Straumann Holding AG
SIX:STMN
Earnings Call Analysis
Q3-2023 Analysis
Straumann Holding AG
The company has maintained its pulse on dental industry trends, focusing on immediacy implants and reporting a 50% market share in the apically tapered segment and high teen share in the fully tapered segment, attributed to significant innovations like the BLX implant. Building on this innovation streak, the company introduced the Straumann iEXCEL dental implant system, a game-changer meant to further capture market share from competitors and address clinician needs with a unified, efficient surgical and prosthetic platform.
Digitalization is playing a pivotal role in the company's strategy, with new software introductions like ClearPilot 7.0 for ClearCorrect treatment planning and the continued push of the ClearCorrect brand through global engagement initiatives. The company's digital solutions are being designed to integrate seamlessly, as shown by the planned acquisition of AlliedStar, allowing for competitive scanner offerings and reinforcing the company's digital footprint worldwide.
While acknowledging macroeconomic and geopolitical uncertainties, the company confirmed its full-year outlook, expecting organic revenue growth in the high single-digit percentage range and profitability at around 25%, inclusive of growth investments.
In China, where the market's expected to grow by 20%, the company foresees continued strong momentum and aims to further gain market share. For the newly launched iEXCEL implant system, North America has been chosen as the starting point due to its favorable specialist market and higher pricing in the dental implant industry. The rollout in Europe is planned for the second half of the year, indicating a methodical approach to capturing international markets.
ClearCorrect has exhibited double-digit growth in business-to-business sales, primarily outside North America. The company plans to persist with its direct-to-consumer emphasis and predicts a gradual improvement in consumer confidence over the next 12 to 18 months. This indicates a strategic balancing act between direct-to-consumer initiatives, like DrSmile, and indirect models aimed at driving patient flow to practices using the company's solutions, with the motivation to sustainably bolster top-line performance and eventually drive group profitability.
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Ladies and gentlemen, welcome to the Straumann Group Q3 2023 Conference Call and Live Webcast. I am George, the Chorus Call operator. [Operator Instructions] 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 Daniello. Please go ahead.
Good morning, everyone, and 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. During this conference call, we are going to refer to the presentation slides, which were published on our website this morning. As always, the presentation and discussion will include some forward-looking statements,As shown on the agenda on Slide 3, I will provide an overview of our current status first. I'm delighted to sit here together with Yang Xu, our new CFO, who is with us for about 2 months. In this short period, she has been a great support, and we are very happy to have her on board. Following my status update, she will share the financial details. After that, I'll update you on key strategic initiatives and our outlook for the future. Of course, we will both be available to answer your questions at the end of the presentation.And let's start with our highlights on Slide 5. This quarter, we achieved a strong revenue growth of 11.4%, leading to a CHF 571 million revenue, which was marked by different dynamics in our different regions. This solid performance brings us to a total of CHF 1.8 billion in the first 9 months of the year, despite very significant currency headwinds, which represents an organic growth rate of 8.7%.One of the highlights has been once again the implant volume growth achieved in the Chinese market, which has been driven by the continued dynamic patient flow following the Chinese volume-based procurement process, which has been implemented in the first half of this year.The second key highlight is the agreement we signed to acquire AlliedStar, an intraoral scanner technology company located in China. This is an important strategic acquisition that will enable us, on the one hand, to offer competitive intraoral scanner solutions in China and, on the other hand, to target additional price-sensitive markets and customer segments in the future in other geographies.Finally, I'm very excited to report the prelaunch of our latest innovation from iEXCEL, our new performance premium implant system for both bone and tissue-level treatment. This innovation answers important clinician needs, providing greater versatility and simplicity for their implant treatment. I'll be happy to share more shortly.Overall, together with our customers, partners and our team, we were able to deliver strong results and making [ current ] progress along all our key strategic areas during the third quarter. Once again, I would like to stress that this would not have been possible without our team's commitment and dedication, given the challenging environment. So, despite many geopolitical and macroeconomic uncertainties and due to the confidence in our teams, we confirm our full year guidance of high single-digit growth, together with profitability at around 25% despite strong currency headwinds.On Slide 6, you can see that patient demand for solutions remain solid with variations in some regions during the third quarter of 2023. The softer patient flow seen during the first half has been confirmed during the third quarter in North America, which is due to the macroeconomic developments in the region, which had a continued impact with variations in some regions during the third quarter of 2023. The softer patient flow seen during the first half has been confirmed during the third quarter in North America, which is due to the macroeconomic developments in the region, which had a continued impact on consumer behavior. It has impacted the demand for treatment with an effect more prolonged specifically in the full-arch implant segment and orthodontic [ case starts ]. Despite this more challenging market environment, we delivered a solid 5.5% organic growth, leading to additional market share gains in the region.Our biggest region, EMEA, reported a good performance of 6.6%. The main growth contributor was Germany, followed by Iberia, Italy, Turkey and Eastern Europe. The implant business continued to perform well, led by the premium brand Straumann and supported by the brands, Neodent and Medentika, which are picking up speed. Furthermore, the ClearCorrect B2B segment made a notably positive impact in this region, while our direct-to-consumer business experienced a slowdown in the third quarter, which had a negative effect on the overall EMEA regional results. Additionally, in the third quarter, we continued to expand our direct presence in the region by establishing new subsidiaries in the Baltics region through the acquisition of our local distributor.In the LATAM and Asia Pacific region, we saw strong patient flow through to the third quarter. In Latin America, we achieved 19.1% organic revenue growth, mainly driven by Neodent and IO scanners. The main contributors in LATAM were Brazil, Mexico, Peru and Chile.Asia Pacific was the fastest-growing region with a significant organic growth rate of 26.8%. Australia, Japan and India showed strong growth, while the Chinese volume-based procurement process, which is part of China's broader effort to enhance health care affordability, keeps driving strong positive impact on the implant volume growth in China.And with this, I will hand over to Yang, who will provide additional details on the financials with Slide 7.
