Carl Zeiss Meditec AG (AFX) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Carl Zeiss Meditec Conference call. Let me now turn the floor over to your host, Sebastian. Please go head.

Yes. Good morning, ladies and gentlemen, both who joined in presence and those who joined us online. Very happy to have you here for our Analyst Conference for the fiscal year '22/'23. I'm Sebastian, I'm the Head of Group Finance and Investor Relations. And thrilled to say, we've have a very special lineup of speakers today. So first, and as usually, our earnings calls are Board members and management, our President and CEO, Dr. Markus Weber; our CFO, Justus Wehmer, will take you through our financials of the past fiscal year and provide you an outlook for '23/'24. We also have here, still sitting in the back, coming up -- moving up front later on, Dr. Euan Thomson, Head of our Opthalmology business; Andy Chang, President of Carl Zeiss Meditec U.S.A. and the Head of the Ophthalmology Sales. And I'm very excited to also introduce little bit later on one of our great customers in the U.S., Dr. Bruce Rivers from the Envue Eye & Laser Center to talk about cataract and refractive surgery with a bit of a U.S. viewpoint in particular. And there will be a lot of opportunities throughout the session for Q&A. So first, we do initial Q&A session on the financials with management. So we'd ask you now to leave the cataract and refractive topics for a little bit later to discuss them with the specialists, who will join later on. And let's focus on the financials and the outlook and the strategy first with Markus and Justus. And then we'll do probably a quick coffee break after that initial presentation. And then roughly between 11:00 and 1:00, roughly, we'll have them and the presentations on ophthalmology and cataract and refractive. And I think we'd probably be closing, yes, I think, probably around 1:00 or a little bit later and go downstairs for lunch with those of you, who still have time to join us, we'd be happy to do that, then afterwards, to maybe have some additional informal conversations. So we look forward to this. And without further ado, I'll pass it on to Markus for the introduction. Markus?

Yes. Thank you so much, Sebastian, and also a very warm welcome and good morning from my side, ladies and gentlemen. Welcome to the '22/'23 Annual Analyst Conference at Carl Zeiss Meditec AG. It's my great pleasure actually to having you here in London, but also online. I truly appreciate and we truly appreciate your interest in our company and also the results. And we're looking very forward to discuss with you the annual results, but also the strategy and the next steps forward. Having this said, let's go briefly through the agenda. So first, I will start to give you an overview of the results. Then Justus, as usual, will give you more insights and details on the financials. Afterwards, I would like to address some focused topics. And finally, I will give you then an outlook for the fiscal year '23/'24. And as also usual, there will be then a session for questions and an open session there for Q&As. So let's get started, and I'm very pleased to report strong annual results, this above the market revenue growth. We achieved almost EUR 2.1 billion in revenue, a year-on-year growth of 9.8% and constant currency growth above 10%. The growth came from both SBUs and all 3 regions, which makes us very happy about. These are very strong results and despite currency effects turning against us in the last month of the year, it became extremely close to the EUR 2.5 billion target, we gave you in April. The device business demonstrated a very robust performance and outpaced the consumable business, which had a high base for comparison from last fiscal year due, among other factors to the increase in stocks in the Chinese sales channel. We've been ramping up production capacities and supply chain has been further stabilized. The lead times of some key products has been much reduced and many products are back to a normal level. Some backlog remains, mainly in the area of operating microscopes and refractive laser systems, but we're very, very confident to also clear most of this in the first month of the new year. Open orders, therefore, have been further reduced to a level of EUR 409 million, still slightly elevated compared to historical levels. Our strategic investments in innovation as well as sales and marketing, bless you, are continuing at a good pace. Justus will give you more details on the P&L later. EBITDA from EUR 397 million in the prior year to EUR 348 million by 12%, mainly driven by these high investments in innovation and sales and marketing. EBIT margin dropped to 16.7% from 20.9% in the prior year as a consequence of a relatively weaker product mix and, as I said, higher strategic investments. Adjusted EBIT margin was at a level of 17.4% compared to 21.4% in the prior year. We slightly missed our margin target on an as-reported basis due to more than EUR 4 million in special effects in Q4 from the deconsolidation of 2 development stage investments as part of an ongoing repositioning of our diagnostic portfolio. Also the negative trend in the euro R&D created a headwind for margins in the last few months of the year, in particular. All in all, we're satisfied with the results in line with the lower end of 17% of our previous margin range. We had forecasted in early August, and on an adjusted basis, we're all within the range. Our net income reached EUR 292 million, benefiting from higher treasury interest income and positive currency effects from hedging. Earnings per share of EUR 3.25 was nearly unchanged versus prior year of EUR 3.29. We propose to pay out a stable level of EUR 1.10 dividend per share as a dividend. Now I would like to hand over to Justus, who will provide you with more background and will discuss the figures in some more depth.

Thank you, Markus. Welcome to all of you who are online, and welcome to all of you here in the room in London, and pleasure to see many familiar faces here who have found their way to be with us. Yes. So I'm now going to give you a more detailed overview of our financials, starting like always with OPT. Revenue came in for OPT with EUR 1.577 billion compared to prior year. The reported increase was roughly 7.3%. and at constant currency at a very similar level. Growth was mainly driven by our devices business as delivery times finally began to come down in the second half of the year, in particular. Consumables were weaker than usual, as all of you know. This is mainly a base effect as the second half of fiscal year '21/'22 benefited from an inventory build in consumables in the Chinese sales channel, as we have discussed in previous calls. We clearly see various other factors pressuring the EBIT margin, a weaker product mix as well as planned investments in strategic R&D projects such as digital, surgical ophthalmology, regulatory affairs, and also increasing sales and marketing activities, such as physical trade shows, higher advertisement and travel. As a consequence, ophthalmology EBIT margin declined by 6.8 percentage points compared to last year to 13.9%. Let me also address proactively 2 questions that we can go into further detail in the Q&A session as well. I'm talking about the 2 big issues we have to deal with in our largest market, China. The destocking of refractive consumables, of course, and the incoming nationwide volume-based procurement for IOLs. First is the situation in the Chinese market as it comes to the planned destocking of refractive consumables. As we had announced in August, we have paused deliveries of refractive consumables to China around the end of fiscal year '22/'23 to normalize stock levels in the sales channel. This process is now underway, and our colleagues at Carl Zeiss China currently expect stocks to be at the target range at the latest during February of 2024 during the main winter season in China. So the delivery is out of Germany. And with that, renewed sales and earnings for Carl Zeiss Meditec from this key product will then resume. Consumption levels in China are slightly growing at the beginning of the fiscal year, which on the face of it looks good. However, you should keep in mind that last year's period still had a negative COVID-19 impact and also that our number of devices in the field has grown by more than 10% year-over-year. So the underlying utilization seems to be a bit on the weak side as we have commented since the summer season. The trend has not been deteriorating for the last few months and our destocking assumptions are based on the current slightly weaker consumer climate. We're currently in a seasonally weaker period. We will know more about the risks and opportunities for the remainder of the year by the time we get to the main winter seasonal peak in January, February. Because we're missing such a key product and its significant contribution to ophthalmology gross profit and level of expenses and R&D investment is very high in ophthalmology at the beginning of the new fiscal year, I want to caution again that there will be a very weak profitability margin with no real earning contribution from OPT in the first few months for this fiscal year. This is in line with what we have announced last quarter, and it will clearly be temporary as the destocking process unfolds. Secondly, we have recently received the first results from the first nationwide tenders for volume-based procurement for IOLs in China. These results now provide more clarity not yet entirely, but at least more clarity, and present us with a good base for future profitable growth in the next years. Overall, and so much we can share with you today, the results were in line with our expectations. We're facing significant cuts in price that we'll be able to maintain and grow our market share vis-a-vis our international competitors. We're actually quite satisfied that particularly in the premium category, we have been able to sacrifice less of our pricing than some of our rivals and still maintain a very healthy market share of at least around 20%. The initial negative impact on our EBIT though from price cuts will likely be a bit above EUR 10 million based on an implementation at some point in Q2 throughout the rest of the year. And please keep in mind, there's still a lot of uncertainty, how fast all these things will kick in, but this is at least right now our working assumption. For fiscal year '24/'25, we expect continued growth at then stable prices. For the next years, we expect to maintain and expand our position in the Chinese IOL business with our price competitiveness assured by our ramp-up of local production in our Guangzhou plant. From a high-level view, the Chinese market, which is barely above EUR 4 million in IOLs implanted annually, and this is really a near drop in the ocean in the nation of 1.4 billion that is aging very fast, it remains an enormous growth area for us. Despite local competition likely increasing their presence in the monofocal area, we have a very fine position with one of the very strongest international brands in the market with limited branded products available. With the uncertainties emanating from these 2 large special effects in China soon out of the way, we expect that profitability in the ophthalmology segment can begin to recover in H2 of this fiscal year. So let's move to MCS. MCS delivered a very robust performance with revenue of EUR 513 million compared to EUR 434 million last year. This represents a revenue increase of around 18.3%, at constant currency 18.7%. A very strong result helped by increased conversion of backlog in the second half year as supply chains began to ease. Gross margin improved to 62.2% versus 59.9% in the previous year. Pricing power remained strong throughout the period of high inflation. EBIT margin is at a high level of 25.3%, improved 3.8 percentage points year-over-year on good operating leverage. Let's move to the regions. All regions contributed to the growth with the strongest momentum this time from Americas. I'm happy to have Andy actually here later, who can certainly answer questions on that. Americas achieved sales of EUR 571 million, an increase of 17%, at constant currency 16%, among which, the U.S. showed growth primarily attributed to devices business with good conversion of backlog. Latin Americas demonstrated robust momentum, too. Argentina and Mexico, in particularly, grew strongly. In EMEA, we noted revenues of EUR 517 million, an increase as reported of 13%, constant currency 14%. Core markets such as France, Italy, Spain, Germany demonstrated strong performance. In Asia Pacific, we achieved revenues of roughly EUR 1 billion million (sic) [ 1,001.2 ] growth of around 5%, constant currency 6%. China, including Hong Kong, developed slightly down year-over-year, given high base of prior year's artificially high consumable deliveries, as mentioned earlier, when I was talking about the stocking. India and Southeast Asia, again, delivered very high double-digit growth rates. And Japan and South Korea were performing practically stable. So let's have a look at the P&L lines. Gross margin with 57.7% was 1.6 percentage points below prior year's level due to less favorable product mix with lower recurring revenue. Also, the previous year level had been somewhat inflated due to the higher shipments of refractive consumables to China as discussed before. OpEx are notably higher, mainly driven by strategic investments. Sales and marketing expenses are higher due to growth initiatives in part due to the expansion of our sales force, launch of our cataract offering in North America. We're also working on several growth initiatives in both surgical ophthalmology and refractive laser including investments in product management, direct-to-consumer marketing and sales support functions. Travel advertising also increased year-over-year. So while the sales and marketing expense ratio is up some 20 basis points to prior year. However, please note that we're trending in ratios below the pre-COVID levels as we will discuss later. R&D increased due to continuous investment in digitalization, such as Cloud and software development to build additional features for our workflows. We're also investing in IOL development and regulatory affairs. EBIT of EUR 348 million was below previous year's level, which was EUR 397 million, as already shown and explained by Markus. EBIT margin was 16.7% versus previous, 20.9%. A quick look at the adjusted EBIT margin, which was 17.4% below prior year's level of 21.4% on an adjusted basis. Therefore, we're well within our target range. Some adjustments arise from purchase price allocation-related amortizations on intangible assets in connection with the acquisitions in both periods and special effects from the deconsolidation of 2 development stage companies, 20.9%. Take a look at the adjusted EBIT margin, which was 17.4% below prior year level of 21.4% on an adjusted basis. Therefore, we are well within our target range. Some adjustments arise from purchase price allocation related amortizations on intangible assets in connection with the acquisitions in both periods and special effects from the deconsolidation of 2 development stage companies, Photono and Ophthalmic Laser Engines in the reporting period of roughly EUR 4.3 million. These relate to products we have decided to no longer support as part of the reorganization of our ophthalmic diagnostics offering. And then finally, a quick look at the cash flow statement. Operating cash flow increased to EUR 251 million, previous year EUR 188 million. The increase was mainly due to higher interest income from our treasury and less tax payment. We had a significant ramp-up of inventories, however, to support the diversification of our supply chains. Investments increased due to the expansion of production capacities for consumables in both the refractive and IOL business as well as the investments in Vibrosonic and Audioptics. Cash flow from financing activities are mainly impacted by changes in liabilities against our treasury accounts and the increase in dividend payment. Net liquidity continues at a high level of over EUR 864 million, only slightly down year-over-year. And thanks for your attention so far. And now I'll hand it back to Markus.

