Half Year 2026 Medacta Group SA Earnings Call

September 9, 2026

Speaker #2: You're every move you make. So the story goes over and over. We hurt over and over. We hurt over and over. Broken hearts over and over.

Speaker #2: We hurt. Say you don't want to dance it. You've been hurt so deep.

Speaker #1: Good afternoon. This is the Carrasco Conference Operator. Welcome, and thank you for joining the Medacta First Half 2026 Results Conference Call. As a reminder, all participants are in listen-only mode.

Operator 3: Good afternoon. This is the Chorus Call Conference operator. Welcome, and thank you for joining the Medacta H1 2026 Results Conference Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. At this time, I would like to turn the conference over to Mr. Francesco Siccardi, CEO of Medacta. Please go ahead, sir.

Operator: Good afternoon. This is the Chorus Call Conference operator. Welcome, and thank you for joining the Medacta H1 2026 Results Conference Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. At this time, I would like to turn the conference over to Mr. Francesco Siccardi, CEO of Medacta. Please go ahead, sir.

Speaker #1: After the presentation, there will be an opportunity to ask questions. At this time, I would like to turn the conference over to Mr. Francesco Siccardi, CEO of Medacta.

Speaker #1: Please go ahead, sir.

Speaker #2: Thank you very much. And good afternoon, or good morning. Welcome to Medacta H1 2026 results conference call. So the slides of today's presentation can be found on the Medacta Investor Relations website, along with the media release.

Francesco Siccardi: Thank you very much, and good afternoon or good morning. Welcome to Medacta H1 2026 Results Conference Call. The slides of today's presentation can be found on the Medacta investor relations website, along with the media release. I would like to remind all participants that the presentation includes forward-looking statements which are subject to risk and uncertainties. Listener and readers are therefore encouraged to refer to the disclaimer on slide 2 of today's presentation. After those housekeeping remarks, I will now turn to slide number 4 and start with the highlights of today's publication. As already reported, Medacta grew almost 10% in constant currency in H1, reaching EUR 368 million in terms of revenues. We managed to report an adjusted EBITDA margin of 27.8% in constant currency or 26.5% reported, equivalent to adjusted EBITDA of EUR 97 million.

Speaker #2: I would like to remind all participants that the presentation includes forward-looking statements, which are subject to risk and uncertainties, listener and readers are therefore encouraged to refer to the disclaimer on slide two of today's presentation.

Speaker #2: And after those housekeeping remarks, I will now turn to slide number four and start with highlights of today's publication. As already reported, Medacta grew almost 10% in custom currency in H1, reaching 368 million euro in terms of revenues.

Speaker #2: We managed to report an adjusted EBITDA margin of 27.8% in constant currency, or 26.5% reported, equivalent to adjusted EBITDA of €97 million. The net profit for the period reached €42 million, or 11.4% of revenue, and we are confirming both our 2026 outlook and our midterm outlook.

Francesco Siccardi: The net profit for the period reached EUR 42 million or 11.4% of revenue, and we are confirming both our 2026 outlook and our midterm outlook. If we turn to the same page, this is just to remind everybody how Medacta has been able to continue to deliver a significantly above-market growth. Our success relies on differentiating innovation that are really improving patient outcome, and at the same time they are sustainable under an healthcare system point of view. Those innovations are introduced in the market with a very strong focus on medical education, so training of surgeons all over the world that are able to acquire the knowledge necessary to use these new techniques, new technologies, new products through our medical education.

Speaker #2: If we turn to the same page, this is just to remind everybody how Medacta has been able to continue to deliver a significantly above market growth.

Speaker #2: Our success relies on differentiating innovations that are really improving patient outcomes and, at the same time, are sustainable from a healthcare system point of view.

Speaker #2: Those innovations are introduced in the market with a very strong focus on medically education, so training of surgeons all over the world that are able to acquire the knowledge necessary to use this new techniques, new technologies, new products through our medically education.

Speaker #2: And then, of course, we need to constantly expand our sales force globally across all our business lines, in order to reach as many customers as possible on a global scale.

Francesco Siccardi: Then, of course, we needed to constantly expand our sales force globally across all our business lines in order to reach as many customers as possible on a global scale. If we go to the slide number 6, we have already reported our geo mix sales. We have been able to grow double digit across three out of four regions. In EMEA, at 10%, in APAC at 13.1%, in Latin America, 16.4%, while North America, differently from the other periods, grew around 7%. This changed a bit our geo mix, and as you will see, this will have an impact on some of our margins. If we go to slide number 7, we could see the very solid growth across all the portfolio, starting from our hip that grew around 8%, knees almost 11%, extremities almost 16%, and spine 4.5%.

Speaker #2: If we go to slide number six, we have already reported our Geomix sales. We have been able to grow double digits across three out of four regions.

Speaker #2: In May, at 10%. In APAC, at 13.1%. In Latin America, 16.4%. While North America differently from the other periods, grew around 7%. This changed a bit our geomix and, as you will see, this will have an impact on some of our margins.

Speaker #2: If we go to slide number seven, we can see the very solid growth across all the portfolio. Starting from our HIP that grew around 8%, NIS almost 11%, extremities almost 16%, and spine 4.5%.

Speaker #2: The product mix as well, did a change a little bit and, as we will hear later, this has an impact as well, mainly on the gross profit.

Francesco Siccardi: The product mix, as well, did change a little bit, and as we will hear later, this has an impact as well, mainly on the gross profit. If we go a little bit into the details, our performance in hip continues to be significantly above market, probably around 2 times. We continue to focus on our minimally invasive solutions. We have introduced, in the H1 of the year, our enabling technology, NextAR Hip, in the US and Australia, which is in limited market release. We are in a full market release for our new triple taper stem M-finity, which is starting to gain momentum in the US and more recently in Japan. On slide number 9, we can follow our consistent expansion on the knee portfolio, almost 11% in H1 2026.

Speaker #2: If we go a little bit into the details, our performance in HIP continues to be significantly above market, probably around two times. We continue to focus on our minimal invasive solutions.

Speaker #2: And we have introduced in the first half of the year our enabling technology, Nextstar HIP, in the US and Australia, which is in limited market release, while we are in full market release for our new triple taper stem, Infinity, which is starting to gain momentum in the US and more recently in Japan.

Speaker #2: On slide number nine, we can follow our consistent expansion on the new portfolio. Almost 11% in H1 2026. This is driven by our focus on kinematic alignment and the unique implant we have in the market, specifically designed for kinematic alignment, the GMK Spherica, which is clearly driving our growth and becoming our most important new product in a relatively short period of time.

Francesco Siccardi: This is driven by our focus on kinematic alignment and the unique implant we have in the market specifically designed for kinematic alignment, the GMK SpheriKA, which is clearly driving our growth and becoming our most important knee product in a relatively short period of time. Here as well, we are more than 2 times faster than the market in this segment. In spine, we did grow single digit, 4.5%. We have redesigned a bit our strategy, mainly in the US market, focusing much more on enabling technology, which is now representing around 50% of our spine revenues in the US, meaning 50% of our spine products are implanted with the support of enabling technology. We are going more direct and more with exclusive agents in that segment.

Speaker #2: Here as well, we are more than two times faster than the market in this segment. In spine, we did grow single digit 4.5%. We have redesigned a bit our strategy mainly in the US market, focusing much more on enabling technology, which is now representing around 50% of our spine revenues in the US, meaning 50% of our spine products are implanted with the support of enabling technology, and we are going more direct and more in with exclusive agents in that segment.

Speaker #2: We continue to have very strong performance in MA as well as in Spine, followed by both Latin America and Asia Pacific. This remains well above market growth in the first half of 2026.

Francesco Siccardi: We continue to have a very strong performance in EMEA as well in spine, followed by both Latin America and Asia Pacific. This remains well above market growth in the H1 of 2026. We now move to the extremity segments, almost 16% year-over-year growth for H1. We have introduced here as well, additional technology elements. Together with our NextAR shoulder application, we have introduced the revision shoulder arthroplasty, first in the US, and now is going to expand outside of the US. This technology is supported by a new AI-based MyShoulder Planner, which helps surgeons to carefully plan their products, their procedures, and hopefully deliver a better care for their patients.