Thank you, Guillaume, and good morning, everyone. It's my pleasure to speak to you for the first time and I do look forward to meeting you very soon in person.I would like to begin with our revenue development at the group level and will then provide an update on the performance of our businesses.On Slide 8, you can see that our 9-month revenue reached CHF 1.8 billion with an organic growth of 8.7%. The negative currency effect in the first half continued into the third quarter due to the strengthening of the Swiss franc, bringing the first 9 months FX impact to CHF 101 million, which leads up to a 3.4% growth in Swiss franc. The M&A effect added CHF 17 million due to the acquisition of PlusDental and Nihon last year, bringing the adjusted 9-month revenue base for 2023 to CHF 1.64 billion. For completion, there was no merger and acquisition effect in the third quarter.In the center of the chart, you can see that all our regions reported a very good performance in the first 9 months, as mentioned by Guillaume. EMEA and North America contributed to the largest share of the group's revenue growth in absolute numbers, followed by CHF 26 million in both Latin America and Asia Pacific. The result in Asia Pacific continued to be heavily impacted by China. With a strong third quarter, as noted on the prior slide, our first 9 months grew a solid 8.3%. This is great achievement, keeping in mind the significant price cuts we had to manage due to the VBP in China.Slide 9 takes us through an overview of our performance by business segments. Implantology maintained its robust performance with double-digit growth in the premium and challenger segment. Both segments are expanding geographically while the challenger brands experienced a stronger organic growth. Premium implantology was primarily driven by BLT and our immediacy portfolio. Neodent stand out as a leading challenger brand, sustaining strong growth momentum across all regions.In our Orthodontics segment, we significantly enhanced our aligner value preparation with new features and software offerings. As a result, we witnessed a double-digit growth in our ClearCorrect clinician brand. This B2B business remains dedicated to strengthening its presence in existing markets and introducing new solutions.Looking at the direct-to-consumer business, as we discussed before, we have been focusing more on profitability since the beginning of the year. Combined with lower consumer confidence, this led to a negative effect on this specific business segment.Our digital solutions business has strongly contributed to the group's performance, primarily driven by the success of our intraoral scanners as in previous quarters. The remarkable progress of our Virtuo Vivo scanner stand out as a highlight. Intraoral scanners serve as a entry point for the digital workflow for clinicians, playing an important role in enhancing clinical quality and efficiency. Consequently, the penetration of intraoral scanners in the market continues to gain traction in many regions, contributing to the expansion of our global customer base. As you know, this part of the business and this growth is an essential element of our digital strategy.With this, I hand back to Guillaume to provide an overview about our recent achievements and strategy.
Thank you very much, Yang. And let's move on to Slide 11 to talk about recent achievements and strategic update.Let's start with the premium implant portfolio first, and let me provide some context around our major upcoming iEXCEL launch. According to our estimate, the 2022 global dental implantology market value was worth about CHF 5.4 billion, with the premium segment representing around half of it. This market is usually split in 3 different segments according to implant designs.First, the traditional parallel walled implant making up about 20% of the premium implant market. Secondly, the apically tapered implant representing around 55%. And finally, the fully tapered implant segment representing around 25%. The share of the traditional parallel walled implant segment is shrinking year after year as apically tapered and fully tapered implants that are designed for immediacy approaches are growing faster, offering shorter time-to-treat treatment options, which are preferred by health consumers. It is in this segment that significant innovation such as our BLX launched in 2019 is a key driver for market share gain, enabling us to reach around 50% of the apically tapered segment and a high teen share of the fully tapered segment.To keep on this strong dynamic, I'm excited to report the prelaunch of our new Straumann performance implant system, branded Straumann iEXCEL, which includes a full new implant line, namely the BLC and TLC designs.Let's move on to Slide 12 to talk about this new C-line, which is representing our new generation of apically tapered implant portfolio made of our unique Roxolid material and benefiting from our advanced SLActive surface. The new BLT is integrating with the proven TorcFit connection already known from the [indiscernible] for its high strength and slim abutment design. The BLT implant comes with an improved self-taping thread design for faster insertion, extended cutting flutes to remove the need for taping as well as a slim effect to preserve patient limited [indiscernible] and which allows bone compression in undersized [indiscernible].Moreover, the combination of the new design, together with the unique Roxolid material is enabling clinicians to use the reduced 3.75 millimeter for most indications, promoting then less invasive treatments but also helping to preserve bone for more functional and esthetically clinical outcomes. Additionally, the introduction of broader options with 5.5 and 6.5 millimeter implant diameters versus our former BLT aligns with the growing trend of immediate implant placement in the posterior region, especially in the North American region. The shorter 6-millimeter option has been also added as it can eliminate the need for bone grafting in some procedures, streamlining the treatment process and increasing patient conversion to treatment. Finally, the new C-line implants combine these advancements with the well-documented benefits of a tissue-level design, reducing the incidence of peri-implantitis and enhancing patient outcomes.On Slide 13, you can see the entire new C-line that has been developed with the idea to create a