Yes. Thank you. Thank you so much, Justus. And now I would like to comment on a few key topics and then turn towards, together with Justus, to the outlook. So actually, I'm very proud to share with you the new AT ELANA, which is a hydrophobic trifocal lens, which we're about to launch now in the European market. And as you can see, actually also a wonderful design. And just presented at the biggest European trade show in Vienna in September through the ESCRS. So the foldable ELANA is made of a glistening-free hydrophobic acrylic that allows for optimal image quality. This new lens come fully preloaded in the easy-to-use BLUESERT™ injector that provides reliable implantation, while enhancing surgical efficiency and safety by eliminating the need for IOL loading, saving further precious time and minimizing potential errors. So the lens design features diffractive rings across its entire surface. It incorporates patented smooth micro phase manufacturing technology from Zeiss that minimizes light scattering and the related visual symptoms. That's, by the way, was one of the reasons for our investments in new production facilities. Increased light transmission through the optics improves overall image quality, and allocation of a higher proportion of light for near vision helps provide excellent performance for near to intermediate vision by preserving far visual acuity. It has a 360-degree square edge design that has been shown to be key for preventing posterior capsular opacification, PCO, a common, but also harmless complication. There's many IOL types that requires an ambulatory treatment on a therapeutic laser. Its step-vaulted C-loop haptics and specially designed and reinforced optic-haptic junctions have been shown to maximize capsular contact, which can further reduce PCO, and serve to enable centration and maintain positional stability that are requisite for optimal visual performance with a multifocal IOL. So this product will help further enhance our position in hydrophobic market and drive growth in European markets from this fiscal year onwards. It was -- will also be a key growth driver for us, as we work on key registrations for APAC and Americas over the next few years. Let me make a few comments on our strategy at Carl Zeiss Meditec and how it has evolved over the last couple of years. More than 20 years ago, actually we started out as a pure hardware company with more than 90% of revenue coming from the equipment business. Our historical business and focus has been ophthalmology. But with the addition of microsurgery business unit in 2006, our portfolio has been expanded to visualization tools used for all kinds of head and upper body treatments. To this day, our cutting-edge devices in ophthalmology and microsurgery create the anchor products for our customer relationships and provide us with a big competitive advantage, owning by far the largest installed base in many categories of diagnostic and surgical systems. Over time, we've been diligently moving our business to an integrated value proposition by entering and shaping workplaces, connecting devices to each other and creating added value in terms of efficiency and quality by using them in combination with each other. Due to the success in entering different consumable businesses, most notably in refractive and surgical ophthalmology, today, we're able to deliver a free workflow from Zeiss, connected devices at every step of the workflow in combination with high-value elements that are hugely scalable, such as consumables, delivering a maximum of productivity to our customers. Most of you know about our cataract workflow. And it will come up again today in Euan's and also Andy's presentation. This is our most mature work for proposition today, but we're developing many workflows, and I want to take the opportunity to highlight a new one, where we've been able to move things forward in 2023. So in microsurgery, we have had a strong position in the ENT. so Ear, Nose and Throat segment is our leading TIVATO. Oh, so the picture is gone. Maybe you can help? Okay, no signal. Blackout, okay. Maybe I'll just conclude. So that is our TIVATO and EXTARO microscope, and we're coming back to the slide in a second. So we've been adding market share in recent years. These are powerful anchor products. With the acquisition of Audioptics in the fourth quarter, we've enhanced our microscope with a new and novel diagnostic technology for the middle-ear channel that gives doctors and surgeons new possibilities in treating hearing loss. By connecting this to the microscopes, along with surgical instruments, we're establishing a new workplace to the community and to the market. With the development of implants, which we had initiated this year, ahh here we go, with our investment in the company, Vibrosonic, the aim for the creation of a full workflow, including implants against hearing loss. While this will require several years to get to maturity and market launch, and of course, still does face significant development risks, I truly believe it's an excellent example in how to implement our strategy in this specific case. Notably, it's very much a controlled risk, high reward. Most of our development resources go into high-value accretive areas such as consumables and implants by the more mature products such as high -- such as in this case, the surgical microscopes create good revenue and cash flows. My particular focus since taking over the CEO at Carl Zeiss Meditec has been to create the right kind of organization to lead this strategy to a successful implementation. So the following priorities have been of critical importance, changing to a workflow-based organization. So this means that our products cannot be developed and sold in local teams or even silo departments. Instead, we need to build effective global teams around the needs of our customer. This manager is responsible for the entire workflow instead of individual products. Secondly, scalability of the organization. We need to remove barriers and bottlenecks to growth that are quite common in a company of our size with a fast growth rate over the past few years. Over the years, many localized processes and improvisations that work well in addressing certain challenges in development, all operations have become bottlenecks for faster growth and better scalability as the organization has grown. Our new organizational development focuses on removing these obstacles by harmonizing processes and rolling out best practices everywhere in our business. Facilitating decision-making with sharpened roles and responsibilities, this goes hand-in-hand with my previous point. Across our organization setup, we need strong and effective leadership at every level. The high degree of coordination between all kinds of different competencies that our strategy requires can only treat this clear assignment of roles. And lastly, winning through empowerment. At Zeiss, we have incredible talent and innovation. Both to be an effective organization and to make the most of our all inspiring team potential, we need to let our people do their jobs with a high degree of personal empowerment. This way, we earn the loyalty and the highest performance of our people and we'll win the battle for the best talent in the labor market of today and especially also in the future. I'm actually very excited to lead through this organizational and cultural change and continue to be impressed every single day by our progress and our organizational spirit. With this great team we have, we strongly believe in fiscal year '23/'24, we'll go on the offense again. This leads me, actually Justus, to the outlook, and looking forward to the insights there.

Okay, fine. Thank you, Markus. Yes. Let me take you through a couple of thoughts on the outlook. Clearly, fiscal year '22/'23 has been a difficult year for us in terms of profitability, with a significant hit to our margins. And as I've indicated, the first half of fiscal year '23/'24, in particular, will also not be easy. Therefore, let me present you with a longer-term view and try to give some guidance on how we'll manage the P&L going forward. Gross margin has been -- sorry, under pressure this year due to factors we have discussed at length before. As you see in the 5-year chart, it is still well within the normal range. However, the uptrend from the previous 2 years, has been briefly interrupted. Our growth strategy, as highlighted by Markus, focuses on creating workflows by first, connecting devices to workplaces, and then adding high-value instruments such as consumables. Typically, consumables have higher gross margins versus equipment. Sometimes, the margin accretion only builds over time as critical scale is reached in production and sales. Therefore, while we will not promise it for every year sequentially, our gross profitability should slowly rise over time as the recurring business expands. The successful implementation of our workload-based strategy in a post-pandemic environment required a good deal of additional investments, particularly in R&D and sales and marketing after a period of more restrained investment during the pandemic and just prior to it. Most of the critical investment has been completed by now. The current economic uncertainty presents us with some headwinds for fiscal year '23/'24. In particular, as general inflation, especially in wages, has not fully abated, we clearly have to brace for an even more difficult year if our largest market of China were to face more sustained weakness, which we cannot know for sure right know -- right now. Therefore, a tactical adjustment to the speed and the amount of additional investment is prudent and required. We'll enter the new year with highly restrictive hiring policies and reprioritize our key growth initiatives in sales and marketing and R&D to keep the most critical projects at full speed, but slow down the ones with lesser impact on our competitiveness and financial impact. To be very clear, the goal is to provide some downside protection in case a more severe economic scenario were to materialize. What you can trust, though, as we'll be absolutely not do is to just cut expenses across the board to artificially lift our profitability back to 20% midterm goal. Actually, this course of action would not be very difficult to implement, yet it would be most damaging to our future success and competitiveness. The way to achieve our midterm 20% margin target over time will be sustainable profitability improvement via more recurring business, driving mix improvements and economies of scale by always maintaining a healthy degree of growth investment to win in the marketplace with our customers. And this is -- if you look back to our historic development, this is true for probably 20 years, and some of you who are invested for that long have been following that we've very strictly adhered to that strategy. So lastly, let me comment directly on the outlook for the new fiscal year. For '23/'24, revenue should be at least in line with the underlying market, which is expected to be around mid-single-digit percentage range. Presumption here is a stable macroeconomic environment and excluding currency effects. As mentioned before, the special headwinds relating to China will weigh heavily on our ophthalmology business in the first half of the year. Destocking refractive treatment packs in China will impact revenue and EBIT in the mid-double-digit million euro range as we've been telling you earlier this year, leading to a depressed EBIT margin in Q1 '23/'24, which will likely be only in the single-digit percentage range. Nationwide volume-based procurement for IOLs in China will impact our business by a bit more than EUR 10 million in EBIT from Q2 throughout the rest of the year. In H2, we're expecting a recovery due to the results of our measures to slow down the pace of investment and the recovery in consumables, particularly in refractive with our installed base growing further throughout the year as we work our way through the remaining backlog of VisuMax systems and upgrade additional systems to VisuMax 800. Our EBIT should return to a healthy level in H2, which from today's point of view, should be in the high teens range and grow again versus H2 '22/'23. As a result, for the whole year '23/'24, EBIT is expected to remain around stable versus fiscal year '22/'23. Should the global economy situation deteriorate further, particularly in China, we've contingency measures in place to slow down expense growth even more. Our mid-term margin target of 20% remains unchanged as a result of rising share of product mix and innovation, driving profitable growth. And with that, we've come to the end of our prepared remarks on the financials. Thank you very much for your attention. And I think we hand it to the moderator for the Q&A session. Thank you.

Let's first go through some questions in the room. So Falko here, why don't you start?

It's Falko Friedrichs from Deutsche Bank. Three questions, please. The first one is on the margin bridge from fiscal '23 to fiscal '24. So your new guidance points to a bit of a margin decline year-over-year. Can you add a bit more color on the drivers for that? How should the gross margin develop year-over-year? And how should the individual cost lines develop? And my second question is, are you willing to share in which year you aim to be back at this 20%-plus EBIT margin? Is that already realistic in fiscal '25? Or should we rather assume fiscal '26? And then my third question is, the ophthalmology segment was a little bit softer in the fourth quarter. Was that just due to a tough comp? Or was there anything else that was a little bit softer in terms of the market or your business development?

So Falko, thank you very much for your questions. And maybe I take the last 2, and Justus will talk about the margin bridge. So we don't see -- for ophthalmology, we don't see, let's say, a long-term softening of the market. So there is not -- from our point of view, there is no new drivers, which are challenging us. So indeed, what we see is, I would call it, the local economic variations, which may come. So we had, for instance, now in China, that NVBP, the nationwide volume-based pricing and procurement. So this is something, which we've to adapt on. But to be honest, as Justus stated, it's a huge market, and it's also clear that there's a huge market potential. So from this point of view, everybody is facing the same challenges, and we're turning that as an opportunity for us. So that's the one thing. So maybe to summarize that in ophthalmology, there are, I would call it still, let's say, reasons coming from corona and the corona incident, which is currently creating still some uncertainties. But on the long term, we see actually the big trends on program. Secondly, the 20%. Well, so far for us, we don't see -- we don't actually foresee to reach -- to exceed the 20% purposely by '25. So this is really something what we see more in the midterm. So we still have some heavy investments, especially in the new workflow solutions, which will be introduced now to the market, and Euan and team will talk more about it. So this is now coming. And from this point of view, we assume that for the first workflows, there are still investments necessary before actually the return kicks in. And so from this point of view, yes, so the overall P&L is healthy and it's actually supporting this. But we consciously decided to go for a high profitable gross , actually to go for it and then actually optimizing that by the second half of the decade to make sure that we'll exceed the 20%.

So the margin bridge. So for the gross margin, you'll need a strong stomach for the year to come, as I said in my notes, yes. So the first 6 months will not look pretty for OPT. With the second half of the year, and assuming normality in China, and knowing that our installed base of lasers has grown last year and indications are that it is going to further grow going forward, we clearly see that the potential in China is such that we then can basically with the second half of the year make up for that loss from the destocking, and then should see gross margins on a higher level for the entire year than what we have seen for this year, yes. And your question on the OpEx development, I'd say for the total year, you should actually see the R&D margin to have seen kind of a peak level this year. I would not expect it right now, assuming that the top line growth comes what we expect to be. I do not see it going north from where we're right now. And the same is true for sales and marketing that they should also rather go sidewards, potentially even go somewhat down, yes.

