thing which I think I will highlight here that will help or that will continue to support the growth of iEXCEL is that all the evolution and innovation on the prosthetic side will be available only with the iEXCEL connection, which is the new TorcFit. That means if you would like to benefit from our new angulated screw channel on customized abutment as an example, if you would like to benefit from our new laser textured value-based 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 Molar with Anatomic Healing Abutment which is allowing you to do the restoration with one Appointlet with the patient, you have to use iEXCEL because it all comes with the new connection. Then there is a lot of our strategy from future innovation that will also drive the penetration of iEXCEL and then making our customers benefiting from the latest technology.
Operator: The next question comes from Julien Ouaddour, Bank of America.
Julien Ouaddour: The first one, I mean, thanks for all the color on China. But just me being picky with [indiscernible], But you mentioned sort of back-end loaded growth for next year. Just wanted to confirm, is it because 1Q '26 is likely to remain negative for the market. I believe the VBP implementation at public hospitals may start only in 2Q? And also, you talked about the Shanghai Camps benefits from local production and this cost advantage probably fully offsetting the price cut for next year. But given the, let's say, the full ramp-up is expected for 3Q, could we see some gross margin pressure in H1 and a bit more back-end loaded recovery? Second question is on clear aligner. You mentioned the ambition to achieve leading position in these markets. I think today, you have 3% market share. Competition is pretty fierce. What's your mid- to long-term ambitions for ClearCorrect? And do you fear aligners becoming a kind of like commodity products and a price war could maybe slow down a little bit the margin expansion target that just set within the partnership?
Guillaume Daniellot: That's 4 questions. But we'll be happy to answer. The first one, Q1 2026 China. I think, here, we cannot express phasing in 2026. It's too early from exactly Q1. When we say backloaded, is obviously, first, when you look at comparison base, we are going to have a very high comp base in the first half and a very low comp 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 given a lot about the Chinese authorities communication about the magnitude of the change and especially when they are going to finally give reasons, which is not really clear at the moment. If the VBP reasons will be given, when I say reasons, 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 reasons of who is 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 VBP 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 VBP effect, and that we will benefit from those new rules moving forward. When it comes to the Shanghai Campus, yes, I think we don't expect -- and we'll see the price decrease being bigger than our COGS gains that we are going to do. 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 VBP 2.0 rules. When it comes to clear aligner 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 aligner 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 midterm 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 are looking for.
Operator: The next question comes from Veronika Dubajova from Citi.
Veronika Dubajova: I'm going to try to keep it to 2. One, Isabelle, I was hoping you could circle back on the tariff commentary that you made at the beginning of the call. I think on this first half conference call, you sort of expressed the hope that tariffs would mitigated fully this year and then you'd have an impact as you move into fiscal '26. I know you mentioned the CHF 20 million to CHF 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 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 CHF 35 million number for next year. I guess, is there any mitigation? Or is that including the mitigation efforts. 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.
Isabelle Adelt: I'm happy to elaborate on that and 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 CHF 22 million to CHF 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 play through transferal of production activities of finished products to the U.S. for especially the Straumann Green products. But then what we're currently preparing for packaging and finishing lines for Neodent 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 OpEx savings, where we have 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 CHF 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 CHF 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 39% tariffs 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 Straumann branded products faster than expected to our campus in campus in Andover close to Boston. And having said this, we expect a very similar mitigating results for next year than what we see this year.
Veronika Dubajova: Okay. So the way to think about the CHF 30 million, is that 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?
Isabelle Adelt: Yes, potentially.
Veronika Dubajova: Okay, potentially. Okay. That's very helpful. And then my second question is for you, Guillaume. And I guess, just your confidence in the China midterm growth rate. And 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, obviously, we've gone this year from volumes growing double digits to single digits to not growing at all. Are you confident that it's 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 3- to 5-year basis? And what underpins that confidence?
Guillaume Daniellot: 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 have one of the company, 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, but there is no other premium competitors that will have local manufacturing, which received license and equivalent, meaning that if there is a condition in the VBP 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 segment 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 2 aspects. On the one side, I think the market has the significantly 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 external factor, which are the VBP on the one side, which are the macroeconomic 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 3 years' time frame because this is the kind of VBP 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.
Operator: Last question comes from Thyra Lee from UBS.
Thyra Lee: Just standing in for Guillaume 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?
Guillaume Daniellot: I think this -- it's very difficult to be very [indiscernible] clear or precise on this question. We expect a good growth rate in North America in Q4. First, because we see a really good development; second, because we believe that the market conditions are helping a little bit also macro, at least from a consumer confidence standpoint. And third, we have also then comparison base, 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 Q3, at least we expect the trend to continue then to be at least equal or better is what we are expecting. Thank you for joining us today and for your continued interest in Straumann Group. We look forward to seeing you again soon and wish you a pleasant rest off today. Have a nice day, good bye from Basel.
Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing chorus call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.