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Ladies and gentlemen, welcome to the Straumann Group Q3 2021 Results Conference Call and Live Webcast. I'm Andre, 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.
Thank you, and good morning, everyone. I hope you, your families and your colleagues are well, and I really thank you for joining this conference call on Straumann Group's Third Quarter results. Please take note of the disclaimer in our press release and on Slide 2. And during this conference, we are going to refer to the presentation slides, which we published on our website this morning. As always, the presentation and discussion will include some forward-looking statements. Today's conference will follow the usual format. As the agenda on Slide 3 shows, I will provide an overview on where we stand and then our CFO, Peter Hackel, will share details about the business performance across all regions. After that, I'll give you an update on key strategic initiatives and our outlook for the future. Of course, we both be available to answer your questions at the end of the presentation. Moving on to Slide 4. I'm going to start with our highlights. Please keep in mind that pandemic-related disruptions still had a noticeable effect on our third quarter results in 2020. Therefore, this should be considered when making comparisons to our third quarter results for 2021. Slide 5 shows that group revenue in the first 9 months of this year reached CHF 1.5 billion, achieving 51% growth compared with the corresponding period of 2020 when the pandemic had a significant impact on results, especially in the second quarter. In this third quarter of 2021, patient flow remained strong. Group revenue reached CHF 496 million, with very strong organic growth of 32%. This result was only possible because of our entire team did really a tremendous job of focusing on customers. Looking at our continuing digital transformation journey, we have initiated exciting steps forward during this quarter. The updated version of our intraoral scanner, Virtuo Vivo, has been launched. And in October, we became a founding partner of the innovative open dental platform for clinicians and laboratories called 3ShapeUnite. We have also made significant progress in implantology. We fully launched our tissue level immediacy implant TLX and acquired a stake in mininavident to further develop a dynamic surgical navigation system. I will share more information about this later in the presentation. In Q3, we continued to expand our presence in the dental service organization segment and started our partnership with Aspen Dental Management. Establishing and executing large partnerships like this will take time. Therefore, we do not expect to see a revenue impact until next year. Based on these positive developments, we have raised our guidance to full year organic revenue growth in the high 30s percentage range, with profitability at least at 2019 level. On Slide 6, you can see that our strong growth continued in all regions during the third quarter of 2021. EMEA and North America reported organic growth increases of 32% and 27%, respectively. In Asia Pacific, we saw organic growth of 29%. Latin America performed strongly with 63% organic growth. However, it is also important to keep in mind that the business in Latin America heavily suffered from the pandemic in the third quarter of 2020 because this region was affected later than the other regions. Overall, the 2-year CAGR based on sales from the first 9 months of 2021 amounts to 17% for the group. And with this, I will hand over to Peter to provide additional details.
Thank you, Guillaume, and good morning, everyone. As usual, I would like to begin with our revenue development at group level and will then look at our 4 regions. On Slide 8, you can see that foreign currency fluctuations had a manageable impact lowering our 9-month revenue by CHF 16 million. The effect of mergers and acquisitions added CHF 21 million, bringing the adjusted 9-month revenue base for 2020 to CHF 981 million. The M&A effect in the third quarter was mainly due to DrSmile, which we consolidated as of September last year. This means we have now reached the last quarter for which DrSmile acquisition will contribute to the acquisition effect. In the center of the chart, you can see that all of our regions reported high double-digit growth for the 9-month period. leading to 51% organic growth in group revenue. This was mainly driven by EMEA and North America, which contributed a combined total of more than 70% of overall growth as you can see on the right of the main chart. Slide 9 shows the strong growth of the EMEA and North America regions. In both regions, we gained further market share, driven by challenger brands unlocking new market segments. The EMEA region remains the group's largest revenue contributor and reported CHF 204 million in the third quarter of 2021, with strong revenue growth of 32% compared to 2020. Growth was driven by sales of premium implants and by challenger brands like Neodent and Anthogyr, which are quickly gathering momentum. The orthodontics business is further expanding with DrSmile and ClearCorrect accelerating growth. The overall result in the region was driven by Germany, France and Turkey. In 2020, the business in North America picked up modestly during the third quarter after lockdown restrictions were eased in June. In the third quarter of 2021, by comparison, the North America region showed strong growth of 27% to reach revenue of CHF 149 million. This growth was supported by overall market share gains due to immediacy solutions and the accelerated growth of the Neodent brand, which has doubled its size in the last 24 months. Digital solutions, such as intraoral scanners, also plays a key role. The strong growth of the Straumann and Neodent brands was also driven by established and new partnerships with dental service organizations. Also it is a smaller market than the