Medartis Holding AG (MED) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. I would like to welcome you to our conference call on the Medartis Half Year Results 2020. I am Christoph Brönnimann, CEO of Medartis, and I have our CFO, Dominique Leutwyler with me as well as our Head of Investor Relations, Patrick Christ. It is our pleasure to have you all in the call today. In this session, we would like to walk you through our half year results presentation, which is available on the Medartis website as well. You can also follow it online if you have joined the call via the link provided on the invitation. After the presentation, we are happy to take any questions. Please also note the disclaimer on Page 2. Furthermore, I would like to inform you that our call is being recorded. A replay will be available on the Medartis website later on. Let's jump on Page #4, our results at a glance. We closed the first half year at CHF 57 million, at an EBITDA of CHF 5.2 million, and a headcount of 621 employees. Compared to the same period of prior year, our sales is down 12% in Swiss francs and 7% in local currency. The EBITDA margin is 9% in Swiss francs and 12% on EBITDA on ForEx-adjusted basis. Our headcount increased by 33 heads compared to mid-2019 and plus 12 headcount versus end of 2019. Some comments on the key developments. After a strong start into the year, we closed the half year at minus 7% versus prior year in local currency, which I believe is a very solid result given the circumstances. Our sales performance was impacted by COVID, mainly in the months of April and May. And we have seen a fast recovery in June, where we have, for the first month posted growth versus prior year, and the trend continued year-to-date. On the ForEx-adjusted EBITDA margin, was largely stable at 12% compared to the 13% in half year 2019. The net profit hampered by CHF 4.3 million negative currency impact compared to CHF 0.9 million impact in the first half of 2019. We have continued to implement on our strategic initiatives, most of them are still on track. We have strengthened the Executive Management Board to better address the regional needs of the market by the appointment of Lisa Thompson in April and Mareike Loch in August. Launch of several product innovations as scheduled, we have completed the upper extremity systems and further expanding the lower extremities portfolio. The wrist spanning plate, which was launched in the U.S., which was a U.S. product, has been introduced now also in EMEA and APAC through the CE marking. We have started with the prelaunch of the business in China with the first clinical cases and expect sales in the second half of this year. We continued the process optimization along the entire value chain and implemented the new organization as planned on the beginning of April of this year in the headquarter in Basel. As COVID was the dominant topic in the half year 2020, I would like to spend some time and share our views on the impact of COVID on the industry, but also on Medartis, in particular. On the hospital side, most of the hospitals have reserved and build capacity to treat pandemic COVID patients; have also issued tightened regulations and internal guidance for the treatment of non-COVID surgeries. Those 2 measures have significantly reduced the OR capacity of all hospitals. They have continued to treat trauma cases. However, we have seen significantly less trauma cases due to the lockdown measures and home offices. Elective cases have been postponed almost completely. The strong restrictions during the lockdown have impacted the entire industry. Some of them were limited access to ORs, to hospitals for our sales force. There was no physical interactions in education events, researches or any congresses, which made the acquisition of new customers and also the launch of new products more difficult as new sets have been difficult to get into the hospitals. Many of those restrictions continue despite the lifting of the lockdown measures, but it varies from country to country. For Medartis, we continue to focus on health protection for our employees, including also work-from-home arrangements. We had a decline in elective procedures, and we also have seen a reduction in trauma cases due to the lockdown measures. However, we have been able to continue to supply our customers at no interruptions in productions and/or our supply chain. And we have implemented a disciplined liquidity, cost management program. Once we got in to the pandemic, we had 3 priorities to start. The first priority was the protection of our employees. The second one was the confirmation of the service level for our customers. And the third one, we spent a lot of time of the preparation for a fast recovery once the lockdown measures were lifted. An internal COVID task force has managed all those 3 priorities. On the cost containment measure included cost cutting and cost avoidance as well as postponement of certain investments, and the hiring of new personnel was slowed down. We have introduced short-time working in the headquarter and also in other countries where it was possible. We have also implemented a salary and bonus cut for the Board of Directors as well as the entire EMB. On the recovery for business, we focused on the continuation of our product launches and the strategic project, that's the finalization of the clean room and the MDR implementation. We have used the lockdown to prepare for not only the new product launches, but also for the training of our sales representatives and continued to engage with our customers using digital tools and webinars. An ongoing investment in the strengthening from the management capabilities with the appointment of Lisa Thompson, Mareike Loch, and as of this morning, Manuel Schaer as a new CTO. I was very pleased to see that we have returned to growth versus prior year very quickly as the lockdown measures were lifted. So we were able to post growth in June versus prior year, and the trend continued into July. We believe that Medartis has a very strong position in the key markets, established product lines, and the effective preparation and launch of the new products will continue to drive the sales recovery in the second half of the year. With that, I would like to close for this part and hand over to Dominique to lead you through the details of our financial results.