Speaker #2: If we now move to the extremity segments, almost 16% year-over-year growth for H1. We have introduced here as well additional technology elements together with our Nextstar shoulder application.

Speaker #2: We have introduced the revision shoulder arthroplasty. First in the US and now is going to expand. Outside of the US, and this technology supported by a new AI-based my shoulder planner, which helps surgeons to carefully plan their products, their procedures, and hopefully deliver a better care for their patients.

Speaker #2: On the sports med side, which is the other element together with shoulder arthroplasty part of the extremity, a segment of Medacta, we launched a secure fix, which is an all-inside meniscal repair system for knee sports medicine.

Francesco Siccardi: On the Sports Medicine side, which is the other element together with shoulder arthroplasty, part of the extremity segment of Medacta, we launched SecureFix, which is an all-inside meniscal repair system for knee Sports Medicine, which is very well appreciated by our customers and is a clear driver for our knee Sports Medicine portfolio. Here as well, we have a growth rate which is more than 2 times the market year-over-year. I would now like to ask our CFO, Corrado Farsetta, to go over line by line of our P&L and comments on the marginalities.

Speaker #2: Which is very well appreciated by our customers and is a clear driver for our knee sports med portfolio. Here as well, we have a growth rate which is more than two times the market year over year.

Speaker #2: I would now like to ask our CFO, Corrado Forsetta, to go over line by line of our P&L and comments on the marginalities.

Speaker #3: Thank you, Francesco, and good afternoon, everyone. Let me now walk you through our financial performance in the first semester, and let's start with the gross profit slide.

Corrado Farsetta: Thank you, Francesco, and good afternoon, everyone. Let me now walk you through our financial performance in the H1, and then let's start with the gross profit slide. In H1, the gross profit was CHF 240 million, increasing from CHF 233 million of the previous year. On sales, the GP margin in the H1 was 65.2% compared to 68.3% of the previous year, representing a reduction of about 3%. This reduction is attributable to three main factors. The first one is an adverse FX impact of 1.3%. The second one is a price erosion of about 0.5%. Those two, let's say, coming from the market totaling 1.8% of this 3% reduction are, as I said, taken from that.

Speaker #3: In H1, the gross profit was 240 million, increasing from 233 of the sales, the GP margin in the first semester was 65.2% compared to 68.3% of the previous year, representing a reduction of about 3%.

Speaker #3: This reduction is attributable to three main factors. The first one is an adverse effects impact of 1.3%. The second one is a press erosion of about 0.5%.

Speaker #3: Those two, let's say, coming from the market, totaling 1.8% of this 3% reduction, are, as I said, taken from that. There is a third element, which is strictly related to the top-line performance in terms of geographic mix and product mix, as just discussed by Francesco, which is affecting our GP by another 1.3%.

Corrado Farsetta: There is a third element which is strictly related to the top-line performance in terms of geographic mix and product mix, as just discussed by Francesco, which is affecting our GP of another 1.3%. This is primarily attributable, as we have seen, to lower sales in the US market, to a higher top line coming from our new business, Sports Medicine, and also given a lower than expected top line, also to a higher D&A ratio, coming primarily from our instruments that are in the market. This is important because those two, the two elements coming from the market are taken. The second one are strictly related to our, say, top line and performance. Moving to the EBITDA margin slide. What you see here is, as always, there are two lines.

Speaker #3: And this is primarily attributable, as we have seen, to lower sales in the US market, to a higher top-line coming from our new business, Sports Medicine, and also, given a lower-than-expected top-line, to a higher DNA ratio, coming primarily from our instruments that are in the market.

Speaker #3: This is important because those two—the two elements coming from the market—are taken. The second one is strictly related to our top line and performance.

Speaker #3: Moving to the ABDA margin slide, what you see here is, as always, there are two lines. The yellow line is representing the evolution of our ABDA margin in reported currency.

Corrado Farsetta: The yellow line is representing the evolution of our EBITDA margin in reported currency, and the red line is showing the EBITDA margin at constant currency. So you see that net from the 1.3% FX effect, there is a 0.9% reduction from the previous semester, which is primarily coming from the GP erosion that we have just discussed, only partially offset by a limited operating leverage due to volumes, and also the ability of the company to keep our costs under control. Moving to the net profit slide. The net profit in the H1 amounted to about CHF 42 million, compared to CHF 60 million of the previous year. In order to comment comparable numbers, we should read last year's net profit as CHF 46 million, net from the one-off positive bargain purchase gain, coming from the acquisition of the company last year.

Speaker #3: And the red line is showing the ABDA margin at cost and currency. So you see that net from the 1.3% effects effect, there is a 0.9% reduction from the previous semester, which is primarily coming from the GP erosion that we have just discussed.

Speaker #3: Only partially offset by a limited operating leverage due to volumes and also the ability of the company to keep our cost under control. Moving to the net profit slide, the net profit in the first semester amounted to about 42 million, compared to 60 million of the previous year.

Speaker #3: In order to comment, comparable numbers, we should read last year net profit as 46 million, net from the one-off positive purchase gain coming from the acquisition of the company last year.

Speaker #3: So, 46, compared to 49, which is coming from 42 reported plus about 7 million of negative effects. So the net adjusted and comparable is 49 versus 46.

Corrado Farsetta: So CHF 46 million comparing to CHF 49 million, which is coming from CHF 42 million, reported plus about CHF 7 million of negative FX effect. So the net adjusted and comparable is CHF 49 million versus CHF 46 million. Moving to the slide of the operating cash flow. The operating cash flow in this semester was about CHF 56 million, down from CHF 73 million of the previous year, and this is representing, of course, the performance just discussed of our EBITDA, but also a higher networking capital needs that were basically needed to replenish the implant safety inventory after the super strong performance of last year, and the preparation of the necessary inventory level to enter the Indian market in the H2. We will discuss very soon in the next slide the investing activities, CHF 74 million, and this has resulted into a negative free cash flow of CHF 18.6 million.

Speaker #3: Moving to the slide of the operating cash flow, the number—the operating cash flow in this semester was about €56 million, down from €73 million in the previous year.

Speaker #3: And this is representing a, of course, the performance just discussed of our ABDA, but also a higher networking capital needs that were basically needed to replenish the implant safety inventory after the super strong performance of last year, and the preparation of the necessary inventory level to enter the Indian market in the second half of the year.

Speaker #3: We will discuss very soon in the next slide the investing activities, 74 million, and this will is resulted into a negative free cash flow of 18.6 million.

Speaker #3: Moving to slide 21—sorry, CapEx, not 2017, yes. This is the usual pie of our CapEx. As always, instruments, €42 million, represent the biggest chunk of our investment. But it is important to notice that our tangible now is €22 million, and this is a number which reflects the large amount of investments that we have to do in order to expand our production capacity, to provide our offices and facilities to accommodate the future production machines and employees that we have in our pipeline.

Corrado Farsetta: Moving to slide 21. Sorry, CapEx, not 2017. Yes. This is the usual pie of our CapEx. As always, instruments, CHF 42 million, represented the biggest chunk of our investment, but it is important to notice that our tangible now are CHF 22 million, and this is a number which is reflecting the big amount of investments that we have to do in order to expand our production capacity, to produce our office and facilities to accommodate, let us say, the future production machines and employees that we have in our pipeline. The rest are more or less in line with the previous year. Research and development, CHF 8 million, and other, CHF 2 million, for a total of CHF 74 million. Moving to the CapEx for growth instruments, plus other intangibles. This chart summarizes the evolution of CapEx on sales over the last three semesters. Three lines.

Speaker #3: The rest are more or less in line with the previous year: research and development, 8 million, and other, 2 million. For a total of 74 million.

Speaker #3: Moving to the CapEx for growth instruments plus other intangibles, this chart summarizes the evolution of CapEx on sales over the last three semesters. Three lines, the yellow line is representing CapEx for other tangible that are primarily land, buildings, and production capacity.

