Carl Zeiss Meditec Aktie

Ladies and gentlemen, hello, and welcome to the Carl Zeiss Meditec AG Analyst Conference Nine Months 2026 Results. The conference will be recorded. [Operator Instructions]

Let me now turn the floor over to your host, Sebastian Frericks, Head of the Investor Relations.

Hello, everybody. Good afternoon. Welcome to our nine months analyst conference. Our CEO, Andreas Pecher; and our CFO, Justus Wehmer, will present the nine-month figures to you, guide you cover the key business topics and provide the outlook for you. Thank you for your flexibility for having this call a bit unusually so in the afternoon. After the presentation, we will address your questions. And with that, without further ado, Andreas, please go ahead.

Super. Thank you, Sebastian. Good afternoon, dear analysts, investors. Welcome to the nine months '25/'26 Analyst Conference at Carl Zeiss Meditec. I'm currently traveling at the U.S. West Coast, more to that later. So we have to schedule this call in the European afternoon. Really apologies for the scheduling constraints and big thanks for your flexibility. I wanted to make sure I can also speak to you. And also apologies if my voice is having a little trouble here, I caught a small sore throat. So I hope I'm still going to be understood well.

I'll begin with an overview of our nine months results, and then Justus will take you through the financial performance in more detail. And after that, we'll cover several key topics, including the appointment of the new Head of Ophthalmology, traveling with him here, the launch of the ZEISS Ultrasonic Aspirator, our strategic partnership with the Aier Group to advance the refractive workflow in China and the status of the first ProfitUp initiatives. And then we'll conclude with an update on our financial 2025-'26 outlook. And then, of course, following the presentation, we'll be happy to take your questions.

With that, let me start with an overview of our nine months performance. So looking at revenue and EBITA, it remains below the prior year, while the recovery of Q3 partially offset the headwinds from the first half. Order entry in none months amounted to EUR 1.606 billion, down 5.5% year-over-year and down 3.3% on an FX adjusted basis. We did achieve solid order growth in EMEA, while demand in the Americas and APAC remained weak. Order backlog stood at EUR 432 million, largely unchanged compared to the end of Q2, but higher than at the beginning of the fiscal year. Revenue for the nine months amounted to EUR 1.554 billion, representing a 2.2% decline year-over-year. On a constant currency basis, revenue declined 0.7%, mainly in this case, due to the U.S. dollar. But factoring in all currency headwinds, mainly the Chinese yuan arising from German exports invoiced in foreign currencies to the ZEISS Group distribution network, FX adjusted revenue was broadly stable. The weaker Ophthalmology business was the key factor holding back revenue development. A key reason for the decline aside from FX was the already known headwind in the IOL business due to the recall of the bifocal IOLs in China since the start of the fiscal year. Also, refractive consumables came in weaker, particularly in Asian markets outside of China. And looking at the revenue mix, equipment accounted for 49%, consumables for 41% and service for 10% of total EUR 9 million revenue. Adjusted EBITA came in at EUR 124.5 million with an adjusted EBITA margin of 8.0% compared with 11.1% in the prior year. Reported EBITA amounted to EUR 108.4 million with a margin of 7.0%. Looking at operating results, they were pressured by continued FX headwinds in Q3 and unfavorable product mix, particularly weaker consumables and several one-off items. We will take a closer look at these one-off items later in the presentation. And stripping out one-offs, our core operating expenses remained stable.

And with that, I'd like to hand over to you, Justus.

Yes. Thank you, Andreas, and a warm welcome from my side to all of you as well. I'll walk you through the SBU performance, starting with Ophthalmology. In the first nine months, reported revenue came in at EUR 1.191 billion, down 4.8% year-over-year. And on a currency-adjusted basis, revenue declined by 2.9% Equipment sales declined by 3%, while consumables sales declined by 5.7%. Revenue was mainly pressured by foreign exchange headwinds, the suspension of bifocal IOL sales and its associated inventory scrapping in China and softer refractive treatment pack sales in Asia. The successor bifocal IOL, which received license in Q2, cannot yet be commercialized until it is relisted under the next volume-based tender.

Following the postponement of the VBP process, it is now expected to take place in September or October with implementation around December of this calendar year. The delay in the VBP process is unfortunately yet another headwind to our revenue as the negative impact of the delayed relaunch outweighs the benefit of continued better pricing for some of the [indiscernible] models.

Refractive procedure volumes softened in South Korea and Southeast Asia, while China continued to show slight year-to-date growth. The start into the main summer peak season in June, however, was weaker on a year-over-year basis. We are seeing a pattern of somewhat later peak in consumption, and we'll continue to watch the trends closely as we get the July and August data.

Equipment sales remained sluggish, in particular, the cataract and diagnostic equipment. Gross margin declined by 1.5 percentage points, reflecting foreign exchange headwinds, the scrapping of bifocal IOLs, weaker consumable sales and inventory devaluation at Katalyst following the measures to wind down the Katalyst portfolio, which I will discuss in more detail in this presentation. These effects were partly offset by tariff refunds on which I will also provide you with some numbers later on in the presentation. OpEx ratio increased by 3.9 percentage points, mainly driven by the extraordinary IVO write-off, legal expenses and ProfitUp related effects. Stripping out these one-off items, core OpEx remained roughly stable. As a result, EBITA margin for ophthalmology declined to 5.2%, significantly below prior year level. Looking at the revenue split, Ophthalmology accounts for 76% of total revenue. Within Ophthalmology, consumables represent 50%, equipment accounts for 41% and service contributes 9%.

Turning to Microsurgery. Revenue and EBITA margin were above prior year, supported by strong Q3 revenue growth and robust delivery of neurosurgical systems. Revenue in the first nine months reached EUR 362 million, up 3.8% year-over-year. On an exchange rate adjusted basis, revenue grew by 7.1%. Both equipment and consumable sales increased, gross margin remained 2.4 percentage points below prior year, still pressured by currency effects and higher amortization of capitalized R&D. EBITA margin improved to 12.7%, up 0.4 percentage points year-over-year. Looking at revenue split, Microsurgery accounts for 23% of total revenue within microsurgery equipment represents 78% service 14% and consumables 8%.

Let me walk you through our regional development. EMEA continued to deliver solid growth, while APAC remained below the prior year level. But let's start with the Americas. The region accounted for 25% of group revenue. Revenue in the Americas came in at EUR 397 million, down 2.6% year-over-year, while exchange rate adjusted revenue increased by 3.6%. The U.S. grew slightly on a constant currency basis, while Latin America declined. Moving to EMEA. The region represented 33% of group revenue and delivered solid growth across all core European markets. Revenue in EMEA reached EUR 509 million, up 5.4% year-over-year and exchange rate adjusted 5.8%. Finally, Asia Pacific represented 42% of revenue, including China at 23% APAC revenue amounted to EUR 648 million, down 8.7% year-over-year or down 7.6% on an exchange rate adjusted basis with growth in India, but weaker revenue in China, Japan and South Korea.

Turning to the P&L. Nine-month margins fell below prior year, while core operating expenses remained stable. Gross profit declined to EUR 793 million, with gross margin decreasing to 51% from 52.7% last year. Gross margin remained below prior year, driven by exchange rates and unfavorable product mix, in particular, weaker sales of intraocular lenses and refractive treatment packs. This was partly offset by tariff refunds. We received an overall tariff refund of EUR 20.8 million during the third quarter. Out of the refunded tariffs, around EUR 11.5 million had been paid in fiscal year '24, '25 and around EUR 9.3 million had been paid in '25, '26. I will come back to this on the next slide as we discuss adjusted EBITA.

OpEx ratio increased to 45.6%, mainly driven by the lower sales base and one-off items. These one-offs included the extraordinary impairment of capitalized R&D at InfiniteVision Optics, IVO, legal expenses and ProfitUp measures. Excluding these one-offs, core OpEx was broadly in line with previous year level. EBIT declined to EUR 87.4 million and EBITA declined to EUR 108.4 million. Adjusted EBITA amounted to EUR 124.5 million, corresponding to an adjusted EBITA margin of 8% and earnings per share was at EUR 0.80 and adjusted earnings per share was at EUR 1.02, both below prior year.

Let's have a brief look at the bridge from EBIT to EBITA and to adjusted EBITA for the nine months of this fiscal year. EBIT amounted to EUR 87.4 million, as stated before. Regular amortization of purchase price allocations amounted to EUR 20.9 million, including DORC and Kogent Surgical. This led to EBITA of EUR 108.4 million and an EBITA margin of 7%. Special items included U.S. tariff refunds for fiscal year '24/'25, legal expenses in connection with the lawsuit related to former IanTECH in the U.S., scrapping of bifocal IOLs, extraordinary R&D impairment, ProfitUp-related expenses and other one-offs. As discussed on the previous slide, we received U.S. tariffs refunds of EUR 20.8 million for both fiscal year '24/'25 and the nine months of '25/'26. The fiscal year '24/'25 figure of EUR 11.5 million was excluded under our adjusted EBITA as it pertains to the previous year's period. The remainder of the EUR 9.3 million is contained in the nine-month adjusted EBITA figures because they had been mainly in Q1 and Q2 of this same year. The net impact on the nine-month period and therefore, also on our guidance is zero. Adjusted for these special items, EBITA amounted to EUR 124.5 million with an adjusted EBITA margin of 8%.