Thank you, Christoph. And also from my side, I would like to welcome you all to this conference call. I'd like to start with Slide #9 with the half year key financial results. In the mid-row, we are presenting the half year 2020 results, where our net sales achieved is CHF 57 million. That's 12% low to our comparable period, the half year 2019. Our gross profit sits at CHF 46.7 million. That is 13% less. The OpEx is CHF 48.4 million, which is 6% less to the comparable period. The operating profit EBIT is a loss of CHF 1.7 million for this period. The EBITDA, as mentioned, CHF 5.2 million, with EBITDA margin of 9% and the EBITDA FX-adjusted at CHF 6.9 million that results in a margin in percent of 12%. The net profit is a loss of CHF 5.8 million to the comparable period earning of CHF 0.7 million. The operating cash flow is slightly negative at CHF 0.2 million. We still invested in our capital expenditure of CHF 7.2 million, but CHF 5.7 million in the PPE and CHF 1.7 million in intangibles. The net working capital is CHF 57.3 million. And the headcount, 621 employees end of the reporting period. The Medartis revenue flow is based on the refill of the consignment sets that you can see here on the next slide. Our customer is the hospitals where we invest in consignment sets that is for Medartis a major investment. In the investment, it contains implants and specific instruments to treat the patient. We not only investing in our sets, we are also investing in our customer in the form of education. Then a case happened, an accident or a malfunction of the bone. In elective case, our sets comes into consideration. In the OR, where the surgery happens, the implants are used. And after the surgeries, the implants are refilled, the plates and screws. Out of this refill, we are able to invoice the hospital and generate our receivables for Medartis. On the next slide, I'd like to go into the regional review. The first region, EMEA, achieved CHF 31.9 million. That's 4% low in local currency compared to the half year 2019. In EMEA, we had a strong COVID-19 impact early April and May with a high single-digit recovery in June. All subsidiaries are, in July, back on budget level, except U.K. The distributors are overall slightly below the half year 2019, but a good recovery we can see already in June and July now. Spain is still below our expectation, and we start there in '21 with our own subsidiary. The next region is North America, where we achieved CHF 9.3 million. That's 10% less to the comparable period. We had there a very strong start in the year, followed by a heavy impact in April, half the sales, and May. We can see now a significant recovery in June and July with a double-digit growth. Our new President did a visiting program with a recommitment of the distributor and the sales force. Selected territories were able to continue the surgeon hands-on product training. The next region is Asia Pacific, where we achieved CHF 10.8 million. That's local currency, the same level as the reporting period from the previous year. We have there the smallest COVID-19 impact on sales for the half year 2019 level, where we also can see now a mid-single-digit growth rate in June. Our strongest market is Australia, where we are slightly behind the comparative period and on budget level now in July. The dynamic growth of subsidiaries in Japan for the lower extremity is also a good sign. Pre-launch of the business in China with our first clinical cases, where we are launching the full launch in quarter 4 2020. LATAM, we achieved CHF 4.9 million. That's 20% -- 26% behind the previous year. We have here the highest and most sustainable impact and the significant decline from March to June. Positive, the subsidiary in Mexico only 10% declined in the first half year and sales in July above the previous