Corrado Farsetta: The yellow line is representing CapEx for other tangibles that are primarily land, buildings, and production capacity. The light yellow line is representing instruments on sales, and the blue line on top is the total of the two. As you see, the percentage on sales of our instruments is pretty stable, around 10.5% to 11.9%. This fluctuation is basically driven by two main factors. The first one is the acceleration of top line, and the second one is also the planning and delivery phase in our business, which basically needs to place orders ahead of time in the order of nine to 12 months. So it is feasible to adjust, but is not necessarily possible to do it in the first semester or in the same year. So this explains these fluctuations.

Speaker #3: The light yellow line is representing instruments on sales and the blue line is on top is the total of the two. The, as you see, the percentage on sales of our instruments is pretty stable around 10.5% to 11.9%.

Speaker #3: This fluctuation is basically driven by two main factors. The first one is the acceleration of the top line. The second one is the planning and delivery phase in our business, which basically requires us to place orders ahead of time, typically in the order of 9 to 12 months.

Speaker #3: So it is feasible to adjust, but is not necessarily possible to do it in the first semester or in the same year. So in this explaining this fluctuations.

Speaker #3: The other one is, as we said, representing expansion in our land and buildings and the expansion of production capacity. So, 17.5% is, just to be clear, without the R&D investments that we have seen in the previous slide.

Corrado Farsetta: The other one is, as we said, representing the expansion in our land and buildings and the expansion of production capacity. So 17.5% is, just to be clear, without the R&D investment that we have seen in the previous months. Moving to the last slide of my presentation. The leverage net debt on adjusted EBITDA was 1.2 times, very low, compared to 0.9 times of the full year last year. I think that concludes my part of the presentation. I will now hand over to Francesco, who will take you through the outlook session and some final remarks. Thank you.

Speaker #3: Moving to the last slide of my presentation, the leverage, net debt on adjusted ABDA is was 1.2 times very low compared to 0.9 times of the full year last year.

Speaker #3: I think that that concludes my part of the presentation and I'll now hand over to Francesco, who will take you through the outlook session and some final remarks.

Speaker #3: Thank you.

Speaker #1: Thank you, Corrado. Yes, so we mentioned at the beginning Medacta is confirming its outlook for 2026 with revenue growth in the range of 10 to 14% and an expansion of the adjusted ABDA margin of around 50 base points versus prior year in cost and currency.

Francesco Siccardi: Thank you, Corrado. Yes, we mentioned at the beginning, Medacta is confirming its outlook for 2026 with revenue growth in the range of 10% to 14% and an expansion of the adjusted EBITDA margin of around 50 basis points versus prior year in constant currency. At the same time, we confirm our midterm outlook, which brings our revenue compound annual growth rate in constant currency between 12% and 15%, with a gradual improvement of the adjusted EBITDA compared versus 2025, again, in constant currency and subject to unforeseen events. Medacta remains not impacted by the US tariffs and will continue to monitor the development. Which are the key messages? The key messages is that Medacta is able to continue to develop and to grow on an above market rate for H1 2026.

Speaker #1: At the same time, we confirm our mid-term outlook which brings our revenue compound annual growth rate in cost and currency between 12 and 15% with a gradual improvement of the adjusted ABDA compared versus 2025, again in cost and currency and subject to unforeseen events.

Speaker #1: And Medacta remains not impacted by the US tariffs and will continue to monitor the development. Which are the key messages? The key messages is that Medacta is able to continue to develop and to grow an above-market rate for H1 2026.

Speaker #1: This is the result of our differentiating innovation medical education and constant expansion of our sales reps and teams. We have been able to continue to deliver a high adjusted ABDA margin of approximately 28% in cost and currency.

Francesco Siccardi: This is the result of our differentiating innovation, medical education, and constant expansion of our sales reps and teams. We have been able to continue to deliver a high adjusted EBITDA margin of approximately 28% in constant currency. An accelerating US development and expansion as we have announced the acquisition of a first large piece of land in Tennessee, where we are going to develop our new US headquarters and manufacturing activity for the US market. Our aim continues to be to outgrow the market in a significant way for the years to come. Thank you very much for your attention. Once again, thanks to all our employees, clients, suppliers, and partners worldwide for the excellent period. Thank you very much.

Speaker #1: An accelerating US development and expansion, as we have announced the acquisition of a first large piece of land in Tennessee where we are going to develop our new US headquarters and manufacturing activity for the US market.

Speaker #1: And our aim continues to be to outgrow the market in a significant way for the years to come. Thank you very much for your attention, and once again, thanks to all our employees, clients, suppliers, and partners worldwide for the excellent period.

Speaker #1: Thank you very much.

Speaker #2: This is the Carrasco Conference Operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone.

Operator 3: This is the Chorus Call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and One on their touch-tone telephone. To remove yourself from the question queue, please press Star and Two. Please pick up the receiver when asking questions. Anyone who has a question may press Star and One at this time. The first question is from Sam England with Berenberg. Please go ahead.

Operator: This is the Chorus Call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and One on their touch-tone telephone. To remove yourself from the question queue, please press Star and Two. Please pick up the receiver when asking questions. Anyone who has a question may press Star and One at this time. The first question is from Sam England with Berenberg. Please go ahead.

Speaker #2: To remove yourself from the question queue, please press star then two. Please pick up the receiver when asking questions. Anyone who has a question may press star then one at this time.

Speaker #2: The first question is from Sam England, with Berenberg. Please go ahead.

Speaker #4: Okay, thanks for taking the questions. Can you just give us a bit of a sense of what you've seen in the US joint market so far in Q3?

Sam England: Hi, guys. Thanks for taking the questions. Can you just give us a bit of a sense of what you've seen in the US joint market so far in Q3? I think one of your competitors commented at a conference yesterday that the markets remain quite soft this quarter, so I wondered if that's what you're seeing as well, and to what extent you think you can offset any market weakness with innovation and share gains in the H2. Then secondly, your EBITDA margin now implies a bit of a step up in margins in the H2 of this year. So can you just walk through the drivers that you see to get you to hit that level in the H2?

Speaker #4: I think one of your competitors commented at a conference yesterday that the markets remain quite soft this quarter. So I wondered if that's what you're seeing as well.

Speaker #4: And to what extent do you think you can offset any market weakness with innovation and share gains in the second half? And then secondly, your EBITDA margin now implies a bit of a step up in margins in the second half of this year.

Speaker #4: So can you just walk through the drivers that you see to get you to hit that level in the second half? And do you expect any of the gross margin pressures that you called out to ease as we move into the second half so you can hit that guidance?

Sam England: Do you expect any of the gross margin pressures that you called out to ease as we move into the H2 so you can hit that guidance? Thanks.

Speaker #4: Thanks.

Speaker #1: Yeah. Thank you, Sam. So in the US, we have seen, of course, the H1 market now; everybody reported the numbers, which are quite a bit lower than in previous years.

Francesco Siccardi: Yeah. Thank you, Sam. In the US, we have seen, of course, H1 market. Now everybody reported the numbers, which is quite a bit lower than the previous years in terms of market growth. We have seen probably a 3% US market growth versus an expected 5% to 5.5%. Q3, we have started to see, at least on our end, some of the Medacta specific factors to be reduced, especially the spine dilution in the US spine segment, which is heading in the right direction. We have seen a good re-acceleration on the hip side, but this was very much linked to our introduction of this triple taper stem. We remain very confident on our ability to accelerate quite a bit in the US specifically as well, which was the biggest gap we had and the biggest surprise we had in H1.

Speaker #1: In terms of market growth, we have seen probably a 3% US market growth versus an expected 5.5%. Q3, we have started to end some of the Medacta-specific factors to be reduced, especially the spine dilution in the US spine segment, which is heading in the right direction.

Speaker #1: We have seen a good re-acceleration on the hip side, but this was very much linked to our introduction of this triple-taper stamp. So we remain very confident in our ability to accelerate quite a bit in the US specifically as well, which was the biggest gap we had and the biggest surprise we had in H1.

