Straumann Holding AG (STMN) Earnings Call Transcript & Summary

Good morning, everyone. I am happy to welcome you, and thank you for joining this conference call about Straumann's first quarter results for 2022. I hope you, your families and colleagues are doing well. We are living in challenging times. It is really distressing to see some of the stories from Ukraine and the uncertainties as a consequence of that. To make our contribution to the huge humanitarian relief effort that is needed, we made a donation of CHF 100,000 to the International Committee of the Red Cross and donated implants with a market value of more than EUR 1 million to clinicians in Ukraine. Measures around the COVID-19 pandemic have been lifted in many countries in the first quarter, which gave us the opportunity to hold meetings face to face and meet some of you in person after a long time. However, local lockdowns came back in China, impacting business activities, adding further to the uncertainty created by the current geopolitical situation. During this conference, we'll be referring to the presentation slides that were published on our website this morning. As usual, you can see our disclaimer on Slide 2. This morning's presentation and this session will include some forward-looking statements. The conference will follow the usual format. As shown on the agenda on Slide 3, I will give you an overview on where we stand. Then our CFO, Peter Hackel, will share details about our business performance across all regions. After that, I'll provide you with an update on the strategic initiatives as well as our outlook for the future. As always, will be available to take your questions at the end of the presentation. Let's start with our highlights and move directly to Slide #5. The group revenue reached CHF 589 million, which is a very strong first quarter results. Overall, patient flow remained high in most countries during the quarter except for China where, on the one hand, COVID-19 lockdowns come back in some large cities and on the other hand, some patients postponed treatment as they expect prices to lower due to the announced volume-based procurement initiative. Organic growth was 27.2% compared to the previous year, which was already largely recovered from the pandemic. These strong results were slightly impacted by negative currency development and a marginal acquisition effect. As you can see, leading innovations continue to be one of the key reasons for growth. The results were driven by strong market share gains supported by the recently launched immediacy implant solutions, which drove customer conversion in many cases. The teams everywhere really did an excellent job executing on the recent launches in all the different geographies. On top of that, we expanded our offering of our Challenger implant brand. In March, we launched the 2-piece ceramic implant Neodent Zi as well Anthogyr Axiom X3, which I will tell you more about later. These launches will help clinicians to cover different price points and offer more innovative solutions to their patients. Another highlight was Latin America, which grew almost 49% organically. Although this region is the group's smallest revenue contributor, this is a really remarkable performance. This quarter, digital solutions revenue was impressive mainly due to our intraoral scanner sales. Please keep in mind, traditionally, the first quarter is not a peak period for intraoral scanner business. Building on the strong first quarter, we are happy to reaffirm our full year guidance despite the current uncertainties around potential geopolitical impact and COVID-19 resurgence. Moving on to Slide 6. You can see the regional organic revenue growth rate for the first quarter as well as the average organic growth rate of the past year. EMEA remained the largest market of Straumann group, accounting for 45% of group revenues over the quarter and therefore, contributed the most in absolute terms. North America performed well with almost 21% organic growth. And APAC showed the slowest growth, having been impacted by COVID-19 lockdowns and treatment postponements in China. As mentioned before, Latin America was our fastest growing region over the quarter though it remains small. The comparative quarter in 2021 when the region grew by 20% organically already showed very good results. The strong first quarter 2022 results have been achieved thanks to the excellent execution by the team in LatAm, which has been taking market share notably on both the premium and value implant segment. Important factors that boosted sales were the clear aligner business there and the direct local presence in several countries in the region. With this, I hand over to Peter who will provide additional details.