complete high-performance, highly versatile system, combined with the BLX TLX line called the Straumann iEXCEL dental implant system. Altogether, it offers a unique clinical flexibility of 4 distinct implant designs with the simplicity of one single implant system. One surgical kit, one prosthetic connection and therefore, one single prosthetic platform.As the new C-line implants seamlessly integrates surgical kits and prosthetics with BLX and TLX, it empowers surgeons to select the ideal implant during surgery. At the same time, [ respiratory ] clinicians benefit from a streamlined process with a single prosthetic connection and a consistent platform regardless of the implant diameter. By maintaining a single prosthetic platform across all implant diameters, customer can also efficiently reduce their stock of prosthetic components, simplifying inventory management.On Slide 14, I would like to talk about ClearCorrect. Our focus remains on enhancing our value proposition. And to achieve this, we are committed to optimizing the overall customer experience. In October, we were proud to introduce new software and features that have advanced significantly again. A key aspect was ClearPilot 7.0, our ClearCorrect treatment planning software. The software empowers clinicians to address even more advanced cases with a comprehensive set of new updates.Among the notable features of ClearPilot 7.0 is the bite jump simulation. This feature allows clinicians to visualize the expected iterations in occlusion, which is particularly valuable for planning and evaluating the regions of techniques such as surgery and elastics. Additionally, as part of the geographic expansion, we are actively promoting the ClearCorrect brand through initiatives such as the ClearCorrect World Tour where we engage with clinicians to present our brand and its offering. This effort highlights our dedication to further strengthening the ClearCorrect brand overall.Moving on to Slide 15. I would like to speak about digital transformation, which is changing the dental industry. While exceptional products remain at the core of our mission, we understand that customer experience is equally critical for solution differentiation and overall success. We clearly know that intraoral scanners are the entry point for every base in the future, which will allow for a seamless connection into our cloud-based Straumann access platform.On the platform, our software suites such as coDiagnostiX, ClearPilot and Smilecloud are going to be accessible to support our clinicians with treatment planning. We are continuing to make substantial investments to ensure the seamless integration of these digital solutions to ensure we can reach as many clinicians as possible regardless of their specific needs.On Slide 16, I would like to share more about our latest strategic move, AlliedStar. I'm very excited about the agreement we just signed to fully acquire this company over the next 8 years, which perfectly aligns with our strategic intention to increase access to our Straumann digital platform of services and solutions. It will enable the group to offer a competitive intraoral scanner solutions in China and in additional price-sensitive markets and customer segments in the future.Our scanner portfolio is going to be seamlessly connected to the Straumann access platform, which will also be launched in the Asia Pacific region in 2024. As part of the Straumann Group, AlliedStar will continue to serve various customer groups through parallel distribution channels. We are delighted to welcome soon the AlliedStar team to the Straumann Group, as I share our commitment to building entrepreneurial businesses with a strong focus on customer centricity.As we move on to Slide 17, I would like to emphasize the importance of execution and bringing our brands closer to our customers, clinicians and partners. We successfully showcased our brands at various customer events including the International Esthetic Days in Baden-Baden, where we had the opportunity to introduce our major portfolio innovations such as GalvoSurge, iEXCEL, to over 600 participants through a prelaunch event.Additionally, at the EAO event in Berlin, which aims to enhance patient care by bridging the gap between science and clinical practice, we reached a large audience and provided insights into our solutions and therefore, reinforcing our brand presence.On the orthodontic side, we unveiled our latest advancements at the ClearCorrect Speaker Summit in Prague. This event laid a robust foundation for the ClearCorrect speaker community.With this, I would like to move to Slide 18. As I mentioned already, digitalization transformed all aspects of the dental industry from patient communication and practice management to diagnostics and treatment. While digital transformation seems to be a very technology-focused topic, it is actually all about people. We believe that fostering a digital mindset in our organization will help us become the digitally powered oral care company we aspire to be.We have just launched Edge Up, which is an initiative we designed in Straumann Group to help our organization embrace the opportunities presented by the digital age. We are providing an education platform for employees to engage and improve their skill set across all teams worldwide and are running specific workshops to develop further agile working methods inside our organization.With this, let's move to the full year outlook on Slide 20. The current geopolitical and macroeconomic uncertainties, which influenced the patient flow observed in the third quarter are expected to continue generating different dynamics in our different regions. Thanks to our differentiated value proposition within the strategic segments we are active in, combined with strong execution from all our team members worldwide, we remain confident that we will continue to gain market share within our estimated global addressable market of CHF 19 billion.In the meantime, we will continue to invest in growth and transformation to maintain our competitive edge in the coming future. As a result, we confirm our full year outlook despite the macroeconomic and geopolitical uncertainties and expect organic revenue growth to be in the high single-digit percentage range and profitability at around 25%, including growth investments.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 Daniel Jelovcan from Stifel.