Anchal, you were next, I think.

Anchal Verma from JPMorgan. Two questions as well, please. One on the order development, that was quite weak for the full year. Can you just talk to the readthrough to revenue developments for next year? And do you expect revenue growth to be positive in H1? And then the second question, a bit on -- I wonder ophthalmology question. There's been some speculation that having refractive surgeries can actually reduce addressable patient population for IOLs or cataract surgeries. Can you confirm if there's any impact of -- that you see if the patient population coming in, in terms of mix? Or do you see that is quite different?

Can you please rephrase the second question?

Yes. There's recent speculation that increasing refractive surgeries might have an impact on the mix of population going into cataract surgeries. Just want to get your view on that? Or do you actually think both the markets are quite independent and you see growth in both individually?

Yes. So maybe I'll go for the second question first and then Justus takes over for the first. So the cataract surgeries -- so the cataract is a disease, which goes along -- which is age related and which goes along, actually this -- that natural lens becomes opaque. That's a different effect as a refractive surgery, which goes in myopia or hyperopia. So from this point of view, in the first glance, you would start to argue saying, this is decoupled. On the other hand, you have a full patient journey over the years. So that means, normally, what you start is until the age of 18, and people are getting adult and they're developing maybe a myopia, then you have a laser refractive surgery. And then they're turning 50, 60, then actually, there comes maybe a cataract surgery. So this is from our point of view. I would call it, 90% or 95% decoupled to the markets. And so that means from -- so cataract is something, which goes along. There's another procedure, maybe you're aware of, like a clear lens extraction and exchange. So this is a different scale and it's a different topic, which goes with a similar procedure. But overall, the refractive part is, from our point of view, the leading part for normal patients to run. Hopefully, it's addressing your question.

Yes. And your question on the order development. The order development in the last, let's say, 4 months has been negative, going down. But there are 2 effects that we have to differentiate. There is certainly one that you can clearly explain by the fact that we kind of are leaving the corona/post-corona times. There was clearly, in hindsight, some inflation in the order book due to long lead times due to uncertainty about logistical distribution networks, functioning or not functioning and so on. We've discussed this in previous calls. So that effect, we always expect it to disappear at some point in time. However, there's undeniably some reluctance to be seen when it comes to device orders. Although -- and this is the good news, although the funnels are actually at record levels across the board of all our device portfolio, no matter whether OPT or MCS. But we clearly see that, especially in countries where you've typically leveraged purchases, so finance purchases. Of course, the interest rate has played a role to delay some investment decisions and that we clearly have seen for parts of our device business. So on the other side, maybe one comment, typically in the pattern of our business year, October and November are rather kind of weaker months. So December is going to be the month that we really have to look out for to see are we now seeing some reversal of trends and you also realize, of course, that interest rates in some countries are now on the way down. So we're monitoring that very carefully, of course. And however, at this point in time, I think too early to tell that this is a structural recessionary trend, yes.

So -- and just how do you expect revenue growth to be in H1? Do you still expect it to be positive? Revenue growth in H1, how would you -- how would that translate into revenue growth? Do you still expect it to be positive?

I think, given that we still have a backlog that we work on, that we have reduced our delivery times again, H2 is in terms of the visibility, a bit more difficult right now. With some caution, I would, however, be optimistic right now that we may be able to deliver top line growth for H1, yes.

Yes. Oliver?

It's Oliver Metzger from ODDO BHF. Two questions from my side. The first one is about the phasing between Q1 and Q2. So you show some confidence for H2, which is good. But as the year starts with Q1, Q2, you mentioned the consumables, the headwind will be more pronounced in Q1 than the Q2, where MVP comes in with some lower impact than expected, but it would be great to have some more comments on your expected phasing. Second question is on growth in ophthalmology. So basically, your comments were primarily focused on your biggest market in China for next year. So with a weak start -- can you talk about also the more -- the growth expectations for the countries outside of China, potentially not only for '24, but also for the years afterwards.

Maybe it's already usual. I take first the second question. So what we see currently is that overall in Asia, and this is now besides China, and we see a strong demand coming in. So a strong growth, for instance, in India. So India has a high double-digit growth last year and the years before, and this trend is unbroken. We see the same in Southeast Asia. So there are effects, and we see this in single countries. The same is in Europe, we mentioned that, for instance, in Spain, very strong growth in Spain, very strong growth in France. And the key markets now from our side, which belongs then to France and Spain, shows us also that our workflows, that we got very positive signs for workflows here. So that means that we can position also in the big chains, as you know. So we're also actually going for the big actually chains and ophthalmology chains that we see a positive element here. What is actually a little bit of a headwind, as Justus mentioned, also myself, is the high interest rate in debt in U.S. So there was a high investment ongoing, especially in devices, and that was actually softening now. That was one of the reasons of the softer order entry because we had so strong order entries now in the last couple of months and even years, that this is now balancing, I would call it. And the other thing, as mentioned, are the special effects in China, now is NVBP, which is let's say, single-digit EUR 1 million impact for IOLs and the RTPs, what we build up actually to mitigate corona. Yes.

Okay. The phasing between -- is it......

Do you want to add further question to it?

One follow-up. I don't want to be 2% -- how do you find high growth? Is it like low teens? Is it in the 20s?

So in India, so high growth is higher than low teens, you can say that actually, right? So it's really very, very strong, strong growth.

So the phasing between H1 and H2, I'll try to give you a little bit of comfort here. First of all, I mean, as you know, 25% of our revenue is China. And in China, of course, the make or break is the development of refractive. But given that the summer peak there will be then on a much elevated installed base of lasers, even if the per laser utilization may be lower or slower, then I think that provides enough potential to then basically turn around the margin trend for ophthalmology quite significantly. However, it's not only that. There's also, in terms of our product portfolio, a couple of things happening over the course of the year. We'll have significant launches in our microsurgery portfolio with the successor of the PENTERO, which is basically a well-established product that has now or will now be replaced by its successor and has already been inofficially launched recently and received very excellent reception in the market. We also will have the VisuMax 800 FDA approval in the course of the next calendar year. So we hope, at some point around April. So that may also give us some additional tailwind for order entry. And we have the CIRRUS 6000 diagnostic device reapproval in the U.S. also kicking in by April. So all of the products that I mentioned, actually in terms of their margins, are in a high range in the device portfolio. And last but not least, I would also mention that we actually enjoy quite a good growth in our IOL portfolio. We're talking a lot about this volume-based purchasing in China. But outside of China, we also have actually, in many markets, seen very good growth rates and with the higher capacity that we have now for IOLs. And believe it or not, but in the past, it was rather a lack of capacity that has held us back of growing faster. Now with the investments that we have made, Markus was talking about scaling for growth, we think that we can then hopefully also benefit from actually some better IOL growth over the course of this year. Yes.

Sam?

It's Sam from Berenberg. You said in the outlook statement, you're expecting to grow at least in line with the market. I just wondered within that, what market procedural volume assumptions you're making for the refractive business, given the sort of macro backdrop and particularly in China, given you've said in the past that you have quite low visibility on procedures? And then on the cost side, could you just talk about how much deflation you're expecting in the cost base next year, particularly thinking about areas like logistics, freight and energy, et cetera?

Well, I can -- I'll start again with the second. I mean, the cost deflation, I'd rather be conservative in terms of expecting any deflationary tailwind. So at least we have modeled it into our system. So from that perspective, if it comes nice -- but I only believe it when I see it, yes? So that's the short answer on cost [ deflation ] expectation. I think your first question was what is the growth assumption in China on procedural growth? Again, it's a function, as we all remember, the refractive business is out-of-pocket expense. So it will ultimately depend on the consumer confidence in China. I think overall, we will see growth. And the question is, however, how elevated it's going to be. And that is obviously the uncertainty which we were referring to when we made our statements about the outlook for this year. So fundamentally, and I think this is important. Fundamentally, and structurally, nothing has changed in China for us. We remain to be the strongest player in the game. Nobody has entered the market and we all have read about J&J and so on, but nobody is changing our market position overnight. We have 8 million SMILE treatments meanwhile, and the brand awareness and brand trust in China is tremendous. So from that perspective and also building on some recent information from our Chinese sales organization, which says that confidence in China seems to be very slowly picking up. I think that we can see in China a growth that is probably able to achieve a double-digit growth rate again.

Okay. And operator, if you could start the question-and-answer session also online and see if there's any questions from the Internet.

Yes. Thank you very much. [Operator Instructions] The first question comes from Oliver Reinberg.

Can you hear me?

Yes.

Perfect. Thanks much. So the first one, I just wanted to follow up on the orders. I think in the annual report, you disclosed that these were down [ 16% ] year-on-year, which is a significant [indiscernible] performance. I fully acknowledge, obviously, because of the base effect we had last year. But my understanding was [ first ] one, we were only down high single digits, so can you just confirm that this means that orders have declined by more than 20% in the second half? And if so, give any more color on what kind of product groups were affected by that? Secondly, just on VisuMax. Can you just provide us an update in terms of the kind of order for [indiscernible] and what you see there? And also, I think, weekly talked about the hundreds of VisuMax that are still subject to delivery. So where we are then now? And third question would be on PENTERO you talked about the one which obviously is a meaningful product category in MCS. Any kind of early commentary to what kind of incremental features are coming with the device?

Okay. Oliver, I'll take the last 2 questions. Justus, take the first one. Maybe to start with VisuMax first. So first of all, we have increased our capacity over the last 18 months by 50%. And that means that we still have higher order entry in terms of devices and tools, which is also good, and this goes along with the question from them, concerning China and RTP consumption because we see a growing installed base in China, and so many of these systems goes to China. So from this point of view, we expect actually driven by the installed base that actually the consumption of treatment [ tax ] is also going up. So overall, Oliver, we see an unbroken trend that in terms of demand for VisuMax. As you know, not in all countries, we have already the clearance to -- actually to sell the VisuMax. So for instance, U.S. is still pending. Some other countries are pending the 800, so not the normal VisuMax, but the new VisuMax 800. And this is then something where we believe that this will give us an additional push and we are preparing for that. In terms of microsurgery to the PENTERO 800 S, and I hope that -- did I understood your question right? Otherwise, please correct me. So the 800 S is actually based on the PENTERO, very successful PENTERO 800 as you know. The PENTERO 800 is positioned a little bit below the KINEVO and actually is covering the -- I would call it, the mid segment and also procedures which are beyond new surgery. So from this perspective, what we add on that is especially also digital. So the 800 S has a lot of features coming in from KINEVO, which positions, as I said, it's below the KINEVO covering then also the market, and making sure that we can expand our market leadership in this field. So first, feedback was quite positive and maybe also important to know, the PENTERO 800 S was developed together with the Chinese team. And from this point of view, it's a quite positive actually element also to penetrate the Chinese market, but also to make it available for the rest of the world.

Okay. On your question on the orders. First of all, your calculation are correct, 16% year-over-year minus. And your question was on what does it mean for the second half of the year, then it would be actually mathematically even higher. Now that is correct, but that is exactly, obviously, the reversal of the high peak in Q4 of '21, '22, where we got all these RTP orders from China, which will just remind you was in the neighborhood of EUR 60 million to EUR 70 million worth of RTP orders, to basically mitigate the risk of having new lockdowns. And as you know, one -- the previous warehouse in China was basically trapped in some of the previous lockdowns, which led us then to that massive stocking in China to become independent. So if you take that out of your calculation, then you come back to a little bit more reasonable numbers, and that is then again in the next layer, the question of how much due to the longer lead times. How many orders for devices were basically put in, in order to hedge the risk of being kind of late in deliveries. And then the remainder is then -- ultimately the question what's really happening in the market in the new normal and in the long term, yes. And as I said, I think I made some comments when somebody else asked the question that for us is probably only to be answered once we see the December numbers. Thank you.

All right. We can maybe take one more on the phone, and then we go back to see if there are more questions in the room.

Okay. And the next question on the phone is Sven Kuerten.

On Microsurgery -- what growth what you see for Microsurgery in 2024 after a very strong 2023. And also, do you think that the Microsurgery margin in the next year was still at the same level as in 2023?