Speaker #1: It's fair to remind everybody that last year Medacta USA had an exceptionally strong H1. So we have a different comparable in H2, both in the US and at the company level.

Francesco Siccardi: It is fair to remind maybe everybody that last year, Medacta USA did an exceptionally strong H1. We have a different comparable in H2, both in the US and at company level. Definitely we see a better chance to accelerate in the second half, including in the US, and that is true outside of the US as well. On the EBITDA margin, I think it is pretty much linked as well to what we just discussed. We were aiming, in terms of growth, a bit higher. We did generate cost in the first half of the year, in order to achieve a higher growth rate in terms of people, structure, et cetera. This did not fully materialize, in certain region in particular, and we mentioned the US growing single digit, which is a very big surprise for us.

Speaker #1: So definitely we see a better chance to accelerate in the second half, including in the US, and that's true outside of the US as well.

Speaker #1: On the ABDA margin, I think it's pretty much linked as well to what we just discussed. So we were aiming in terms of growth a bit higher we did generate cost in the first half of the year in order to achieve a higher growth rate.

Speaker #1: In terms of people structure, etc., this did not fully materialize. In certain region in particular, and we mentioned the US growing single digit, which is a very big surprise for us.

Speaker #1: And of course, we have quite a bit of leverages to adjust our cost increase so we did reduce our cost increase to the level of revenues we are seeing at the moment.

Francesco Siccardi: Of course, we have quite a bit of leverages to adjust our cost increase. We did reduce our cost increase to the level of revenues we are seeing at the moment. We are confident that if revenues develop in the way we now see and expect to continue, we are going to be able to basically hit the targets we have in mind. We had a little bit, again, of external factors headwinds, in particular, some fuel surcharge, so hitting our variable transportation cost. This is something we cannot control, and I think the fuel this morning is again at some record heights, so this will not help. Let us say, outside of external factors, basically the contribution coming from a strong top-line acceleration, which is what we expect should help us to increase leverage on our cost and therefore expand our marginality.

Speaker #1: So we are confident that if the revenues develop in the way we now see and expect to continue, we are going to be able to basically hit the targets we have in mind.

Speaker #1: We had a little bit again of a external factors headwinds, in particular some fuel surcharge. So hitting our variable transportation cost that this is something we cannot control and I think the fuel this morning is again at some record heights.

Speaker #1: So this will not help, but let's say outside of external factors, basically the contribution coming from a strong top line acceleration, which is what we expect should help us to increase leverage on our cost and therefore expand our marginality.

Speaker #4: Great. Thanks.

Sam England: Great. Thanks.

Speaker #1: Thank you.

Francesco Siccardi: Thank you.

Speaker #2: The next question comes from Michelle Bushler with ZKB. Please go ahead.

Operator 3: The next question comes from Michelle Buschler with ZKB. Please go ahead.

Operator: The next question comes from Michelle Buschler with ZKB. Please go ahead.

Speaker #5: Hello. Thank you for taking my question. You noted a notable softening within Medacta's existing customers in the US and the general market slowdown. Could you comment on that a bit more?

Michelle Buschler: Hello, and thank you for taking my question. You noted a notable softening within Medacta existing customers in the US, and the general market slowdown. Could you maybe comment on that a bit more? Like, how much was coming from existing customers and how much was coming from new customers?

Michelle Büchler: Hello, and thank you for taking my question. You noted a notable softening within Medacta existing customers in the US, and the general market slowdown. Could you maybe comment on that a bit more? Like, how much was coming from existing customers and how much was coming from new customers?

Speaker #5: Like, how much was coming from existing customers, and how much was coming from new customers?

Speaker #1: Yes, so this was quite an interesting dynamic, because we have seen a very successful and continued pickup of new customers. In terms of the number of customers, we are almost as strong as the previous year.

Francesco Siccardi: Yeah. This was quite an interesting dynamic because, we have seen a very successful and continued pickup of new customers. In terms of number of customers, we are almost as strong as the previous year, whereas we discussed before, we had a record year, which means our offering, our products, our ability to attract new customers and to hire new salespeople remains pretty much intact. While we have seen, for different reason, mainly, base attrition, so existing customers either doing less than the previous year, moving more business from hospital to ambulatory surgery centers and this is a more profitable business for them and so therefore they are happy with the potentially lower volume. And maybe we are present, working with them in an ASC and not in the hospital. What else?

Speaker #1: As we discussed before, we had a record year, which means our offering, our products, and our ability to attract new customers and to hire new salespeople remain pretty much intact.

Speaker #1: While we have seen for different reason, mainly base attrition, so existing customers either doing less than the previous year or moving more business from hospital to ambulatory surgery centers and this is a more profitable business for them.

Speaker #1: And so, therefore, they are happy with potentially a lower volume, and maybe we are presently working with them in an ASC and not in a hospital.

Speaker #1: What else? We've seen some of course reduction on the spine side, which was again more a Medacta-specific thing linked to our decision to refocus on more profitable spine business and not growing at any cost and refocusing mainly on our specialty products as we said technologies and sales through technology.

Francesco Siccardi: We have seen some, of course, reduction on the spine side, which was, again, more a Medacta specific thing linked to our decision to refocus on more profitable spine business and not growing at any cost, and refocusing mainly on our specialty products, as we said, the technologies, and sales through technology. That is a specific area for the spine.

Speaker #1: That is specific for the spine.

Speaker #5: Okay. Thank you. And if I may follow up questions, you mentioned in the first half strikes in Europe. Do you still see that for the second half or is that over?

Operator 2: Okay. Thank you. If I may, follow-up questions. You mentioned in the H1 strikes in Europe. Do you still see that for the H2, or is that over?

Michelle Büchler: Okay. Thank you. If I may, follow-up questions. You mentioned in the H1 strikes in Europe. Do you still see that for the H2, or is that over?

Speaker #1: Yeah. So, unfortunately, it's not over. And we're talking now specifically about Spain, which is one of our fastest growing markets in Europe, which is still growing despite the fact that the Spanish market in the first half is almost down 20% due to those strikes in the public market.

Francesco Siccardi: Yeah. Unfortunately, it is not over. We are talking now specifically about Spain, which is one of our fastest-growing market in Europe, which is still growing despite the fact that the Spanish market in the H1 is almost down 20% due to those strikes in the public market. They have announced that those strikes will potentially continue, but it is really unknown. There are some regions which are not taking part of those strikes anymore. As you know, Spain is a federal state, so the regions are very autonomous. We will have to see. It is very challenging for us to forecast Spain. I just actually had a meeting this morning with our Spain general manager, and that is a little bit an unknown situation. Medacta is doing very well despite this very strong headwind, and would have been a record year in Spain for us without.

Speaker #1: So they have announced that those strikes will potentially continue, but it's really unknown. There are some regions which are not taking part in those strikes anymore.

Speaker #1: And as you know, Spain is a federal state so the regions are very, very autonomous. And we will have to see. It is a very challenging for us to forecast Spain and just actually had a meeting this morning with our Spain general manager and that's a little bit an unknown situation.

Speaker #1: Medacta is doing very, very well despite this. Very strong headwind and would have been a record year in Spain for us without. But still Spain is affected by those strikes.

Francesco Siccardi: Still, Spain is affected by those strikes, while we did not see any other strike outside of Spain, which was the case in H1 with France, for example. Outside of Spain is more normal.

Speaker #1: While we did not see any other strike outside of Spain—which was the case in H1 with France, for example—strikes outside of Spain are more normal.

Speaker #5: Perfect. Thank you. And maybe one last question from my side. Do you have the approval for the first product in India already?

Operator 2: Perfect. Thank you. Maybe last question from my side. Do you have the approval for the first product in India already?

Michelle Büchler: Perfect. Thank you. Maybe last question from my side. Do you have the approval for the first product in India already?

Speaker #1: We did actually. A few weeks ago, we just got approval for our knees, which is most strategic product and most important in terms of market potential in India.