U.S., the Canadian business is growing very fast, and the group is continuing to increase market penetration with its challenger brands and digital solutions. On Slide 10, you can see that the Asia Pacific and Latin America continue to grow very significantly. In the third quarter of 2021, the Asia Pacific region achieved revenue of CHF 105 million, which is 29% organic sales growth compared to the same period last year. Patient flow in most countries is strong. Due to the ongoing pandemic-related restrictions, travel opportunities are still limited, which leads to higher disposable income that consumers can spend on oral health locally. China, Japan and Australia are driving growth in this region, with strong contributions from premium implants and digital solutions. The group introduced biomaterials in China for the first time in October, while also launching Anthogyr in South Korea and announcing a direct presence in Malaysia. In Latin America, growth is supported by good patient flow and market share gains. Growth in the region during the third quarter of 2021 was very strong. This was in sharp contrast to the same quarter of last year when revenue declined because the region was affected by the pandemic later than other regions. Revenue increased by 63% to CHF 38 million. Patient flow is good, and we continue to gain market share in this region. This trend is being led by Brazil, which is our largest revenue contributor in Latin America, followed by Mexico and Chile, while representing a comparatively small part of the overall revenue in the region, the orthodontics business is expanding very rapidly. Neodent remains the group's strongest brand in Latin America, while the premium implant brands and digital solutions are performing very well with the Virtuo Vivo intraoral scanner successfully established. In the third quarter of '21, Neodent expanded its direct presence in the region by acquiring the distributor in Peru. Turning to Slide 11. We can take a look at our performance by business. Implant sales once again contributed the largest share of our growth. The group's premium immediacy solutions continues to be an important growth driver. Our challenger implant franchise, led by Neodent grown north portfolio, almost doubled compared to the previous year and outpaced the premium business again. North America and Turkey showed the strongest growth. Our digital and restorative business saw growth in the mid-20s, with the largest contributed by EMEA and North America, while Latin America impressed with the highest growth rate of all regions. The trend for digitalization of dentistry is continuing and supports our intraoral scanner sales. Our biomaterials business performed well in parallel with the implant business. Demand accelerated, especially in Asia Pacific and LATAM. Orthodontics was the fastest-growing franchise strongly supported by our expansion in Europe, which is progressing very well. And with this, I will hand back to Guillaume.
Thank you very much, Peter. And then let's move on to Slide 13 and take a look at our recent achievements and the group's strategic update. Culture has been our #1 must-win battle for the past 8 years, and it has become over time, clearly one of our most important competitive advantage. It is a key enabler in our ability to perform. It has helped us to drive strong growth, but also to be very resilient and proactive in time of crisis. It is energizing all of our colleagues, attracting new talent and increasing loyalty and is certainly inspiring us to create our future. As our environment keeps changing at a faster pace, we have done extensive work to evolve our cultural foundation. We have sharpened our purpose and vision and redefined clearly our mission and beliefs as they are guiding our decisions and actions for the future. Our clear purpose is to unlock the potential of people's life as we envision a world where oral health is a source of confidence. We will further deliver on our purpose by being the most customer-focused and innovative oral care company in the world, which is the definition of our mission. We will be happy to go into further detail on our beliefs during our Capital Markets Day on December 16. I'm very proud to see our team have driven our performance to offer the best possible solutions to our customers. And it will be my pleasure to give you some highlights of the great work that has been done during this quarter. And for doing this, let's move on to Slide 14. The dental environment continues to be transformed by digital innovation, and we aim to be at the forefront of providing an exceptional customer experience or dental workflows in both orthodontics and implantology. This is why we are always looking at innovation that provides a platform-based approach with seamless connectivity to our services and solutions. Intraoral scanners are at the entry point to this workflow. This includes the launch of the new version of the Virtuo Vivo intraoral scanner in several countries. Together with the Medit and 3Shape scanner, we are offering a comprehensive portfolio covering all price points. In October, the group became a founding partner of 3ShapeUnite, a new open platform that provides simple and highly efficient access in services and solutions for clinicians and dental laboratories. The platform is seamlessly integrated with the broad range of offerings, including [indiscernible] clear aligner, ClearCorrect aligner. Later this year, the platform will be accessible to the entire TRIOS user base, providing additional opportunities for us to connect with clinicians who have not yet experienced common solution. Slide 15 shows how we are continuing our implantology activities to sustain and further expand our market share in our core implant business. One of the highlights was the international team for Implantology World Symposium, which took place in September and focused on patient centricity. The ITI is the largest global scientific network in