year. In Brazil, we continued decline sales. But we are newly listed at large health insurance company, Unimed, and is the most renowned hospital in Latin America as a new IBRA education center. On the next slide, I change the view into the business segment. The biggest mix segment -- business segment with CHF 41.4 million is the upper extremity. That's negative 6% in local currency. Relatively small declines due to the high trauma rate in this segment. We see also a fast recovery of sales in established hands and wrist segments. The dynamic elbow growth despite the COVID-19, thanks to -- where we added training and sales offensives. We launched also a forearm fracture system and the wrist spanning plate in EMEA and Asia Pacific in June. Lower extremities, CHF 8.2 million achieved, negative 5%. We had there a dynamic start to the year followed by a strong impact in April, half the sales, and May. After elective restart significant recovery, we have seen double-digit growth rate in June and July. We launched the new cannulated screw portfolio extension in June, where we developed this system in only 5 months. Launch of the foot and ankle system is postponed to quarter 1 '21 due to insufficient elective cases during this period. CMF and Other segments, CHF 7.4 million. That's negative 18%. After a good start in the year, most significant effect due to the postponement of the elective cases. Sales in July and June were still behind the previous year. We launched also the new generation of CMF system, including a 3D planning software and cutting guides in April, the first time for Medartis that offered the surgeon a digital planning tool. Gross margin and the gross margin development in the next slide. We achieved a gross profit of CHF 46.7 million. The gross profit margin is at 82%. That's 1.8% lower than the comparable in the previous period. FX-adjusted, the gross profit margin is at 82.9%. Corona-related, we declined in demand and introduction of short-time work led to temporary capacity decline in production to utilize and this result of a lower margin. With split teams, we ensured the delivery capabilities at all times. On the next slide, the cost development of the OpEx. Overall, we had OpEx of CHF 48.4 million. CHF 7.8 million is research and development. We did -- still ongoing investments into innovation and into our MDR readiness. Cost savings through the reduction of activities due to COVID had a positive effect in lower cost. Costs are up to 4%, but compared to the second half year 2019, 1% low. Administration. The administration costs are CHF 11 million, and we expand the IT capability build, including software customizing. We maintained due diligence capacity for our M&A project. Costs are up there 5% in the half year 2019, but flat compared to the second half year 2019. Selling and distribution. We have there CHF 29.6 million. That's 12% less to the comparable period. Cost reductions we had in events, marketing and expenses due to the COVID-19; reduced costs due to the short-time work and lower bonuses due to the lower results. Our ongoing investments in new markets, Japan and China, are still active. Overall, the costs were down by 6% and 3% FX-adjusted. On the next slide, you see the profitability development. We are at CHF 5.2 million. That's 9% as of sales. The revenue loss is CHF 7.5 million in the half year 2019, partially compared to the OpEx reduction of CHF 3.5 million. FX-adjusted EBITDA margin largely stable at 12% versus 13% in the half year 2019. The net profit half year 2020 net loss of CHF 5.8 million compared with the profit of CHF 0.7 million in the half year 2019. The main impact on the FX loss of CHF 4.3 million versus CHF 0.9 million in the half year 2019. And now I hand over again to Christoph Brönnimann for the next part of the presentation.