Maybe I'll take the questions. So first of all, as you said, so the last fiscal year was an extraordinary year for Microsurgery in all regards. So not only in the growth trajectory, but also in the margin development, so this was quite positive. So we believe it will soften for this year. So there's still a very high order backlog. And so that means the order books are really full. So this will stay at least for the running year now. But overall, I think it will be normalized again over the months. So I would expect that the market and I think that's the rest also for [ Meditec true ], that we are growing at least with the market or even outpacing the market in special fields as we did also in the last years and maybe just to make that also clear, and that's what I meant before. When it comes to corona, so the corona was an extraordinary event, and we have seen very high order entries coming in, which is not in sync with, let's say, standard market growth. And this has to be balanced and that's something where the entire community and the entire, let's say, market sees currently. And that's also something what we see in Microsurgery. Overall, team at Microsurgery is quite positive also for this fiscal year. So overall, we expect again a good growth. Also in terms of margin development because as I said, we have already the orders in hand. So this is something which is understood and safe in this regard. On the other hand, yes, there will be let's say, there will be definitely also challenges in gross margin development, how strong this will be, and there will be a challenge, let's say, a significant challenge is something which is currently not clear for us and we will see.

But the growth rate, so even high single digit would be possible in 2024? Normally, it will be around the mid-single digit.

So I would assume that it will be in the mid- to high single digit.

Okay. Let's go back to the room. And I think there's a question here from Carlos and then [indiscernible].

Just wanted to ask about your balance sheet. What's the chance that you find something to spend your war chest over the next 12 months? And I always wonder about the float because of the size group, which is now very cash generated. [Technical Difficulty]

Okay. Ladies and gentlemen, we have the call back now. So let me hand back over to Sebastian.

Yes. Hey, everybody who's joining us online and sorry for an unexpected complication. We had a power outage that -- we appreciate your patience in waiting and we will now move on to the second part of the program to the presentation by Euan Thomson, the Head of the [ SBU ] of Opthalmology. And Euan, I hand it over to you, you go through some exciting things in terms of digitization, go topic for now, and we will, after that, I think, have some interesting Q&A and look forward to the rest of the program. Thanks again so much for bearing with us while we had to solve some of the power issues here. Thank you.

Okay. Thank you. Sebastian. This is working okay for everybody the sound? Okay. I apologize for the subdued lighting, but as my wife will tell you, the lower the lighting, the better I look. So this is a working out. Okay. So my name is Euan Thomson, I run ophthalmology and also digital business unit. And as you'll see when I go through this, there's a strong intersection between those 2. So I joined Zeiss about 4 years ago. My background at the very high level, my background is in for most of my career, I've been CEO of small and middle-sized companies. I've been more than 20 years in Silicon Valley. And originally, I joined Zeiss to help with the digital transformation and to set up this what we call now this digital business unit. And I took over ophthalmology slightly less than 4 years ago, actually, as we came into COVID. So we did, obviously, a deep dive on the business of ophthalmology this morning, and I don't need to go into the history. I think everybody in this room and beyond is very familiar with the growth story of ophthalmology. I chose this time period though, because the beginning of this time period was actually COVID. And I wanted to mention it because it actually talks to the transition that we're making very strongly in ophthalmology, this transition from a solely device player to, I would say, a device and solution player. What happened when he came into COVID was that the world got turned upside down, as we all know. And we found many of our customers, in those first periods of lockdown, were really really confused and concerned about what was going to happen next, how are they going to manage reopening. Clearly, pre-vaccinations and everybody's social distancing, in complete lockdown in many areas, and people were very uncertain around what was going to happen next. So this was really a springboard for us to launch into our solution strategy. What we did during that time period was we didn't focus on conventional selling technique as many of our competitors do. Customers weren't -- to our minds, and we did tens of thousands actually of customer interviews, Customers were not interested in discounts and bundles. They really just wanted to know how they're going to get their clinics back open. And it was a very intense time. So we focused on the things which would enable them to get their clinics back open. We looked at our devices. We did some very simple things such as providing longer cable so that they can actually operate devices from a greater distance from their patients, very very simple things. And we provided free of charge, sort of breath shields, so that when they did -- integrated digital workflows that really are the solution that I'm talking about. So this is our digital ecosystem, as we describe it. And very differentiated from many of our competitors and really is something that's very, very powerful, and we feel will be transformational to the ophthalmology industry, in fact, transformational to the -- all the medical industries that we serve. So this is sort of one pager on our digital ecosystem. And we -- when I talk about this and describe it, I always talk about these 3 layers of value that you can see numbered here, 1, 2, 3. The base layer is the device layer, and it's the base layer because it's our foundation as a company. It's also the foundation of the ecosystem. So we do not -- we have not changed our investments and our focus on producing the best devices in the industry. We firmly believe this is what the Zeiss brand stands for. We believe very strongly that we have the very best devices for everything that we produce in terms of quality and features, the liability across the board, we believe, in our devices, and we continue innovating in this space. But now what we do in addition is we make sure that all of those devices are connectable or connected, and they're connectable to a data platform. And we have 2 forms of data platform. We have a cloud data platform that we call our health data platform, and we have a more traditional on-premise data platform, known as FORUM, which we still support today. So connected devices that are able to feed their data into a platform. And the platform is the second layer. Now we've invested heavily, and we're still investing in safe and secure cloud. We have a partnership with Microsoft. And we've -- we believe Microsoft has kind of endorsed for us, that we have one of the most advanced medical clouds available today. And what that means is it really is a global strategy. We will satisfy the needs of compliance and security, cybersecurity, in pretty much every environment. And it also has a unique kind of organizational structure where the patient is actually at the center of all the data sets. Now that's important. In a second, I'll talk about our workflows. I think a patient-centric cloud is quite different, for example, the way that electronic medical record systems are typically architected. Electronic medical record systems usually have the institution as the center, which means everything happens inside the institution. And not so much for the U.K. where our things are centralized in National Health Service, but in most countries in the world, that means that each hospital or clinic acts independently. And so you want -- when you want to refer a patient for different services, elsewhere, for example, in the ophthalmology industry, it becomes very, very difficult because everything is around the institution. And classically, hospitals will like print out a big sheet of documents to a note that their patient will have to hand take to another institution. Having a cloud that anybody can connect to, whether a patient is at the center, means that a referral becomes really, really straightforward. All we do is you change the access rights to one doctor or another doctor or another medical practitioner, and according to the patient's requirements, there then all of that data was invisible to another player, even if it's at another clinic or another hospital. So things like that, we thought of in advance. We recognize the world is changing, and this patient-centric approach to data ownership and data management is the way things are going globally, and we've built this cloud along those lines. And then the third lever of value here is the application layer. This is a software layer. And just like our mobile phones, which represent a consumer ecosystem, our experience of our mobile phones is really governed by the applications that we use and the access to those applications. So you can think of this as the experience layer, okay? So 3 layers, but the important thing, this is a digital strategy. The important thing is not this, the important thing is what it enables. What it enables us to do is to take any group of devices that are used in the clinical workflow and connect them through the cloud and provide software applications that enable a very streamlined and free flow of information through the procedure. So whether that's a cataract procedure, refractive surgery procedure or even management of the chronic disease, we produce the applications that enable this continuous free flow of information in a very secure environment, to enable different types of -- to streamline things to drive efficiency, to drive security. And in the end, also, we believe, to drive patient outcomes with patient satisfaction. So those -- that's the value I described inside an individual workflow. But actually, when you look at this diagram on the right, you can see that we're developing, and Markus mentioned this earlier on, multiple workflows in this space. So this really represents pretty much all of the clinical workflows that you will find in any field of any branch of ophthalmology. We cover cataract, refractive laser, glaucoma management, retina workflow. So all of these things are built on the same platform. And what that means is that we can provide value in each of these verticals with a fully integrated streamlined workflow, which brings efficiency, for example, inside the workflow, but this is also the whole ophthalmology space. So with this cross connectivity between the different procedures, it means that we have a fully integrated ecosystem that will really transform the whole space of ophthalmology. Most of our customers, for example, in the space of cataract workflow, will also at least be considering or be active in the space of refractive workflow. So having these point solutions is not really what customers are looking for. And we know this. I think all of you that interface with clinics and hospitals know that no hospital wants to have fragmented digital solutions. They're really looking for entire solution for the entire space. So this is what this represents. Now not only are we enabling this by the investment we've made in our digital capabilities, the cloud, FORUM and also the applications, but it's also enabled by the range of devices we have. And our devices are a more complete portfolio than you will find anywhere else in the industry. So this strategy at its foundation is unique to Zeiss. And it's something, again, we believe quite strongly will transform the ophthalmology industry. Now I'm just going to do a quick deep dive into the first solution, and Markus mentioned this one again and sort of presented a teaser that we would go through this in detail. This is the cataract workflow. Now cataract is where we started for various reasons. We decided to make our first truly digitally integrated connected workflow solution. We will start with cataract. Multiple reasons for that, but it's the one that's most advanced. And what we're doing now, as I show, we're already at the point where is starting to document and measure the value of this -- the value of this workflow versus a traditional, more manual workflow, and we'll get to that in a second. But first, I use this as an example to show how this combination of devices, the cloud and the applications all fit together to make a fully integrated solution. The start point -- I'll start here on the left of the screen, the big patient engagement. So we produce a patient application that is basically a white label application that any of our clinics can populate with their own information. Why do we include this? Various reasons. The first is secure data entry, capturing patient preferences is actually two very important features of cataract workflow. Understanding what the patient's needs are in detail enables a personalized selection of IOL. So capturing the lifestyle of the patient and their initial requirements as they come into the clinic is very important. But the other thing is the patient goes through the process, their practicalities like appointment times, appointment scheduling, but also when they're due to take medications. Now again, I think we all know that in the field of healthcare, one of the biggest drivers of outcome is patient compliance. And if you can provide tools to make the patient or to help the patient with their own compliance, then you will likely get a better outcome. So this is an outcome driver in our view. Okay. Initial patient data in, next stage as we go around this clockwise, biometry, looking at the natural power of the patient's lens, so you can match the artificial lens to the initial power of the natural lens. Then we go through the planning. And we have a couple of options for planning, the one for the United States that has got most traction of any, I'd say is the VERACITY surgical planning system. What this enables you to do is as you pull in information from electronic medical record systems, are there any kind of allergies, are there any other medical conditions which might influence the patient's applicability for a cataract procedure, for a lens replacement procedure, together with all the power calculations that take the information from the biometry and enable you to match it any particular lens. Now VERACITY is used today, and we can't get an exact number because we don't have an exact number for the total number of cataract procedures in the United States. But our estimate is somewhere between 10% and 15% of all cataract procedures in United States are planned using VERACITY. Now that then prepares a surgical plan. And the surgical plan is transferred to the operating room, again, via the cloud, so that when a physician arrives in the OR, that particular patient's data is already preloaded. Again, safety and security, you're avoiding multiple data entries. You know there's the right information, the right data for the right patient. But we also, in the operating room, create this operating room workplace call it, where our QUATERA system, our phaco device and our operating room microscope both share the same visualization. So everybody in the operating room can see exactly what's going on. So those are integrated streamlined operating room environment. We also capture video, so it's possible to capture a complete video of the procedure, and I'll go into this in just a second. But that feeds into the next application, which is a video record of the procedure, which can then be used to standardization across the clinic, one physician comparing what they do with another physician, and even optimization of an individual physician's performance in terms of the time they take and some of the nuances of the technique they use. So very useful for physicians who are early in their career. But also even when you think about a sort of a private equity group that's aggregating clinics, it's useful as a tool to try to drive towards standardization across the whole chain of clinics. And then, of course, in the background, you have the benefit of being in a cloud environment, which is this sort of remote visualization of data, which enables new streamlined workflows. We all know that people want to work from anywhere these days. This is just a modern way to do things. So overall, we hear very strong endorsement of this. And of course, endorsement is nice, but data rules. So what we started to do is we started to now capture and test the real value proposition of this integrated digital workflow. Now I can't show you in fact, all of the data that we've got today because we like to only share data that's been fully kind of peer reviewed and preferably published. But this has actually -- this is actually in the public domain now, and it's being presented by our customers. So I mentioned here on the left, I mentioned what we're trying to achieve in terms of the digital workflow. We want to increase efficiency. We want to know the cost of treatment. We want to provide access to the even new business models that are based on value sharing. We want to enable collaborative care and smart referrals. And ultimately, we want to drive insights on a personal level of what will be the best treatment path for an individual patient, which again, accumulating and aggregating data on the cloud ultimately enables you to do, because we will have visibility to millions of procedures as opposed to perhaps the hundreds or thousands of procedures that happen at an individual clinic. So we started to test some of these premises. And on the right, you can see here, actually, I think, even though I've been doing this for some time, some very surprising outcomes in terms of the benefits of this digital workflow versus the manual workflow. So up to a 50% time saving in workflow steps, and the surgeon can save up to 1/3 of time in the operating room. That saving time in the operating room, we know is the most valuable time you can save in healthcare. So being able to reduce and standardize and make more predictable the time to spend in the operating room with this integrated workplace approach that's where all the data is preloaded from the planner really does save time, and that's massive value to our customers. 50% reduction in data entry. This is highly important in terms of driving or driving away from adverse incidents. Many adverse incidents in healthcare are caused by multiple data entry and incorrect data entry. So having a full streamline digital workflow is a great benefit. And then 26% to 31% reduction in staff utilization. So this is the staff that have to prepare the patient come through these different steps and prepare the data in the patient for the surgery. These staff, highly trained people, not medical doctors for the most part, but still nevertheless highly trained and those global staff shortage in this area. So being able to reduce your staff requirements by around 25% to 30% is a massive gain. And then an up to a 30% reduction in process time variation per step. And this predictability in the end saves time, because most clinics and hospitals were scheduled around the longest time taken for a particular step. So standardizing it means they can be more precise with their scheduling, which overall also is another efficiency driver. So we also have early data, which I'm not sharing today, which actually does hint towards improved outcomes to patients under some circumstances. So I'm not going to discuss that today, but please -- but you should know, we are working on this, and we're actually quite encouraged and excited by what we may be able to present in the quite near future. Okay. Now I'm going to come back to the standardization with video because it actually -- it shows you how artificial intelligence can actually be embedded in these digital workflows to drive procedural outcomes and standardization. So this is a pictorial or video representation of our surgery optimizer. Now I click again, and you can see it maybe just slow starting. Otherwise, perhaps you can do to start this off for me. So what happens is, as I said, from our own microscope [indiscernible] with our software in the operating room enable streaming and a capture of the video of the procedure. You can playback this video. And what we do is we use artificial intelligence to segment the video down into the stages of the surgical procedure. So this on the left here, this menu is fully automated. And then a surgeon could go back and they can play back one particular phase, okay? Now in parallel to that is possible to pull in a reference video. So taking the example I mentioned earlier on, it's a large chain of clinics where the clinical director has a certain way that they would like to do things. If they reproduce that way and they use the same technologies, you get efficiency of timing, you get efficiency of buying power. But overall, you will standardize towards a faster treatment time. So you get the -- in the operating room, you get sort of a more predictable and better outcome. So someone who haven't seen an eye procedure before? It's easy for me to forget that actually, this is not familiar to everyone. But in case you're confused, this is an eye, and what's happening at this particular point is the old cloudy lens is being removed. Now actually, the way that surgeons do this can be quite varied. And now there's best practices and there are ways in which could be streamlined and improved. So this gives a surgeon -- and by the way, this is kind of self education. Surgeons, for the most part, will not want somebody peering over the shoulder and telling them how to improve, particularly when they're fully qualified. But I think you can speak to that in a second, perhaps. This is self improvement. So this is a surgeon looking at their own surgical video and comparing it with another surgeon's video. So they themselves get to improve themselves if they spot differences. And this reference video could also be from somebody on the other side of the world, if there's a surgeon they particularly admire that they really want to emulate. Rather than go visit them and to spend 2 weeks with them, they can actually have their videos and they can compare themselves with them. So a very powerful tool. And I want to just validate the power of this. We have a great feedback. We've got like, I think, it's 50 pilot surgeons using this right now worldwide. Feedback has been amazing. And this was one of the early adopters. Let's try.