A quick overview of the cash flow statement. The nine-month operating cash flow was strong and net financial debt reduced. Operating cash flow came in at EUR 146 million, significantly above prior year. The improvement was driven by better working capital, mainly lower trade receivables, U.S. tariff refunds and lower income tax payments, reflecting the earnings development. Investing cash flow turned negative at EUR 83.5 million, primarily reflecting higher receivables against treasury of Carl Zeiss AG. CapEx ratio was 2.6% compared with 3% in the prior year, and net financial debt reduced to EUR 234.8 million as of June 30, '26.

And with that, I hand it over to you, Andreas.

Thank you, Justus. And now let me move to the key topics. And let me actually start with personnel. We're making progress on building the team of the future for Meditec. We've appointed Andreas Volker as the new Head of Ophthalmology, effective August 2026, so brand new. And the Ophthalmology segment has previously been led by Magnus Reibenspiess, who has served well in the double role as Chief Commercial Officer since December 2025. Andreas has more than two decades of global medtech leadership experience from Fresenius Medical Care and Vivonic before that. And in his former role, he held P&L responsibility for an approximately EUR 800 million therapy system portfolio at Fresenius Medical Care, where he had led strategy, product and portfolio management, R&D and while major transformation programs. He successfully drove the commercialization of innovative dialysis platforms, led significant portfolio and organizational transformations and brings extensive international experience across the U.S., China and other growth markets. So his combination of innovation leadership, operational excellence and value created or value creation focused business transformation makes him an excellent fit to lead the next phase of transformation and growth in our Ophthalmology business. And Andreas and I are actually currently spending time in the U.S., well, important time to spend with our customers and our teams. So from the get-go, he gets sort of the first impression on what our challenges are, but also what our opportunities are.

With that, I move on, and I'd like to present an innovation in our microsurgery business that ZEISS TORUS Ultrasonic Aspirator. This has been presented at AANS 2026. It is still pending FDA 510(k) clearance which we expect towards the end of the calendar year. The TORUS Ultrasonic Aspirator builds on the Kogent portfolio and is designed for tissue removal throughout cranial and spinal procedures. The device combines 3 tissue removal modes in one system. These modes are ultrasonic ablation of soft and fibrous tissue, ultrasonic bone cutting and ultrasonic bone dissecting or dissection using torsional motion technology. This product is highly differentiated from competing solutions. It's quite a unique 3-in-1 device that can replace three incumbent devices in the operating room that are typically used for the soft tissue aspiration, bone dissecting and bone cutting. It is designed to integrate with the ZEISS KINEVO 900 S visualization system, enabling system parameters to be displayed directly in the microscope's field-of-view during the procedure. And out of the Kogent acquisition, we've already successfully introduced the electronic bipolar forceps. Now the TORUS Ultrasonic Aspirator represents an important milestone in our instruments strategy. And building on our strong position in neurosurgical and spinal surgical microscopes, we're expanding our presence in the operating room and extending our workflow offering beyond visualization to treatment.

Moving on. In June, we announced a strategic agreement with Aier Eye Hospital Group for the purchase and installation of 25 ZEISS VISUMAX 800 femtosecond lasers across multiple Aier Eye Hospital locations. The rollout is expected to start later in 2026 across domestic and international sites. And this strengthens our position in the global refractive market, supports higher surgical efficiency and patient outcomes. Together with Aier Group, we will explore deeper collaborative innovation in areas such as international expansion, integrated digital workflows and platforms and AI-assisted diagnosis. And needless to say, we're quite happy about this deal. As we have commented about throughout the year, the CapEx environment in China and across most of APAC has not been easy lately and replacement of these machines to China's largest private hospital operator signaling the continued high interest in our refractive technology and the size VISUMAX 800. Globally, we have recently reached 1 million cumulative SMILE pro procedures being performed on VISUMAX 800.

And with that, over to you, Justus.

Thank you, Andreas. So a quick glance on the status of the ProfitUp program. During Q3, first initiatives related to this program have been launched. I'm pleased to report that we have entered into talks with the labor representatives here in Germany are being held in a constructive way and making good progress. So let me flag a few decisions taken in the initial phase of the projects. On operations, we are consolidating handpiece production by closing the door site in Westerburg, Germany and shifting all handpiece production to Chesterfield, U.S., allowing us to improve scale and operational efficiency. We also plan to establish a production site in India to improve flexibility and cost competitiveness. We are joining the site being constructed in Bangalore by ZEISS as a manufacturing hub. This will further help us diversify our footprint and create a more balanced exposure to geopolitical risks. The decision on which products will be manufactured there has not yet been made.

On organization layers and portfolio decisions, we will merge Surgery Interior segment and the Surgery Posterior segment. That means bringing together the cataract and retinal business. This will enable us to better integrate clinical workflows, strengthen our customer offering and generate greater recurring revenue synergies.

We will wind down the Katalyst portfolio by the end of this fiscal year as it largely overlaps with dark dork instruments. This is expected to impact annual revenue in the mid-single-digit million euro range, while the Kogent portfolio will continue to be manufactured in Chesterfield. This portfolio optimization will not have a significant impact on the Chesterfield production side overall. Its capacity will be refilled with handpiece production, what I just mentioned and expansion of Kogent product portfolio.

We will sunset QUATERA and focus on EVA NEXUS as the primary anterior and posterior device, leveraging the popularity of the DORC technology in the surgical market and its large installed base. It is still too early to quantify the exact phasing of savings. But as I told you in the last call, there will be a certain time to implementation and transition for many of the measures involved, leading to a back-end loaded realization of the savings with comparatively little impact on next fiscal year yet. We will continue to update you on the progress of the ProfitUp program and provide transparency on the expected financial benefits as we make progress with the labor bodies and the implementation advances.

Turning now to the outlook section. The outlook remains broadly unchanged. For fiscal year '25, '26, we continue to expect revenue in the range of approximately EUR 2.15 billion to EUR 2.20 billion. Adjusted EBITA margin is expected to be between 8% and 10% as the nine-month adjusted EBITA margin has already reached 8%. And given that Q4 typically delivers above-average top line and margin, we believe the lower end of the margin guidance is well supported at this stage. Where exactly we end up within the range will be determined by the shape of the typical year-end sales ramp in the equipment business on the one hand as well as the trend in the Chinese summer peak season for refractive consumables on the other hand which, as discussed before, has been starting off on a relatively weak note in June. The current business trend is, therefore, pointing more towards the lower part of the range.

The guidance excludes special items in the mid-double-digit million euro range, including costs related to R&D reprioritization, the scrapping of bifocal IOLs, legal expenses and the costs related to the ProfitUp program.

As discussed on the Q2 earnings call, based on our current assessment together with our auditors, we expect a goodwill impairment of approximately EUR 150 million in the ophthalmology SBU in Q4 '25-'26. This impairment relates mostly to the already mentioned IanTECH acquisition, and will have no impact on adjusted EBITA or cash flow. Our midterm and long-term guidance remains unchanged. For the midterm, fiscal year '28, '29 and beyond, organic revenue growth is expected to recover to at least a mid-single-digit percentage rate. Adjusted EBITA margin is targeted to recover to above 15% in the medium term. In the long-term EBITA margin is expected to increase to the previous target range of 16% to 20%.

With that, I'd like to conclude the presentation and open the floor for your questions.

[Operator Instructions] So the first question is from Mr. Oliver Reinberg from Kepler Cheuvreux.

Two question blocks, if I may. Firstly, on China refractive, can you just provide a bit of more color what kind of decline you have seen in June and also how treatment packs overall have developed in Asia in the third quarter? And I think so far, you talked about slight growth in China. Can you just update us on the kind of full year assumption in this regard? And also, if you have any kind of color if this kind of weakness has already translated into pricing pressure, that would be helpful.

And then second question, just on 2026. I appreciate it's a bit out, but it would be great to get expectation in the right ballpark. Can you just talk about the pulls and pushes for next year and whether you are fully committed to EBITA growth next year?

Oliver, thanks for the questions. So to give you a little bit of color, I think to start with year-to-date in terms of procedures in China, we still see slight growth in the neighborhood of 2% to 3%. That is the good news. However, it's also fair to say that we have seen this melting down somewhat over the last two months. And if we take the single data for month June and the very, very fresh data that we just received last night out of our Chinese team, we know that in June, we were 8% below prior year and 5% in July below prior year. So that is basically where we are right now. And explanations that we see is that apparently, the pull-in of the military-related treatments has been somewhat stronger this year. And therefore, so to speak, this portion is right now missing in the summer peak. So I hope that gives you a little bit of better understanding.

You were asking about the remainder of RTP in Asia. I think there's different factors that apply to different countries. I'd say Indonesia and Philippines -- Indonesia and Thailand, sorry, there you have more recently quite a lot of political instability, as you can read in the news, and that is clearly not helping investment decisions. So that is one factor. In South Korea, I think we have reached already with the VISUMAX roll-in that started -- the VISUMAX 800 roll-in that started in Korea, as you know, well earlier than in China. I think somewhat a level of saturation. So therefore, out of Korea, we also haven't seen any kind of significant growth contribution during the course of this year.

You had a question on the pricing pressure, whether we see there are some pricing pressure already. That is not the case. I can clearly, at this point, confirm that we are still in terms of our price realization for the treatment packs in China tracking according to our expectations.