Thank you, Guillaume, and good morning, everyone. Let's move to Slide 8, where we can see the breakdown of the revenue development. There is no doubt that this was a strong quarter and an exceptional result. As Guillaume mentioned, in the first quarter of 2022, our top line increased by 27.2% organically, reaching CHF 589 million. This strong result was slightly impacted by a negative currency development mainly due to the euro and the marginal acquisition effect which comes from the recently acquired company, Nihon. The EMEA region as well as LatAm are further gaining share of the group's organic growth. On Slide 9, you can see the quarterly revenue results for EMEA and North America. The group's largest region, Europe, Middle East and Africa, had a strong first quarter despite a negative currency effect. EMEA grew organically by 33% compared to the first quarter of '21, accounting for CHF 236 million. This growth was driven by all segments with particularly strong contributions from orthodontics and implants. The dental service organization business enjoyed very strong growth, too, as did the digital solutions. Iberia showed highly impressive growth driven by intraoral scanner sales, premium and challenger implants. Germany, being the largest country, drove revenue in absolute terms, with Turkey and Romania showing very strong growth. Our doctor-led direct-to-consumer orthodontic brand, DrSmile, continued its healthy growth in Europe. In the first quarter of '22, North America grew organically by 20.7% while revenue came to CHF 170 million. Both Canada and the U.S. delivered double-digit growth, driven by strong demand across all major franchises. Within premium implants, the BLT, BLX and TLX lines all grew very strongly, reflecting the focus on immediacy. In the challenger segment, Neodent performed well over the quarter, lifted by a strong DSO performance and the region's focus on competitive conversions. This strong performance for implants overall also drove our restorative business in abutments and guided surgery. In digital solutions, intraoral scanners were a key driver for growth with a strong first quarter. Let's look at APAC and LATAM in more detail on Slide 10. Asia Pacific enjoyed organic growth of 18.4% and accounted for revenue of CHF 112 million. China remained a growth market in the first quarter. Also, the growth dynamic was impacted by lockdowns and treatment postponements. This was partially compensated by other markets in the region such as Japan and Australia, which have seen strong growth. The recently established subsidiary in Malaysia performed well and introduced ClearCorrect in the first quarter. The group also expanded further within India, opening an office near Delhi. Across the region, premium implants and orthodontics contributed strongly to the overall performance. Nihon Implant, the Japanese-centered concierge service, which the group recently acquired, started strongly. And as highlighted by Guillaume, LATAM was our fastest growing region. In Latin America, Neodent drove revenue while the premium segment also grew strongly. The region grew 48.8% with the biggest market, Brazil, growing robustly and other markets in the region, notably Mexico and Argentina, growing even faster. The region accounted for CHF 39 million in revenue. All segments performed strongly, and particularly in digital solutions, the Virtuo Vivo intraoral scanner was driving revenue. Orthodontics grew rapidly over the first quarter throughout the region. In both the premium and value implants segments, the group gained market share, thanks to the direct local footprint. Neodent continued to grow very strongly in the region, and a new educational resource, Neodent Campus, was rolled out during the quarter. In the premium implant segment, BLT implants grew strongly, in turn driving solid performances for abutments and restorative materials. On Slide 11, I would like to give you some flavor regarding the different business areas. The group's large franchise, tooth replacement and restoration, contributed double-digit growth in both the premium and value segments while premium implants remained the largest part of our business. The apically tapered BLT implant and the fully tapered BLX implant line remained the key contributors. The group's challenger implant brands grew strongly. Medentika impressed with a strong performance in Germany and in Turkey. The digital solutions business is maintaining the growth momentum and was driven by intraoral scanner sales, especially in the EMEA region. The orthodontics business is doing well, and the investments made to strengthen the value proposition are starting to gain momentum. And with that, I will hand back to Guillaume.