So just the first question is to understand a bit the dynamics amongst the C-line to understand share gains potential. So in other words, if, let's say, a BLT user can also be convinced for the BLX or the other way around or the TLC. It's quite complex, of course, to understand from the outside where you see the most significant share gains or, let's say, even new cost in gains. That's the first question. And the second question is a short one. If I understood it correctly, ClearCorrect grew double-digit in the third quarter, which I think is probably not the case, I mean talking about B2B.
Okay. Thanks, Daniel. Yes, I understand when it comes to BLC, TLC, I think what we can refer to is our BLX launch experience. We actually have seen that a lot of our BLX new customer have been actually generating a lot of pull-through effect with BLT because a lot of specialists or at least large implant users are using different implant designs. They are very open using an apically tapered implant for regular cases, and they are using fully tapered like BLX for more advanced cases and immediate loading cases. And a lot of our new customers that never used Straumann before, that were requiring a fully tapered solutions, joined us also on the apically tapered to BLT, which helped us really to win market share during the past 4 years on both segments.And what we have seen is some of those BLT users did not jump on BLX because it was another surgical kit, another connection and they were really looking for simplicity. And the same for some of our BLX users that are using, in some cases, other implant brands that are still sticking to what they were doing before in order not to add again additional prosthetic portfolio.Then we have seen a major need here in clinicians to have simplicity in having one instrument set, be it on the prosthetic side or on the surgical side and having the opportunity to really use the implant design of their like, depending on the case. Then if you look at the opportunity as a whole then, it's -- you need to take the BLT segment or the apically tapered segment and the fully tapered segment altogether. If you want, then you have the -- as I said, you have then a 50% share for apically tapered for Straumann, which is representing around CHF 1.5 billion overall market. And the fully tapered market premium, which is representing 25%, we said, and it's around a bit less than CHF 700 million, that I would say, CHF 650 million, we have high teens of this.Then if you do the math, you will see that if you add the share that we don't have, then that's around 60% of that apically plus fully tapered, it represents a market opportunity of CHF 1.2 billion. And that's where iEXCEL will help us to gain share into that CHF 1.2 billion market opportunity premium, which is the remaining business that we don't have in apically plus fully tapered implants. We are 41% today, a little bit more than 40%. We believe that in the next 4 to 5 years, we should be gaining an over kind of 10% share would be a little bit what we would be expecting. That would be another significant incremental then top line that would be generated through that major innovation.When it comes to ClearCorrect, I think ClearCorrect has been double-digit growth B2B on our -- then the clinician brand. I think this is where we have been very happy with the traction we are generating, mainly, I would say, in other regions that are Europe, Asia Pacific, Latin America. It has been much lower in North America. And the downside came from our B2C activities as Yang alluded to during the presentation.
The next question comes from Susannah Ludwig from Bernstein.
I have 2, please. I guess, just first on China. Can you talk about how sustainable you think the growth is in -- sort of as we go into 2024? Did you see any benefit still from pent-up demand in this quarter? And then what was sort of the relative contribution from volume gains versus market share gains in the quarter? And then secondly, can you just talk about the rollout plan by geography for the new iEXCEL implant system? How are you thinking about this as a contributor to growth in 2024 from a regional perspective?
Yes. Thank you. Yes, China, we think that, honestly, the strong momentum we see should continue because the large increased addressable market that has been created, thanks to the new VBP pricing will continue to drive then the significant patient flow. Then we believe still, as we said, around 20% market growth in the months to come, then it's something that we are pretty optimistic about. When it comes to our performance and how much is coming from volume growth and market share gain, it's too early to say for the time being. We need to see a little bit more about some of the volume from the overall market in order to compare with. We know that we are really having significant market share gain on both other premium competitors and value competitors. But it's still, as of today, difficult to give an analytical perspective about how much the total growth is coming from this side. But I would say a significant part of it still.
Was there any COVID pent-up demand in this quarter? Or is that sort of all through now?
No, I think it's all through, honestly. I think the pent-up demand came really -- I think, when it comes to COVID on the -- for what it is from January -- December to January, COVID cases during the second part of the -- during the second quarter, mainly then I think starting from June, I think it has been the end. I guess that starting from July and the beginning of the third quarter, I don't see major effect on the pent-up demand, to be honest.On the iEXCEL, I think this is -- we are really excited about this launch because we believe it brings a very, very significant answer to some of the major headache of large users, clinicians. Then we are going to start by North America. North America is obviously still a major specialist market on implant. They are the ones that will benefit significantly from this innovation. Then we are going to start in January with an implant launch over there. It is also where, of course, this is the highest prices in our dental implant industry, and that's explaining why we are starting with this [indiscernible]. Secondly, we are going to then roll this out in Europe starting in the second half of the year in all our major European markets.