Thank you, Dominique. Let me talk about the focus and priorities. As we have communicated half year ago, our priorities are such as focusing on the sales and the regional needs of our markets. The second priority is the expansion and the building up of our U.S. business; and thirdly, continue to expand our innovation pipeline and accelerate our time to market. There is no change to those priorities. Let me give you an update as to where we stand since March of this year. We have appointed Lisa Thompson as a new President for North America and Mareike Loch, as of August, as the new Head of Sales for EMEA. With this change, we have now expanded regionally the Executive Management Board and having our both largest and most important regions, North America and EMEA, represented in the Executive Management Board. We have started with an analysis of our incentivation plan for the sales organization and how we launch new products and how we convert our customers. To support those initiatives, we have appointed Peter Cologna as the Head of Education as of June, and he will support the sales force training on a global basis. We have gone live with the new organizational structure in Basel in the headquarter, and we will continue to reduce costs and optimize processes along the entire value chain. On the second priority, on the U.S. business, Lisa Thompson has started with a heat-mapping and performance review of the sales organization and has started to make some selected territory expansions and adaptations in the distributor sales force as well as our direct sales force. She has engaged in a visiting program with the recommitment of our distributors and sales force and increased the focus on increasing the sales quota for reps. We have defined a further pipeline expansion to meet the U.S. market needs. Our third priority, the acceleration of the innovation pipeline and time to market. As of this morning, we have appointed Manuel Schaer as the new CTO and member of the Executive Management Board, and he will join Medartis beginning of November. We have further completed the plate and screw portfolio in the areas of the upper extremities, and we further launched in lower extremities with launches in mid- and hindfoot portfolio. We continue the internal and external expand our portfolio beyond the plates and screws and including focus on the digitalization, which we have now started with the launch of new CMS system. Let me give you an update on the launches. I'm proud to announce that we are on time as planned, and we have used the market flexibility to continue to launch our products as it was scheduled. The forearm fracture system was fully launched in June and the clavicula system, which was launched for the limited release in June, is going into the full launch now at the end of August, beginning of September. Both systems have received very positive feedback from the surgeons, and we're really looking forward for those 2 systems to drive our sales in the second half of this year. The CCS compression screw extension is fully launched now also in June. The mid-hindfoot correction system and the distal ankle fracture system is in the full limited release, and we have decided to postpone the full launch into the quarter of 2021 due to the COVID impact on elective surgeries and hence, less documented cases from the limited release as we have planned as of this -- as of year-to-date. The new generation CMF system, including the 3D digital planning software, has been launched and will be expanded as we go forward for additional indications. The priorities for the second half of this year. First, we'll -- at the ongoing management of the COVID-19 situation, taking into account the specific regional developments, of course, we will continue to focus on the protection of health and business continuity, but also continue our cost discipline while driving sales execution to capture market share and also to continue to launch and drive sales with the new product launches. Second, continue to focus on the execution of our strategic initiatives regionally. That means the further strengthening of the regional management teams following the appointments of Lisa Thompson and Mareike Loch in the U.S. and EMEA. And in the U.S., we're going to continue the sales execution and the heat-map with training plans and performance-based incentivation for the distributors and the direct sales force. In Japan, continued the expansion of the subsidiary in the lower extremities. China has now started with the elective cases, and we expect now the full launch of the sales activities in the second half of this year. In Spain, we have announced that we're going to go direct. So we're building up now the own subsidiary, and we are planning to start the direct sales activities at the beginning of '21. Third, we will continue to expand our portfolio and pipeline that includes the full launch of the clavicle system in a few weeks or starting in a few weeks. The full launch of this foot and ankle system prepared for the Q1 in '21. And we will continue to expand the projects in our pipeline internally, externally as well as continue with potential M&A opportunities. Let me summarize and give an outlook for the rest of '22. We have, thanks to a stringent management of the COVID-19 pandemic and while we continue to focus on growth initiatives, posted a result which is largely stable ForEx-adjusted EBITDA margin in the first half of 2020, and we have quickly returned to growth in June driven by new product launches, the strengthening of the organizational structure, and we expect a continued push and acceleration of our top line throughout the second half of 2020. Medartis adheres to continue to focus on the priorities as stated, which include enhanced sales and regional focus, accelerated building up of the U.S. business and acceleration of the innovation pipeline and time to market. As a result of the current uncertainty of -- caused by the COVID-19 pandemic, Medartis is not providing any full year guidance for 2020. But from today's perspective and without a worsening of the corona pandemic or other -- any other unforeseen circumstances, Medartis confirms its medium-term goals, which is an increase of the annual sales growth of over 15% in local currencies and the gradual increase of the adjusted EBITDA margin. With this, I'm at the end of my presentation, and we would like to take any questions you may have.