implantology and provides a unique platform for knowledge fact check. Our partnership drives innovation and advancements in the implant space and help develop our capabilities to fulfill clinicians' needs. About 10,000 participants took part in the symposium, where comprehensive education sessions opened up discussions with a specific focus on patient centricity and immediately treatment protocols. Straumann TLX implant was fully launched during the symposium, following the very well-received limited market release at the beginning of the year. It combines our tissue level concept with the BLX fully tapered design, which is Straumann's most advanced technology for immediate treatment. The implant tissue level color is designed to preserve peri-implant health. The implant body has been developed for optimal primary stability and immediate protocols in all bone types. It's a technology that creates real benefits for the patient and this launch marks another major milestone for our immediate strategy. Let's move to Slide 16. Guided dental surgery improves precision in implant placement and helps to make treatment outcomes more predictable for the benefit of patients. To make the use of guided surgery fast and convenient for clinicians, we have invested in a 39% stake of mininavident to further develop their dynamic surgical navigation system, a new exciting digital technology. It is a miniaturized navigation system, which is directly fitted to the surgical [ hand ]. In real time, it guides the surgeon to the correct implant position and angle via a digital 3D environment. The technology is compatible with most 3D implant planning software. It means that dental surgery can be guided digitally without having to produce physical drilling guide beforehand. With Slide 17, I would like to share some progress on our rapidly growing orthodontics business. We have further enhanced the clinician experience by significantly reducing the time it takes to propose a treatment plan. We are able to deliver this, thanks to an enhanced performance software for setting up alignment treatments. In order to support clinicians who want to improve their skills on clear aligner treatments and to help them and their staff being successful with their treatment, patient communication and practice management, we launched the Ortho Campus in October. It offers a comprehensive collection of orthodontic tools, programs and professional education curriculums. Slide 18 illustrates our ongoing success with dental service organizations known as DSOs. In the last couple of years, we have established ourselves as a strong business partner for them. Today, they value how we support their growth with our consultative approach, our commitment to education and training and our end-to-end portfolio of solutions and services. Today, we are working with DSOs on all continents and are [indiscernible] at winning an increasing and increasing share of the DSO market has been further strengthened in the last couple of months. In May 2021, we entered in a multiyear strategic partnership with the California-based Western Dental and Orthodontics to advance oral care together. More recently, in September, we started our partnership with Aspen Dental Management. This collaboration also includes ClearChoice dental implant centers, which Aspen acquired in 2020. Aspen operates more than 930 locations across 45 states in the U.S., while ClearChoice operates 71 locations in 28 states. These 2 DSOs combined are the largest providers of fixed and removable dental prosthetics in the United States. Slide 19 gives insight into our next investment. In order to continue to be a leader in innovation and to foster interdisciplinary cooperation and customer interaction, we are going to build a new technology and innovation center in Arlesheim near Basel in Switzerland. This investment of around CHF 18 million will further support our growth strategy as we are reaching the maximum capacity of our current office, lab and warehouse space in the region. The new facility will unite departments that are currently located at different sites. The center will host research and development and will act as a hub for global supply chain, logistics and warehousing activities. A training center and interactive showroom for customers will also complement the site. To save quality environment and foster our team health and well-being, the facility will meet the latest standards for energy efficiency and ergonomics, including green roof and solar panels as well as recycling exhaust heat. The location is well linked with the transport and will offer numerous charging stations from electric cars. Construction will start in 2022, and the new facility will become operational in the first half of 2023. Slide 20 brings us to the full year outlook for 2021. Dental practices were operating with healthy patient flows through the first 9 months of 2021. Our innovative solutions and our strong execution drove growth in the third quarter and led to continued market share gains. Pandemic-related restrictions are still limiting spending alternatives such as travel to a certain extent, leaving some customers with more disposable income to spend on specialty dental treatment. While we believe this trend can be expected to gradually soften as spending opportunities continue to open up, we are raising our guidance to full year organic revenue growth in the high 30s percentage range, with profitability at least at the 2019 level. Moving on to Slide 22. It's my pleasure to announce our Capital Markets Day on December 16 on behalf of the entire Executive Management Board. We will discuss the evolution of our culture, of our strategy and approach to sustainability. More information will follow in due course. Until then, please save the date where we definitely hope to see you there. Now I would like to open the question-and-answer session. [Operator Instructions] Chorus Call, can we have the first question, please?