Our next question comes from Maja Pataki from Kepler Cheuvreux.
I'll stick to 2 for now as well. Guillaume, if we look at the clear aligner business, can you help us understand how we should think about your involvement with Smile or with the direct-to-consumer business, let's say, over the next 12 to 18 months? Are you waiting for a better consumer sentiment to become a bit more aggressive on the marketing side? Or is this franchise, in general, more something that you are reconsidering full stop? That's my first question. And then my second question, just to understand, I mean, if we look back prior to COVID, your Q4 revenues was always representing quite a significant part of the overall sales for the full year. Is there anything apart from the fact that we have a certain -- we have the uncertainty with regards to macro, that would call out a different kind of seasonality pattern, increased intraoral scanner sales or the aligner side of the business? Just to understand the dynamics.
Yes. Thank you, Maja. I think the consumer business is obviously something strategic for us then that we are considering. And to answer your question on the 12 to 18 months, we believe that we will see a gradual improvement of the consumer confidence. And therefore, we would see better then performance from a top line standpoint. But clearly, we still want to ensure that this business could start driving profitability at group level. Then that's the strategy that we decided to undertake and that we are going to be consistent with this in the next 12 to 18 months.Now what about your question about reconsidering this? No, we do not reconsider that as per se because we believe that direct-to-consumer is a critical expertise we need to have in the future in different ways or form. And as we are discussing here very significantly about DrSmile, we are having also another business, which is at a lower top line implant, but still very strategic for us, which is called [indiscernible] in Japan, which is also direct-to-consumer related to implant and which is used as a consumer service to drive more patient flow to actually existing clinician and existing practice.Then I think there are 2 ways to look at direct-to-consumer, the direct business like DrSmile is doing or the indirect business, which is like leveraging the direct-to-consumer expertise to drive more patient flow to our existing practices using our solution. And then we are going to continue to invest in those 2 models and will potentially reallocate more resources in one model that will prove to be more successful. I would say that's the way we are considering direct-to-consumer from a strategic standpoint, but we are really definitely continuing to be engaged into direct-to-consumer activity and keeping practitioners in the loop because obviously, at the end, it's all about making clinicians more successful that will also drive the Straumann Group success overall.
The next question comes from David Adlington from JPMorgan.
Firstly, maybe just on EMEA and North America. Slowest quarter since 2014, 2015, actually deteriorated obviously. Just wondering how you're thinking about the potential of adjusting the cost base, given the slow market conditions? It sounds like you're willing to continue to invest. Just wondering what you need to do to maybe think about how you adjust the cost base if particularly these slow markets remain for an extended period.
David, I'm sorry to interrupt. It's very difficult to hear you, I'm sorry. Then could you speak maybe closer to the mic or something because I want to make sure we understand all your question.
Is that any better?
Much better. Yes. Thank you.
So maybe just on EMEA and North America, slowest quarter since 2014, '15. Just wondering how you're thinking about potentially adjusting the cost base, given slow market conditions, what would you need to see in order to adjust the cost base? And then secondly, just on APAC, obviously, you're seeing very strong volume growth in China. You sort of mentioned that you see some sustainability into next year. I just wondered what the margin implications were in terms of mix with APAC, LATAM growing very strongly and much more stronger than developed markets.
Yes. Thanks, David. A lot of questions here. Let's -- for NAM, honestly, we are still -- while it has been somewhat lower growth than what we had in, as you said, in 2015 or '16, '17, '18, we still see growth, and we are not seeing decreasing any of our cost base for the time being because we are facing huge opportunity from our perspective. We have an opportunity of iEXCEL, which is going to allow us to significantly then look at the future with being optimistic. Once again, growth is a factor of 2 combination, a combination of 2 major important parts. And the first one is market demand. And I agree that we see that softening a bit, and it might continue somewhat in North America.But the second side is obviously market share gain against competitors, and we have proven we're able to do this. And we think that with our portfolio of innovation, which is iEXCEL, but also you know that we have GalvoSurge, which has just been launched now in Europe, and we are going to get FDA approval in the second half of 2024 for North America. Then we are going to launch our new intraoral scanner with AlliedStar. And from a pipeline of new product standpoint, we are, we believe, in a very strong position. And we still believe that growth will be achievable. To which extent, it remains to be seen. But that's why I think the question about starting to revise our cost base, it's really not in our mind at least for the time being.And when it comes to EMEA, I think for EMEA, if you remove the direct-to-consumer effect, I think we generated very solid growth in EMEA. We have seen demand remaining pretty resilient, also, especially in the core business. Then we are not destined of a trend that would push us to start thinking about revising our cost base. This being said, we are also looking at investments and our cost base in a very nimble way. We are still having that agile mindset where if we need to take strong decisions in a fast manner, I think we have demonstrated, we are able to do this, then we would obviously being able to do this, if we see that trends would be completely different than the one that we would be seeing as of now.And when it comes to Asia Pacific, then the volume growth that has been coming from the Asia Pacific region and especially China has been really supporting us then to have limited impact from a profitability standpoint of the lower pricing. If you look at those massive volume and where our organization has been also been very cautious with structural cost increase, I think we are, at the moment, pretty pleased with the overall outcome, be it on the top line, but also on the profitability perspective. Then I would say on this side also so far so good when having the benefit of Asia Pacific and Latin America, a very dynamic region.