Thank you, Peter. Let's move on to Slide 13 directly. You may be familiar with this slide on which you can see our group strategy, which is the north star for every decision we take. I would like to talk about recent achievements and our strategic progress on the next few slides. So with this, let's move to Slide 14. As the worldwide population is aging, the numbers of edentulous health consumer is rising and making these indications the fastest growing segment in implantology. Full restorations are complex cases that require advanced skills and a treatment offering for different clinical and financial situations. This is why we have very significantly developed a comprehensive expert portfolio in the past couple of years. We are now covering a wide range of indications and price points to allow clinicians to give patients their teeth back with the functionality and esthetics that they are requesting to build up their self-confidence. Our portfolio offers many different possibilities to give patients teeth again, be it with removable or fixed tooth replacement. Implants designed for immediacy treatment protocols are a crucial part of this portfolio as especially edentulous patients are looking for a short time to teeth and a cost-efficient solution. Our launch of the fully tapered BLX and TLX as well as the launch of the Zygomatic implant, which allows to treat patients with severe bone loss without complicated augmentation procedures, have complemented our portfolio ideally to unlock this untapped segment for the Straumann group. This high quality of the launch execution allowed us to gain market share in the immediacy segment in a consistent manner and enabled cross-selling of Straumann group's wider portfolio. The affordability and versatility of our solutions drive health consumer decisions to go for implant-based solution rather than the denture alternative, which is increasing our addressable market. On Slide 15, I would like to speak about the 2 very exciting challenger brand launches we accomplished in the first quarter which will help to accelerate the internationalization of these brands. Anthogyr Axiom X3 is a fully tapered implant designed to offer universal anchorage in all bone densities. It offers a holistic solution, including immediate treatment with adaptive protocols while respecting and preserving the bone. The global launch event in March was attended by around 1,000 participants from 70 different countries, underlying the international potential of this addition to the Anthogyr offering. Right at the end of Q1, we also officially launched the Neodent zirconia implant, the Neodent Zi. This apically tapered ceramic implant is designed to broaden access to ceramic implants. It offers clinicians an innovative and unique injection-molded ceramic implant, which is also usable for immediacy protocols. The ZI features screw-retained connections between implant and abutment and a comprehensive ceramic prospect portfolio, meaning that there is no contact between metal and patient tissue, which fulfills the desire for a fast, esthetic and affordable solution. These features make the ZI a valuable tool for clinicians seeking to differentiate their practice. So far, more than 1,500 dentists have been trained to place this implant in several countries. Let's move on to Slide 16 and talk about our orthodontics business. During the first quarter, we made further progress in strengthening our value proposition by introducing new software features that improve customer experience and support the treatment of more complex malocclusion cases. The ClearPilot 3.0 and 3.1 software versions empowers customers to move teeth directly in the 3D model and enhance treatment experience with the ability to visualize overcorrection. It also allows to rate and send feedback on the quality of the setup. Since the launch, we have collected almost 10,000 ratings, including comments that will help us further develop the next generation of aligner and software features. We also started supporting the treatment of more complex cases with the introduction of cutouts or elastic to cover additional indication. This new clinical feature will enable clinicians with more control in the treatment of teeth with class 2 or class 3 malocclusions and the ability to perform more complex teeth movements. The integration of the intraoral scanners proved to be a key success factor in delivering simplicity for the clinician. Based on constant significant investments, more development are also expected to be released in the next month. Features like diagnosis tools, surgical simulation, smart tooth movement are currently planned for ClearPilot. New aligner features to support the treatment of deep and cross-bite cases will be launched also later this year. Let's move on to Slide 17. The impressive performance of the digital solutions portfolio was driven by intraoral scanners, the biggest part of this business. The relaunch of Straumann's Virtuo Vivo intraoral scanner has been welcomed by practitioners who find the increased usability and connectivity help improve their workflows. Also in the first quarter, the Rapid Shape P50+ 3D printer, a high-volume, high-intensity device, had a limited market release and will get a full market release later in 2022. Moving on to Slide 18. We acquired a strategic minority stake in a cloud-based practice management software, CareStack. This partnership will support dental practices in simplifying treatment planning, scheduling and payment options, thereby helping Straumann bring clinicians to provide high-quality care in a more efficient way to their patients. Combining our clinical excellence with CareStack's advanced business intelligence and comprehensive practice operations will offer clinicians a seamless end-to-end experience. CareStack practice management software is usable for individual practices, groups and DSOs. Together with CareStack, we will drive internationalization of the software, which will help increase penetration in different geographies. This brings me to Slide 19, which summarizes the recent changes to our Executive Management Board. Sébastien Roche became Straumann group's Chief Operating Officer on April 1. He will oversee the group's production site for implants and biomaterials. In addition, Jason Forbes has been appointed as our new Chief Consumer Officer and will drive the real consumer presence part of the group's strategy. Jason took up the role on April 19 and is responsible for leading DrSmile, Smilink, Nihon Implant and other strategic direct-to-consumer initiatives. This is a newly created role to make sure this priority is reflected at the highest levels of the group. On Slide 20, we would like to give you an update on the progress we have made on sustainability. As communicated previously, we introduced a Straumann group sustainability framework this year and set clear goals for each commitment. In the meantime, we have established a team of sustainability ambassadors through the organization to cover all regions and business units. To empower our people, we have rolled out a culture workshop program in line with our sharpened purpose and beliefs introduced in Q4 2021. In Q1, those workshops could take place face to face again and had more than 1,200 participants, many of whom reported feeling energized having learned valuable lessons for their personal development. In our framework, we committed to care for the planet and to save forward the environment. In order to put together an environmental strategy to minimize our emissions, manage our waste and reduce our use of materials, energy and water, we run an internal environment, i.e., a crowdsourcing campaign in the first quarter. It allowed employees to contribute to improving the group's environmental footprint. Over 6 weeks, employees submitted more than 230 ideas, which will now be taken forward and assessed by 28 environmental ambassadors. Furthermore, we made great progress in refining our data collection and reporting process in order to more clearly identify the status quo. This will form the baseline to set the target date for getting to net zero carbon emissions. Within our renewable and electricity program, we are working with the sites to achieve 100% renewable electricity by 2024. As a reminder, 69% of our electricity was already renewable by the end of 2021. Let's move directly to Slide 22 and the outlook for the group. As mentioned earlier, we maintained our guidance for the year despite the uncertainties and challenges in front of us. We will continue to seek to anticipate and mitigate supply chain disruption, inflationary and geopolitical developments and their potential indirect impact on consumer behavior. Organic revenue growth is expected to be in the low double-digit percentage range, with profitability around 26%, including major growth investments. With our strategy and high-performing team in place, we believe we are well positioned to succeed in this uncertain environment. Now I'm going to open the question-and-answer session. [Operator Instructions]. Operator, can we have the first question, please?