The first question comes from the line of David Adlington from JPMorgan.
Two short ones, please. So I know into Q4, there was a little uncertainty on whether you might have pulled forward some CapEx sales into early in the year. I just wondered now that we're kind of knocked into Q4, how you're feeling about that? And then just on Q3, there was some commentary in the market that from one of your competitors that they've seen a slowdown in the U.S. in September. I just wondered if you've seen anything along those lines? And how you sort of trading through the first part of the fourth quarter?
Well, when it comes to the third quarter in the U.S., you have seen a very healthy growth from our side. We have not seen really a slowdown here. Then I would say that we cannot really, let's say, support this statement. We have seen still a healthy patient flow within the North America region. For the CapEx, you're -- yes, you are mentioning on the -- I guess, on the digital equipment side. Yes, I think we believe that there will be some also significant digital equipment sales during the fourth quarter because dentists have done a great year. And I guess that some of them will obviously try to offset some of their tax income by trying to do some investment before the end of the year. Then we will see the digital equipment being still a growth driver during the fourth quarter.
The next question comes from the line of Chris Gretler from CS.
I have two questions. The first relates to the EMEA business. Could you actually kind of talk about the growth contribution of the individual businesses in that region, in particular, kind of how substantial was the contribution of the orthodontics business because, I guess, a 30%-plus growth rate in EMEA against a reasonable comparison already kind of is quite impressive? And maybe in that context, whether the IDS had any impact, particularly on the capital equipment side? And the second question relates to -- maybe to follow up the visibility into kind of the next few months. I think last time around, you mentioned a quite strong visibility into the planning of your customers and that the levels are very solid. Is that still the same? I mean there might be a case which international travel or intercontinental travel coming back now potentially. And I mean you mentioned that there might be a bit of a spending impact here. Is this something that we should be worried about?
Yes. Thanks, Chris. When it comes to EMEA, I fully agree. I think EMEA has been really driving the tranche here during the third quarter. And if you look at the detailed performance per franchises, it has been supported by all the different product areas. They have been very strong on the core premium business, and I think this is something that we see actually all across the region. We had the premium that suffered most during 2020 because that's the most exposed approach has been rebounding very strongly in 2021. And the largest part of our core business is still done, of course, in EMEA, and that's one of the reasons why they have been still coming strong after 9 months. The second thing is that the rest of our businesses are developing also very well. Nonpremium or our challenger brands are actually delivering strong results because we have made a significant focus on this and brands such as Medentika, which is still coming from Germany and which has a very strong foothold in Europe. But also Anthogyr, as you know, that brand that has been acquired, which is a French brand that is developing new products and we discussed about the [ X3 ] which is going to start gaining attention, even if it's just in a prelaunch phase or it's starting to bring some visibility to Anthogyr. And last but not least, as Peter expressed the expansion of our orthodontic business is starting to get traction. We had a start and stop during 2 times with that launch, and it has been a challenge to really implement this brand in Europe. But now that we have not any obstacle for this, we are starting to structure this properly, and we start to see some contribution there. And all in all, it's a very strong contribution from all the different product portfolio and without mentioning digital. When it comes to Q4, yes, I think Q4, there will be a couple of factors that could affect this tailwind, I would say. The first one is the dentists have been really doing an exceptional year. We know that a lot of them are going to take a -- some more holidays during December. We think December will be a very short month. It's already usually a shorter month than the others, but I think it's going to be one even more, Christmas being at the end of the week also. And I think a lot of the dentists we are hearing will take at least 2 or 3 weeks' vacation in a lot of different regions, then that's why we're expecting also this effect linked to less of surgical time available from the dental professionals. The second side is, yes, it's been spending alternative will continue to open up, which means that the oral health consumer will do some arbitrage between the different priorities. And we have been on the high side of the spectrum and while it might be some balancing act here for some of them. I think, again, we'll not see any dramatic shift. But as we expressed, we'll see a softening tailwind that we should be starting to see in Q4.
The next question comes from the line of Patrick Wood from Bank of America.