[Operator Instructions] The first question from the phone comes from Dylan van Haaften from Bryan Garnier.

And congratulations on the results. I'll just ask 2 questions and pop back into the queue. So just on U.S. growth. You mentioned both -- I mean double digits in the press release. So are we correct -- pre-COVID. Are we correct in asserting that we're back to sort of low teens, confident in FX growth in June, July? That's question one. Secondly, could you help us quantify the backlog in CMS? And I appreciate the uncertainty in COVID here, but how do you envisage this filling up in the next half year, maybe 18 months?

Okay. Thank you very much for the questions. Yes, we are back in growth versus prior year. In most of our key markets as of June, the trend accelerates. And you're right also in the U.S., we were growing at double digit on a monthly basis. On your questions on the CMF backlog on elective surgery, it's enormously difficult to give more insights. What we have seen, as there is a huge backlog in most of the countries on elective surgeries, countries and hospitals choose to prioritize selective procedures. Most of the countries have elected to prioritize hip and knee, followed by smaller indications. So we will see a recovery in elective procedures in some countries on the foot and ankle replay and also CMF, and other countries continue to focus -- or other hospitals continue to focus on hip and knee. So it's enormously difficult to give you an estimate how quickly we will recover on the elective and the CMF.

Excellent. And then just to cheat with a final question. Could you tell me sort of what you're seeing in terms of trends? And I mean, particularly sort of, I imagine for vehicle-related injuries driving trauma. But on the other hand, more bike sales and perhaps more bicycle-related injuries, and I'd sort of be keen to sort of find out how that's been balancing out and what you've been seeing?

Vehicle-based accidents are still a, let's say, major reason for trauma cases. However, with the investments in the safety of our cars, free-time activity-based trauma cases are much higher in numbers. And that's why what we have seen during the lockdown as people have remained at home over home-based, that was the reason why the trauma cases have decreased significantly. So the travel of the vehicle in the western world is by no means the largest one -- largest reason for trauma accidents anymore.

The next question from the phone comes from Daniel Jelovcan with Mirabaud.

Two questions. I was wondering to North America, the double-digit growth you mentioned in June, July, that actually more than the EMEA and Asia Pacific and I struggle to find the reason. Was that -- I mean North America is in a tougher shape than the other regions of the world in terms of COVID. Or is that related to your territory expansion? Or are you more active in territories in the U.S. which are not that affected by COVID, et cetera? Just to find out the specific reason for the good growth in North America. And the second question is the launch in China. Is that -- so you have already approved the products, I guess, for move to CFDA, which is known to be even tougher than the FDA. So -- and then maybe when you launch it, what impact do you expect? I mean is the Chinese market tougher to penetrate relative to Europe and the U.S.? Or you already have, I guess, clear plans for distribution, direct and so on. Those are my 2 questions.

Okay. Thank you. Let me answer on North America first. It is -- honestly, it's difficult to get the full read on the U.S. What we have certainly seen is very regional lockdowns, starting in New York, then also in California, then the pandemic spread into the southern states with lockdown measures in Florida, and then recovery also in Dallas and Texas. So it is enormously difficult to say what exactly the trend is in the U.S. What we have seen is that large hospitals have started to reserve capacity for the treatment of pandemic and corona patients. So a lot of surgeries have shifted from being treated in large hospitals in ASCs, in ambulatory surgery centers. Those are service centers where we are generally well positioned. So that was probably one of the reasons why we could recover. The second one certainly was also why we have not seen complete lockdown measures in the U.S. So there was always business going on. And with the shifting into ASCs, that was one part why we could have recovered. We have also seen a good momentum in the upper extremity portfolio. We have seen a good momentum in the spanning plate. That all has started to help us recover and very quickly get into a faster growth rate. Other than that, it's very difficult to pinpoint what exactly the reasons are. With the onboarding of Lisa, with her focus on the sales strategy, the territory reviews, the reconfirmation of the commitment with the distributors, making the adaptations or making first adaptations in the sales organization, whether it's distributor sales organization or the direct, that has certainly helped as well. On your questions on China, yes, you're absolutely right. We have approved the entire portfolio. The way it works in China now, we are in some selected evaluation cases. So we need to go into the clinic, need to have first clinical experience, which is a prerequisite now to enter into tenders. So most of the business in China is tender-based. So we are submitting our offer for first tenders. This is required to set the pricing of our portfolio. This is why we are very carefully selecting the tenders to set up pricing level right. Once we enter the tender, then we're going to be ready for selling, which we expect in the course of the second half of this year. The sales and our sales organization in China will be distributor-based. We are not going to go direct with our direct sales force. We will add distributor in the regions now around Peking and Shanghai. That's where we focus. And as we go forward, then we will add other regions to our sales territories as well in China. Does that answer your question?

The next question from the phone comes from the line of Sibylle Bischofberger with ZKB.