The next question comes from Hassan Al-Wakeel from Barclays.
I have 2, please. Firstly, can you talk about current trading and patient flow trends in September and October? And to what extent this substantiates an acceleration in growth in Q4 as comps ease? And what about 2024, do you see softer consumer sentiment as an impediment to achieving your midterm target of double-digit growth next year? And then secondly, following up on China, are you seeing or do you expect any competitive response in the value segment? And is 20% growth plausible over the coming years and not just in the coming months as you alluded to earlier in this call as affordability has improved and penetration is low?
I think what we are seeing in September, October, we don't generally comment, anyway, month-to-month basis. But honestly, we don't see in Q4, the start in Q4, anything different than what we have seen in Q3, mainly, at least nothing significant that would lead us to think that in all our major markets, we would have a very different perspective.The second thing is I don't think -- or I don't remind we have given any guidance for next year from a top line, then we did not say that we are going to grow whether double-digit or single-digit or whatever. But as I said again, from our perspective, we see the future with our growth contribution would be coming, if not from the market growth from market share gains, thanks to the different opportunities that we are creating for ourselves. And what is very important for us is keeping our destiny in our hands and not depending only into external factor to be able to generate growth. And it's too early to say for 2024, what will be, again, the macroeconomic environment and we'll be really happy to deliver our guidance in February when we are going to share our full year results.This being said, we have not expressed anything against reaching our 2030 target for the time being, which has been always our CHF 5 billion long-term perspective. And we think that we are still in line with being able to achieve this.Finally, coming to China, I would be happy to be able to do some forecast for the years to come. But of course, what the recent past has really taught us to be cautious about talking in years. I think if everything would remain the same as of today in geopolitical situation and in the macro situation in China, but yes, I think the segment that has been opened for being then now addressable for implant treatment, thanks to those new pricing, would theoretically allow us to grow around 20% for the years to come. At least the next 3 years would be something that is realistic. But once again, it has constant environment, which has proven to be quite challenging in the recent past where our global environment has been changing always very significantly in the different regions.But if you look at from a pure theoretical standpoint, in the segment that has been opened now for implant treatment based on affordability, yes, it has the potential to do this.
And competitive response?
Oh, sorry. So far, we have not seen any major effect of competitors in this field. They are obviously trying. We see, of course, also Chinese brands becoming also more active. But that's why I think we need to be very agile here and to monitor all that. That's why also going there on a regular basis, I think I told everyone that I've been traveling quite often there and still going next week, the full week in China, to meet our partners and being able to monitor competitive response. But especially once again, what is in front from the way we are looking at the businesses is being close to customers. As soon as we are able to anticipate customer needs and there are a lot of changing needs in China right now, I think we would be able to keep the performance that we're having now. And it's all about flexibility, agility, customer obsession, that will help us then to drive significantly performance as we have been doing in the past month.
The next question comes from Hugo Solvet from BNP.
I have 2. First, a clarification on the U.S. Can you indicate whether or not you're seeing further deterioration, stabilization or a slight improvement on the complex cases? And second, well, you did not give a follow-up to Hassan's question, you did not give a 2024 sales growth, but indicated earlier this year that you were expecting possibly flat margin at about 25% in 2024. So it became more evident throughout the year that you guys should be able to sustain very strong growth into 2024. On balance, you have growth investments to launch GalvoSurge in EMEA, the C-line system and the likes [indiscernible] in Asia Pacific. So just wondering what the thinking around margin for next year and how it evolves throughout the year?
When it comes to then U.S. on complex cases, right, I think complex cases is still one of the area where we see the market softness. Reason is, obviously, that those cases being very expensive, most or a large part of the patients are going through financing. And when you look at the current interest rates, of course, then the patients are -- for a large proportion of them wanting to wait or reschedule the treatment. And we are seeing this trend continuing. As soon as the interest rate will remain at a very high level, we don't see this really changing significantly.When it comes to 2024, then we are not going to give guidance right now. We are, again, being very optimistic about 2024 in our way to be able to counter some softness of the marketplace, but let us deliver then our Q4, seeing more what will be coming also from a macroeconomical environment in order to be able to deliver guidance for EBIT. But once again, we are here and being able to drive very significant outcome based on our growth. And something that you have to take into consideration is also the FX rate. Then our FX rate, it's having a very strong headwind. You might have seen that -- I think it was already around, well, 2.3% that we're having as an impact on our EBIT with the strengthening of the Swiss francs. Then I think we have done a very, very strong achievement in being able to cope with this and generating very significant efficiency gains. And I think this is a very strong highlight also of what we have demonstrated in the first half of the year and that we are going to continue in order to deliver also on guidance for EBIT in 2023.