I have two, please. Apologies if I missed it, but the Aspen agreement. It's always quite a large agreement with them on that side of things. And appreciate that you mentioned there wouldn't be any impact this year, and it's of course much more about next year. But any sense that you can give us on roughly the magnitude of how that could look in proportionality next year? Anything that would help us kind of get a sense of how large that could be? That's the first question. And I guess the second question is also a follow-on on the particularly the EMEA performance of DrSmile and the clear aligners. I'm just curious do you feel like the strong growth there is because the market is underpenetrated? Or is it more -- and so you're converting more brackets and wires to Aligners? Or do you think you are taking more share? Or because it's very strong growth, I'm curious, what do you think the biggest driver of that is?
Yes. When it comes to Aspen the effect will be seen next year. The switch and the transfer of product from one brand to another is taking a couple of months because you need to prepare, of course, all the different setup from a surgical standpoint. You need to do the education of the different clinicians. Then it will be -- it will start to be seen in Q1 next year. The order of magnitude is we can say the overall ClearChoice Aspen are representing 150,000 implants overall. And we were already having a part of this with ClearChoice because we were already providing the Neodent implant to ClearChoice. Then we are going to have an additional, I would say, 50,000 implants coming from this new partnership over a period of 12 months. Then it's -- again, you are not going to see a significant, let's say, impact from one month, but it's going to be then perceived on just step-by-step basis in the North American results. When it comes to EMEA and orthodontics, I think, yes, it's a good question, Patrick, that we see growth on both sides. We see growth on the B2B side, and we see growth on the C2B side. They are -- both are growing significantly. Both are doing -- are adding a significant contribution to growth. And we don't have one which is really representing more than 80%, for example, of the total growth. It's a pretty balanced performance, which is we see from our perspective, very sustainable for continuing to generate regular strong growth performance in the months to come.
The next question comes from the line of Julien Dormois from Exanne BNP Paribas.
One relates to once again clear aligners. I think you guys expect about CHF 250 million in sales from that business in 2021, if I'm right. Now how should we think about 2022? And more specifically, what are the main drivers in your mind that could guarantee further outperformance in that space? Should we be thinking about further expansion in Europe? Should we be thinking about the DTC move in the U.S.? Or any color from your end on what could maintain the strong outperformance versus this market, which is -- versus fast-growing market would be appreciated.And then my second question would be on this interesting partnership the stake that you are taking in mininavident. I'm just curious to know what is a reasonable time frame for the launch of this robotic platform? And any sense of what is the appetite from your customers for such a platform? And how does the competitive landscape look on that side?
Yes. Thank you, Julien. Then when it comes to clear aligner and how we can sustain a strong growth, and it's going to be a threefold. The first one is technology and innovation. We are -- as we said, we are investing significantly into software development. Then we will further develop then our software capabilities to meet additional cases and expand our indications. Our goal is somewhat by the second half of the year in 2022 being able to start targeting specialists with our capabilities from the software, then opening a new segment in which we are not acting in. The second side is continuing our expansion. As you know, we are going to launch then ClearCorrect in China in the end of Q4, beginning Q1 2022. This is a large market where we are not active yet. And this is also going to provide some growth opportunity for the ClearCorrect business together with investing in feet on the ground in the European region because we are starting getting traction. And the last one is, of course, then continuing our B2C activities, especially in Europe to start with, testing and piloting, again, some business model in other regions, but the expansion we are getting in Europe is also providing us some very significant growth. And that's the threefold significant opportunities that are going to allow us to pursue significant performance on the clear aligner side. When it comes to the navident technology, we are expecting the first system potentially being piloted on the market during the the beginning of the second half 2022. There is appetite for those kind of systems as soon as they are providing strong and efficient customer experience. What is existing at the moment is closer to robotics. There are some that are closer to robotics, which is making the usage quite cumbersome still today and with a very high price tag. Then we will be much more in the entry segment to have something which is really agile, versatile to use and that would provide immediate benefits to the surgeons. That's our expectations. We still need to develop that technology in this sense. But if we are able to get there, I think we will have a market opportunity that could open up during the second half of 2022.
The next question comes from the line of Jelovcan Daniel from Mirabaud.
Congrats to the outstanding quarter. The first question is maybe financially not so important, but strategically, I find that very interesting that you mentioned -- you launched Anthogyr in South Korea, which we all know is a brutal market over the price and with different reimbursement levels. So how do you want to place Anthogyr, which is certainly priced above many discount very cheap implants? How is that going to work? And the second is in terms of digitalization, your new agreement with 3Shape, will that change the door open a function even more? And maybe you can explain in general digitalization at the moment, how important that is for sharing, for instance, when you win a new customer and then you cross-sell [indiscernible] the other way around? And yes, that's two questions.