I was really impressed about the good recovery in June and July. Could you already give us any hint about the development in August? Or is it too early to say because it's holiday season in Europe? And secondly, is it already possible again to gain new customers? Can you meet them, especially in the U.S., and so -- and to new hospitals?

Sure. Thanks. We see an acceleration of the recovery in June, and July has been stronger. It's -- we are mid in August, very, very cautiously I would say the trend continues, yes. We have been able to convert customers in the U.S. As I mentioned before, we have not seen a complete lockdown in the U.S., on selective basis, selected states. We were able to get into hospitals on the restricted conditions. So by getting an access permit, for example, requested by the surgeon and the sales force was able to support surgeries in the U.S. throughout the crisis. So as we got into the hospitals, yes, we can bring in our sets, we can convert customers. It's a very limited basis. But that's what we have used the time during the lockdown, especially in April and also in May to prepare our sales on the indications. We gave them product trainings. We gave them trainings on the technologies, on the indications. But also working on the target, how do we go back into the market once the lockdown measures are lifted? And at the end, it is very local. So we have completely different situations in Switzerland as opposed to Germany, Australia and the U.S. But the local teams have done a very good job in preparing. And this is why I believe one of the strong reasons why we recovered in June so quickly as we have prepared the organization very well. So does that answer your question, Sibylle?

Absolutely, it does. Just an add-on question. Switzerland is very important for you anyway, and you didn't mention Switzerland, especially. But could I assume that the development was the same in -- as in Europe, in general? Or was it stronger or weaker?

No. The performance in Switzerland is very satisfying as well. We have seen a recovery, which is also linked to the lockdown measures and the lifting of those measures. And Switzerland was probably one of the first countries that facilitated easier access into the hospitals, again as compared to Germany, for example. But we are pleased with the Swiss performance.

[Operator Instructions] The next question from the phone comes from Chris Gretler with Crédit Suisse.

Just 2 quick questions on M&A. I think you mentioned in your prepared remarks that in G&A, you maintained the capacity for projects. Actually, could you discuss the latest development there? And how does that kind of evolved, particularly also given the situation? Are you making any progress? That will be the first one.

Okay. Let me comment. I think, yes, we did make progress. We continued the conversation, the reviews of potential targets going on. We said we're going to focus on U.S.-based business technologies. What has slowed down is the ability to travel to the U.S. in case you want to go into due diligence. But until up to that phase, we continued all the conversations as of today.

Okay. Good. So hopefully that kind of improves, that way we can see kind of some deals, hopefully. The second question is on the 3D planning software. By when do you think you could expect this to kind of get into other indications? And what would be kind of the first additional kind of indication you would be targeting the distribution?

Yes. And we have now started in the mandible area. So any indications in the mandible CMF. So the next one in the CMF range would be orthognathics indications, but we have now started to work on this forearm as well as lower extremity osteotomies in the foot and ankle area. We want to use the same digital technology. And now we're adding those indications. And we would expect to roll out additional indications now on a regular basis as we do have the technology platform now.

The next question on the phone is a follow-up from Ms. Bischofberger with ZKB.

I just wondered about the new products of CMF. It took some while to have the new generation. Could you give me any feedback how it was accepted in the market? Or is it too early to say?

No. I can share the initial feedback that we have received, which is throughout very positive. On the system, it's completeness, the indications, the plates and also the screws that work very well. And also the digital planning software that we have presented now, first reactions have been very positive, user-friendly, and meeting the needs of the surgeons. But that's a very limited feedback as we have started with the full launch now in June, and we're converting hospitals now, especially focusing on the DACH region. But that's very early feedback, but it's encouraging.

And my other question is about Spain. You said that Spain did not develop as expected. What was the reason? And is this the reason that you're now starting your own subsidiary to make it better?

Yes, absolutely. Its development, of course, also this year, but that's not necessarily just the distributors -- to blame on the distributor. But I think we have looked at the performance over the past years, also of the reputation of the distributor in the market, and we feel we can grow faster by going direct. And as the distribution agreement ended by year-end, anyway, we made the decision not to extend it, but instead to go direct in Spain as of next year.

We are now taking questions from the webcast. The first question comes from [ Anoush Mücher ] with [ Finanz und Wirtschaft ]. Two questions. What does medium-term goals mean, 3 years, 5 years? And do you plan to set up a production site abroad in order to mitigate the FX effect?

