Medacta Group SA (MOVE) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Medacta First Half 2026 Preliminary Unaudited Revenue. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Francesco Siccardi, CEO of Medacta. Please go ahead, sir.

Thank you very much, and good morning or good afternoon to everybody. Welcome to Medacta H1 2026 Preliminary Unaudited Revenue Conference Call. The slides of today's presentation can be found on the Medacta Investor Relations website along with the media release. And I would like to remind all participants that the presentation includes forward-looking statements, which are subject to risks and uncertainties. Listeners and readers are therefore encouraged to refer to the disclaimer on Slide #2 of today's presentation. And after the housekeeping remarks, I will now turn to Slide #4 and start with the highlights of today's presentation. So Medacta did continue to outperform the market in H1 2026 with a constant currency growth rate of almost 10%, 9.7% in constant currency, reaching EUR 368 million. We did announce as well 2 major expansion projects, which are the following. The first one is the completion of our expansion shell or manufacturing unit shell in Ticino in Rankata, while the second news is about a land that we purchased 2 days ago to be precise, in Tennessee, and that's where we're going to develop our new manufacturing capacity in the U.S. The performance of H1 allows us to confirm the outlook for the full year 2026, which has a target revenue growth in the range of 10% to 14% in constant currency and an expansion of our adjusted EBITDA margin of around 50 basis points versus prior year, all, of course, subject to unforeseen events. The same applies to our midterm outlook, which is confirmed as well with a revenue CAGR between 2024 and 2027 in constant currency is expected to range between 12% and 15% with a gradual improvement of the adjusted EBITDA margin versus 2025, again, in constant currency and subject to unforeseen events. If we move to Slide #5, our pillars for our above-market growth remain intact. And those are the strong differentiation across all our portfolio in terms of new products that can improve patient outcome and health and sustainability. Those products are introduced in the market with a strong focus on medical education. And the third very important pillar is a constant expansion of our sales team across all our business lines and across all the geographies. If we go on Slide #6, talking about geographies, we can see the different performances across Europe, North America, Asia Pacific and Latin America. Let's start with Europe that developed pretty well despite quite a lot of headwind in the region, namely some strikes, which are ongoing in Spain and there were some other -- in other countries, including France. Despite this, Europe grew 10%. North America did develop well as well, 6.6% top line growth. We did have some headwinds in -- specifically in this region, namely the sales channel transition in spine. And we have seen as well some softening on the joints. I'm pretty sure we will have some Q&A in this segment, so I will leave it for later. While Asia Pacific did develop very, very well with another 13.1% growth. Latin America, 16.4%. One aspect, which is very, very important, all those performances are compared to a performance of last year in the same period, which was extremely strong. Just as a reminder, in North America in H1 last year, we were growing 21%, including the Paros acquisition. So very, very strong comp. Moving forward, if we look at our product line and business lines, we had our Hips growing at 8.1%, the Knee almost 11%; Extremities, almost 16% and Spine, 4.5%. I would say the product performance is mainly driven by the geographic performance. In general, we stayed focused under a product point of view to our main strategy. Again, anterior minimally invasive surgery on the Hip continue to drive our growth. And we have started to introduce even more technology on the Hip side with the first cases of the NextAR Hip starting in the U.S. and in Australia. And we did experience a very, very good growth both in Asia Pacific and in Latin America. So still a growth of around 2x the market growth forecasted by some of our forecasting model, which I believe is potentially something we need to discuss later as well. On the Knee side, almost 11% growth. Again, GMK SpheriKA and single-use deficiency continue to drive a lot of adoption with surgeons. Strong double-digit growth in Asia Pacific and in EMEA and more than 2x market growth for our Knee line as well. Spine is the weakest, if you want, of our business line. Good performance in EMEA, followed by Latin America and APAC, while the negative growth rate in the U.S. coming from our transition of our sales force to more focused distributors and more of a hybrid direct model is facing some strong headwinds, let's say. Despite this, this growth is probably around 1.5% market growth year-over-year, and we expect this to further accelerate quite a bit significantly in H2. Extremities is a very robust growth, around 16% year-over-year. We did, again, introduce new technology in the segment with our NextAR shoulder revision application. And this is based on a very important new development, which is the new AI-based MyShoulder Planner which allows surgeons to do their planning locally in real time, and this is actually a very strong feature, both when used in combination with the NextAR shoulder and with our PSI. Sportsmed as well, very good growth, launch of our SecureFix All-Inside Meniscal Repair System, which is reinforcing our meniscal repair solution across our knee sports medicine portfolio. We are experiencing a very good market traction in the U.S. in the last few months with onboarding of very significant academic centers that will help us to drive our sports medicine effort moving forward. Again, more than 2x above market growth for this business line. This performance allows us to confirm our outlook for the short term. As I mentioned, 10% to 14% in constant currency and an expansion of the adjusted EBITDA in the range of 50 basis points. We are aware that this requires a stronger second half and acceleration in H2. It does compare to a weaker growth last year, and we are very confident in some of the pipeline acceleration we have seen over the last few months. June was very strong. July looks stronger as well. I spent a couple of weeks in the U.S. in July to check firsthand the pipeline, and I have to say I'm very pleased. That's why the midterm outlook is confirmed as well with our compound annual growth rate 2024, 2027 in constant currency expected to range between 12% and 15% with a gradual improvement of the adjusted EBITDA margin versus 2025, all in constant currency and subject to unforeseen events. And just a quick reminder, Medacta remains not impacted by the U.S. tariffs, and we will continue to monitor the development of the situation. The key messages remain similar to our narrative. We can continue to deliver an above-market growth as a result of constant development of differentiating innovative products that can improve patient outcome and sustainability. We can deliver this innovation and sustain the introduction with a very strong medical education program. And this attracts the combination of new products and good medical education continue to be a very strong attractive model to sales reps across the globe and across all our product lines. And our goal remains to continue to outgrow the market and our guidelines confirm that we are convinced that we can do so for years to come. I would like once again to thank all our employees for a very good performance in H1 and especially continue to thank them for the H2 performance we are called to deliver in order to further accelerate our global presence. Thank you very much, and I would like maybe to go back to you to manage the Q&A.