Yes. Thank you. When it comes to South Korea, yes, we are launching Anthogyr. And we are also working to register Nuvo because we believe that there are segments in South Korea that would allow us to be increasing our share in this market. You're totally right. I think the South Korea market is very brutal in terms of accessibility on the marketplace in terms of a price level. Then this is why we believe it's very important that we keep very active and we keep innovative here, innovating. Anthogyr is going to be launched because they have an implant that will be going to be very much in offering what South Korean clinicians are looking for, which is fully tapered value implant, and this is what going to be an Anthogyr. And we will have some pressure on the ASP side. But we believe the product portfolio of [ X3 ] will be really dedicated to the South Korean market. And to really be able to adapt to more aggressive ASPs, Nuvo that will offer the same connection than South Korean implant brands will also be a way to progress in this very demanding market. When it comes to the digital workflow, I think, actually, it's a very important question, we see our partnership with 3Shape as a very important strategic move for further positioning us as a major player in the digital field. And I would use a metaphor here is that the way clinician will use product, at least some of the dental products in the future, is exactly the same that we have changed our way to use taxis with Uber coming in. I think it does not change the way you were taking in taxi in the sense that you are going in a car, they will drive you from A to B, and you will just pay for the ride. The huge difference is how you are getting access to the taxi and how convenient it is to take the ride, to have the information about the driver and so on and so forth. The platform that are now coming up in dental is providing those kind of user experience, user efficiency about taking a intraoral scanner. And as soon as you know that you want to do an implant, then you will have just to select through an app format, the Smile in a Box from Straumann as an example. And all your patient data are going to be already included in the other form, they will be already knowing where you are, what product you want and your preference. Then we believe it's just the beginning of that user interface changing significantly in dental, and we want to be at the forefront of it. Then it will help us to differentiate us versus competitors by being ready before anyone else for those kind of interaction. And we will, of course, propose this service to the customers that are not working with us already because then we will be able to attract them not only by the quality of our products and the innovation of our technology but also by the conveniency of the workflow we are proposing.
The next question comes from the line of Maja Pataki from Kepler Cheuvreux.
I have two, please. First of all, Guillaume, you're talking about the consumer spending, the move towards specialty dentistry because there is a lack of spending alternatives. And the argument is very rational, makes a lot of sense. But I was wondering, is there anything -- any evidence that you have seen or heard from your dentists, where they actually say, like, yes, patients are telling us that they have been pulling things forward? Or is it more just a normal way of thinking this would be a rational explanation? That's question number one. And the second question is with regards to margins. Thinking about next year, is there anything with regards to cost inflation that would be outstanding that we need to bear in mind?
Yes. Thank you, Maja. Yes, I would say we have evidence from dentists that this consumer spending has been, I would say, higher from a priority standpoint, but especially has been facilitated for spending on implant. And I had many discussions with our clinicians and our customers saying that they are much less discussion on pricing that they had pre-pandemic. Then -- meaning that the available income is there and as they don't have a lot of different, I would say, alternative or a lot of different of conflicting priorities, then they are more going into spending quicker and without discussion on some of the implant treatment that have been proposed. And we have heard that from a lot of different geographies. Then how this will continue in the future still remain to be seen. But when people will start again to travel and to also go in restaurants without having any fear or potentially being constrained to present COVID-19 pass and so on and forth, we believe that, of course, we will be going back to something which is a bit more balanced. But still so far, we are hearing really quotes given by dentists and surgeons being accepted faster than it was before the pandemic. When it comes to the cost for 2022, we see, of course, some of the inflation coming. We don't see this as a major, major threat force. Our, let's say, raw material costs are not the major part of our cost when it comes to our overall cost base. But of course, inflation would have to continue to grow, it would affect personnel costs that would have an effect that would, of course, need to be reflected in the way we think. But I would say, so far, we don't see major headwind from inflation for 2020.
And just a follow-up on that. We had a couple of companies, and that's why I'm asking or reporting more recently that they're seeing meaningful enough inflation on wage cost. Is that anything that you're seeing as well? Or is it due to the geographic exposure for you, not that -- not so much of an issue?
Well, I think that's a good point that the inflation is going to be quite different regions by regions. We see inflation going especially from personnel cost more important in the U.S. as an example, that have been discussing with a lot of our colleagues in the different regions. But once again, so far, we don't expect a huge impact on our side. but this is something that we will monitor to see what is going to be the inflation in the coming months that would potentially drive then our thoughts in a different way.