Okay. Just a quick follow-up, if I may, in terms of the iEXCEL implant system. Any idea of the price mix, the premium to BLT?
Yes, I think that's a good question, Hugo, also. I forgot on this one to express. That's where we have another potential effect of generating top line growth is that the BLC line will be priced around 10% more than the current BLT, meaning that any cannibalization of BLT will be also a very positive effect from a top line standpoint. And we are also trying to continue to push here the value generated from innovation, which is also one of the factor of really strong performance by the Straumann Group.
The next question comes from Veronika Dubajova from Citi.
Welcome to Yang, look forward to hearing more from you as we go forward. Two questions for me, please. The first one is just actually on the -- just a follow-up on the competitive environment in China, Guillaume. And I think we've seen some of the large dental providers in China talk about potentially switching to deeply discounted implants as they face some pressures from a sort of wage perspective among dentists in China. I'm just curious, kind of what your degree of pricing flexibility in that market is. And I appreciate your excitement around the volume growth potential in the midterm, but just curious if you foresee any further pricing concessions that you might have to make in China. Or is that kind of business, that sort of heavily discounted DSO-type-business a business that you would rather not have in the market? That's my first question.And then my second question is -- and apologies, I'm also going to circle back to how you're thinking about 2024. Obviously, very clear message on your ability to outgrow the market and quite a lot of exciting products. Just curious how you're thinking about the investments required to get iEXCEL and GalvoSurge into the market. And any thoughts that you have at this point in time around wage inflation expectations for 2024?
Yes. Thanks, Veronika. I think -- I believe that there is, of course, some segment in the market in China, which is also developing that what we would call the [ eco ] segment. And I think that the [ eco ] segment will also grow significantly and this is where we are having also different brands for then targeting those different market segments. And we see, of course, some demand for lower pricing. And that's one of the reasons why we are not only -- and we are very often talking about massive growth developments and volume development, but it's not only common actually. It's also Anthogyr, which is our second brand, which is tackling the value segment. And we have our T-Plus and Warantec brands that are tackling the [ eco ] segment where we see also then a significant volume growth.Then we totally see what you are talking about, and we see a significant growth in all those different segments, and that with our multi-branding, multi-pricing strategy, the way we are trying to generate most of those massive volume growth opportunity that is represented by the Chinese market. And we don't need to make too much price concession on our A brand, thanks to leveraging the B and C brands that we are having available.Secondly speaking, when it comes to the means that we are going to use for GalvoSurge and iEXCEL and so on, I think we are going to leverage a lot what we are also having developed as a marketing platform in North America and in Europe and Asia Pacific in all our different regions. I think we have already a lot of our education platform, a lot of our marketing activities that we are usually then conducting that are going to be then leverage a lot for those innovations. There will be some additional ones and some additional investment based on the magnitude of the opportunity that we see. But this is also going to depend on how much the business will be coming. And that we are flexible on the resources we are allocating today and we have already a lot of those platforms that are already existing.And from a wage pressure that we're seeing in all, I think, the different regions, it's very different from region to region. We are seeing 2 things. We want to make sure that we value our people. We recognize the importance of talent in our organization. We want to recognize people for performance, then this is what we are doing from both a structural and a merit increase policy that we are then putting in place in the organization. And I think we are covered with regard to these questions, especially if some of the price increase that we are going to do, either by some overall list price increase, but also, as I just answered on the BLC line, by some positive mix effect that we should be seeing also in 2024.
That's very clear, Guillaume. And can I just circle back to your China answer? I appreciate, that's really good to hear that you can compete in all the segments. Just circling back to your growth expectations for China. I just wanted to clarify that you do expect 20% volume growth in China next year? Or should we be more optimistic or less optimistic at this point in time?
Well, once again, we are not, again, giving guidance for 2024, Veronika. But what I said and I think you are correct is that we are expecting the market to be around a bit lower than 20%, and we expect to do above 20% in order to gain some market share here.
The next question comes from Graham Doyle from UBS.
Just 2 from my perspective. Would you be able to just again sort of quantify, if you could, the sort of visibility you typically have on a revenue basis, so from a sort of order perspective? I know it's slightly tricky, but just, is it kind of 4 or 5, 6 weeks, just to get a sense of how much visibility you have into the end of the year. And then on pricing, would you be able to quantify how much of the growth in Q3 might have been price versus volume? And particularly in Latin America as well, that would be super helpful. And if you have time, I appreciate it's a third question, but if you were to contextualize how you think of patient flows now versus the same time last year, that would be really helpful.