[Operator Instructions] The first question is from Michelle Büchler from ZKB.

So the first question is on the U.S. softening. You mentioned it's due to the market softening in general, lower demand and U.S. spine channel. Maybe you could give some more color on that. As Stryker reported last night, for instance, our Q2 looked pretty solid with a Knee growth of 8.4%. Was it just the second quarter that looked better? Maybe you can give some more color on that, please?

Yes. Thank you, Michelle. So I would say definitely, yes. So Q1 was particularly soft in the U.S. We heard about the storms that impacted Q1. Probably a portion of this was recovered in Q2. That's why you see an overall acceleration in Q2. But if you take Q1 and Q2, so H1 overall in the U.S., I think we should expect or at least that's our view at the moment that the U.S. market is simply going back to pre-COVID growth rate. And if you look at the pre-COVID growth rate in orthopedics, in hip and knees, in particular, it was around 3%, 3.5%, 2.8%, depending on the pre-COVID years you're peaking, while we were used to probably a 5% growth rate in the post-COVID years, '21, '22, '23, '24 and '25 as well. And I don't see, frankly, no reason why post-COVID, we should remain 2, 3 points higher than the pre-COVID level. And I would say we are probably going back to a normalized growth rate in Orthopedics, nothing more than that on the joint side. While on the spine side is more Medacta-specific execution situation. We are growing pretty well in Asia Pacific, in EMEA in Spine. In the U.S., we are actually growing through the new channels that we are building, but we are experiencing some more attrition from the older channel, which it's fine. I think in the long-term, we will be happy. We are a little bit in a painful moment at this time, but I think is the right thing to do for the long term. It's useless to do turnover without margin attached to it, which was the situation, and it is the situation of many spine surgeons -- sorry, spine companies in the U.S., and that's not a business model that we want to follow. So we are rebuilding in a more solid way our U.S. spine channel. We are actually reinforcing the team with good talent coming on board, which are offsetting the headwind we are facing, and that's what it is. I think in the next couple of months, we should hit the valley because the process started in September last year, and then we will start to recover and grow faster on a more solid basis.

May I ask another question?

Of course.

So Smith & Nephew announced that they are going to launch a kinematically aligned knee, and I looked at their slides, I think it was the beginning of June. I'm not as much as an expert as you are, but to me didn't really look truly kinematically aligned. Maybe you could say something about competitive landscape and how far ahead you still are with your kinematically aligned knee?