Let me show you the real world results. I reduced my surgical time from an average of 12 to 13 minutes to about 6.5 minutes. So you can see the Capsulorhexis is reduced to about 27 seconds. And I'm actually implementing. I'm using -- I'm holding it somewhat midway between the center and the edge of that [ axis ] its a lot faster. The hybrid resection part made the biggest difference. I came down from about 40 seconds to just 9 seconds. Then you have the poster [ fluid wave, nucleus drive ] decompression and the rotation of the nucleus. The Phaco itself came down from about 3 minutes 10 seconds, all the way down to 1 minute and 52 seconds. On average, about 2 minutes, where very deep enough, I get that first chop through and through and make sure that I don't repeat any movements and repeat any chops as such. So yes, you can see...

To be clear, that is actually a fully qualified surgeon. This is not somebody in training. Operating -- the routine, the operating room routine with their own patients. And what they learned from studying their performance versus the reference surgeon is actually not just how to reduce their overall time, but dramatically, if you remember the times that she mentioned. And by the way, those times you were talking about already fast. So that is not -- she is not the slowest surgeon by any means. I mean people will take routinely twice as long as she already talked when she started this process. But she also mentioned -- and without going into the technicalities of what she mentioned, what you heard where she was changing her technique. So overall, she actually was still improving in terms of what she was offering in terms of her surgical process was actually improving as a result of this comparison. So it's not just about time. So this is early days, but I think it's a very strong example of how artificial intelligence can be used with the technology to improve overall quality of treatment. Now what does this mean from a business standpoint? What this means is that whereas we produce the best microscopes in the world, we know that. Our value proposition is no longer simply the best possible optics. Our value proposition is the microscope now becomes a standardization and optimization tool because of that architecture that I showed you at the beginning. It's no longer just a device, it's connected to the cloud, and we introduce application on top. We now have a completely different value proposition for that microscope and a new differentiator for that microscope. And by integrating into the workflow, and the times I showed you just now in terms of the efficiency gain of the workflow, do not include the surgery optimizer. This is now added value above that. So these are new value propositions for our customers to differentiate our technology, in a way that I would say goes about and beyond anything we could do inside the device itself. Now our optics are already exceptional in our microscopes. So although we will continue to innovate there, the kind of step function in terms of value add that we get from our digital program is significant compared to any optimization we can do inside the microscope itself. And that's just one example. Okay. So what's next? Just to finish with, I've mentioned some of these things already. We continue to build not just the cataract workflow, but to build these fully integrated workflows, each of them at a different stage, but all of them will roll out. This is highly differentiated. So even when you hear other companies use the same words like ecosystem and workflow, creation of this fully integrated ecosystem for ophthalmology that crosses over the different procedures is really unique in the space of ophthalmology. And because we have this range of devices, complete range of devices that other people don't have. This really will remain, I think, unique to Zeiss. And just again, a teaser at the end here. Once you've captured every single step in the workflow, you then have the ability to aggregate that data, not just from the clinic, but also networks of customers can also anonymize the data and share it between themselves to encourage collaborative research. And this, again, is not just [indiscernible] research for one step in the procedure. This is research across the entire workflow, and transition that when you think about management of chronic eye disease in the retina, this aggregation of data is really exciting for our customers. And they're very, very powerfully giving us the message that they want this. So I'll stop there.

Thank you so much Euan. Yes, thank you so much for your clear talk. We'll have a Q&A session a little bit later on. So my suggestion would be in light of time to get a bit back into the schedule that we go on with the presentation by Andy and Dr. Rivers. And then we have a combined Q&A and you can ask on all things, digital ophthalmology after that. So thank you for -- again for bearing with us, and we will go on with Andy.

Great. Fantastic. Welcome, everybody, and I'm glad to be here to be able to string along and connect the dots for you in terms of our results, our strategy and then, of course, what's going on in the market and then also sharing what happens actually in the field with our doctors. So we're talking about winning in cataract and refractive. I think what we already have covered is our success within refractive globally, within visualization, within diagnostics around the globe, within each of the key markets. What I will be able to share with you are specifics on the global market, how we're doing in terms of the strategy of our digitalization also some of our new launches in the marketplace. Just a little bit of background myself. I've been 20 years within ophthalmology eye care. Starting off with pharma, small public companies to, of course, now with Zeiss have gone on almost 8 years. So I'm proud to be here because one of the things that we are dedicated to is innovation like you've already heard. But then how does that translate into each of the key markets? Okay. Two of the biggest markets are still China and U.S. You can see by the number of procedures. I think many of you already know this quite well in terms of the overall prevalence of cataract and refractive procedures globally. We'll get into some of the nuances of the local markets for sure. But along with that, our biggest plan so far is to make sure we execute, bring all the different products, product portfolio and solutions into each of the different markets. So we're all at different stages of different product launches just like Justus and Markus has said that we have yet to launch the VISUMAX 800 and some of the new key features and solutions into some of the major markets out there. So of course, we're in a strong position in terms of our diagnostics, like I talked about, which is sort of the bookend of a patient journey into the OR and back. And that circle is complete for their first eye, their second eye and all of the different subsequent patients that our surgeons are dealing with our health care providers. In terms of full product portfolio launch, we have yet to have the entire portfolio within the key markets. However, we're working towards it, just like we have mentioned in terms of our investment. And then within the most recent entry launches within the U.S. market, we have the hydrophobic portfolio, the IOL, the monofocal as well as our phacoemulsification device called Quatera. Okay. So a little bit into the global market in terms of share, these are the estimates. We are the dominant player in terms of the biometry device, now keying in specifically to the cataract surgery realm. And of course, visualization, we're also the market share leaders. Now there's a lot of small players on the left. That's why you see the competitors there. There's not one major player other than us owning that market, having the predominant share. But we're working on what's in between. And that's really what we're talking about today, in terms of the IOL, OVD, the consumable space that we're moving into, and of course, the lens extraction component that we just launched. And again, not in every market. Now how does that translate to the U.S. market? We know that U.S. is still a large player within the cataract surgery realm and of roughly about 20% of the entire global market. And we come from a position of strength in terms of our installed base. So globally, we know the installed base of all of our equipment that drives diagnostics, workflow solutions and visualization, which means that in the U.S. and around the globe, that almost every ophthalmologist and optometrist encounters a Zeiss device in their clinic or their OR. And so we come from a position of strength and be able to do that and tying in the entire workflow and optimizing for the patient outcomes. As you know, in terms of our technology and our innovation, we don't stop. And this is what you're seeing through a small snippet in time in terms of our innovation just within cataract surgery, by the way. And you can see that we are investing. We'll continue to invest, but there's a component, which is the digitalization. What you see here is that we are very good at devices, just like Euan had talked about, at devices, technology. But the next layer is it produces a ton of data, a ton of analytics that we have not yet optimized until today. And those are the things that we're working on in terms of the digital integration in the marketplace. And just a couple of things or a couple of snippets that this is just the U.S. market alone, we've already calculated above 1.2 million IOL calculations for our customers that are utilizing the tool. Over 50,000 cases per month, just like Euan had talked about, roughly 10% to 15% of all cataract procedures in the United States are done with VERACITY. You see some of the commentary there, in terms of time efficiencies [ saved ] accuracy, but most of all is optimizing for the patients. And the great news is this is just a start. And just like Euan have stated and Markus, every facet of what we do will have a workflow integration such as refractive, glaucoma, retinal. And then we'll share with you a little bit about what some of the ophthalmologists are using the tool in the U.S. market. So I'm going to start the video. [Presentation]