Francesco Siccardi: We did, actually. A few weeks ago, we just got approval for our knees, which is the most strategic product, and the most important in terms of market potential in India. We would start to ship finally those goods that have been sitting on our shelves because every week could have been the week of green light. We should start to see some action already in September.

Speaker #1: We would start to ship finally those goods that have been sitting on our shelf because every week could have been the week of green light.

Speaker #1: And which is start to see some action already in September.

Operator 2: Perfect. Thank you, Francesco Siccardi.

Michelle Büchler: Perfect. Thank you, Francesco Siccardi.

Speaker #5: Perfect. Thank you, Francesco.

Speaker #1: Thank you.

Francesco Siccardi: Thank you.

Speaker #2: The next question comes from Grand Oil with UBS. Please go ahead.

Operator 3: The next question comes from Graham Doyle with UBS. Please go ahead.

Operator: The next question comes from Graham Doyle with UBS. Please go ahead.

Speaker #4: Kathleen, guys, thanks for taking the questions. Just two, please. One for Francesco and one for Corrado. Francesco, on the top line, so when I look at the midpoint of the guidance, I think it's something like 14% growth in the second half.

Graham Doyle: Afternoon, guys. Thanks for taking the questions. Just two, please. One for Francesco, one for Corrado. Francesco, on the top line, when I look at the midpoint of the guidance, I think it's something like 14% growth in the H2, which is about 4 percentage points more than H1. Which is when I look at my math, in H2, you've got an extra trading day. It seems like US demand probably gets a little bit better as insurance normalizes and you get through deductibles. Presumably, there's some pent-up European demand from strikes, and then you've got the improving spine piece as well. Is it still reasonable to think of the midpoint or better is actually still possible for the full year, because of these tailwinds, you could do something like a 14% in the H2?

Speaker #4: Which is about 4 percentage points more than H1, which is when I look at my math. So in H2, you've got an extra trading day.

Speaker #4: It seems like US demand probably gets a little bit better as sort of insurance normalizes and you get through deductibles. Presumably, there's some pent-up European demand from strikes.

Speaker #4: And then you've got the improving spine piece as well. So is it still reasonable to think of the midpoint or better is actually still possible for the full year?

Speaker #4: I because of these tailwinds, you could do something like a 14% in the second half. And then Corrado, just a quick one on depreciation.

Graham Doyle: Corrado, just a quick one on depreciation. There's nothing happening, you're not accelerating depreciation on instruments or anything. It's just a case of there's a greater share of instruments out there. Just to double-check how that calculation is. Thank you.

Speaker #4: There's nothing happening. You're not accelerating depreciation on instruments or anything. It's just a case of there's a greater share of instruments out there. It's just a double check how that calculation is.

Speaker #4: Thank you.

Speaker #1: Thank you, Graham. So, concerning the top line, there are all the elements you mentioned, plus, of course, India Q4 is only Q4, and that's 100% growth.

Francesco Siccardi: Thank you, Graham. Concerning the top line, there are all the elements you mentioned, plus of course, India, Q4 is only Q4, that's 100% growth. There are a few other elements. You mentioned spine. There are some price cuts that came into force, for example, in France, which is our most important market in September last year. So by September, this price deduction would be not there anymore. It was around 3% in certain products, so it is quite significant. There are still, of course, some variables, like we mentioned Spain and the strike, the spine re-accelerating in the US. Is it easy to achieve the mid-portion of the guidance? I would say it's not. But is it possible? I would say it is possible. But probably is more likely to be slightly below the midline given the fact that we have 4 months to go.

Speaker #1: There are a few other elements you mentioned spine. There are some price cut that came into force. For example, in France, which is our most important market in September last year.

Speaker #1: So by September, this price deduction would be not there anymore. It was around 3% in certain products. So it's quite significant. Then there are still, of course, some variables like we mentioned Spain and the strike.

Speaker #1: The spine re-accelerating in the US. So is it easy to achieve the mid portion of the guidance? I would say it's not. But is it possible?

Speaker #1: I would say it is possible, but it is probably more likely to be midline given the fact that we have four months to go. But we remain positive.

Francesco Siccardi: But we remain positive. We always are very ambitious at Medacta. I think to grow even 10% to 12% in the current environment, is phenomenal, and would probably be close to 3% above market, three times the market, which is remarkable. But, we always target very high numbers and I always prefer to be slightly disappointed on a very good performance than being happy because we did 6%. So that is a little bit on the sales. I hope I addressed your question, otherwise, just let me know, then ask Corrado to address the other one.

Speaker #1: I mean, we always very ambitious at Medacta. I think to grow even 10 to 12% in the current environment is phenomenal. And would probably be close to 3% above market three times the market, which is remarkable.

Speaker #1: But we always target very, very high numbers and I always prefer to be slightly disappointed on a very good performance than being happy because we did 6%.

Speaker #1: So that is a little bit on the sales. I hope I addressed your question. Otherwise, just let me know. I'll ask Corrado to address the other one.

Speaker #4: Yes. Hi, Graham. So yes, I confirm we didn't change any accounting treatment of our capex. What we have seen in the first semester is a purely arithmetical result coming from a lower than expected top line and the same amount of instruments and DNA that are still in the market, regardless of the level of top line reached in a certain semester.

Corrado Farsetta: Yes. Hi, Graham. So yes, I confirm. We did not change any accounting treatment of our CapEx. What we have seen the first semester is a pure arithmetical result coming from lower than expected top line, and the same amount of instruments and D&A that are still in the market, regardless of the level of top line reached in a certain semester. Just a pure arithmetic calculation, nothing else.

Speaker #4: Just a calculation. Nothing else.

Speaker #1: But if I can comment on that, Graham, of course, very often in business, revenues fix a lot of problems. So as we can control our new instrument sets that we put in the market, we did put in the market a higher number of instruments based on higher expectation.

Francesco Siccardi: But if I can comment on that, Graham. Of course, very often in business, revenues fix a lot of problems. As we can control our new instrument sets that we put in the market, we did put in the market a higher number of instruments based on higher expectation. We can pull back on some incremental instruments in H2 so that we can potentially improve the ratio of CapEx to sales, and therefore you would see a GP improvement in potentially H2, provided of course the revenues reach the levels we expect, which is quite likely. But those are all effects linked to an unexpected softening. So you put resources, networking capital, instruments, people, then you are slightly behind. You see this phenomenon in H1. You try to adjust it immediately in H2.

Speaker #1: We can pull back on some incremental instruments in the second half of the year so that we can potentially improve the ratio of capex to sales and therefore you would see a GP improvement in potentially second half provided, of course, the revenues reach the levels we expect, which is quite likely.

Speaker #1: But those are all effects linked to an unexpected softening. So you put resources, networking capital, instruments, people, then you're slightly behind. You see this phenomenon in H1.

Speaker #1: You try to adjust it immediately. In H2, most of it you can manage it. Some of it you can't. And then you have a little deterioration.

Francesco Siccardi: Most of it you can manage it, some of it you cannot. Then you have a little deterioration, but H1 was probably our worst semester in the last five years after COVID. We will compare it with the best semester of Medacta history, which was probably Q1 2025.

Speaker #1: But H1 was probably our worst semester in the last five years after COVID, and we were compared with the best semester in Medacta history, which was probably H1 2025.

Speaker #4: Yep. That's super clear. Thanks a lot, guys. Maybe a cheeky follow-up, which is if you look at some of your big peers like a J&J, whether it's their spin or Smith & Nephew kind of re-evaluation of Ortho.

Graham Doyle: Yeah. That is super clear. Thanks a lot, guys. Maybe a cheeky follow-up, which is, if you look at some of your big peers like Johnson & Johnson, whether it is their spin or Smith+Nephew kind of reevaluation of ortho, there is clearly a lot of disruption which you would have thought would be quite good for you guys in terms of market share gains and being able to invest and kind of work closer with surgeons. Is there any logic in, if an interesting product or facility was to come up as part of that disruption in terms of M&A kind of bolt-on size, does that make sense, or is organic still the best way of thinking about product development or filling in gaps for you guys?

Speaker #4: There's clearly a lot of disruption, which you'd have thought would be quite good for you guys in terms of market share gains and being able to invest and kind of work closer with surgeons.