The next question comes from the line of Falko Friedrichs from Deutsche Bank.
Two questions, please. The first one is also on your EBIT margin. I mean we noticed that you slightly increased the wording around your guidance for this year for the EBIT margin. Was that just a function of the higher expected top line? Or did you start to really notice that some of these efficiencies you benefited from over the last few quarters could be a little more structural going forward and could actually also positively impact next year and the years thereafter? That's question one. And then the second one, are you able to provide a little bit of a sneak preview for your upcoming Capital Markets Day? I understand you can't share too much detail. But could you potentially share a bit of color on the potential topics seems you're drilling deeper into and whether we can expect any sort of midterm guidance, midterm expectations?
Yes, I think Peter will take the EBIT question. I can comment, Falko, quickly on the Capital Markets Day. Then yes, we will -- what we will discuss more in detail is we have redefined our overall strategic approach for the next 5 to 8 years' period. Then we are going to present what are going to be our major strategy areas that we would like to invest in. We are going also to present the different performance in our key regions, involving our key Executive Management Board members. And we will, of course, give an update on how we are developing very significantly on culture, as I quickly expressed in the presentation. Last but not least, we are developing an updated or a new sustainability strategy that we would like to present to everyone our approach to ESG which is going to be also completely renewed. Then that's one of the -- some of the key topics that we are going to address during our Capital Markets Day. Peter?
On the EBIT margin, Falko, thank you for the question. I mean you are aware of our long-term strategy that we want to invest in growth, and at the same time, we incrementally also want to increase our operating profitability and margin. But as we have increased the guideline -- the guidance for the top line, meaning top line is coming in higher than what we expect that half year and time gets shorter versus the year end, obviously, we cannot manage that as carefully as we could that if we would have some more time, that means, hence, we can benefit from the economies of scale and we have also increased the margin in respect to the higher top line expectation that we have as of today. So top line expectation, entire top line is the main driver for that increase, Falko.
Okay. And then maybe a brief follow-up just in terms of the cost base. Can you give some qualitative insight into how much lower it still is versus pre-pandemic level in terms of selling, marketing, travel expenses, et cetera?
Yes, I would say. Since -- I would say, since midyear, we saw an increase of our spending rate. And as expected and as communicated also in the half year, we saw an increase of our spending rate. Activities are returning a bit back to normal. However, especially if you look at international travel and international big events and congresses, there we still see significantly lower activities. So we see an increase, but I would say it's still not back to normal and pre-pandemic level yet.
The next question comes from the line of Lisa Clive from Bernstein.
Just a question on the European market. With the European MDR moving into the next phase -- next year, could you just give us an update on what you expect in terms of competitive dynamics? You did mention earlier this year that I think Implant Direct had already effectively pulled out of the market? Are you seeing any further changes?
Yes. Thank you, Lisa, for the question. Actually, we see, again, MDR as a great future barrier to entry in our core business, which we did not have in the past. Then we see that as a very positive move for the midterm. Then what is going to happen with the other players at this stage, we don't know because we have not been involved in any of the MDR readiness activity that they are taking. We are focusing on our own MDR readiness. We have been the first dental implant company to be ready from a premium implant portfolio perspective. And I would say our very strong approach to evidence-based dentistry is, of course, a huge advantage here. And the fact that we have been investing on Neodent, also Anthogyr being also brands that have been creating clinical evaluation have been supportive as well. We are completing our readiness for our other implant and clear aligner brands for Europe, and we will be ready for the trade when it comes to our site. Then we will see for the smaller company. I guess, that for a smaller company, it will be more difficult. And we know again that some of them will reduce their portfolio because they will not be able to be ready in time for the entire product ranges. And I'm sure that for some of them, it does not make sense to invest in clinical trial if you have a limited number of -- limited net sales on some of your implant line. Then it remain -- what remain to be seen is the effect and the final effect of it, but we know it's going to be positive from our side in any manner.
The next question comes from the line of Oliver Metzger from ODDO BHF.