So what you see there is obviously the strategy taking hold. And no different than your personal life, we just talked about it as a team. If you think about a few years ago, 5, 10 years ago, all the devices were separate. You had your cell phone, you had your PC, you get on to a laptop, but they weren't really connected. So thinking about how you go from one place to another, you use a GPS device. All of this is now integrated just like in ophthalmology, and you're seeing this take hold and it's improving patient outcomes, and that's what we're after. So shifting gears real quick to another market-leading market-shaping discussion, which is SMILE, which is we celebrated our 8 million cases plus in SMILE around the world. As we all know, prevalence of myopia is really severe within Asia, and that's where you see the dominant -- in terms of our position, which is a good place to have than we already talked about. Within the Western markets, we certainly do have room to grow, and that's what we're focusing on in terms of the product innovation, solutions and also the refractive workflow that Euan has also stated. And this is where you'll see all of the integration coming together. The best part about it is that we are the predominant share and the market leaders here. We do have some followers there to come. That really validates what we're trying to do. And actually, I have a special guest coming up, as you know, Dr. Bruce Rivers will share his journey in how he discovered SMILE within the military, but also in his private practice. Just like I mentioned -- this is closing on a couple of slides now. Just like I mentioned, the prevalence of myopia is quite severe and quite strong within Asia and especially working with big institutions like [indiscernible] SMEC and all of our partners out there that is actually getting worse. And what started off as their journey into myopia control became myopia only management because they couldn't stop it. But this means that our entire workflow comes into life, when we see the patients from vision in terms of their early care and then how we then migrate them into refractive care if needed. In the U.S., specifically, in terms of the market, it has gone through its peak and has softened a bit based on some of the economic pressures that you've seen. So in the market today, in a public domain, you can see by market scope, the entire procedure market has dropped a little bit and softened post-COVID. And I think that's been reported throughout. But we do know the opportunity is still quite larger than the United States. And if you think about the number of patients that one, the growing problems of myopia again for the kids, but also within the contact lens intolerance component and other facets where they can benefit from procedure like laser refractive surgery or SMILE in particular. Moving on to our investments. We know that we're working on the refractive workflow as well as new platform just like the VISUMAX 800 and the MEL 90 other indications to come. So the innovation and investment will stay into the major markets. So we haven't fully captured that opportunity yet. Okay. So one fun slide that we wanted to share with you. This is real, I had to fact check this. One of our customers showed us and said, "Hey, did you know Elon Musk posted a SMILE post." And I thought it was a joke, but if you actually can go and Google it and you can find it. But the point of all of this is that the market is rapidly changing, to have in an isolation thinking that one person can't control the market or at least influence the market, you can see where he is embracing SMILE, and he posted that, hey, there's alternative treatments out there, which is pretty good for us, we're watching it and seeing what the impact would be like for the market, but it could be pretty polarizing too. But anyway, so before I do, I want to introduce Dr. Bruce Rivers. He has a long journey into ophthalmology, into eye care, but served the U.S. country, not just in Army, but then also in the Navy, 1 to 2 tours in Persian Gulf. And if that wasn't enough, he also led a refractive ophthalmology department for the Army is where I met him first, led the war fighter study on refractive surgery and its impact on the sharpshooters. And then after that, decided to go into private practice in the middle of COVID. So he's not averse to difficult times and definitely can present in the dark. So Dr. Bruce Rivers can you come on up? Yes. Thank you for being here.

Thank you. So I'm not sure what that says about me but the fact that I decided to open a practice during COVID, doesn't make me sound very smart. But thank you so much for having me here. It's really a pleasure. What I thought I'd do is kind of talk to you about my journey, talk you about why refractive surgery is so important in the military and how that has kind of shaped my journey with not only with ZEISS but just developing my practice and kind of using a lot of the stuff that you've heard conversations about earlier. So like Andy said, I started out in the Navy, started out as a medic and I have no interest in eyes whatsoever. I was actually trying to get my college degree. And unfortunately, in the Navy, they try to send you to a ship and I was trying to stay off of a ship. And they do not do eye surgery on a ship so I decided to be an eye tech, had no interest in eyes but it turned out that kind of planted the seed. And I really, really loved working for an ophthalmologist at that time. I went on to become an officer in the Navy and did like 12 years in the Navy. And then I transitioned to the army once I got into medical school. As Andy said, we -- I was the first doctor in the military to do SMILE and as a part of the army refractive surgery research center. I retired as a [indiscernible] opened my own practice a couple of years ago. So why is refractive surgery so important in the military? So a lot of people don't know this but in the military, at least in the U.S. military, you can't wear contact lenses when you're deployed, right? The 3 things that gets a person evacuated from a combat zone is if there's a risk of life, limb or eyesight. That last one is typically self-inflicted by soldier is wearing contact lenses in his really daily environments. And so as a result, refractive surgery is really, really important. It's not really an elective thing. It's actually like a necessity. And so if you can get surgeons out of glasses, it's really a big one. Not only does it improve their performance but you cut down on the risk of them having to be sent back because they have an eye infection. So SMILE, I got PRK right before I deployed to Iraq, so 18 years ago. My vision is great but it was a very painful recovery. The thing I liked about SMILE is it kind of bridged the gap. So on the military, about 80% of people would get PRK before SMILE came out. And obviously, because everybody was worried about the LASIK flap, they worried getting hit in the face or some type of injury. So when SMILE came along, it actually provided us like the best of both worlds. So you get the healing and recovery of LASIK but the stability of PRK. And so it quickly took off as a very popular procedure in the military. And that was one of the things that I really, really liked about it. It is one of the reasons I was so excited when we heard that it was coming to the U.S. So for me, like I said, I got PRK. I ended up doing a lot of different things in Iraq. And so I was like a minus 6.5. And for me, the things I ended up doing, I was not at a hospital, I was with a combat unit. So I found myself in different situations. I was so glad I got refractive surgery because if my glasses would have gotten knocked off, it would have been very difficult for me to do the things that I needed to do. My transition from the military to the private sector, I was the first one in D.C. to start off doing SMILE. And I think that for me, because of the way I look at SMILE, look at refractive surgery, I kind of look at athletes and law enforcement in the same way as I look at soldiers. And being in the D.C. area, you have what we call the [indiscernible] organization, so FBI, CIA, DA, all of those organizations, Secret Service, there's a lot of those people in the D.C. area. And those -- that population really fits the same requirements that a lot of soldiers have. And so for me, just kind of making that transition from the military to the private sector, we really try to focus on SMILE as being a great procedure for everybody but specifically, those individuals. And this article was actually an article that me and Dan Reinstein just recently published last week talking about people with really high-precision jobs and why these procedures are better for them. The picture over there, we started our program with Howard University. So those are 2 basketball players that I did SMILE on. And the thing I love about that is that I do SMILE on those guys, they played in a game 2 days later, and they were hitting 3 pointers. The coach was really, really happy. So it just shows like to me, I would never have done LASIK on someone and been happy with them playing basketball 3 days later. Just I would have never done that. And then speaking to integration. So in the military -- the nice thing is that in the military, I was always used to having the best equipment. So we always have nice equipment. The problem in the military though is because of security reasons, we were never really able to integrate everything the way I was able to do when I got out. So in my practice, with really small staff and because we are completely integrated, we're 100% paperless, it really makes things very easy for my staff. Just like they talked about earlier, the IOLMaster Veracity all these things for me, the microscope, all these thing for me the workflow is very easy. In fact, I was able to actually plan a cataract surgery in my room yesterday through Veracity on my iPad. I would have never been able to do that in the military. So the technology is really amazing. And I think the other thing is that for patients, it makes their experience very streamlined. When they come to my office, they'll say, "Oh, wow, I've never had these tests." And they've had them. I just don't think they've ever had them in the way that we do them. And then future innovation. So one of the things that I'm really looking forward to is how we continue to push the envelope. So the VISUMAX 800, the refractive workplace, I think those are things that are going to really continue to change the game. We've already started looking at [indiscernible] and then, of course, visualized for [indiscernible] development. Those things are really important to me, not only to fine-tune results, but just to improve patient outcomes and really just kind of set us apart in the D.C. area. And then lastly is the video. I'll let it play but my son just got SMILE. He's in this video. [Presentation]

Thanks so much, Dr. Rivers. An honor to have you here and to talk about that. And to all of you, we can now do a combined Q&A because the first Q&A was getting cut short a little bit. [indiscernible] earlier to follow up if there's anything left over. But you, Andy and Dr. Rivers, I think you'll also be happy to take some questions. And yes, look forward to it. Who wants to start? Oliver, do you want to start? let me see if this is on?

It's Oliver Metzger, ODDO BHF. The question I have to you from, let's say, pure view for a practical environment. So you say you only offer SMILE. I'm sure you also talked to some colleagues. So why is -- your view from your perspective, why is LASIK still so dominant in the U.S.?

Yes. So I don't only offer SMILE. I do everything, SMILE, LASIK, ICLs, everything. And I honestly think that when all things are equal, I think the SMILE is the best procedure. But I can approve -- I can use the procedure that's best for the patient. I think in the U.S., the reason SMILE has had a little trouble taking off is because the name SMILE, I think, has been difficult for people to kind of view that as an eye procedure. And since LASIK has been so dominant for so long, I think that if SMILE was kind of anchored to LASIK, maybe next-generation LASIK or [indiscernible] LASIK, I think that it would probably be more likely to pick up. The other thing, though, I think is that a lot of surgeons are in markets where nobody is doing SMILE. And so in their mind, they're like, why would I change if beyond the dominant procedure. And that was the case in Washington, D.C. until we opened. And so now we're starting to see other practices that don't do SMILE, they're starting to tell people -- they're starting to advertise that they do SMILE. And then when patients come in, they say, you're a good candidate for SMILE. So what that tells me is that they're starting to get worried about this new procedure. And before long, when patients are actually driving the market and asking for SMILE, they're going to be forced to either get on board or lose patients. And so I think that it's just a matter of time, and it's a matter of patients being more educated about why SMILE is a better procedure.

Can I just maybe add just a little bit, and you can comment on my addition as well. But I think at the time of introduction of SMILE, the U.S. is a relatively mature market, which meant that people had already -- a large number of people had already invested in kind of alternative ways of doing it because obviously, LASIK was sort of a big market driver, and it received a lot of market acceptance. So sort of unlike China, I would say, going into a mature market, you have to convince people to give up what they were doing and invest in the new technology. And it's not kind of a level playing field where you just say what is the best technology to buy. So I think it's also a contributor is the kind of the maturity of the market.

And that's true. And I have the luxury of starting from scratch. I didn't already have a laser. I knew I was going to get a VisuMax. So someone who's been well established or someone who has maybe clear for offices and they're doing LASIK for them to transition, it's a really big commitment that they have to make, especially if they have multiple offices.

It's Falko Friedrichs from Deutsche Bank. And my first question is on this digital ecosystem. How should we think about that going forward? Is it essentially that you're building your Mac IOS and [indiscernible] is building their Android, and you really have to opt for one of them? Or is it that you can still interchange...

Actually, our platform -- you can connect other manufacturers' devices to our platform. It's not kind of -- there's no shutout. There's no lock out. And we want this for various reasons. The primary one is that we want to be kind of user-friendly, and so people don't feel that they're making that 100% commitment. The value add will be the sort of the level of integration you get when you have a fully integrated ZEISS workflow versus somebody else's workflow, so -- versus pieces of somebody else's technology. That's the first part of that answer, I think. Overall, we have a much higher level of maturity in what we're doing. And sort of if people have to choose, I think the way that the market will view it is actually the first, we're much further ahead. So it's not iOS and Android just both mature operating platforms. You have to choose one or the other. There's just a great deal more that we can offer right now. I mean order of magnitude more, in my opinion, than you will get with any other manufacturer. And then ultimately, as I said in my presentation, the breadth of applications. So we're not just looking at having a point solution for cataract. We're looking at having an integrated ecosystem for all of ophthalmology, and that will be a big differentiator. So people are faced with sort of that level of choice. I think, to my mind, it's not just 2 equivalent operating systems where it's just a matter of preference. I think what we offer will be far greater than what anybody else can offer.

For Dr. Rivers in that regard, would you choose one of these ecosystems? Or could you also opt to go for 2 or 3 different ones?

So I currently use the ZEISS ecosystem. So I use [indiscernible] and I use [indiscernible]. And I think the way they rolled it out was really smart because even though I was opening a new practice so everything I bought what I wanted, knowing that I was going to integrate. But in other practices that have already -- they already have equipment, and they're not going to buy new equipment, I think it's really smart for ZEISS to do this so that everything kind of connects through their ecosystem, whereas other companies that I know are working on our ecosystem, when you ask them, well, can I use the IOLMaster? And they usually say, well, we're going to be able to do that. But right now, this is kind of like within our company, and we're going to expand later. And I think ZEISS was smart in kind of allowing those other systems. So although I own a lot of ZEISS equipment, I do have other equipment from other companies. And that all feeds into the same system without any problems at all.

Okay. And then my last question. How is that U.S. cataract launch going versus your initial expectations, launching the [indiscernible] with just the monofocal? Is that in line with expectations, more difficult or easier?

Maybe I'll answer that. So the cataract platform, as you know, is an entire ecosystem. So what we're doing is we're starting from our areas of strength, which is our biometry, our visualization. And then we're moving into the QUATERA as well as the IOL. So we just launched into it. In terms of expectations, we knew that it was going to be a slog in terms of the incumbent but we're not going to give up. So we're on it.