2026, you wanted to get a little bit of color on what is it, what we see for next year. Obviously, a somewhat bold moment to give you an answer on that. But I mean, what I can share with you right now is that we would, over the course of next year, obviously number one, expect some more momentum out of the integration of our DORC sales organization into the ZEISS sales organization because that has advanced throughout this year, and we think that we are now basically in a position to get more traction in terms of rolling and with that, of course, older generation. I think we would see or expect at some point next year then also clarity at least on the NVBP. As we said, right now on the -- our estimation is that by end of this year, it should kick in. And obviously, it's a lot of speculation right now, but frankly spoken, after now a delay of almost nine months, I would be already satisfied to have it behind us and have the results and with that having better clarity on what we can expect in terms of volumes and especially at which sort of pricing.

Beyond that, please understand speculations on the U.S. I think I have stopped trying that because we have too often changes in tariff announcements and tariff applications. And for EMEA, at least, considering that this year against all odds, so to speak, in the scheme of bigger, we are seeing quite a solid development. I would at least right now, expect this to continue. And yes, I think this is my five cents at this point in time, Oliver. I hope that helps you a little bit.

Next question is from Jonathon Unwin from Barclays.

You mentioned that you expect to be closer to the bottom end of the margin range for this fiscal year. But I'm just wondering what's kind of happened in the last quarter to make you feel that the full guidance range that you set at Q2 is no longer in play. Is it really the refractive treatment pack weakness you've seen in Q3 in China and earlier on in the year in APAC? Or is there something else to call out? And if there is something else, just interested to hear how you expect those areas to play out in FY '27. And I was wondering if you could also confirm whether you had expected a tariff refund in when you set the margin guidance of 8% to 10%. So was that expectation already baked into that margin?

So I think the explanation the -- do we have -- maybe you can go on mute. We see the weaker indications for the refractive business that we start with, and you know that the leverage of this business is massive, is probably the key indicator for the margin profile that we expect for Q4, and that brings us to this lower range of the margin as we have just explained in the presentation. I think beyond that, there is no specifics.

I could potentially add that we also know, of course, that in Q4, we always have two effects. Number one, MCS device business coming in strongly with better margins. And against that, you have the stronger diagnostic device revenue, especially from the U.S. And there, of course, then again, the question is how will the currency fare? And because both MCS and CDM are strong businesses in the fourth quarter in the U.S. And there, currency can either be in your favor or potentially come in as a more stronger headwind that from our current estimates, these two key factors combined explain why we are currently guiding more for the closer end.

In terms of the question on the whether we had expected the refund when we had designed the guidance. Yes, it was kind of -- yes, somewhat expected. Of course, not knowing what exactly would be the outcome of the U.S. justice who was taking this case up.

The next question is from Oliver Metzger from ODDO BHF.

First was also on refractive in China. So you still see some slight growth. And I assume that just on the back of SMILE pro, you still have a positive volume price effect. So does it mean that actually you see the underlying market is shrinking?

And second question is about your TORUS ultrasonic device. So will you execute the sale by yourself? Or do you plan also to partner this device?

Last question is quickly on Microsurgery. So yes, we saw some encouraging development for some quarters. You already made a comment for Q4. How should we think? Would you consider that the trough now is over and so that we progress from this current still slow growth level?

Thank you, Oliver. So, refractive in China, your question on the slight growth. Yes, of course, we do have the benefit of the higher pricing for the SMILE pro treatment pack that is helping, but we are not seeing a shrinkage of the market to be clear here. And I would argue probably the reason that Aier has put in this 25 VISUMAX order is also an indication that a shrinkage is not something that is considered to be happening anytime soon. So much on that.

On the TORUS, we are considering to use the same channels to address our customers as we do right now, which is a mix of direct and indirect sales, depends a little bit on the regions in the world. But obviously, this is strategically a device that extends our current pure single hardware play into a what we would call a not yet a workflow, but at least a work band because everywhere where our microscopes are being used, you will find devices that do the application of this TORUS. And with that, I think it's highly complementary. And what's also worth mentioning, it comes also with the consumable portion. That means the end pieces being used on the TORUS are consumables, which, as you also know, strategically, has always been our target to extend our instrument and recurring revenue portion in MCS.

And finally, your question on has MCS basically passed the inflection point? And are we more confident going forward? I would say, at least the indicators in terms of order book and project pipeline are giving us some reasons to believe that this is the case. And as we have learned in the last years. You are never safe from tariff discussions or tariff impacts, especially in our core market, U.S. But generally, Oliver, yes, I would say we are hoping for some reasonable growth next year.

And Justus, let me just build on the second point on the TORUS. Actually, here on the West Coast, we just spent some time with one of our larger and actually largest customers and one of our long-standing partners that together with him, we're serving this customer. He is quite aware of the TORUS. He's very excited actually about it. So that's a good signal that this is something that he's really happy to bring into the market. And talking to some of the customers, they're really curious. So we have quite some hopes that this will be a good product.

The next question is from Richard Felton from Goldman Sachs.

First thing I wanted to come back on, you mentioned that there are certain products that are sort of being phased out or wound down as part of the ProfitUp initiatives. Do you have any sort of firmer views at this stage of how much of a headwind that's going to be on revenue into 2027, just so we get models in the right place?

And then sorry to follow up on the 2027 point again, but we're getting quite a lot of questions from investors on it. So maybe just helpful to clarify. But as you head into sort of '27, I guess sort of what are the kind of the main building blocks for the bridge for margin? I think you said that on the cost savings side, you don't really expect to see that much of an impact yet. I guess China refractive remains uncertain. VBP potentially unlocks some more bifocal sales. What else should we kind of keep in mind when we're trying to think about numbers heading into 2027? It would be really helpful just to get a sort of broad view of main drivers you see them currently.

Richard, of course, happy to take these questions. So on the products that we are taking off, I think you can expect this to be a rather mild impact of anywhere mid- to high single-digit million because as you just heard, we are talking about instruments, predominantly here with Katalyst. And from that perspective, it shouldn't be something of material headwind on the top line.

Just as a disclaimer, however, all decisions in terms of portfolio alignment or portfolio shaping have not yet been taken. So we keep you posted if there was more to come. And if so, what exactly will be the impact, yes. But from what we have shared with you here in this call, it's roughly what I said, mid- to high single digit.

Building blocks for next year. I mean, if we just look at this year's numbers and look at what are the key distractors, so to speak, then obviously, this nightmare of the IOL revocation associated with the scrapping that was necessary, that was a weight that we clearly wouldn't expect to be repeating itself. And yes, of course, on the other side, we have the uncertainty of the NVBP on pricing. And I think it is also fair to assume that it will be a steep impact. But on the other side, there's also the volumes associated to it that like in the first tender that we participated could potentially then provide some upside for recovery. Will this all come in, in '27? Obviously, not so sure. But over the course of two years, I think they are conceptually at least should be an opportunity and especially with a better ability to plan and schedule.

I think the other point that I already mentioned is MCS that there is some cautious optimism for a better start into the new fiscal year. And obviously, as Andreas just highlighted, the fact that we do have some hopes for this new product, giving us a little bit of new upsides and opportunities. Again, I wouldn't generate here too high hopes, but maybe we be surprised because the reception so far has been very well. And we clearly can say that we have a value proposition that is unique, and there is no competitor in the market right now who can offer a device with these three modularities. So it is quite a good differentiator.

I think last but not least, I would dare to mention that the exchange rates after two years being heavy, heavy headwind for us, right now, at least indications are more reasonable for next year and the absence of further headwinds from the exchange rate would already also be a meaningful improvement in our P&L. And yes, I think I'd leave it there. There's a lot of speculation, of course, about refractive and how it ventures. And of course, as you know, that is ultimately always going to be a decisive factor. But being now in the third year of a market in China, that has been challenging, but in which we have been able to solidly defend our position and to defend our margins, I think at least we have proven that we can cope with it. So I think that's what I, at this point in time, could share with you.

The next question is from Falko Friedrichs from Deutsche Bank.

I have two questions, please. The first one, given your comment that you're trending towards the lower end of this year's margin guidance, and it sounds like there is unlikely going to be a big step-up in margins next year either. Do you still have an unchanged confidence in delivering this more than 15% margin target in fiscal '28, '29? And can you just give us a little bit more comfort on the points that are giving you this confidence?

And then secondly, a question for Andreas. Are you able to share if the ZEISS Group has already started to increase its shareholding in Carl Zeiss Meditec since the announcement in June? And if yes, potentially also give us an indication of the magnitude?

Falko, then let me start with -- try to give you a little bit more comfort. In terms of the 15% in 28%, 29%, I think it is clear in order to achieve this, we need to execute diligently on our ProfitUp program. And the one message that we want to get across today is that although obviously, we cannot share more details, especially on the headcount reductions given here the negotiations with the workers' council, but I would already consider it a positive that we are in constructive discussions and negotiations, and we are not seeing here red flags on the, so to speak, on the campus or anything of that nature. So I think overall, there's a very reasonable progress. And with that, I do hope that we can implement the headcount reductions according to our plans, and we'll see then most likely in the end of next fiscal year, but more accentuated in the fiscal year after the expected payroll impact, and that is, first of all, helping us, of course, on the OpEx.