Speaker #4: But is there any logic in if an interesting product or facility was to come up as part of that disruption, in terms of M&A kind of bolt-on size, does that make sense?

Speaker #4: Or is organic still the best way of thinking about product development or filling in gaps for you guys?

Speaker #1: I would say that every time I look at price points paid for M&A for technology, for products, the return on invested capital when we do it internally is incredibly better.

Francesco Siccardi: I would say that every time I look at price points paid for M&A, for technology, for products, the return on invested capital when we do it internally is incredibly better.

Graham Doyle: Okay.

Speaker #1: I mean, you have seen probably an obvious just announced the acquisition of essential spine for 150 plus million. We developed in-house our own technology.

Francesco Siccardi: You have seen probably, and all this just announced, the acquisition of Essential Spine for 150 plus million. We developed in-house our own technology. We are going to introduce our own robotic pretty soon, and we spent a fraction of that. You see it in our R&D. It did not explode.

Speaker #1: We are going to introduce our own robotic pretty soon. And we spent a fraction of that. I mean, you see it in our R&D—it didn't explode.

Speaker #1: So that is, I think, always better. Then if there are opportunities, as you have seen with the sports medicine, with a smaller lines, we always look at it.

Graham Doyle: Yeah.

Francesco Siccardi: That is, I think, always better. If there are opportunities, as you have seen with the Sports Medicine, with the smaller lines, we always look at it. And there are, as you said, from time to time, opportunities, but we tend to develop in-house our own innovative products rather than buy them. That has always been the case, and most likely will continue to be the vast majority of our growth strategy.

Speaker #1: And there are, as you said, from time to time, opportunities, but we tend to develop in-house our own innovative products rather than buy them.

Speaker #1: That is always been the case. And most likely we'll continue to be the vast majority of our growth strategy.

Speaker #4: Perfect. Well, thank you so much for that. That's really, really helpful. And it makes total sense.

Graham Doyle: Perfect. Thank you so much for that. That is really helping, and it makes total sense.

Speaker #1: Thank you very much.

Francesco Siccardi: Thank you very much.

Speaker #2: The next question comes from Ed Hall with Tefal. Please go ahead.

Operator 3: The next question comes from Ed Hull with Stifel. Please go ahead.

Operator: The next question comes from Ed Hull with Stifel. Please go ahead.

Ed Hull: Afternoon. Yeah, thanks for taking my questions. The first one would be back on the US and the acceleration you guys have talked about. We have seen the last three semesters of relatively flat reported numbers. I appreciate that you have outlined the headwinds over the last 12 months. If we think about we are looking at H2, and you have talked about spine getting better and the hip re-acceleration from the triple taper stem. What else should we expect from the US market? Is it too far to say that we would see a lower attrition rate on the base surgeons in H2? Am I jumping to conclusions there? That would be my first question. Then just second question for Corrado Farsetta, I guess, on the inventory in the rebuild that we have seen there.

Ed Hall: Afternoon. Yeah, thanks for taking my questions. The first one would be back on the US and the acceleration you guys have talked about. We have seen the last three semesters of relatively flat reported numbers. I appreciate that you have outlined the headwinds over the last 12 months. If we think about we are looking at H2, and you have talked about spine getting better and the hip re-acceleration from the triple taper stem. What else should we expect from the US market? Is it too far to say that we would see a lower attrition rate on the base surgeons in H2? Am I jumping to conclusions there? That would be my first question. Then just second question for Corrado Farsetta, I guess, on the inventory in the rebuild that we have seen there.

Speaker #5: Good afternoon. Yeah, thanks for taking my questions. The first one would be back on the US and the acceleration that you guys have talked about.

Speaker #5: So we've seen the last three semesters of sort of relatively flat reported numbers. And I appreciate that you've outlined the headwinds over the last 12 months.

Speaker #5: So if we think about sort of we're looking at H2, and you've talked about spine getting better and the hip re-acceleration from the taper stem.

Speaker #5: What else should we expect from the US market? Is there is it too far to say that we would see a lower attrition rate on the base surgeons in H2?

Speaker #5: Am I jumping to conclusions there? I mean, that would be my first question. And then the second question—for Corrado, I guess—on the inventory and the rebuild that we've seen there.

Speaker #5: How much of this would be for India versus, sort of, repairing safety stocks from the exceptional growth you guys saw in 2025?

Ed Hull: How much of this would be for India versus repairing, let's say, safety stocks from the exceptional growth you guys saw in 2025? Thanks.

Ed Hall: How much of this would be for India versus repairing, let's say, safety stocks from the exceptional growth you guys saw in 2025? Thanks.

Speaker #5: Thanks.

Speaker #1: So let me try to address the US. So we mentioned a good re-acceleration on the hip side. The knee was already growing pretty well, I would say.

Francesco Siccardi: So let me try to address the US. We mentioned a good re-acceleration on the hip side. The knee was already growing pretty well, I would say. We have introduced a new shoulder as well, which we see a good acceleration. It's called the M-Vizion Monobloc Medacta Stem, which address an important segment of the market, which is mainly represented by the market leader, which is Stryker's shoulder, or the former Tornier. That is going to help us a lot. Then you mentioned correctly the spine, which should reduce the dilution on the overall growth rate of Medacta USA. Then is the base attrition going to reduce in a significant way? We believe so.

Speaker #1: We have introduced our new shoulder as well which we see a good acceleration. It's called the monoblock Medacta stem. Which address an important segment of the market, which is mainly represented by the market leader, which is Stryker shoulder or the former Tournier.

Speaker #1: That is going to help us a lot. And then you mentioned correctly the spine, which should reduce the dilution on the overall growth rate of Medacta, you say.

Speaker #1: Then is the base attrition going to reduce in a significant way? We believe so. We have analyzed really customer-by-customer what's going on. And we believe that this phenomenon should significantly reduce and at the same time we have seen as we said a good pipeline of new customers picking up.

Francesco Siccardi: We have analyzed really customer by customer what's going on, and we believe that this phenomenon should significantly reduce and at the same time, we have seen, as we said, a good pipeline of new customers picking up, and that's where the confidence in the H2 acceleration of the US market is coming from. The first 2 months, smaller months, because those are the summer months, are confirming those trends. We remain cautious because those are things out of our hands, but we are quite confident on a good recovery H2 of the US. Corrado, I let you comment on the net working capital.

Speaker #1: And that's where the confidence in the second half acceleration of the US market is coming from. And the first two months smaller months because those are the summer months are confirming those trends.

Speaker #1: So we are we remain cautious because those are things out of our hands, but we are quite confident on a good recovery second half of the US.

Speaker #1: Corrado, I'll let you comment on the net working capital.

Speaker #3: Sure. Well, let's see. Networking capital and I would say that the biggest chunk of our change in inventory is driven by the growth of the top line.

Corrado Farsetta: Sure. Net working capital, I would say that the biggest chunk of our change in inventory is driven by the growth of the top line. Today, we have to serve new customers, and the biggest chunk of this change in inventory for semester is for those new customers in the market. Then there is a portion of the exchange in inventory, which is, as we say, needed to cover some tensions on our inventory that we have observed after the super strong growth of the last year, and then the smallest portion of this change in inventory, CHF 25 million, the smallest portion of it is related to the new market of India. Of course, we will keep this new inventory proportionate to the top line in this semester. So I would say that this is a very small part of this change in inventory.

Speaker #3: Today, we have to serve new customers, and the biggest chunk of this change in inventory in the first semester is for those new customers in the market.

Speaker #3: Then there is a portion of this change in inventory which is, as we say, needed to cover some tensions on our inventory that we have observed after the super strong growth of last year.

Speaker #3: And then the smallest portion of this change in inventory, 25 million, the smallest portion of it is, let's say, related to the new market of India.

Speaker #3: Of course, we will keep this new inventory proportionate to the top line in this semester. So, I would say that this is a very small part of this change in inventory.