That's a good question. We communicated midterm goals for us the next 3 to 5 years, where we're going to get back to more than 50% growth and an increase of our EBITDA margin. The manufacturing side, I must say, we are, as of yet, not planning to set up manufacturing site abroad. Also now in the corona pandemic situation, we have not had any impact in our manufacturing site. We have taken precautionary measures. And we still believe we have an advantage having development and manufacturing engineering close by here. So we still have sufficient capacity for the years to come, and we'll continue with one manufacturing site here in Basel.

The second question from the webcast comes from [ Mr. Pietro Carter ] from [ Largerie ]. May I ask you whether you gained or lost market shares and in which areas and regions?

Honestly, I can't comment. I would -- it's enormously difficult to lose how much in the past half year, as you would understand. The tumor in the market was way too big. What I'm convinced looking and comparing how quickly we recovered, I think we're probably at the upper end and recovering from the crisis. So I'm very positive that, I would say, we most likely have not lost any market share. But that's speculation.

The third question from the webcast comes from Ms. Tanya Hansalik from Octavian AG. What was the impact of government-subsidized short-time work on the margins in H1? What impact do you expect in H2?

Let me hand over that question to our CFO. Dominique will take it.

Yes. Thank you, Christoph. So the impact was roughly 0.8% on the margin that we achieved in the first half year. And now with the ongoing situation that we have stopped the short-time work. In the second half year, we are expecting to have a recovery towards to the half year -- to total margin seen in the last year 2019.

[Operator Instructions] The next question comes from the telephone and is a follow-up from Mr. Jelovcan with Mirabaud.

Yes, just maybe a general question. I mean what we have learned now is from many companies that they had also cut last month the surgeons they have scheduled more operations per day in order to compensate for the loss. So pent-up demand plays a role. But afterwards, there is also a big pool of new patients. And [ surges ] in the dental field is similar, a lot of pent-up demand until September. But afterwards, it's a big question mark what happens with new patients. So maybe you can elaborate a bit on your situation in that.

I'm hearing the same. I would share the observation. As I said before, as elective procedures have been postponed, the waiting list have become very long in most hospitals. So hospitals had to prioritize and they prioritize the elective procedures that generated the most turnover for them which, in most cases, is hip and knees. That's why hip and knees has been prioritized. As we're working off the waiting list for hip and knees, they're now moving up in adding different indications, maybe in the lower extremities or even upper extremities. So as the waiting list has been working down, most of the customers told us they were a little bit surprised not to see a constant flow of new patients coming in as, in general, public and patients are afraid to return in a hospital right after the lockdown. So we will see, I think -- we expect that, over time, maybe in the fall getting into the winter season, those elective new patients will come back and undergo surgeries, but we will see how it will develop. I think there is some fear of the public to enter into hospitals during that pandemic and corona crisis.

Okay. So that was also an element why you did not provide the guidance or not only because nobody can predict the order waves, potentially, but also because you cannot predict how quick a new demand will come. Is that correct? Maybe you can give us an update roughly on your business, elective and nonelective, I would say, in normal times.

Yes. Yes, that's the multiple factors that play in. First of all, yes, the second wave, is it going to be a steep wave, is it going to be a flat wave? We all don't know. The restrictions remain into place. Some hospitals may tighten up the restrictions of access, other hospitals may maintain the capacities for the treatment of corona patients. That's one element. The second one is exactly the prediction of the patient flow, especially in the elective area, is enormously difficult. If we look at our business in the upper extremities, we have probably about 70% -- 60% to 70% trauma, 30% to 40% elective. In the lower extremity, it's exactly the opposite. So lower extremity is much more elective. They're also in the range of 60% to 70% versus trauma.

There are no more questions at this time. Mr. Brönnimann, back to you for any closing remarks.

Okay. Thank you very much for your attention and also the active participation in the presentation of our half year results. I also thank for your interest in our company. Thank you, all, again. In case of any questions, please feel free to reach out to Patrick Christ, our Head of Investor Relations. And with this, I would like to close the call. Please stay safe, and I wish you all a great rest of the day and rest of the week. Thank you very much for your time and attention.