Visibility order perspective, we don't have order visibility perspective because it does not work that much like this. What the visibility we have is about consumer or patient appointments. And that's what we are seeing when discussing with clinicians knowing, generally speaking, that they should have a clear view of their agenda for the 4 to 6 weeks ahead. And that's the kind of discussion we are regularly having. And that's why the way we are discussing with them, we don't see major changes in between what has been the case in the past month over then the fourth quarter.When it comes to price, I think we have -- we don't exactly give all those details, but what I can share is that we have more volume effect than we have price effect, but we still have price effect when we were saying that we were increasing prices and we were wanting to increase prices by 4%, we said at the beginning of the year. We have seen that achieved in different geographies, and we are still positive in pricing despite the very strong decrease in ASP in China. Then I think it's a very strong capability to execute on pricing because despite this significant cut in this part of the year, we are still generating also a positive pricing effect. But for the rest, it's mainly volume-generated growth.And when it comes to the patient dynamic or patient flow then the this year versus last year, I think it's -- it will be what we expressed, I think, from a general standpoint. In China, it's obviously much better than it was last year, especially because last year, we were still into this mixed lockdown effect coming from COVID because that was almost the end of the zero COVID policy in China, that has been up [ to the leverage ] in November, and that has been stopped in November. In LATAM, we see same kind of patient dynamic, and we see a slower in North America. And while we see some erosion in Europe but really not to a significant manner, then I would say it's -- in Europe, it's still pretty stable, I would say.
The next question comes from Falko Friedrichs from Deutsche Bank.
Two points of clarification, please, for me. Firstly, Guillaume, I'm trying to piece your comments together about the move from Q3 into Q4. Did I understand it correctly that it shouldn't decelerate, and there might even be a chance that it reaccelerate a little bit, given the easier comps? That's my first question, and specifically in EMEA and North America. And then secondly, there is quite a bit of a concern in the market right now about this consensus market expectation of 11% organic growth for next year. Considering all your statements today about the new launches, about good growth in China, that seems to be achievable. But I would be very curious to hear your thoughts -- early thoughts without giving any specific guidance on whether that 11% growth could be achievable? Or if it maybe makes more sense to start with a bit of a lower estimate here?
I think the overall sentiment that we have, and if you put everything together, we don't see acceleration in Q4, but we see being able -- in the current world, being able to deliver double-digit growth in third quarter, we are seeing that as a very strong reasons. If we can deliver the same in Q4, we would be also very pleased. I think that's the way I would put it because it's still very volatile out there and being able to see exactly what will be the consumer behavior, it's still a question mark. But based on what we do and based on the customer feedback, I think, yes, we are positive that Q4 should not be too far from our third quarter.When it comes to consensus, I think consensus, we are not going to give guidance here again. I think there is -- we see -- and we appreciate the strong confidence in what we're able to deliver. And as you express, Falko, I think you are right, we have opportunities in front of us, and that's what is great, and that's where we are pretty positive in our capability to deliver growth. To which extent it's going to be? What will be the macroeconomical environment? I think it's too soon for us to be able to give a perspective here. We just say that we want to keep our destiny in our hands, being able to drive growth. Now, with the current macroeconomical environment, it's still quite a very high target from our perspective. But again, it's too early for us to say, to be honest.
And a quick follow-up, if I may, on the clear aligner growth. So these comments about double-digit growth in B2B and slower growth in direct-to-consumer, was that for Q3? Or was it for 9 months or both? Could you clarify that?
Yes. I think it was for Q3, but we also have that valid for the 9 months. I think it's -- we have seen that because we have decided to go for profitability in a way since the beginning of the year, then we have decided to really drive now then not a top line maximization on direct-to-consumer, plus we had a combination starting from April of this lower consumer confidence affecting direct-to-consumer business on the B2B side. And we have seen that still continuing in the third quarter, accelerating actually a bit in the third quarter because of the holiday season, for the direct-to-consumer business. And yes, that's both sides.
The last question comes from Robert Davies from Morgan Stanley.
I had 2. One was just if you could provide any clarity between the 9-month growth that you've seen so far this year of around 9%. Just if you could just aggregate how much of that was -- do you think was market share gains versus underlying market growth? And what your expectation into '24 for the potential for further market share gains? So that was the first question. And then the second one was just around, I guess, the -- a couple of people have touched on this already. Just the moderating growth profile that you've seen through the year in Europe, in particular. What sort of countries within Europe specifically have you seen growth decelerating?
Wow. How much market share gain, how much -- honestly, there is -- we are receiving market share data a quarter later. That means we have only some data for the first half and not 9 months, then it's still a really big picture. I will give you my assumption, but I think it's not backed by number. I think plus/minus, I don't think we are very far from this. It should be 1/3 market, 2/3 market share gain, okay? That would be my best guess.When it comes to -- what was it again -- sorry, the second question?
Just a bit more clarity around the individual country dynamics within Europe and basically what's getting better, what's getting worse within the decelerating growth profile.
There is no decelerating growth, once again. I think the decelerating growth is coming from the direct-to-consumer. I think our EMEA B2B has been solid. Then we are not really seeing decelerating honestly, in any major countries. I think what we are saying is that Germany is doing actually very well. We have Italy also doing very well. We have Eastern Europe also delivering very well. U.K. has been, for the beginning of the year, a very strong contributor. No, honestly, I think EMEA is so far pretty solid. The deceleration has been coming from our direct-to-consumer orthodontic business.Okay. Then I would like to thank you for being with us this morning and for your attention. We are looking forward to speaking to you again soon, and we wish you a very nice day and all a friendly goodbye from Basel.
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