Speaker #1: And just an additional comment on that. You are comparing, if you want, a rebuilding of net working capital with a net working capital or a stock level of last year, which was really aggressively deployed because of the very high demand, I think, in the first semester last year. If I remember well, Anya, it was above 20%, or around 20%, in growth.

Francesco Siccardi: And just an additional comment on that. You are comparing, if you want, a rebuilding of networking capital with a networking capital, a stock level of last year, which was really aggressively deployed because of the very high demand. I think the first semester last year, if I remember well, Anja, was above 20%, around 20% in growth. This was quite above our plans. So the stock level you see at the end of H1 2025 was not a physiological level, was already impacted by an above, higher than expected growth. This was the case as well at the end of the year, which is where we were starting to rebuild our stock levels, in 2026.

Speaker #1: And this was quite above our plans. So, the stock level you see at the end of H1 2025 was not a physiological level; it was already impacted by a higher-than-expected growth.

Speaker #1: And this was the case as well at the end of the year, which is where we were starting to rebuild our stock levels in 2026.

Speaker #5: Very clear. Thanks. And maybe just to follow up on India, I appreciate this. I think at the full-year call, at the start of the year, you mentioned pricing was comfortable to Europe with roughly 100 million patients.

Ed Hull: Very clear. Thanks. Maybe just to follow up on India. I appreciate this, I think at the full year call at the start of the year, you mentioned pricing was comparable to Europe with roughly 100 million patients. Is this the sort of market size we should think of? How should we get to a realistic number for a midterm?

Ed Hall: Very clear. Thanks. Maybe just to follow up on India. I appreciate this, I think at the full year call at the start of the year, you mentioned pricing was comparable to Europe with roughly 100 million patients. Is this the sort of market size we should think of? How should we get to a realistic number for a midterm?

Speaker #5: Is this the sort of market size we should think of? And how should we get to a realistic number for the mid-term?

Speaker #1: So it is a very interesting about India is not only the current market of 100 million, but its growth rate. And I believe reports talk about 15 plus percent growth rate of the Indian market able to absorb those kind of procedures.

Francesco Siccardi: What is very interesting about India is not only the current market of 100 million, but its growth rate. I believe reports talk about 15% plus growth rate of the Indian market able to absorb those kind of procedures. So every year we should talk about this 100 million, because when you have this growth rate, in three, four years, you are close to 200 million, and so on, so forth. That is what is appealing about India. They are absorbing quite a lot of innovative products. They are very keen in technologies as well. So the pricing, as you said, it is in a range that we feel comfortable to play with. It is a European price. It is a low European price, but it is a European price.

Speaker #1: So every year we should talk about this 100 million because when you have those growth rate, in three, four years, you are close to 200 million and so on and so forth.

Speaker #1: And that is what is appealing about India. They are absorbing quite a lot of innovative products. They are very keen on technologies as well.

Speaker #1: So it's the pricing, as we said, it's in a range that we feel comfortable to play with as a European price is a low European price, but it's a European price.

Speaker #5: Very clear. Thank you very much. And congrats again.

Ed Hull: Very clear. Thank you very much, and congrats again.

Ed Hall: Very clear. Thank you very much, and congrats again.

Speaker #1: Thank you, Ed. Thanks a lot.

Francesco Siccardi: Thank you, Ed. Thanks a lot.

Speaker #4: The next question comes from Sandra Dici with Octavian. Please go ahead.

Operator 3: The next question comes from Sandra Dietschi with Octavius Finance. Please go ahead.

Operator: The next question comes from Sandra Dietschi with Octavius Finance. Please go ahead.

Speaker #2: Yes, good afternoon. Thank you for taking my question. So I have one on the spine marching. The growth in that segment has, as you mentioned, been somewhat soft due to the transition to direct sales force.

Sandra Dietschi: Yes, good afternoon and thank you for taking my questions. Last one on the spine margin. The growth in that segment has, as you mentioned, been somewhat soft due to the transition to direct sales force. You also indicated that profitability has been protected. Now, did also the dilution to the group margin continue to decrease? Or where is the spine profitability today relative to the rest of your business? Maybe also more importantly, what do you need to achieve in spine so that spine is no longer dilutive to the group margin? Is that anytime soon, or what should we expect there?

Sandra Dietschy: Yes, good afternoon and thank you for taking my questions. Last one on the spine margin. The growth in that segment has, as you mentioned, been somewhat soft due to the transition to direct sales force. You also indicated that profitability has been protected. Now, did also the dilution to the group margin continue to decrease? Or where is the spine profitability today relative to the rest of your business? Maybe also more importantly, what do you need to achieve in spine so that spine is no longer dilutive to the group margin? Is that anytime soon, or what should we expect there?

Speaker #2: But you also indicated that profitability has been protected. Now, did also the dilution to the group margin continue to decrease or where is the spine profitability today relative to the rest of your business?

Speaker #2: Maybe also more importantly, what do you need to achieve in spine so that spine is no longer dilutive to the group margin? Is that anytime soon or what should we expect there?

Speaker #1: Yeah. So hi, Sandra, first of all. It's too long we didn't see each other. It's so spine is quite an interesting beast. First of all, under a GP point of view, it is actually higher than joint.

Francesco Siccardi: Yeah. So, hi, Sandra, first of all. It is too long we did not see each other. Spine, it is quite an interesting beast. First of all, under a GP point of view, it is actually higher than joint. So if we talk about the margin starting from the top, the gross profit margin of spine is better than most of our product lines. Then you go down at EBITDA level, and today it is improving. It is not yet at the level of the core business of Medacta Hip and Knee. This was mainly driven by very high commission paid in the US, which was driving our profitability of that line in the US to negative numbers. Overall, spine is already quite a bit positive, so it is positively contributing to the overall profitability of Medacta. But it is well below the hip and knee EBITDA, mainly driven by volume, I would say.

Speaker #1: So if we talk about the margin, starting from the top, the gross profit margin of Spine is better than most of our product lines.

Speaker #1: Then you go down at ABDA level, and today it is improving. It's not yet at the level of the core business of Medacta, hip and knee.

Speaker #1: And this was mainly driven by very, very high commission paid in the US, which was driving our profitability of that line in the US to negative numbers.

Speaker #1: Overall, spine is already quite a bit positive. So it's positively contributing to the overall profitability of Medacta. But it's well below the hip and knee ABDA mainly driven by volume, I would say.

Speaker #1: It's almost one order of magnitude smaller than our hip and knee portfolio. What needs to happen? We need to change our business model in the US in order for scale to bring marginality and this is what we have been doing.

Francesco Siccardi: is almost one order of magnitude smaller than our hip and knee portfolio. What needs to happen, we need to change our business model in the US in order for scale to bring marginality. This is what we have been doing. Then in general, overall, continue to scale it up in order for this business to leverage some of the fixed cost and increase marginality. So I would say is around a third of the marginality we have on the core joint business at the moment. We are already quite happy because, only a few years ago, it was barely at breakeven. If you go 2 years back, we were losing money. This is trending in the right direction. The next business line we needed to turn around in terms of profitability is Sports Medicine, which is starting, of course, from a negative.

Speaker #1: And then in general, overall, continue to scale it up in order for this business to leverage some of the fixed cost and increase marginality.

Speaker #1: So I would say is around a third of the marginality we have on the core joint business at the moment. We are already quite happy because only a few years ago it was barely at break even and if you go two years back, it was we were losing money.

Speaker #1: And this is trending in the right direction. The next business line we need to turn around in terms of profitability is sports medicine, which is starting of course from negative.

Speaker #1: We are investing heavily: Salesforce expansion, etc. Those are the two areas where we need to grow in order to reduce the dilution at the EBITDA level.

Francesco Siccardi: We are investing highly, sales force expansion, et cetera. Those are the two areas we needed to grow in order to reduce the dilution at EBITDA level. That's as well why we believe in our midterm guidance of potentially further expanding our EBITDA over time.

Speaker #1: But that's as well why we believe in our mid-term guidance of potentially further expanding our ABDA over time.