The first one is on market growth potential comment on that, because on IDS, the sentiment was very good. So -- but also the expectation from other players were above the historic average of somewhere with 5% to 6% market growth. And you made some comments on price dynamics. So for example, patients talk to dentists and that's basically better than pre-corona. So -- but would you agree that we will see potentially some years with the market growth north of this 5% to 6% historic range? The second question is on the level of competition in the orthodontic space. So in the most case, we talk only about the market leader in this context. But first of all, on IDS, there were now 41 companies, which offers orthodontic compared to only, let's say, a 1 single-digit number in 2019. So how do you evaluate the growing number of players? It's -- do you think that there could be some more pressure on prices in the future? Or how do you think on it?
Yes. Thank you, Oliver, for those macro question. I think, it's -- yes, it's really interesting. And when it comes to the overall growth of the implant segment, I believe that we will still be in the 5%, 6% market growth. I don't see that accelerating so much. I think it has accelerated during the post-pandemic period, that I'm convinced about this. How much it will be sustained in the midterm? I'm still having a question mark on this one. I think there will be less pressure on ASPs that we had, and that's a really good thing. And it's especially the really good thing for premium. We don't have any kind of discussion about premium ASP at all. And for us, it's also very important because we are one of the most innovative company in implant. We always put some price premium on our innovation and being able to have a market that is more ready to access premium for innovation because of the fact that we have less pressure from health consumer on their side, it's obviously very positive. But for the overall market growth, I think, the volume-wise, we'll see coming back to the same level gradually. When it comes to the clear aligner, yes, competition is growing very significantly. We'll see a lot of small players. This is what we have seen in the implant business. We expressed the fact very often that we were seeing the clear aligner business like being 10 years behind the implant business when it comes to competition, and we are seeing exactly the same trend. We are seeing -- in the implant, we have seen the value brands coming that has been very local or regional, and we see exactly the same on the clear aligner side. Will it bring pressure on ASPS? I would say, yes and no, but we will see -- I personally believe the [indiscernible] implant. You will have a premium segment and a value segment. Value segment will be also very trusted by local and regional brands. You will have a still a premium segment, but that will be delivering innovation, ease of use, digital integration, that will be very important for the future. Then either you do a small number of cases, and you don't need to optimize your case too much and you will be able to look at prices or you want really to increase your volume in clear aligner being supported, being educated and having somewhat some of the premium services that company can deliver, and then you will be ready to pay a higher price. Then that's -- those kind of 2 segments that we are going to see, I think, being established in the months and years to come.
Okay. I have one quick follow-up regarding your partnership with Aspen. So is the partnership only focused on dental implants or which scope does it have?
No, that's only on dental implant for the time being. But as the dental implant is also obviously involving digital workflow, that's all those capabilities to expand in some of adjacent fields that would be possible. But so far, it's dental implants for this specific agreement that has been signed.
The last question comes from the line of Veronika Dubajova from Goldman Sachs.
Thank you for squeezing me in at the end. I have two questions, please. One is just -- I want to circle back to the guidance for the full year. And just try to understand when I look at it, it does suggest a pretty notable slowdown in the fourth quarter. Listening to you speak for the past hour, it doesn't really sound like you're seeing any signs of that. So I just kind of want to confirm that really what you're trying to factor in in here is maybe the uncertainty around December, but don't necessarily any other underlying changes in the market if you look at the performance in October? And then my second question is just back on the orthodontics theme, I think you've talked about the sort of CHF 200 million to CHF 250 million of revenues this year. Just kind of curious from you, as you move into next year, I think this is the conversation that a lot of folks are having about one of your competitors here. What do you expect next year for that business to grow above or below the, let's say, 20% to 30% market growth that we've observed, just given this element of extra demand that we've observed through the last 12 months as a result of disposable incomes being where they are?
Yes. Thank you, Veronika. When it comes to guidance, we think that -- again, we don't see a dramatic decrease of patient flow. But as we expressed, we'll see that, that it will gradually soften, then we just need to see how fast and what will be the consequences of -- alternative for people to spend more than, let's say, dental specialties. And the second thing, as we said, is that we believe this number will be pretty small as many clinicians have decided to take a longer vacation side. And that's the only two factors that we have taken into the guidance. When it comes to our growth rate for next year from clear aligner, yes, we believe that -- again, we are coming from a lower base, then -- from a lowe base versus some of our competitors, and we believe that we will be higher than the 20%, 30% growth rate when it comes to clear aligner from a global basis for us. Okay. Thank you, and thank you all for your attention and your questions. We're really looking forward to seeing you again soon, potentially at our Capital Market Day, and we wish you and all of your colleagues and families the best of health. And have a nice day and goodbye from sunny Basel today.
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