Associated with it, of course, there's a plentitude of other measures that all need some ramp-up timing, but will then also continue to deliver. And I think we shared with you last time, the program in itself should have a net impact of EUR 160 million. EUR 160 million on top of a normalized performance given that, as I just outlined, we think that we should eliminate for the next year two of the key headwinds, which is the extraordinary situation of this revocation of lens basically a part of our core IOL business and the heavy headwinds from exchange rates in total can also contribute already a meaningful whatever, 2 to 3 percentage points of margin improvement.

MCS, as I also mentioned, with a somewhat stronger perspective, I think all of that, I would right now consider as key components for the associated recovery. And as we said, with the institution of a commercial officer and a stronger and more focused sales push of our entire portfolio and bundling, we are obviously also outside of China expecting over the course of the next two years, some more returns. So I'll leave it there. The whole program is set up of 130 individual measures. We can certainly not cover all of them. But I think the management team of Meditec is fully committed to execute and deliver on it. And then whatever happens outside is one thing, but we will certainly ensure that we get the contribution out of the program.

And I think then the question was to Andreas.

Yes. I'll take the second one. Thank you, Falko. Maybe just one last little bit of flavor on the ProfitUp. You just mentioned it, right? The management team is very focused on that program and the intensity and the focus on operational execution is quite strong. And I think that's specifically with the program where, of course, it takes a little bit to have the measures come in. This is what I typically look at very closely, how do we track, how do we work on it? And if there are setbacks, how do we deal with it. I certainly see a lot of seriousness, a lot of focus on that, that makes me quite confident that we will get to what we want to achieve.

And maybe coming to your second question on the share buyback. Well, I mean, we had the announcement, right, that we wanted to have a buyback of less than EUR 200 million and stay below the 70% holding. And well, I mean, I don't have any knowledge about the percentage of purchased shares right now. We intentionally set it up that way, right, to have the fairness to all the investors. Maybe to give you the flavor there, I mean, it's an eight-month period from mid-June until the end of February. And so far, 1.5 months have passed on that. That's the facts that I know. The rest, I don't know. I hope that helps you a little bit, Falko.

And the next question is from Anchal Verma from JPMorgan.

Just two questions from me, please. The first one, I'm sorry, this is on 2027 again. Just to follow up on your thoughts around how we should be thinking of the phasing into next year. Do you believe it could be a softer start given the market dynamics are weak? So essentially another H2 weighted year? Or shall we think of the easier comps in H1 as favorable?

And the second question is a follow-up on the Chinese refractive trends. When Aier Hospital reported recently, they were pointing to weak June refractive data partly because of the changes in the application process for the military students. How would you extrapolate that on an annual basis? Should we think of it as demand lost? Or is it demand delayed?

Starting into next fiscal year, I mean, I'm sure, typically, as you know, Q4 is the strongest. And I think for the eight years that I'm here, Q1 has always been the softest quarter. And I would basically expect that to be fairly similar. The question is how deep is the trough? And at this point in time, at least, I do have a little bit of optimism that the trough won't be that deep as it was last year because last year was a coincidence of, I think, two specific factors, both China and the U.S. at the same time, but for different reasons, basically guiding significantly lower into the year. And that, as you know, triggered then ultimately also our profit warning. So therefore, I am somewhat more confident that we see better start into this year.

China refractive and what you were saying about the military demand, it may be slightly lower in 2026 due to less recruiting, but there is really not good data on it. So I really don't want to speculate on what it ultimately means. We have actually been surprised by it in two years to some extent. And that means it is not as trivial to predict on that properly and correctly. So therefore, I would refrain from that here today, too.

And the next question is from Susannah Ludwig from Bernstein.

I have two, please. I guess, first, on your midterm guidance of 15%, to what extent do you need refractive procedures in China and APAC to recover from the current lower levels to hit that target? Or maybe another way of asking is what level of growth in China refractive is baked into that 15% margin?

And then are you able to quantify the EBIT headwinds this year from the lens revocation in China so we can think about the benefit in 2027, assuming VBP comes in at the end of this year?

I can start on the first question. The second part of the question, I couldn't simply because of the audio quality, I couldn't fully understand, but you can repeat that later, maybe, Susannah.

So midterm, what is it, what kind of growth we would anticipate or hope for in China to get to the 15%. I'd say probably a mild anywhere low to mid-single-digit percentage rate would be a good tailwind for us and generating volume and the associated margin that certainly would help us on that on the journey to this 15%. So is it reasonable or unreasonable to expect for that? I think we have shared with you in former earnings calls that we clearly believe that there is still a pretty high untapped market in China for myopia treatment on the one hand side. And secondly, we still perceive presbyopia treatments as an opportunity, and that is actually part of our profit Up program to push that stronger and invest into this market segment, which we feel is utterly underserved and that could basically provide some additional contributions even if in the myopic field, the growth rate wouldn't track to what I just said.

And now maybe your second question, if you can repeat it once more. I was not clear whether I fully understood it.

Yes, sure. And thanks for the color on the first question. The second question is if you could quantify the EBITA headwind from the bifocal lens revocation in China this year, just because it helps us think about the benefit for next year because you highlighted that as something that helps is that sort of profit coming back or at least partially.

So I think we actually gave you some color on it in the last earnings call, but it is clearly in terms of top line in the neighborhood of roughly EUR 30 million and with a very healthy margin associated to it that certainly brings you also to a bottom line headwind that is significant. So our average margins on the premium lenses is clearly tracking higher than our average margin, and that gives you an indication what was the bottom line headwind.

And the next question is from Davide Marchesin from Equita.

I have three questions. And the first one is a follow-up, a clarification regarding tariff refund. Because in the press release, I saw the EUR 11.5 million refund, but I didn't see the other EUR 9 million tariff refund. So is it correct so that you included the EUR 9 million tariff refund in your adjusted EBITA? And is this included in your full year guidance?

The second question regarding the Chinese refractive market. You said that you are aiming to achieve a low single-digit growth. I think in the last quarter of the year despite a market being down around 5% in July. So is it correct that you are targeting low single-digit growth in the last quarter of the year or you are referring to the full year?

And the third question regarding the gross cost savings. So you are targeting to achieve EUR 200 million cost savings over the next, I assume, three years. While on the other hand, you are targeting to have an increase of infrastructure cost in the region of EUR 40 million. Is it fair to assume that next year, so in '27, the cost savings will be at least enough to offset the increase of the infrastructure cost?

Davide, thank you for questions. The clarification on the tariff, the EUR 9 million is what has been associated to revenues in this fiscal year and therefore, has been shown not as an extraordinary income, but ultimately, it's an operating income. And that's why we have the separation and the EUR 11.5 million refer to revenues from previous year. And therefore, in terms of accounting standards, it must be considered and shown as extraordinary. So that is what I can confirm with regards to that question.

On China refractive, again, to clarify what I meant with low single-digit growth, then first of all, this refer to where we are after nine months. And I think given that we are currently seeing a somewhat softer development going into Q4, I would clearly say that for the full year, a low single-digit growth would be probably more reasonable, whether it's going to be further melt down or not, obviously, that remains to be seen. But I clearly wanted not to be understood that we expect a low single-digit growth in Q4 for our refractive business in China.

On the gross savings, your assumption of next year that potentially savings are roughly kind of on a level that is close to what we will incur as expenses for the -- from the headwinds that we had -- not the headwinds, sorry, but for the expenses associated to the program that we have mentioned in our last call. Yes, I think from our models, at least, we would probably say that this is a reasonable assumption.

The next question is from Julien Ouaddour from Bank of America.

I have three, please. The first one, could you just update us on the VBP assumptions you have in terms of price cuts? I think in the past, you mentioned the fiercer competition. I mean, has it changed recently? And do you still expect a pretty nasty one?

Then secondly, could you just comment about what you're seeing in the U.S. IOL market, maybe just in terms of procedure growth, in terms of competitive dynamic, that would be helpful.

And the third one is, I mean, I'm just wondering if you factored in any potential headwind from new competition in refractive space in China specifically for either 2027 or for your 2029 targets? And I mean, do you think you will be able to keep your -- either the peak volume market share you have right now or the price intact when the new entrants will be there? I'm just asking because I mean, the consumables are tied with a very high profitability profile for refractive and any impact on either volume or prices will have probably a pretty nice impact on the margin assumptions.

Yes, Julien, thank you for your questions. And so VBP assumptions, actually not much more to share. Nothing has changed in terms of our expectations. There will be -- from all what we know, there will be more Chinese contenders and also in the premium segment. So therefore, we would expect at least, I'd say, evenly harsh impact than what we have seen in the first round. On the other side, maybe on a positive note, we have gone through the sampling by the Chinese authorities and have been fully approved and qualified to participate with our product portfolio. And I don't want to speculate here, but at least from our understanding, all contenders must actually be approved through this sampling, and it remains to be seen whether everybody will actually get that approval. So from that perspective, my only message is there's so much uncertainty associated with it that we do not have another model, and it remains along the lines of what I just said.

The U.S. IOL market dynamics, maybe just to clarify again, this market is one where we, I think, as frequently discussed in these calls, where to this date, we not really have yet conquered a meaningful stake. Therefore, in terms of dynamics, for us, it means we clearly have to wait for the completion of our lens portfolio. And we do expect by the second half of next year, then finally, the approval of the hydrophobic trifocal lens that will be a meaningful change in our offering and will allow us to start bundling a more reasonable portfolio, having then a monofocal and a trifocal hydrophobic lens. But other than that dynamics, I think there is other market contenders who can speak more -- how should -- with more competence on it.