Let's say, I will try to be as kind as possible. So if you look at the new Knee of Smith & Nephew, is extremely similar to the JRNY II Knee of Smith & Nephew. Exactly the same obliquity of the joint line, a standardized 3 degrees. And if you understand thematic alignment, you know that we are not talking about an average alignment of X degrees. We are talking about matching the alignment of each individual patient. So I think they are renewing, let's say, an old knee portfolio with actually nothing really major in this knee design. And we will see the market how they will react. But I don't see this as a threat at all. It's very, very similar to their JRNY 1, JRNY II knees, which was exactly designed in the same way.

That's what I thought. And maybe one last question. What product launches should we expect in the second half of 2026? You mentioned in the last call that you're working on something? And will we announce it once you have something?

I'd say we have really accelerated. So we exited our limited market release on our new triple wedge hip in the U.S., and in the U.S. only at the moment, which is called Infinity. That is a very important stem design in the same category of Z1 for Zimmer or AI for J&J. So this is definitely something which is important for the U.S. hip category. We are introducing on the hip side, as I mentioned, our NextAR hip technology, which is important to, again, counter some hip technology competition. We are going to introduce a dedicated NextAR KA module in the second half of the year, which is important in U.S., Australia and Japan, in particular. We are introducing a new shoulder in the U.S., which is pretty much matching the new trends in the U.S. shoulder market. And this is something we are accelerating in the second half of 2026. We are expanding our NextAR spine offering with a strong focus on endoscopic spine navigation, which is a very, very interesting trend and very keen to develop. So -- and sports medicine as well, quite a strong product range expansion in the shoulder sports medicine with a very interesting disruptive technology that should be in the anchor space, which should be released in second half of this year. So across the portfolio, we see quite a lot of strong pipeline. And as I said, I spent a bit of time, 2 weeks straight in the U.S. traveling and meeting a lot of prospects, both under a surgeon point of view and especially under new distributors' point of view. And I've seen a very, very solid pipeline and we're very excited about the second half of this year. We're going to have a lot of work.

The next question is from Beatrice Survey from Berenberg.

I just had one question on the 2026 outlook. You noted that you're aware that you need an H2 acceleration, but I suppose could you give us some more color on what parts of the business you expect to accelerate and what visibility you have on this?

Yes. I would say there are several areas that are going to accelerate. The vast majority of the products I just mentioned will hit first the U.S. market. And the U.S. market is the market that needs to accelerate. Maybe a little bit of color on what's happening in the U.S. I think it's important. When we describe our growth, we very often talk about our base contribution coming from existing customers that we acquired, let's say, in 2024. And then we have the so-called carryover business, which are new customers acquired in 2025 and will contribute full year in 2026. And then new customers acquired in 2026. So in H1 2026, the contribution of new business and carryover was basically identical to the performance we did in 2025, which, as you remember, was a 21% growth rate. The missing element is on the base, where we have seen some retraction on the spine, as we mentioned, some softening on the hip and knee side, on the ASC space. We have seen quite a lot of customers focusing more on the ASC only and dropping some of their hospital-based volume. Why? Because they are creating a very interesting new business opportunities for example, concierge model where they can basically make more money per patient. And so they are less keen in continue to do maybe Medicare patients in a hospital environment, and they are more keen in moving in that direction. So we think this is a trend that will continue, probably with a smaller effect in H2, plus we see, as I said, a very strong acceleration in terms of pipeline of both customers and sales force expansion in the U.S. So definitely, the U.S. will be an area where we need and we expect to accelerate significantly. Another area which is expected to finally start in H2, which was 0 in H1 is India. We have prepared quite a lot of stock and CapEx to start in India. Actually, the first shipment should start next week. And -- but we are still waiting the last documents for clearance. This has delayed our expected start by approximately 3 months. That's a regulatory hiccup. There's nothing we can do other than just continue to push, but we have no other documents to give to the authorities, but India is another source of growth. In Europe, we experienced quite a lot of strikes. In Spain, in particular, the market is flat because of this situation. Medacta experienced still very high double-digit growth in Spain, but this was definitely a negative, of course, effect, France as well. So if we normalize H1 and we see H2, we should see an acceleration in Europe as well simply because the market is normalized. Those are more or less the expectations. So new products, normalization, additional territories in India, expansion of sales force in the U.S. and new products introduction in the U.S., more or less. So quite a lot of verticals in which we can. And with a 14%, 15% growth in the second half, which I remind everybody as a relatively lower comp should be absolutely possible. And then we will definitely be in the middle of our guidance, a little bit higher, a little bit lower, we will see.