Anchal Verma from JPMorgan. Just a follow-up on the digital and workflow improvements. So you've shown us the time savings and the workflow improvements with the digital offering. The metrics you showed us, the reduction metrics, what will the relative do? Was it relative to manual procedures? And how does that compare to what's on the market versus other peers?

Yes. Thank you. It's a good question. So we actually run these as we would run a normal clinical study. So we had kind of a control reference point, which was generally inside the same clinic offering a traditional way of doing things and then upgrading to the full digital workflow, and we run them side by side. So there was no question of one clinic's already faster than another, and we're leveraging that. These were improvements inside the same clinic. And I think in terms of where we are versus anybody else, being at the point that we can actually measure it and showing this level of improvement demonstrates how far ahead we actually are because I think it's one thing having a PowerPoint and saying sort of having the word ecosystem on it. It's another thing actually having a fully integrated set of technology with a cloud platform and on-premise platform, the applications, which actually lead to the improvement for connectivity for all the devices even as we've said sort of ZEISS devices but also other devices they may have in the clinic. These are things which the -- right now, there is no comparison for. So that's -- you couldn't really show one against the other. They're just not mature enough to even measure.

Maybe I'll add to that just real quick. So if you take a patient diagnostic into that workflow, if it's a manual process, they sit in front of the biometry devices, sit amongst many devices, then a technician would take a print out and go on a website and key in the parameters to get an IOL calculation. Now they have to do this for their first eye, their second eye and all the patients for the rest of the clinic day or the surgical time. And maybe you can add to this, too. And then on top of that, if the patient decides to change their mind and opt for a premium lens, you redo that workflow and validation again. So this is what I was talking about earlier that in our consumer lives, we're so used to that integration, we don't have to think about it and map quest again for those that are old enough to know that or whatever you pull up. That disappears now. So do you want to add a little bit of that?

Yes. And I think the other thing is that, the nice thing about Veracity is that -- so I use a wide variety of lenses from a lot of different companies. And what I like about Veracity is that no matter what lens I choose, it's going to give me the calculation or going to give me the right power for that patient. And over time, as you do more cases and every time you update the system just by looking at the patient I did surgery on, it will pull that information into Veracity. And so it's constantly fine-tuning your results. And so surgeons will often target a certain final prescription. And the biggest thing is probably ties to what someone asked about refractive surgery and how that affects the cataract market. So it doesn't really affect the cataract market because -- for 2 reasons. One, anyone who's got refractive surgery and he may develop a cataract, that person has been used to not having glasses. And so they're going to be more open to having cataract surgery sooner. The biggest problem with people who had refractive surgery getting cataract surgery is that in the past, trying to calculate the right lens for them has been difficult. And for me before, if I was going to do a surgery on a patient, I would have maybe 4 different calculations in front of me, and then I would kind of do all of this math work to try to figure out what lens to pick. And even then when I picked that lens, I would kind of be like, all right, I'm hoping this is going to hit the spot. Now you don't have to worry about that. And a good example is my wife had LASIK 15 years ago. And I just did a trifocal lens on her 4 months ago. And I obviously was not worried about hitting the mark. I was worried about her being happy. But in the past, I probably would have suggested someone else do her surgery because I don't know if I would have been so confident on being hitting the mark.

Just 2 more for me, please. One on a wider R&D question. So obviously, your spend has been increasing. Beyond the multifocal IOL in the U.S., what else is within the R&D pipeline within ophthalmology?

I'm not sure we get real granular on sort of every component of R&D. But I think we can see that we are actually innovating across the entire portfolio. You could take all of our mature platforms such as biometry and microscopes sort of the imaging devices, and there's meaningful research taking place across the board. So I think the key thing for us is we haven't slowed down in any of those areas. What we've added on top of this, and I think Markus and Justus referred to this earlier on, the innovation of IOLs was something that we took on in advance of getting ourselves into that consumable market. And I think this -- and the same thing with digital. So we take -- and this tends to be, I think, a positive feature of ZEISS as well invest ahead of the market, and that's what's really taken us into these new areas. And if we haven't done that, we would basically still be a device manufacturer. So I think these periods, it does ebb and flow. And we wouldn't expect the same percentage of revenue in R&D expense as we grow the revenue. And some of the programs get more and mature so we can actually reduce the absolute R&D expense. But I think the way that I would describe it is this kind of investment ahead of the market because we are expanding our portfolio and taking ourselves into new capabilities and into new areas.

And just last one. On VBP, if I can follow up, please. Can you just show your assumptions on the VBP headwinds you're seeing? Also, can you provide an update on the tenders? So we will be talking about that previously came out, we've mentioned that there are around 60% price cuts. You've said that you've achieved better pricing than competitors. Can you just provide a bit more color around there?

Yes. Maybe I think we touched upon it, and you're talking about the Chinese volume-based pricing. It's within our expectations. We knew that there was going to be a pricing pressure and volume base expectations within the local competitors as well as the global ones. So we're managing it. It's still quite dynamic, and we're seeing all the net and the results of that. But so far, we're meeting expectations.

It's a little bit early, I think, to give sort of a full perspective on this because it's kind of happening in real time as we're here today.

A couple of questions. I mean you mentioned the impact of interest rates on leasing. How much of your device portfolio you think is not both [indiscernible] but for like leasing schemes?

Yes. So a couple of the methods in which we can get equipment to our customers. One, the leasing is through a third party. So the leasing partners would then take the ownership, and then so the way that we treat it is it would be a sale. So internal leasing also does occur but it's a much smaller subset.

One thing actually occurred to me on this as listening to the question earlier on is that, I think what's important to understanding in terms of the whole business of Meditec, not actually include Microsurgery in this as well is that we have different types of funding and financing for different types of product. So if you think about the types of product that hospital [indiscernible] microscopes for neurosurgery, microscopes for retinal surgery, these types of capital purchases tend to be coming out of the hospital's capital budget. And that's relatively unaffected by changes in the financial environment. Then we have a whole range of customers, I'd say, particularly in the United States, where these are small clinics or chains of clinics where they're kind of heavily dependent on sort of on financing, which means they're impacted by interest rates. Other markets remain robust because again, these hospital budgets versus sort of capital budgets versus smaller clinics where they have to finance to buy equipment. And then you have the third category, which is really I would categorize it as the consumer products, a consumer patient faced with upgrading to a premium IOL when they have a cataract procedure or opting to have a refractive surgery procedure, which is entirely their choice. And these things then are impacted by consumer confidence as Justus mentioned earlier on. So I think -- and even there's a difference between countries in terms of those dynamics as well. So it's a little bit hard to give one sort of unified percentage answer to this. But I think it is both. It's an opportunity and somewhat of a challenge when this environment shift that you've usually got one area that remains strong, you might have another area that undergoes some challenges. And I think this sort of mix we've seen in ophthalmology in terms of the product portfolio and the strengths of the different pieces speak to an environment we've had in the last year or 2 where this dynamic has been rapidly shifting. People came out of COVID, out of lockdown actually with kind of, I'd call it, excess cash. And I think across the world -- and you can probably talk to this, Dr. Rivers as well, that I mean across the world, we heard stories of people haven't been on vacation, they have been in lockdown, still earning. They have this money. And one of the things they wanted to do was to have refractive surgery. So we saw this boom period for refractive surgery globally. Then you go into different era where there's less consumer confidence goes down a little bit and less disposable income, people are now traveling again. And these are -- as I think Justus and Markus referred to earlier on, these are kind of the ripples of COVID that is still kind of spreading out from the event.

Yes, I would agree. I think that in the U.S. with COVID, there are a lot of people that realized after the lockdown that it was difficult for them to get and to see an optometrist to get new glasses and new contact lenses. And a lot of times, I think that drove their decision to say, well, if I just eliminate this altogether, I don't have to worry about it. And so...

And then the second question, I was doing a little benchmark between you and Alcon, how much you spend on R&D and certain marketing. And I think on R&D, you spent quite a lot relative to the size. On sales and marketing, there are like so many reps. So I was just wondering how do you compete against that? And as a client, how do you view that in terms of like just the presence of an Alcon in the U.S. and other markets?

I think, I speak to this as well but a large part of that is the kind of product mix. We have a much more extensive range of devices. They would say their portfolio today is more heavily consumables biased. To sell consumables on an ongoing basis to a clinic really means that you have to have a reps in constant contact with the clinic, making sure they're reminding physician of their own individual value proposition and helping them with the logistics and so on. And I think that's where a lot of that money gets spent. We are not -- we obviously are growing into that space. And I think it's reasonable to think that we will grow our sales and marketing presence in that particular way as our consumables market continues to grow. Meanwhile, we are -- as I've said, I think of it as kind of investing ahead of many markets, which is why the R&D expense can sometimes be higher. And they are, I think, a great company but at the same time, I think that can tend to be kind of a fast follower or a follow-on technology as opposed to really driving the leading edge. So that's probably, I think, a balanced characteristic.

Yes, I'd just add to that is, our strategy as you know, is on the digitalization. And we know that within the predominant share of digitalization, on-premise solutions and workflow like FORUM, we've been leading for a number of years. So most of the teaching institutions do have our solution. And that's really our strength is how do we maximize all the tools that the current ophthalmologists are in training or optometrists are in training that they get used to our workflow.

Yes. I was going to say I think a couple of things. Alcon, they do a great job of bundling things. And so a lot of physicians may choose to use all of their products as a bundle because overall, the cost is going to be less. But that means that you have to kind of give up something, right? So one of the things that I liked about the video earlier where everybody was talking about competition, healthy competition is really good. For me, I chose to maybe not go with some things just because I didn't want to be kind of locked in. So for example, if you use like 90% of your lenses are Alcon lenses, then there's other areas where you may save money. But the problem with that was that means that in the future, if a better lens comes out, then I'm still locked in to having to use their product. And it's not that it's a bad product. I just don't like to be boxed in. And then I think the other thing is that in most training institutions, when I got trained, I got trained and everything other than diagnostics was Alcon, so the lenses, the FICO system. And so we may have a system like that when you graduate and you go to your next place, you're going to go with something that you're comfortable with. And I think that the more residents are exposed to different technology, I think it offers an opportunity for them to maybe choose different things as opposed to going with something that they just know and they're comfortable with.

So you have not talked a lot about presbyopia correction from a laser vision perspective. Of course, you are performing a lot of SMILE for big patients, but you still have this category of 40-to-55-year patients with clear eyes that could potentially opt for these procedures. We've got Presbyond the 90. So from a ZEISS perspective first, is that a meaningful growth opportunity? And maybe from a surgeon perspective, do you see patients potentially able to do that procedure?

Yes, from a surgeon perspective, again, that kind of speaks to the earlier question about refractive surgery and how it affects cataracts. That population, the 42 to 60, that's the perfect population for a premium lens. And so I think that right now, like the most popular premium lenses in the U.S. are Alcon lenses. And that's the population where they have the disposable income, and they want to have -- they want to be glass-free. And so that's a huge market. I think that the more -- right now, there's only one trifocal lens in the U.S. but as other lenses come online, I think that it actually gives us more options. And I think it allows us to grow that market a little bit more, at least from a private practice perspective.

Yes. So a couple of things on the not available in Presbyond. In that particular, Presbyond is not available in the United States yet. And so the -- we treated more of it as a patient perspective is that they can get clear lens exchange, just like you said, if that's what the surgeon wants to do or in this case, on laser procedure. And that is something we are focusing on. There's many attempts at treating presbyopia with different tools. So this is something that we are investing in.

So I think to answer probably what's behind your question there, yes, we do consider this as a significant opportunity in the future. And it's one of the areas we are investing in kind of ahead of the commercialization phase. I think it's important for a couple of different reasons. The first, it is a new group of patients offering them a new procedure, something that's not available today. And they do, as you said, and this is a group of patients who have kind of a disposable income. They want to invest. It's an inconvenience to suddenly switch to reading glasses and can impact people's lives generally. So we see strong demand in the future for this. The other thing is that it's really to the point that Andy just made, it's a relatively complex run up compared to a standard sort of refractive laser procedure because you're having to create this sort of personalized blended vision type of approach. So this is where we also feel that our workflow strategy is really going to help us. So as we move towards kind of full global commercialization of this, the fact that we can have this fully integrated workflow will help digitize and standardize the run up to the procedure and not just -- and the procedure itself in a very standardized way. So we believe quite strongly that this will actually lower the barrier to entry as we do reach the market fully for this.