New competition in China, yes, you're absolutely correct. We are expecting new competition to enter. And as you can imagine, what we have just spoken about today with our strategic partner, Aier Group and the installation of another 25 lasers. The idea is, of course, to fill the market as good as possible before anybody else with a reasonable offering and a solid technology can offer the market. We do clearly have in our midterm planning, the expectations that we are -- we will have to deal with headwinds when it comes to margin realization.

But I think today, it's too early to tell or disclose your details because, again, here, the question is what will a new competitor ultimately in terms of procedures, what will that company actually be offering? Is it comparable to SMILE? Is it more a flat cutting process? Will they have the ability to support the application in the field, which we have learned over the last decade is a key factor. And obviously, being able to service 24/7 the systems in the field. So there's more to it than just having a technology and that I think remains to be seen what will be then ultimately the character of the launch and how fast it will be changing the market dynamics.

There's a question from UBS, Graham from UBS. He had some technical difficulties. Therefore, I will read the question. Two questions, actually, I believe the second one has partially been answered, but let's read both of them just in case.

First one, should we model refractive China down in Q4 given exit rate, which I understand was down high single digits? And second question, can you grow EBIT next year given the tariff refund headwind next year versus this year and the cost savings are more back-end loaded. So is next year essentially a consolidation year?

Model refractive in China down in terms of revenues, I think I tried as good as I can, Graham, to provide you with the data that we have on hand. And they are, as just said, indicating at least June and July somewhat softer. We have seen, however, years in the past where we had then a rather stronger peak later in the season, and there's always a bit of a seasonality within the seasonality, so to speak. So I would not yet completely give up on it. But I think the key message here today is do not expect any miracles in terms of a big boost for the summer peak. If that was the case, I think then we probably would have seen other numbers here in July.

On your question, next year consolidation year, I would tend to say, and again, building on the impacts of the back-end loaded program, ProfitUp program, I would tend to agree with you that we are clearly aiming for some margin improvement next year, but clearly not on a linear projection from here to the 15% target. I hope that gives you a little bit of flavor. Thank you.

At the moment, there seem to be no further questions in the line.

Okay. Then thank you very much for everybody for joining the call. And the IR team will be available for follow-up questions in the next few days. Enjoy the summer break, everybody, and we'll be on the road again in September and talking to many of you. So look forward to the discussions as we head into the critical year-end phase. And yes, that's looking forward to staying in touch. Thank you very much, everybody.

Good morning, ladies and gentlemen, and a warm welcome to today's earnings call of the Carl Zeiss Meditec Group following the publication of the 6-month figures of 2025/2026. And with this, I hand over to the Head of Group Finance and Investor Relations, Sebastian Frericks.

Hello. Good morning, everybody, and thank you for joining our 6 months '25/'26 earnings call. As usual, our management will guide you through our financials, and then we will talk quite a bit today about our ProfitUp program, including the cost restructuring and portfolio measures that we are planning as well as give you a new outlook for the current fiscal year '25/'26 and an update on our midterm targets. With that, I'll hand it over to Andreas Pecher, our CEO. And then afterwards, Justus, our CFO, will take the financial question.

Great. Thank you, Sebastian. Well, good morning to analysts and to investors. Well, welcome to the 6 months '25/'26 of Carl Zeiss Meditec AG. Justus and I will walk you through the quarterly overview and financial results. After that, we'll dive deeper and share more details about our ProfitUp program. And at the end, we'll present our guidance for fiscal year '25/'26 and our midterm outlook. And of course, following the presentation, we'll be happy to take your questions. So let me start with an overview of our 6-month performance. Well, to cut it short, top line and earnings in the second quarter still remained weak. This weakness was primarily driven by currency headwinds and an unfavorable product mix with weaker sales of intraocular lenses in China.

Order entry in 6 months amounted to EUR 1.038 billion, representing a 5.2% decline. Adjusted for currency, it declined by 2.3%. We achieved solid order growth in the EMEA region, while demand in the Americas and APAC remained weak. Our order backlog saw a slight sequential rise with EUR 435 million at the end of Q2 compared to EUR 405 million at the end of Q1. Revenue for the 6 months amounted to EUR 991 million, representing a decline of 5.7% year-over-year. On a constant currency basis, revenue declined by 2.8% year-over-year, driven primarily by movements in the U.S. dollar. If we factor in all currency pressures, FX effects amounted to EUR 46 million. So FX adjusted revenue was down 1%. Beyond U.S. dollars, the currency impacts were mainly related to the Chinese yuan. And in this adjustment, we're also eliminating all currency effects related to the exports into the Zeiss Group's global distribution network. Revenue declined across both equipment and, particularly, diagnostic devices and consumables, in particular, IOLs in China.

Looking at the revenue mix, equipment accounted for 50%, consumables for 40% and services for 10% of total 6-month revenue. Profitability significantly declined in the 6 months. Adjusted EBITA came to -- came in at EUR 60.5 million, with the adjusted EBITA margin at 6.1%, down from 10.7% in the prior year. Reported EBITA amounted to EUR 39 million with a margin of 3.9%, down from 10.8% in the prior year. We'll walk you through the detailed adjustments later in this presentation.

The significant drop in profitability was mainly driven by negative FX effects and unfavorable product mix and negative operating leverage. While core operating expenses remained stable, we recorded an extraordinary impairment on capitalized R&D related to IVO, Infinite Vision Optics, which pushed up our overall R&D ratio. Now I would like to hand over to Justus. He will provide you with more background and discuss the SBU figures in more depth.

Thank you, Andreas, and good morning, and welcome from my side. So let me briefly walk you through Ophthalmology performance for the first 6 months. The Ophthalmology SBU delivered weak revenue and a notable decline in EBITA margin. Let's start with the revenue. Reported revenue came in at EUR 754 million, down 6.7% year-on-year. And on a currency-adjusted basis, revenue declined by 4.2%. Revenue decline was visible across both equipment and consumables. The performance was impacted by several factors. Of course, the exchange rates, as already mentioned, the loss of the bifocal IOL sales in China associated with the revocation of the license for one product that we have commented in an earlier call, scrapping of the recalled bifocal IOLs, resulting in a one-off EUR 6 million impact on both revenue and cost of goods sold. This scrapping was fully completed during Q2.

Equipment sales remained sluggish in Q2, in particular, in the Americas region. Our successor bifocal intraocular lens has now obtained registration approval. Once the new round of China's VBP tender launches, we expect a clear opportunity to relist this product in the tender catalog and resume

[Audio Gap]

Of course, future pricing and volume allocation will depend on the final bidding outcome. At this point, I would also like to address the time line for the new VBP round, which many of you have asked about. According to our current estimates, it will most likely start in June to July of this year. In China, refractive procedure volumes delivered reasonable growth in Q2 despite a strong prior year comparison base.

Let's move to the EBITA margin. EBITA margin of Ophthalmology dropped to 1.5%, which is a 7.6 percentage point decrease year-on-year. Lower EBITA margin was attributed to gross margin decline by 2.5 percentage points, pressured by the exchange rate headwinds, bifocal IOL scrapping and an unfavorable product mix. The OpEx ratio increased sharply by 5.1 percentage points, largely due to a EUR 13 million extraordinary write-off related to our IVO business. We have deprioritized this project, resulting in the impairment of capitalized R&D assets. Excluding the extraordinary IVO write-off, our core operating expenses remained broadly stable.

Finally, looking at the revenue splits, Ophthalmology accounts for 76% of total OPT revenue. Within Ophthalmology, consumables represent 50%, equipment accounts for 41% and service contributes 9%. Turning to Microsurgery. Overall, we saw both revenue and EBITA margin decline, mainly pressured by currency headwinds. Revenue in the first 6 months reached EUR 237 million, down 2.1% year-over-year. And on a currency-adjusted basis, however, revenue grew by 1.8% in the first 6 months.

In Q2 alone, currency-adjusted revenue rose by 4.2%, showing clear sequential momentum and an incremental ramp-up. Q3 started with strong orders and top line. We expect the currency impact to neutralize and deliveries to continue to improve in the second half. EBITA margin decreased to 11.5%, a 4.8 percentage point decline year-on-year. This was mainly driven by a 5.5 percentage point decline in gross margin, reflecting currency effects. OpEx remained roughly flat. Looking at the revenue split, Microsurgery accounts for 24% of total revenue. Within Microsurgery, equipment represents the largest share at 78%. Service contributes 14%, consumables account for 8%.

Let me walk you through our regional development. Overall, EMEA remained solid, while Americas and Asia Pacific posted softer development. Starting with the Americas. The region accounts for 25% of group revenue. Revenue came in at EUR 247 million, down 11% year-over-year, while currency-adjusted revenue declined by 3.5%. This reflects a weaker investment environment driven largely by heightened geopolitical volatility and broader market softness across the region, including the U.S.