The first question comes from the line of Patrick Wood from Bank of America.

I guess the first one, just curious, the one comment that I guess you guys haven't sort of touched on in the presentation in a meaningful way was really the consumer. And obviously, we've seen some mixed signals from other dental companies, but very strong numbers from yourself. What do you think about the outlook of the consumer and implications for whether orthodontic work or single-tooth restoration or whatever? How are you thinking about that business going forward? And have you seen any initial hesitancy from consumers, anything like that? Very curious. And I guess the second one is around immediacy. Could you remind us -- I mean I still thought the majority of loading was still delayed today, I don't know, 2/3 delayed and then 1/3 immediate, but curious how you feel about that. And if that shift is accelerating in terms of prioritizing immediacy, has that had any impact on the parallel walled business? Because, obviously, tapered is somewhat, as far as I understand it, more useful in the immediacy side also.

Yes. Thank you, Patrick. Looking at consumer, we can say, yes, we have seen in different geographies some consumer -- I would say different behaviors than 2021, but it's very different from geographies to geographies. If you look at Latin America and Europe, I would say, we have seen a very healthy trend in Q1 despite, obviously, the consumer confidence going down, as everyone has seen in the report. But honestly, even for the beginning of April, we have not seen anything major, even though we see patients wanting to discuss a little bit more potentially the price or some may be taking a little bit more time than before to take the decision to go on the treatment side. I would say more on the clear aligner side also than on the implant side so far. When it comes to North America, we have seen a little bit of more, I would say, convincing power needed to have the patient undergo any treatments. We have seen that with some of our DSO partners sharing some of this perspective. Especially March and April, I would say we have seen a little bit of this lack of consumer confidence about the future, which is a little bit changing their behavior, but nothing, I would say, too dramatic for the time being. And in Asia Pacific, we have seen a very strong change because of what's happening, obviously, in China with, on the one side, the lockdown which is preventing people to go to the dentist anyway, then stopping completely the treatment. But also that VBP, again, that volume procurement base -- volume-based procurement project from the Chinese government, which is a little bit of pushing patients to reschedule treatment and waiting when the price will be lower. And that's where we see a significant impact on consumer behavior, not so much because of inflation, but because of COVID and VBP in Asia Pacific like China. And I would say, maybe in North America, there's colder feet to go under treatment. And the rest of the regions was more positive, I would say, consumer behavior. When it comes to immediacy, yes, I think we see immediacy is the fastest growing trend. We see that clinicians are really using more apically tapered or fully tapered implant. But I would say we don't see the parallel-walled implant declining faster than before. It's more a question of generation. The clinicians that have been used to place parallel-walled implant, they still continue to place parallel-walled implant for a lot of them. But as this generation is step by step stopping their activity, then we have a steady decrease of the parallel walled segment, which is obviously replaced very significantly by apically tapered and fully tapered. I would say that's the dynamic we are seeing from an implant design standpoint.

The next question comes from the line of Daniel Jelovcan from Mirabaud.

The first one is to the Neodent zirconia. You mentioned it's apically tapered. And the apically tapered market in general is far bigger than the fully tapered. So is that also the case for zirconia? Or are there different dynamics here? So I guess the upside for zirconia is quite big for this implant. And the second one is in China as well. The VBP or in general, the regulations, I think you are a bit delayed with ClearCorrect, on the top of my head, because the Chinese authorities have no time, I guess. So how is the status there? And the deadline for VBP in dental was end of March. So how does that look like now at the end of April? And what I don't understand really in VBP, how can that have an impact, that patients delay because of VBP. I mean, I guess, when I go to a premium implant dentist, the consumer doesn't really know that there -- about VBP. So I don't really understand the reason there.