And just a follow-up on Presbyond. Does it come with recurring revenues like treatments, I mean, treat fees or treatment tax or?

It's more or less -- exactly. It's analogous to what today are the standard refractive laser procedures. Correct.

You guys talked a lot about sort of digitalization being one of your strengths. Can you talk about how you see monetizing that? I guess if it is an open system, how are you using to drive equipment growth? How can you help use it to drive consumables growth? Like what stops you go from just using your digital system and Alcon or competitors' lens?

Yes, that's such a very good question as well. So we're at the early stages of this. I mean, the first thing is development of technology. The next thing is you get the value evidence together and prove that it has value, and the next stage is obviously fully monetization of that. So we're at that sort of second stage now and planning for the third. So I think what we do believe is that there are different business models available to us. So the easiest one to understand would be you take a large clinic, and you just get them to upgrade to the full ecosystem. And you can include in that sort of recurring revenues that would link to the consumables as well. So there's kind of a new value package that we can put together, and those things we're definitely exploring. The other is sort of potentially different business models of the future. And this is not something you should expect to see in the short term but something we're certainly thinking about, which would be more along the lines of kind of the managed care type of relationship with customers where we're able because of these enhanced efficiency and more standardized outcomes, perhaps to offer different types of kind of guarantee to the - to a customer that goes beyond the product itself. That starts to move towards a certain throughput if you're using our ecosystem. So I think we -- as with all of the workflow solutions strategy, we see ourselves as increasingly becoming closer and closer to our customers and offering more of what it looks like from a business standpoint, more of a partnership type of model. And we feel that this is a much more meaningful thing to customers than, for example, the classic bundle that they can get from this kind of a lock in to a particular product that they would get from some of our competitors. This is a way of really not just giving them a discount but often something meaningful in terms of staffing, in terms of throughput, standardization, happy and improved customer outcomes, patient outcomes. These are big things that we know our customers from our feedback really care about. So I think these monetization things would develop. But I don't want to say anything specific about them right now. We certainly are exploring them, and we do feel that they'll be very impacted on the market.

[indiscernible] JPMorgan. Just wanted to get your thoughts on the light adjustable IOLs in terms of potential impact on the market. And do you have any plans for developing your own version?

Maybe I address the first question in terms of the impact. I think it's a neat alternative for patients, especially for the post refractive eyes is what we're finding in the marketplace but it's still very much a niche. And maybe if you want to talk to it in terms of a clinical perspective, Dr. Rivers.

Yes. I think it's definitely been a great option. For me, unfortunately, it's very time consuming. And so for a small practice like mine, even though the technology, I think, is really neat, it's just not practical for me. But for practices that have the capacity to do it, I think that it's definitely been like a new niche, especially for post refractive eyes.

Any plans for you guys?

Yes. Again, I'd be reluctant to talk about our long-term development and R&D plans, but we are a great innovator.

Could I maybe just ask about the training process? If you want to move to a new IOL, how long would it take you to train and shift to add that to your sort of repertoire? And the same for SMILE. If you don't do SMILE, how long does it take you out of the practice? And how much does that cost you -- like all the time you're not doing procedures, how much of the cost to you as a surgeon?

So for SMILE, there's actually no decrease in your revenue because with SMILE, before you can do SMILE, you have to do a certain number of LASIK cases. And so a practice that's already LASIK heavy, they're simply replacing the laser. And they're going to continue to do LASIK until they are ready to do SMILE. And I think that's the beauty of that laser is that you can do LASIK and you can SMILE. So that, I don't think would necessarily be a deterrent. And your business wouldn't stop. You would just simply start using another laser. In terms of IOLs, there's really not much of a learning curve for the IOL. Is -- the biggest thing is maybe your calculations for the lenses you put in, which goes back to using Veracity. And so when we switched to the LUCIA, other than learning how to load the lens, it's no different. It's like changing a tire. No matter what size of tire, you're going to still change it the same way. So the lens is the same, just how you inject it. The big learning curve is just understanding like maybe how your calculations affect the lens choice. And because we have Veracity, it actually worked out really well for us when we started using that lens.

But if you didn't have Veracity, would it be a bit more like, oh, I don't want to do -- I don't want to switch because I don't want to get this wrong.

Yes, I don't think it would stop someone from switching because you still fall back on the IOLMaster, which is really good. But I think that yes, you may have a few instances where you're still trying to fine-tune things with that lens.

Sam England from Berenberg again. I just wondered what role you see phakic IOL is playing in the refractive market in the future? Some of the surgeons [indiscernible] going to recently have been maybe a bit more positive on the potential for those offerings in the longer term. So just interested to get your view from both a clinical and a sort of business perspective.

Yes. So for me, phakic IOLs, we do a lot of them in the military and they definitely have a place. I know that there's always concern about from both sides. The phakic IOL people are always concerned about laser-based procedures and vice versa. But really, they are 2 separate markets. And the reason I say that is because the price of a phakic IOL is cost prohibitive if a person is eligible for a laser-based procedure. And so typically, in my practice but in the military, we typically will do a phakic IOL when a person is not going to be a good candidate for a laser-based procedure or we're worried that in the future, they're going to have some problems. So their cornea might wrap up or something like that. And so it's really 2 different groups of people. And it's not really the same population. Although you could do an ICL on someone who was a minus 4 and was a good candidate for SMILE at least in the U.S., the cost of doing that is going to be more for the patient. So...

[indiscernible] we are giving the bundling versus physician choice. So at least what I see in Europe or in Germany especially is that there's clinic consolidation. I'm not sure whether you see the same dynamics in the U.S. But I could imagine in the end, it's the one who consolidates probably private equity in this case, decided where business and where more or less the bundling is going to go and the business in the end is going to go to. So how do you contact this trend? Or how do you deal with this building force on the customer side with regards to asking probably for discounts and so forth?

Yes. Maybe I'll start. In terms of for consolidators regardless of how they're backed, we work with a lot of major chains or consolidators around the world. And they care about standard of care, and they care about clinical outcomes because that's how they bring patients back. With our digital solution, we're able to give them that tool to really integrate how they are doing and how they're doing it in their clinic from a business standpoint. So that's a position of strength from our perspective. And very seldom do you find though that even though they're more financially driven, the physicians are still making the choice of what's best for the patients. So -- and as long as we stay true to that, I think we'll be fine.

I think building on that, the purpose of private equity moving into any space as we all know, is the economy of scale, right? So owning 10 clinics should be financially different from owning one clinic, and that's how they essentially sort of generate the added value. Now discounts and bundles are the way that each individual clinic has operated in the past, but we certainly see our opportunity here, as Andy indicated, in the kind of taking a workflow perspective because if we can say across a chain of clinics, you can standardize outcomes. You can actually connect the data. So it doesn't matter which clinic you're working in. You can access the patient from any other clinic that you can drive efficiency and lower staffing levels. These are value propositions that nobody has ever been able to offer in the past. And I think they become more and more appropriate the more you're thinking about the scale. So there's certainly a value proposition for a smaller individual clinic but multiply that by 10. This really is, I think, some way of driving the economy of scale. So again, in terms of commercializing what I showed you today, we are -- we've built the technology. We've focused on the value evidence. We're now at the point of looking at these types of commercialization opportunities but we do see great potential there.

Is this a global trend? Or is this something which is country or region specific due to reimbursements traveling?

Global may be exaggerating it slightly, but I think certainly, there are -- in most of the regional markets, there are certainly areas where this is taking place but it's not always sort of a private equity perspective. You can get some of the large hospitals who decide they want to go down a globalization route and leverage their brand, leverage their scale in order to go into other countries. This is another form of kind of creation of chains. The private equity group, I mean, Andy, sort of correct me here but we think of the private equity groups predominantly operating in, say, the United States and in Europe. In Asia Pacific, it's more of the clinics themselves that are consolidators.

Just checking if there are any questions on the phone. I don't know exactly how many people are still listening into phone. Operator, if you still have people on the phone, you could try a small round of Q&A there unless we're probably going to wrap up within the next few minutes. Anybody on the phone, in the queue?

Yes. We have 2 more questioners. And the first question comes from Sezgi Ozener.

We can't hear you.

Mr. Ozener, are you still with us? You can unmute yourself on your telephone.

Can you hear me now?

Now we can. Now we can.

Okay. Perfect. I just wanted to ask about a ELANA. Is this -- I mean would you need any modification on ELANA to be able to launch it in the U.S. as the hydrophobic trifocal? And you mentioned, I believe, a few years' time but it'd be great to hear how you see the competitive positioning there. And also comparing hydrophobic ELANA to your existing hydrophilic trifocal, what are your differences and the implications for your existing product? Would you foresee any cannibalization there?

I can address that. Okay. So addressing your first question on the FDA in the U.S. process, you have to go through a clinical trial like any other IOL especially tied to a new multiple focal platform. So that's why we said the timeline that we did. And the second question is we took what was tried and true as a market leader in trifocal and then improved that on new material for the hydrophobic platform. Now the world is split into 2 a little bit. There's a hydrophilic market and then there's a hydrophobic market. And that's why we believe we -- this is our entry point to dive further into the hydrophobic without abandoning the hydrophilic.

There was another one on the phone, I believe.

And the last question comes from Oliver Reinberg.

Can you hear me?

We can.

And 3 quick questions. And the first one would be to Dr. Rivers. Dr. Rivers, you talked about that you're not only offering SMILE but also LASIK. So can you just talk to what kind of share of your treatments are related to SMILE? And what is the kind of biggest volumes where LASIK works better and for what reasons? And Secondly, I think last year, we actually talked about the price cuts for premium [indiscernible] in South Korea. And there was some kind of hope that this could probably spark some kind of uptick in refractive laser volume is a kind of economic replacement. So can you just provide an update on that? And thirdly, just to get refractive really more growing in particular, outside China, I mean, is there any kind of milestones that you're looking forward to? I mean, you [indiscernible] maybe one point but is there anything that we can watch out for?

Maybe do you want to address the...

Yes. So for LASIK versus SMILE, so over the past 2 years, I think I've done 6 LASIK cases. And those have just been individuals that could not get SMILE. They wanted SMILE, but because they were either hyperopic or they had a little amount of sphere, right now in the U.S., you can only go -- you can't go below a minus 1 sphere. And so those individuals, they have to get LASIK because that's really the only option. I do expect the parameters to be expanded but still anyone who's a hyperope, they're not able to get SMILE in the U.S.

In the question on South Korean [indiscernible] and who would take that one?

I'll take that real quick. In terms of, I think, what we see the impact of the reimbursement for the premium IOL in the Korean market. We did see a steady flow of the refractive market in that space. So that's the good news, I would say.

And was there any impact on refractive between IOLs and refractive in Korea? I think that was part of the question.

I think, honestly, we're -- as we said earlier on, I think Justus and Markus said earlier on, we're sort of seeing those generally as 2 different populations. So I mean there's some crossover perhaps at the clear lens exchange, but I think it's -- for the most part, there's 2 independent patient populations.

Oliver, I'm sorry. I don't know if we missed a part of your question. Have we answered everything?

I think the third part was like looking for milestones in the refractive space. We can certainly talk to sort of continualized sort of global launches of platforms. But I think, in my mind, at least, I'd say the global acceptance of Presbyond is going to be a kind of a major milestone for us, I think, because it not just offers a -- it's not that it simply offers a new treatment for a new group of patients but it's actually, I believe, could also drive some of the transition that we talked about, for example, in the United States where you have people with what is now aging technology, but actually provides them with a good income. They feel very much operating in the safe zone. But if you -- if there's a whole new group of patients, which could be attracted with one device versus another device, I think this could be a catalyst for -- a transition point for our business in certain markets at least.

All right. Then I think in light of time, we are [indiscernible]. We're going to wrap up. Thank you so much for participating for a great discussion. And thanks for sitting in the dock with us here and having a very good talk. Thanks to our guest, Dr. Rivers, for joining and to all the presenters for facilitating this forum. And I'd be happy as many as possible join us for lunch. We go downstairs. Just in 5 minutes or so, we head downstairs, so everybody packs up. And for those who want to stay, we'll be here at least another hour or so at lunch downstairs in the restaurant of the hotel. And yes, to those we are not going to speak with any more before the break, wish you a Merry Christmas and Happy New Year. And thank you for your support and for your interest in Carl Zeiss Meditec. And hope to be speaking to many of you, some probably before the close of the year and many of you undoubtedly at the very latest within the next couple of months again. Thank you so much.