Moving to EMEA. EMEA represents 35% of group revenue and delivered a solid performance. Revenue reached EUR 346 million. Currency-adjusted revenue grew by 5.6%. Growth was supported by most core European markets, while Middle East and Spain remained sideways. And finally, on Asia Pacific, Asia Pacific represents 40% of revenue with China contributing 21%. Revenue amounted to EUR 398 million, down 10% year-over-year and an 8.6% decline on currency-adjusted basis. India delivered solid growth, while important markets, however, including China, South Korea, and Japan, and Southeast Asia showed some weakness, which weighed on the overall regional results.

Turning to the P&L. Margins came under pressure in the first 6 months, while core operating expenses remained stable. Gross profit declined to EUR 491 million, with the gross margin decreasing to 49.5% from 52.7% last year. This decrease was mainly driven by the currency headwinds and unfavorable product mix, including loss of the bifocal IOL sales and scrapping of this product in China. Looking at operating expenses. Total OpEx increased by around EUR 13 million, mainly attributed to the extraordinary impairment of IVO and legal expenses included in G&A. Excluding these, underlying OpEx numbers remain broadly flat. OpEx ratio increased to 47.2%, reflecting negative operating leverage. As a result, profitability was significantly impacted. Both EBIT and EBITA declined significantly.

Earnings per share decreased to EUR 0.17, driven by the lower EBIT and negative financial results, primarily due to higher interest expenses. On an adjusted basis, adjusted earnings per share was EUR 0.48, excluding noncash valuation effects on contingent purchase price liabilities while currencies and hedging results were not adjusted.

Let's have a brief look at the bridge from EBIT to EBITA and to adjusted EBITA. Regular amortization of purchase price allocations amounted to EUR 14 million in the first 6 months, including effects from DORC and Kogent Surgical. In terms of special items, the current period includes legal expenses in connection with the lawsuit related to former IanTECH in the U.S., the scrapping of bifocal IOLs, extraordinary impairment of R&D we've already discussed. On the contrary, the prior year benefited from a one-off gain from public grants received in China for our IOL production. Adjusted for these special items, EBITA amounted to EUR 60.5 million with a margin of 6.1%, a notable decline compared to previous year.

A quick overview on the cash flow statement. We delivered strong operating cash generation. This improvement was mainly driven by a significant reduction in receivables as well as lower income tax payments aligned with our operating performance for the period. Higher investing cash outflow was mainly driven by an increase in receivables against the Zeiss Group treasury, while CapEx ratio was at 2.7% lower than the prior year level. Financing cash flow declined, mainly impacted by the redemption of liabilities in Zeiss Group treasury. By end of Q2, net financial debt decreased to EUR 274 million at a lower level compared to a year ago. With that, I'll hand the floor back to you, Andreas.

Thank you, Justus. Well, let's move to the ProfitUp measures before I then hand back to Justus for the outlook. Well, before I now talk about specific measures that we're launching to stabilize and turn around Carl Zeiss Meditec financially, let me reiterate why we need to act. You've seen the slide in our publication in December already. I talked through it. Over the recent few years, our market environment has changed a lot, and this requires us to rethink how we operate as an organization.

The curve outlines the path we're taking from scaling through transition and ultimately back to profitable growth. Up to 2023, our focus has been on scaling for growth. Following very rapid growth in our consumables business in the 2010s -- 20-teens and coming out of COVID, we needed to adapt our structures to counter increasing complexity. During this period, we implemented new organizational structures to support expansion beyond our established anchor products. We made significant investments, for instance, expanding our manufacturing capacity, enhancing R&D to diversify our portfolio and strengthening our digital capabilities to enable workflow solutions. We also invested heavily in our workforce and talent base.

However, we have been open about the fact that not all of these investments have translated into the returns we wanted to see. Nevertheless, this foundational work was essential to prepare us for broader opportunities and to ensure we have the capabilities needed for the next stage. Since 2023, we began to see a rapid and initially unexpected market weakness. This year and the next few years, we're in a necessary transition phase. This is where we must adapt to rapidly evolving market dynamics and increasing regulatory complexity. Our priority here is to revise our existing structures, portfolios and footprint. These adjustments allow us to respond effectively to developments that are challenging our profitability. And after that, we expect to see the benefits of our efforts. And this is the phase where we expect to return to healthier growth rates and renew our profitability ambitions and also will reap additional benefits from our innovation pipeline.

With our ProfitUp initiative, we've launched a comprehensive bundle of measures to counter the recent margin erosion induced by market weakness and cost layers that, in many cases, were not well-balanced anymore to the weaker market environment. We want to restore an adequate earnings power and thereby give us, again, the financial flexibility to invest in future growth. And to achieve that, we need to realign our global structures and our organizational setup to achieve all 3: efficiency, profitability and customer value. We need to take clear prioritization decisions. This will lead to some products that are not mission-critical to our workflow strategy to be divested or phased out. Other products will be added from our innovation pipeline as well as from partnerships to regain market share.

As I talked about during our December earnings call, our innovation arm is strong. However, our commercial arm remains underdeveloped in many markets. We'll strengthen investment into market developments and enhance our commercial offerings. We want to achieve a clearly visible acceleration of top line growth. We will localize products to China, as we have been talking about, as well as to other Asian markets. We will also optimize our supply chains and look for savings in procurement as we qualify additional suppliers. The transfers do not stop with manufacturing. Selected R&D activities are under assessment to be relocated to best cost locations to ensure our cost structures remain competitive.

Last but not least, we also have to keep an eye on G&A cost. We have to deal with additional inflation in our infrastructure expenses and need to offset this via efficiency measures in G&A. So summing up, we want to achieve both growth above the market with continuous innovation as well as show financial strength comparable to the sector. All business segments, functions and sites are in scope for this exercise.

So what does this mean in financial terms? We're looking at a list of measures that taken together will bring about more than EUR 200 million in profit improvements year -- every year, year-by-year, by the financial year 2028, 2029, 3 years from now. The measures stretch across all areas. To name some key [indiscernible] measures, the commercial organization will work on cost reductions, particularly in headquarter organization and back-office functions as well as higher productivity and working with the global sales entities. Operations will work on optimizing supply chains, renegotiating key procurement contracts and qualifying additional suppliers.

We're targeting significant savings from this area. R&D costs will be reduced sustainably by portfolio measures affecting some structurally lower-margin products, which are not mission-critical for our workforce strategy. We will also work on making the footprint more efficient by moving resources into best cost countries. And we will also refocus our digital health portfolio.

In G&A, we will run efficiency programs across our group functions and business support functions with all contributing their fair share. And all in all, based on current assessments, up to 1,000 current positions across the global organization may be affected. There will also be a buildup of new positions, mainly in lower-cost countries. So the net reduction in jobs will be less. And as I said initially, we are not focusing solely on cost and portfolio measures. To improve our market offering and gain share, we have launched targeted initiatives to grow the top line. Partly, this will come out of our innovation pipeline and will also be supported by increased investments in market development alongside the newly established commercial organization's prioritization of key strategic growth projects.

Our goal is to deliver a clear and visible acceleration in top line growth. In operations, we have already launched a program to localize manufacturing with China as a main focus as we have discussed before, but we're also going to build capacities in the best cost country outside of China over the next years. And these efforts will lead to faster growth at more competitive cost of goods sold, leading to better gross profit margins over time. The growth contribution and additional savings from the long-term footprint project come on top of the previously mentioned greater than EUR 200 million in savings until '28, '29, but some of it will take longer to materialize in our P&L. And with that, I hand back to Justus for more details and our financial outlook.

Yes. Thank you, Andreas. So where does this leave our financial outlook? As we have discussed in our press release today, we also have to deal with higher infrastructure costs. These include the already present expenses for the new SAP implementation as well as a new Zeiss Group-wide customer relations management system. In addition, on Friday last week, our Supervisory Board agreed to the rent contract for the new headquarter in Jena as well as to a gradual price increase in shared services procures from the Zeiss Group over the next 3 years. The cost of these business services has been rising for several years with significant payroll inflation. There is no profit margin for any of these activities at the Zeiss Group level. Exclusively, actually incurred expenses are being passed on and the phasing over the next years will be step-wise to mitigate the impact until the efficiency measures are contributing.

All in all, we expect to have to reinvest around EUR 40 million out of the EUR 200 million into additional infrastructure expenses by '28, '29, leaving a net improvement of EUR 160 million. On top of that, we will see acceleration of top line leading to further positive operating leverage as well as the longer-term benefits of the footprint project. Lastly, as you will certainly expect, given a program of these sizes affecting payroll expenses, there will be substantial one-offs [ nonrecurring ] investment. Cumulatively, these could reach up to EUR 150 million over the 3 years period. Please understand there's still a lot of uncertainty in these estimates, and we will report on them in detail as we move forward. We will adjust out the nonrecurring items related to these initiatives from our guidance achievement.

To wrap up and before turning to the outlook, let me once again reiterate what our target view is for Carl Zeiss Meditec. We are investing into the future and

[Audio Gap]

of our company. We want to get back to above-market growth. We want to get back to significant investment in innovation. We want to build long-term financially healthy structures. We want to restore adequate and sector-like profitability, giving us enough financial freedom to seize strategic opportunities. And we want to be a fast-acting customer-centric company and a high-performance environment with our employees.