Thank you, Daniel. Yes, good question. Neodent Zi on the ceramic side, it's an apically tapered. Because -- as you rightly said, the largest part of the market is apically tapered implant and most also of the ceramic implants are apically tapered from a design standpoint. What is very, very different here on the Neodent Zi implant is that it's a very unique product on the marketplace because it has a small diameter implant, 3.75, in 2-piece screw-retained version. That means you still have the versatility when you are doing the prosthetic side. And I don't want to enter too much in detail. But very often, because ceramic is a brittle material, more difficult to work with, competition has either no smaller diameter or the smaller diameter are either the monotype, then you have very limited flexibility from a prosthetic standpoint and they are not very used. Or they are not really reliable when they have a 2-piece screw-retained. And thanks to that specific manufacturing style, we have a very robust ceramic implant despite being 3.75 millimeter and having that capability to have a very flexible way to restore the implant. And this is a very unique combination of features that should open up the ceramic implant as much as the clinicians are going to then test it. And we are doing a careful launch. We are doing what we call an education-based launch to make sure that practitioners are learning to place the implant properly, that they are learning the benefits of the implant. And we have, so far, a lot of very satisfied clinicians with the use of the Neodent Zi, which is a much higher acceptance in general than other ceramic implants. And we want to do that properly, and again, in a very structured manner as we are always doing product launches, but we are very excited by this opportunity. When it comes to China VBP, I think the timing has shifted from the Chinese government. They were first planning to include 15 provinces. Now they want to include all the different provinces in China, and they decided to delay the project up to Q3. That's the reason why it has not been implemented yet, and we still don't have the details yet also on what kind of the implant category are going to be created to enter VBP. Then that's the reason why there is no implementation yet. Yes, the Chinese government has communicated about the VBP to the population. They are also getting informed when they are getting to national hospital about that project. And that will decrease the overall cost of the procedures. Then it's not going only to, let's say, drive ASP of implant down in national Chinese hospital, but it will also drive the cost of the procedure down for the patients. And then that's why I think sometimes -- potentially guided by some information at the national hospitals, sometimes with the information they got directly from the government, they are knowing that the price of the implant procedure will go down. Finally, with regard to the question on the regulatory front, ClearCorrect, you're right. The COVID-19 impact and the fact that government officials on the regulatory side, some of them were not able to then come to the office and do the regulatory work, we have a delay in our planned ClearCorrect green light for China. That was planned for the end of our Q1 quarter and should be done in the coming months. We still expect that during the first half, we are going to get that agreement, hoping that things are going to do better in China.

The next question comes from the line of David Adlington from JPMorgan.

Firstly, I just wondered if there was any stocking impacts in any of the regions we should be thinking about or taking into account, I suppose, notably in possibly Russia, in Europe? It will be -- just in terms of the COVID impact in the U.S., slow start to the year because of COVID [ through] February and March and just wondering what you're seeing continuing into April.

Yes. I think there is no significant stocking impact effects in our Q1 number. And there have been, at some point, some additional order in Russia before we had that significant conflict starting, especially because we had also acquired a distributor in Q4 2021, if you remember. Then we have been stocking actually the distributors to get started the Straumann distribution instead of the Dentsply implant distribution, which was also helping us to gain market share in the Russian market. But if you look overall, of our total number, there is no stocking impact that could be seen here. On the COVID impact in North America, we had some impacts in January. We have seen the COVID impact was a lot in between the end of December 2021 and the beginning of January 2022. But I would say that this COVID impact has flattened out, and we don't see, at the moment, any major disruption or slowdown in the U.S. market due to the specific COVID virus.

The next question comes from the line of Maja Pataki from Kepler Cheuvreux.

I have also 2 questions. The first one on the clear aligner business. Looking at the numbers that have come out of the U.S. last night with Align Technology, your orthodontic business seems to be quite significantly in a better shape. But I was wondering if you could share a bit more details. More specifically, has the orthodontics business been growing above group or below group? And can you tell us maybe some differences in how the B2B business has been performing versus the B2C2B business. And then my second question, is it fair to assume that on your -- based on your statements, what you're seeing about the consumer sentiment, that we have not seen business momentum in April deteriorating significantly? I mean of course, growth is probably off from where you were in Q1, but it would be very helpful to get a bit of an understanding whether you're still seeing healthy double-digit growth in April.

When it comes to clear aligner, I think this is very different from region to region and as you said, on the channel to market as well. What we can say is that the orthodontics business is growing very well in Latin America, in Europe and to a very small extent, I would say, in Asia Pacific because it's still a very small business, taking into consideration that China ClearCorrect has not been started. But this is a very strong growth starting from also a significantly low base. Then that's why we are very happy with the results here. For North America, we have seen the B2B business being -- while slower than what we had at the end of 2021, because we think that the consumer confidence has impacted more the clear aligner side than the implant side, which did not come -- which is not coming as a surprise for us because we believe that a part of the clear aligner business is still something that one could call a cosmetic decision to take from an esthetic standpoint, whereas an implant is still a very functional need. Then when you have this kind of consumer confidence, if you take care of your health, you have more the propension to go for the treatment than potentially an esthetic treatment that you think you can maybe postpone for when you will have more confidence in the future. And that's where, as an example, as our base in North America is the biggest, we have seen more this effect happening in North America. When it comes to the direct to consumer, which is only in Europe, we have seen actually direct-to-consumer still healthy. It's a strong growth based on quite some already strong growth before for DrSmile, then we are keep supporting the development of that channel because we see that it's really answering to a specific target group, which is obviously not going to a dental practice first to initiate the treatment. When it comes to the consumer side, we are -- it's the same here. We have seen consumer sentiment, and I would say, I would call it more patient flow, being still positive in regions like Europe, LatAm and some countries in Asia Pacific. The only one that has been significantly, once again, impacted is China for the 2 reasons that I explained being COVID and the [ VBB ] effect. And North America has been positive, but to a lower trend than what we have seen at the beginning of the quarter.