Speaker #2: Great. Thank you. That was super helpful. And maybe if I may a quick follow-up on the profitability. The US impact, as you mentioned that the lower contribution has kind of a negative impact on the gross margin.

Sandra Dietschi: Great. Thank you. That was super helpful. Maybe if I may, a quick follow-up on the profitability, the US impact, as you mentioned, that the lower contribution has kind of a negative impact on the gross margin. Can you confirm that on EBITDA level, there is no meaningful difference between the US and the rest of your portfolio? Did I understand you correctly? You would expect that the regional mix will come more supportive in the H2?

Sandra Dietschy: Great. Thank you. That was super helpful. Maybe if I may, a quick follow-up on the profitability, the US impact, as you mentioned, that the lower contribution has kind of a negative impact on the gross margin. Can you confirm that on EBITDA level, there is no meaningful difference between the US and the rest of your portfolio? Did I understand you correctly? You would expect that the regional mix will come more supportive in the H2?

Speaker #2: Can you confirm that on EBDA level there is no meaningful difference between the US and the rest of your portfolio? And did I understand you correctly?

Speaker #2: You would expect that the regional mix will come more supportive in the second half?

Speaker #1: Yes, that's correct. So the US pricing is higher than the European pricing. So a gel mix change will impact the GP. It has a much lower impact at ABDA level because the US market carries quite a lot of additional cost from distribution cost, marketing cost, insurance cost, and so on and so forth.

Francesco Siccardi: Yes, that's correct. So the US pricing is higher than the European pricing. So a geo mix change will impact the GP. It has a much lower impact at EBITDA level because the US market carries quite a lot of additional cost from distribution cost, marketing cost, insurance cost, and so on and so forth. So EBITDA-wise, the profitability of the US market and some of the European markets are similar, very comparable.

Speaker #1: So ABDA-wise, the profitability of a US market and some of the European markets is similar, very comparable.

Speaker #2: Thank you.

Sandra Dietschi: Thank you.

Sandra Dietschy: Thank you.

Speaker #1: Thank you very much, Sandra.

Francesco Siccardi: Thank you very much, Sandra.

Speaker #4: For any further questions, please press star and one on your telephone. Gentlemen, there are no more questions. Registered at this time. Excuse me, there's one quick last question from Graham Doyle with UBS.

Operator 3: For any further questions, please press star and one on your telephone. Gentlemen, there are no more questions registered at this time. Excuse me, there is one quick last question from Graham Doyle with UBS. Please go ahead.

Operator: For any further questions, please press star and one on your telephone. Gentlemen, there are no more questions registered at this time. Excuse me, there is one quick last question from Graham Doyle with UBS. Please go ahead.

Speaker #4: Please go ahead.

Speaker #2: Hi, sorry, and thanks for taking the follow-up. I figured we had a bit more time. One of the comments you made, Francesco, was that H1 was obviously a bit more challenging on the top line than you'd anticipated.

Graham Doyle: Hi. Sorry, thanks for taking the follow-up, but I figured we had a bit more time. One of the comments you made, Francesco, is just that April was obviously a bit more challenging on the top line than you had anticipated, and obviously you have talked about the US. Do you have any idea what is actually happening in the US as to why that market is a little bit slower?

Speaker #2: And obviously, you've talked about the US. Do you have any idea what's actually happening in the US as to why that market is a little bit slower?

Speaker #1: I would say there are two factors. Number one is it simply happening what I was expecting since a few years, that the market is going back to a normal growth rate, a pre-COVID growth rate.

Francesco Siccardi: I would say there are two factors. Number one is simply happening what I was expecting since a few years, that the market is going back to a normal growth rate, a pre-COVID growth rate. If you look at the MedTech reports pre-COVID, I think the joint replacement market was in the range of 2.5%, 3%, while we were used now after COVID 2021, 2022, 2023, at rates of around 5%, 5.5%, which were quite a bit higher. That was abnormal and, if you want, still a recovery of the big gap generated by COVID, and then you remember the shortages of nurses, et cetera. It took quite a bit longer than expected to recover all the patients missing during 2020, 2021. Then of course it would normalize. There is no reason why it shouldn't go back to pre-COVID level, and that is one factor.

Speaker #1: And if you look at the MedTech reports, pre-COVID, I think the joint replacement market was in the range of two and a half, three percent, while we were used now after COVID 21, 22, 23 at rates of around five, five and a half percent, which were quite a bit higher.

Speaker #1: And that was abnormal and if you want, still a recovery of the big gap generated by COVID and then you remember the shortages of nurses, etc.

Speaker #1: So it took quite a bit longer than expected to recover all the patients missing during 2020, 2021. But then, of course, it would normalize.

Speaker #1: There's no reason why it shouldn't go back to pre-COVID levels, and that is one factor. This is general, I would say. The second one is more Medacta-specific.

Francesco Siccardi: This is general, I would say. The second one is more Medacta specific. We have, as you know, quite a lot of customers in the ASC segment. I always mention that the surgeons that are working in an ASC are working as well in a hospital. Very often, we work with them, first of all, in an ASC, and then we have to fight with them to go through the hospital purchasing department, and it takes quite a bit of time. It did happen in the H1 that quite a significant number of surgeons that was working in an ASC and in a hospital, and we were only serving them in an ASC and only partially in the hospital. They basically dropped their hospital volume. The surgeons picking up those hospital volumes were not Medacta customers, so we have seen some attrition.

Speaker #1: We have, as you know, quite a lot of customers in the ASC segment. And I always mention that the surgeons that are working in an ASC are working as well in a hospital.

Speaker #1: Very often, we work with them first of all in an ASC and then we have to fight with them to go through the hospital purchasing department.

Speaker #1: And it takes quite a bit of time. It did happen in the first half of the year that quite a bit quite a significant number of surgeon that was working in an ASC and in a hospital and we were only serving them in an ASC and only partially in a hospital.

Speaker #1: They basically dropped their hospital volume the surgeons picking up those hospital volumes were not Medacta customers. So we have seen some attrition. This is one of the phenomenon we started in order to understand why our customer base volume was going down.

Francesco Siccardi: This is one of the phenomenon we studied in order to understand why our customer base volume was going down. This has nothing to do with the general market slowdown. Once this phenomenon is finished, that is a temporary situation. We were helping the transition of many customers from hospital to ASC, and when they drop their hospital volume, we lose volume. That is something we have seen unexpectedly in H1. They can drop their hospital volume because they make significantly more money in an ASC setting. Even by doing 80% of the volume they were doing before, they probably make more than what they were doing before in working in a hospital, significantly more. That was an interesting phenomenon we focused on, and we did understand.

Speaker #1: But this has nothing to do with the general market slowdown. And once this phenomenon is finished, that's a temporary situation. But we were helping the transition of many customers from hospital to ASC and when they dropped their hospital volume, we lose volume.

Speaker #1: And that is something we have seen unexpectedly in H1. And they can drop their hospital volume because they make significantly more money in an ASC setting.

Speaker #1: So even by doing 80% of the volume they were doing before, they probably make more than what they were doing before in working in a hospital, significantly more.

Speaker #1: So that is that was an interesting phenomenon we focused on and we did understand.

Speaker #2: Awesome. Thank you so much. That's really, really helpful.

Graham Doyle: Awesome. Thank you so much. That is really, really helpful.

Speaker #1: Thank you very much. Thank you for the last-minute question.

Francesco Siccardi: Thank you very much. Thank you for the last-minute question.

Speaker #4: This was the last question. Back to you for any closing remarks you may have.

Operator 3: This was the last question. Back to you for any closing remarks you may have.

Operator: This was the last question. Back to you for any closing remarks you may have.

Speaker #1: No, I would like to thank, as always, everybody for participating in this call. And once again, thank you to all our employees, clients, suppliers, and partners worldwide who help us to deliver these performances.

Francesco Siccardi: I would like to thank as well, as always, everybody for participating in this call. Once again, thank to all our employees, clients, suppliers, and partners worldwide that help us to deliver those performances. Thank you very much, and speak to you all soon.

Speaker #1: So, thank you very much, and speak to you all soon.

Operator 3: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.

Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.