Turning now to the outlook. The current year '25/'26 has started on a weak note as we have discussed at length with significant headwinds, in particular from the Chinese IOL business, but also from the negative exchange rates. We expect the impact of these factors to be much reduced in the second half. Typically, our equipment business is back-end loaded and the main seasonality in our consumables business coming from the Chinese refractive laser summer peak are still ahead. This is why we think the current year will be a tale of two half-years. The first half year saw a significant drop in top line and adjusted EBITA. The second half, we'll see more stable results, not far from last year or, in the best case, even slightly higher. Under these assumptions, we will likely get to EUR 2.15 billion to EUR 2.2 billion in revenue.

Adjusted EBITA margin will turn higher and reach between 8% to 10%. Special effects such as the ones we have shown you in the first half and possibly the first effects from the ProfitUp measures will continue to happen, and we will report on them when we incur them. We currently expect a mid-double-digit million euro amount. There are additional IP topics amounting to at least between EUR 10 million to EUR 20 million in potential impairment on capitalized R&D that might take place in the second half year based on today's assessment of our pipeline and planned measures.

Let me also mention another risk that is not yet included in this outlook. Due to the erosion of our profit margin in Ophthalmology and the disappointing contribution, in particular from the acquisition of IanTECH in 2018, the goodwill on our balance sheet being carried by the Ophthalmology division is not as well underlined anymore by the cash flows of the cash-generating unit. We are currently still analyzing the impact of our ProfitUp measures as well as the midterm view on recovery of our profit margins as well as having discussions with our auditors on the viability of the current

[Audio Gap]

ophthalmology. A write-down on some of these intangible assets that, based on early estimates, may somewhat exceed EUR 100 million in the second half year can, as of today, be expected. We will let you know as soon as we have clarity because discussions with our auditors are still ongoing. We would treat it as a nonrecurring item regarding our guidance as it is a noncash accounting charge mainly related to acquisitions of the past not working as planned and profit margin having declined.

Economically, the risk to goodwill is most closely linked to the acquisition of IanTECH in 2018 and underperformance versus our expectations. Importantly, potential impairment would not change anything we do in the Ophthalmology business and has no other impact on our ProfitUp decisions. Turning to the midterm outlook. Organic revenue growth should rise again and reach at least a mid-single-digit percentage over the medium term. Supported by our ProfitUp measures, we are targeting an adjusted EBITA margin greater than 15% by the fiscal year '28/'29. We continue to see the previous target levels of 16% to 20% EBITA margin as viable for our business and our sector and generally achievable in the long term. With this, I'd like to conclude our presentation for today, and now we look forward to your questions.

Thank you very much for the presentation, and we now move on to the Q&A session. [Operator Instructions] And we already have the first participants. Mr. Reinberg.

Oliver Reinberg from Kepler Cheuvreux. Three questions from my side, if I may. Firstly, can you provide some kind of color on the phasing of your new 15% margin target? You still call out that 2027 may be kind of transition year. So any kind of color what the...

Let's take another one and we check what's going on there.

Hello?

Yes. We can hear you. I can hear you.

We can't.

We can't, unfortunately.

Hello?

In the room, we can't hear the questions.

So then we try -- we might get a feedback from Carl Zeiss if you can hear Mr. Reinberg now?

I can just hear you, the moderator.

Hello? Hello?

I can hear you, Mr. Reinberg. Just mute yourself and go to the next participant. Please, try again as the next one. And Mr. Unwin.

Hello, can you hear me?

We are not hearing anything. Sorry.

Hello?

Yes, I can hear you, but in the meeting room of Carl Zeiss Meditec, there seems to be an audio difficulty. So please stand by for a second.

Yes, please just -- let's fix this and we get back to the Q&A in a couple of minutes. Yes. Sorry about that.

Okay. I just got the information from Carl Zeiss Meditec that you should be staying on the line for a couple of minutes and they fix the audio line. Please stand by. [Foreign Language] Mr. Reinberg, are you still on the microphone?

Yes, I'm still here.

Perfect. Thank you very much. Just check if the audio line is ready to go. To all the participants, please stay tuned, and sorry for the delay.

Moderator, could we go into a separate call, please, for a moment to fix this connectivity issue or the technical issue?

Yes, we now can hear you and we can try to get back to Mr. Reinberg. Mr. Reinberg, your microphone is still open. Can just try to say something and we check if Carl Zeiss in their meeting room can hear?

Of course. Can you hear me?

Super. Now we hear you. All good, very good to hear you. Apologies for the problem.

Please, Mr. Reinberg, feel free and be welcome to place your question.

Brilliant. We made it. Three questions from my side. First one would be on phasing. Can you just provide some kind of color if you expect a kind of linear approach towards the 15% margin target, in particular, as I note that you call 2027 still a kind of transition year. Any kind of color here would be great. Secondly, on the midterm outlook, can you provide any kind of color what is assumed in this for Chinese refractive franchise and competition and whether you incorporated any kind of revenues from the U.S. cataract franchise and ICLs in China? And then lastly, just on refractive. I think you talked about reasonable growth. Can you provide a bit of more color and what your assumption is here for the full year?

Oliver, it's Justus. And once again, sorry for the delay, but I'm happy that now the line seems to work perfectly. On the phasing, I mean, you -- I think almost had the underlying assumption that it is not linear, of course, as you can imagine. Yes, we are in a transformation program that starts now. I would clearly see that we have a back-end loaded curve for that program, especially once we consider the composition of general cost, but also personnel cost. So therefore, I don't want to go into too much details, but be rather soft in your assumptions on impacts out of the program in the next fiscal year. And then, I think, you will see a more accentuated acceleration in the second half of the 3-year time horizon that we have given to you. And I think we keep you posted on it as we continue.

On the midterm outlook, I think we have clearly baked in some caution on the refractive margin development into that perspective. We obviously anticipate local competition in the Chinese market entering meaningfully or more meaningfully in the next 12 to 24 months. And that is clearly included. I think on cataract business, we are assuming that we can at least grow with market growth. And I'd say -- I think you were pointing to potential enhancements in the offering towards ICL, but that I think is not of any meaningful impact on the guidance that we just shared.

On refractive, what did I mean with reasonable growth? What I meant to say is that we're seeing growth over last year, which I think is generally a positive signal because the first 6 months of last year, as you remember, were actually also somewhat stronger than we had expected. For the remainder of the year, without having any indication on consumer confidence being significantly changing, we remain somewhat cautious, but I think I would also share with you at this point that we are actually quite happy with the SMILE pro share increasing in the total number of SMILE treatments. And we also see that the overall number of SMILE treatments, so both SMILE and SMILE pro as a percentage of the total treatments is actually solid at 70% and slightly above, which means the down trading towards LASIK we do not see continuing. So I hope that answers your questions. Thank you, Oliver.

Okay. So we move to the next participant, Mr. Felton. So then, we get back to Mr. Unwin.

I was wondering if you could provide a little more color on the portfolio optimization opportunities which you see, which specific business lines you expect to discontinue or to sell. And are you able to quantify the revenue and EBITA contribution from these businesses today just so we can get a sense of any potential drag on the top line and earnings growth as you go through that process? And then on the mid-single-digit constant currency growth by FY '29, how should we think about the building blocks to get to that? Do you need to see some sort of market improvement to get there? Or by removing the lagging businesses and improving the sales force, does that get you to the target? Those are my questions.

First one, I missed. The other one, I can talk a little bit. The second one, I didn't understand.

We didn't fully -- and that was not because of the technical problems we had at the beginning, but we didn't fully get the second question. Can you repeat it, please, once again?

Just on the midterm growth target of mid-single-digit constant currency, do you need to see a market improvement in the businesses to get to this level? Or can you get there by removing lagging businesses and improving the sales force?

Maybe I'll start and then, Justus, you chime in. Well, first on, you wanted more color on the phasing out of certain products. Well, I mean, there, we're evaluating currently alternatives to maximize the value. Of course, we have ideas. In parts, we're going to divest certain areas and do some sunsetting, phasing out. But please stay with us. We'll update you once we have taken the final decisions on that. On the second question, no, we are expecting a reasonable revenue growth in that. So our current ambition and our current plans are to achieve what we talked about with, I would say, reasonable growth in our top line.

Yes, which is basically at least market growth as we would expect it. And as you know, that is -- has been somewhat fluctuating with the currencies depending on whether you apply U.S. dollar or euro. But I think anything between 3%, 4%, maybe a little bit higher is reasonable from our perspective.

Good. Did that answer your question?

Yes, I would have liked a little bit more color on the divestments, but I'll just have to wait.

Okay. Thank you. Sorry about that, but we'll keep you updated once we're there.

So we try to get back to Mr. Felton. So we try again, Mr. Felton. Then we move on to the next participant. Mr. Davide Marchesin.

Hello? Can you hear me good?

Yes, we can hear you.

We can.

So first question regarding China refractive business.

We don't hear you.

Can you hear me? Can you hear me?

I can hear you pretty clear and...

Can you hear me?

We don't. Not getting into the room, unfortunately. Nothing changed on our side.

Hello. Can you hear me?

I can hear you, Mr. Marchesin. I'll try to reconnect to the audio of Carl Zeiss. Just stay tuned for a second. So we try to get back. Mr. Marchesin, can you [Technical Difficulty]

Apologies one second, please. Can -- for those who might not be able to ask the questions, we really sincerely apologize for these technical hiccups, and this has not happened before, and we will fix it later. But I would ask you to please e-mail the questions to us, and we will read it in the room. We can try for you to read the questions out loud. If you can't, and this is also for Richard from Goldman Sachs, please, and Davide from Equita, please. Why don't you send the questions per e-mail to me, [email protected], and I will read them out in the room and we answer them this way. I apologize for the somewhat complicated proceeding, but to not lose any more time and to not make it too tedious, let's do it like this in case the audio doesn't work. Thank you for your understanding.