Perfect. And the momentum on sales growth in April, is there anything you can share?

While we are not sharing monthly results then the -- but I would say that we are still in line with our guidance when it comes to that April numbers. We think that we are still on a double -- low double-digit growth perspective. That is our goal to achieve looking at the uncertainties that is -- that are around us.

The next question comes from the line of Julien Dormois from BNP Paribas.

The first one relates to the growth that you experienced in Europe. So obviously, you had good growth across all geographies, but Europe clearly stood out. So just curious whether that is coming from older stores being aligned with all the business lines growing nicely at the same time? Or whether you would also point out maybe some share gains or mix contribution or anything that could explain the superior growth that you've experienced in Europe? So that would be the first question. And the second question relates to the digital business and specifically to intraoral scanners, which seems to be on a roll for you guys. Two questions here. The first one is just could you remind us a very rough estimate of how much that contributed to group sales as a percentage? And second, just also elaborate a little bit on the rationale for having free scanners available and how your strategy around this offering could evolve in the coming years?

Yes. Hello, Julien. Yes, when it comes to Europe, yes, I would say that the major -- there are 2 major reasons for the European excellent results. The first one is that on our B2B side, we have very strong implant results because on the premium side, our immediacy segment is really growing significantly based on the innovation. But now our challenger strategy is kicking in much better than in the past. We have been adding activities and strategies on go-to-market for the challenger brands that have been a lot focusing on or being successful in North America, in Asia Pacific, in Eastern Europe. But we see now our team in Europe have embraced this strategy of premium and challenger to be grown together. And with the change of some of our leadership from a sales standpoint there, we see a significant momentum on implants helping us to grow then all our product portfolio. And this is really promising for us also moving forward and gaining share on not only a premium as it has been the case in the past, but also on challenger in this specific region. Ortho is growing significantly because, as said, starting from a low base, we are doing significant investment in a go-to-market standpoint. We still have a lot of work to be done here, but this is delivering some significant growth for us, at least from a relative standpoint. And well, the digital business has been helping. When it comes to the digital side, one of the specificity that we have, at least on our IOS portfolio, if you remember, is that we are really covering all price points, which is also an excellent position to be in when we look at the current macro economical environment. We are adding the high end with free shape and the best technology out there. But we have also adding the middle market with Medit, which is allowing us more flexibility in pricing and a very good news is that our VirtuoVivo, which is designed, manufactured and distributed by the Straumann Group entirely, is really starting to make its inroad in the market and especially in our team about adding an entry market price for IOS in these current circumstances is a really interesting asset. Then the overall digital business is a low double-digit number within our total sales.

The next question comes from the line of Oliver Metzger from ODDO.

First question is similar to a previous one. So if I look on the quarterly performance of Europe compared to North America, it clearly shows that over some quarters, we see a quite nice outperformance in Europe. So given also the comments you said before, but also the overall dynamics, my assumption is that for dental implants isolated, North America is still showing an outperformance and it's just the DrSmile contribution which make the growth difference in favor of Europe. So could you comment on that, please? Second question, you mentioned at orthodontics, that you're now able to treat more complex treatments. So would you describe this step as the last one which fills the gap in the technological offering compared to the market leader? Or do you still see some further steps needed really to fill the gap with regards to this offering?

Yes. I think a good question, Oliver. When it comes to our growth rate from the implant side between Europe and North America, we have had numbers that have, let's say, I would say, comparable, I would say. Where you are right is that the performance in Europe has been significantly also supported by the DrSmile direct activity that I forgot actually to mention to Julien before, which is the second explanation of the European very good results. When it comes to then the second question, again, what was the second question, sorry?

It's about your technological offering and you said you are able to treat more complex treatment.

Yes, got it. Sorry. Yes, on the orthodontics side, yes, we said we are investing significantly in software development. And we are very pleased with the results of our software engineering team, which is really working very strongly in order to close the gap of indication coverage. Would our 3.1 ClearPilot software is closing entirely the gap? The answer is no. Is it, let's say, closing a part of the gap -- a significantly part of the gap? The answer is yes. We have the capability to do much more than what we have done before. But we believe that, again, within the next 2 versions, we should have almost the gap completed. And we think in our development plan by early 2023, we should have the capability to enter the specialist orthodontic segment with our ClearCorrect offering and our complete software feature for the ClearCorrect software on the clinician side.

The next question comes from the line of Falko Friedrichs from Deutsche Bank.

I have 2 questions, please. And the first one, we obviously know you don't provide specific earnings figures with your Q1 update. But given that you started this year quite clearly above your sales growth guidance, is it at least fair for us to assume that you also started the year a good amount above your EBIT margin guidance for this year? And then my second question is on clear aligners. And do you plan to make any adjustment to your strategy now in terms of the rollout of this business in light of this more uncertain market environment at the moment? Or do you just plan to go ahead with your initial plans assuming that all these market headwinds are more of a temporary nature?

I can take the first question, Falko. Thank you very much for that. And obviously, as we are not providing any details on our earnings figures in the first quarter, I cannot also -- not go really into the details. However, I mean what are the earnings? The earnings are always a combination of revenue development and the OpEx spend that we have. And we can manage the OpEx spend. And obviously, revenue is above expectation that then, it's fair to assume that also on the EBIT, we perform above certain expectation in the first quarter. However, I also want to stress that we stick to the guidance for the full year on the revenue side as well as on the profitability side.

And when it comes to the clear aligner strategy, we are sticking to our strategy. We said that we wanted to invest significantly in this area on, of course, the technology side, and we discussed that a little bit with our new software version that has been just released now once again, but also on our go-to-market approach. And then we are continuing to develop go-to-market investment, that developing teams on the ground on the major market, in order to make sure that we are going to gain also customers in the short- and mid-term future. Then from an investment standpoint, we are not changing anything versus what we have planned to do at the beginning of the year.

The next question comes from the line of Veronika Dubajova from Goldman Sachs.

I have 2, please. Just one, I want to circle back to the guidance for the full year. And I appreciate that the world is really uncertain. But if I just assume you guys deliver 14% sales growth, I think what it implies is basically 10% growth in the remainder of the year. So just trying to kind of understand, is that something that you're seeing already in April? Or is this something that you anticipate will happen as you transition through the rest of the year given where the consumer is? Just really want to understand the motivation for going from 27% to 10% growth, like what actually drives that? What's the bridge from one to the other? So that's my first question. And I don't know if, Peter, you're able to clarify, did you say that growth in April was low double digits? Or that growth in April is consistent with the guidance? So that's my first question. And then my second question is just kind of more broadly on the China dynamic. And if you can give us an update on where you are with the clear aligner launch and approval there, that would be great.

Yes. Thank you, Veronika. And coming back to the guidance side, I think we -- the way we are seeing right now is that we have been achieving a very strong Q1 and we are very excited with this because obviously, this is giving us the opportunity to continue to invest in line with our plan and making sure that we can continue investment we have planned also during the whole 2022. Then for us, this is positioning us in a great way in order to be able to build up our competitive situation or position in all the different segments we are in. When it comes now to what will happen in the next 9 months, you know, it's very difficult to predict. Then we are not planning exactly how much growth we are going to do, as an example, in the second half, because I think it's very difficult to evaluate. You have, on the one side, the inflation, which is just starting to kick in at the consumer side. And we all know that food price and energy pricing are going to make some significant impact on household available income. What will be the priority that they are going to do in their spending with regard to health or with regard to other kind of spending, I think no one knows. Then that's why we prefer to be cautious here and make sure that we are keep monitoring what will happen in the coming months to make sure that we are ready to adapt our strategy, if needed, to what the consumer sentiment and consumer behavior will be. The second thing for us is that in the major markets like China, like Russia, that were a strong growth contributor, we have quite a very challenging situation right now and nobody can predict what's going to happen with COVID in China, looking at the very strong stance that the government is taking with regard to their response to the outbreak. If they continue to do a very stiff lockdown and blocking, you know, Shanghai, blocking Beijing and all those major cities are doing a big part of our business, then we would have also some very challenging situation in China. Then we are still very positive for most of the geographies, but those would be significant cloud that we are -- on top of our head that we need to take into consideration from a guidance standpoint. And we will be able to monitor that very clearly. And I'm sure that after the second quarter, we will be able to have a clearer view and see if guidance needs to be reviewed. But at the moment, we are pleased that we are able to stick to our guidance and to reaffirm that we are going to be able to grow double-digit growth. When it comes to China, yes, the China approval process has been run then quite some time ago for ClearCorrect. We have everything ready. We have a specific Chinese treatment planning and the treatment planning team is ready, ready to go and already doing some test cases to make sure that they are sharpening their skills while we are getting approval. We have our manufacturing plant which is ready. They are also performing some cases in order to make sure that we are keep increasing efficiency in the plant while we are finalizing the approval process. And we have done all the different paperwork and all the necessary evaluation and toxicity tests and so on for all the different materials, then we are just waiting for the approval process within the Chinese regulatory authority. Then this is taking more time than we have planned also due to some of the local circumstances within China at the moment, but we hope that the regulatory authority will be able to resume their activity and come back to us within the coming weeks.

Understood. And then just quickly on the April comment because, I think, for instance, Align said last night that their April sales were flat versus March. Are you seeing a similar slowdown in your business? Is April growing double digit? Is it growing similarly to Q1?

No. Again, as I said, I think April is not growing similar to Q1 because we see, while the Chinese impact, as an example, and some of the consumer confidence has been impacting some of the trend, but we are still on the double-digit side for us in April from what we have seen so far.

The next question comes from the line of Daniel Buchta from ZKB.

The first one would be on your organic growth. Maybe is it possible for you to break it down a little bit more into price and volumes? I mean just to get an indication on how successful you were on price increases already. And in general, I mean how do you see the feedback from your customers on that side? And in the past, you indicated that you at least expect to pass on basically all inflationary pressures. And then the second question, in addition to your comments on the aligner business, I mean you stated when you expect to be able to do the complex cases. And how is the picture on the teens market? I mean do you -- when do you expect to have all regulatory approvals on that side? And when do you think you can be ready for that, as it would be the second bigger gap still left for you in the aligner space?

On the organic growth, price versus volume, I think we have put some price increase, then the price increase are still at a reasonable level. It's a very low single -- it's low single digit that we are doing, then there is a lot of the organic growth which is coming from volume. Looking at the inflationary pressure, we have the capability to pass part of the inflation. But if inflation, like in the Eurozone or North America, is around 8%, we are not -- we have not yet translated all the inflation in our pricing strategy. Now we are allowing ourselves that we can do some -- that we can do several price increase during the year. This is still something which is on our radar and based on the development of our gross margin, that is what we will be evaluating. But for the time being, we have not either translated inflation in our personnel cost, meaning that our cost did not grow as well following the inflation. When it comes to the aligner side, on the teens market, then you need to do a difference between the mixed dentition or the final dentition. Then we are already active a little on the teens market, for older, the teens that are above 13 years old and are having their final dentition. We are -- we got the approval, FDA in North America, that we are going to leverage much more, because we did not market that yet. We are planning significant campaign on this one and we need to do some additional clinical evaluation work for going to the mixed dentition, meaning below 13 years old.

The last question for today comes from the line of Vane-Tempest, James, from Jefferies.

I just have 2, please. I think you mentioned that Russia and Ukraine is up to 4% of revenues. I'm just wondering what inventory levels you've got? And how you're able to resupply and what disruption has been to procedures and how durable that current business is? And then the second question is, there's been a number of questions before on the call talking about April. I think previously you've mentioned you have 60 days' visibility into the business, so just wondering if you're also seeing double-digit growth in terms of what you're expecting to see coming into May?

Thank you, James. Yes, when it comes to Russia, then we have, as we said during out full-year results, we have had the opportunity to generate some stock in the Russian [indiscernible] to make sure we can, as a medical device company ensuring a continuity of care, all the patients that have been under treatment, especially all the prosthetic parts and all the appointments that were planned, that have been entered in order to support patients in need, then we had 6 to 7 months' of stock, as we said, then planning to go until September, October. Then this is still the case. We are evaluating the situation and hope that this terrible and unacceptable conflict will see a quick end in order that we can afterwards, we can support our team in Russia over there and helping them out also to resume fully the activity. And when it comes to April, as I said, I think April we are then happy to see still double-digit growth, even though it's really significantly lower than what we have been able to achieve in Q1.

Were you able to give any commentary on May, just going -- I gather that you did have around 60 days' visibility into the business before. Can you give us in terms of what you're expecting to see?

May?

Yes.

Well, May -- again, no, May, we cannot give visibility globally, I think, because what we know is that, again, we have some visibility when it comes to customer appointments, then the customer appointments in the major geographies except China have been still positive, then when we look at the, at the bookings in the dentist side. But if patients start to call in and are starting to reschedule, then this is something that we will not be able to see. Looking at the current uncertainties, I would not comment on the May potential numbers. Okay, thank you all for all your questions. And with this, then we conclude our conference. We look forward to meeting you at one of the upcoming financial conferences or during our virtual roadshow meetings, which are outlined on Slide 24. Thank you once again for joining us today and have a great day.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call and thank you for participating in the conference.