And to other participants, we try to get to the next one. Mr. Oliver Metzger.

We don't hear him.

Yes. We now just could hear you...

Hello. Do you hear me?

Yes. Now we hear.

Hello, Mr. Metzger. Yes, we can hear you.

Great. At least this works. So one bigger comprehensive question, please. So regarding your midterm guidance, can you a little bit more about the moving parts? Because there's -- one hand, there are some underlying market assumptions, there is the ProfitUp program. Also some -- from a regional perspective, some views. Also to what extent, for example, the VISUMAX 800 launch in the U.S. was assumed. So would be really great to get a little bit more background regarding the assumptions. And second question is more a quick one. Can you make a comment about rollout VISUMAX 800? So momentum over the last quarters or in particular last year was better. Where do we stand -- where do you stand right now?

Yes. Thank you, Oliver. Let me try to give you a bit more color. As we have said, the entire program that we are embarking upon should by the year '28/'29 contribute an EBIT improvement of roughly EUR 200 million plus. And that does not include any impacts out of the bigger footprint measures that we have mentioned because there, we clearly would estimate that their contributions will only be of more meaningful character probably in a 4-, 5-year time frame. We do have to discount from these EUR 200 million some of the headwinds that we were talking about, which is mainly rising infrastructural costs. We have some peaking G&A expenses out of the SAP roll-in, the global roll-in that is basically happening over the next 2 to 3 years and being concluded.

Likewise, a global project to set up a next-generation customer relationship management system. And we have the move into the new premises in Jena, which was decided 10 years ago and the move into this building is now coinciding basically with the transformation program. So there's some counter effects out of this. And then ultimately, also some headwinds out of the services that are more expensive getting out of the Zeiss Group. And that is roughly a EUR 40 million effect -- counter effect against the EUR 200 million, which leaves us with a net contribution out of this program of some assumed EUR 160 million.

We, on top of it, are obviously focusing on top line measures, meaning growth beyond the assumed growth rates in some pockets of our business. I think Andreas alluded to the fact already in our December earnings call, but also in this presentation, that we want to strengthen the commercial muscle that we feel that we have in our existing portfolio already today. Still opportunities in some underserved markets and the new setup with a Chief Commercial Officer is something where we clearly would expect that this will drive some additional growth momentum.

And out of this, we also would anticipate some bottom line improvements. So with that, we would think cumulatively that we should achieve by the year '28/'29, an EBITA margin, an adjusted EBITA margin in that range of 15% or better. The guidance for the outlook in the long term, where we have reconfirmed the 16% to 20% is basically an expression of the fact that we then would expect in cumulation to the just described effects, then additional support from the footprint program. And I think that pretty much comprises the bridge to the guidance that we just shared. The second part was on the VISUMAX 800.

There -- I mean, without going too much into detail, I would say that goes as planned. The uptick is there. Of course, the 800 has also an advantage of, well, more customer value, so we can achieve higher pricing. And I would say, so far, we are quite happy with the rollout of that.

Yes, is there a follow-up, Oliver, please?

Yes. So yes, please. One follow-up regarding my first question. So if you set up a guidance and normally, the guidance is somewhere, let's say, the midpoint of some assumptions. So would you say that this guidance consists some safety caution? Or is the guidance -- okay, it's taken here the midpoint of our assumptions. It could be [indiscernible] to the top or to the bottom, would be really great to get your, let's say, your own assumptions, how aggressive you model it?

Well, Oliver, I think as you can imagine, we are talking here about a massive program where we have a list of measures that is identified. However, the precision in terms of when can we -- what become fully effective and fold out its total impact versus what other headwinds we may face out of the market is not a precise science. So I think, as I said as answer in one of the previous questions, we clearly have baked in some caution in terms of headwinds on our underlying business on competitive impacts that may hit us.

We were referring to the second NVBP. And I think we also made it clear in our explanations on the presentation that we also expect there further headwind on price and volume that we can expect. So therefore, yes, I think there's a reasonable portion of caution in this guidance. But I think beyond that, you hopefully understand that it's rather difficult to give you here a total precision on this prediction.

Maybe just to add into the program, I mean, I hope that came across. This is quite a serious program. I mean, there's a lot of effort into that of the whole organization, and it covers and encompasses the whole organization. A lot of work has gone into detailing the measures already. Of course, there is still some work ahead, quite some work ahead. And of course, we still have to then implement many of those measures. But rest assured there that this is a very strong focus of the organization.

So I would also say, as things happen, typically not everything comes through, that's normal in programs like that. But it's clear here that we want to achieve those targets. And if we don't -- if we have to add further measures, we will identify further measures and work on that. So that should be very clear. Our target is very firm. We want to achieve that. And we believe that we have the means to do that.

Okay. I will now add some questions that were sent to me by e-mail. I will start with Goldman Sachs and then move on to Equita and then to JPMorgan.

Thank you for sending.

And if anybody still has sound issues, please keep sending me them, and we will treat them in the order they arrive here. So first, to Richard from Goldman Sachs. First question, please, can you talk a bit more about your initiatives to reinvigorate top line growth? What will the organization do differently moving forward? What elements of your R&D and innovation pipeline are you most excited about? Is there anything to give more confidence or more conviction to the revenue growth guidance in particular? And then last one, China IOL VBP, what's your assumption on the impact embedded in your current year guidance?

Maybe I'll start with the R&D pipeline we have here. Well, if I look at the -- I mean, you can imagine, right, we do have quite a strong innovation arm, at least that's clear here. So if I look in both businesses, we do have a couple of items there. One instance on OPT, Ophthalmology, is the trifocal toric hydrophobic lens that's actually being released as we speak. We have an additional development on the presbyopia treatment based essentially on technologies that we have.

On the MCS side, I would expect instruments. So we're working -- getting into the workflow strategy and making and realizing it. So I would say there's going to be a number of instruments, not far away. And if I look further, essentially, we have a pipeline for the coming years of regularly releasing products that we will announce. And last but not least, don't forget DORC, where we acquired quite a nice product pipeline that we're now moving into the market. So I would say I'm fairly excited about that, what we have there. And there's more to come in the next quarters, I would say.

I mean, you were -- if I recall that correctly, asking about what are further measures on the commercial side. I think we explained it before that we take more direct leadership in the portfolio management in the countries than we have had in the past. So we are training more comprehensively the sales forces to enable them to better pitch the entire workflow offerings. And I think, as we said in earlier calls, we feel that some of what worked perfectly in markets like China could also work in other regions in the world. And I think this is one of the key elements, and that is then also added and completed with, for example, new business model opportunities, bundlings, or other attractive offerings, Equipment as a Service and so on and so forth.

So I think there are some elements that we can clearly play stronger in the future than as we have done it in the [indiscernible]. On the revenue growth targets, I think you were asking, and I just want to reiterate what we said before, that the underlying assumption is that with the portfolio that we have and with the strategy and the completion of the portfolio, just again referring to, among others, the completion of the hydrophobic IOL portfolio, we will be able to, certainly, grow at a market growth level. And I think on the NVBP, I mean, it's really early to tell here.

We have baked in, as I said before, the expectation that there will be a stronger pressure, especially in the premium segment on the pricing. But I remind everybody that we didn't discount as aggressively in the first tender for the premium lenses. But it's obviously very hard to predict, at this point in time, what this could end up with. But as I said before, we have in our model taken some preparation for lower margins in the premium segment in China going forward.

Okay. I hope these were all answered. And Richard, please send any follow-ups just in case. One second, please. I'll continue with Davide from Equita with your questions that you e-mailed in. So the first one, I think some were already answered, so we can keep it short. The first one was how sales of VISUMAX 800 are progressing in China and how many devices we are expecting all in all in '25/'26 of VISUMAX 800? What's the utilization rate between the 500 and the 800, so between the old SMILE and the SMILE pro? And are some local players already able to sell SMILE technology or will be anytime soon? That's the question on China refractive.

Second question, China IOL, if we have already restarted selling the bifocal IOL. Third question, is there an improvement in the U.S. in equipment demand? And final question, I think we may have answered this one already, regarding the EUR 40 million additional infrastructure expenses in the Zeiss Group context. Does it include the lease agreement on the property as well as the repricing for services?

Okay. Sales VISUMAX 800. What we would expect is actually a fairly normal run rate, which typically means that we have a sales going out of probably somewhere around 200 units in this year. And of this, most likely anywhere between 2/3 to 3/4 going into China. And I think after the first 6 months, we can say that we are on track for that, as Andreas said before. The utilization rate, I think, was the second question. We clearly see an uptake in the SMILE pro utilization rate over the last month. I personally have been visiting clinics where they actually have already passed the point where actually there is more SMILE pro treatments than SMILE treatments, but that may be still some anecdotal data.

But overall, the utilization rate of SMILE pro is trending clearly upwards and obviously giving us in terms of pricing and associated transfer price for the -- or sales price for the treatment packs also a little bit of tailwind. On the competition, I think we -- I said it earlier, we would expect in the next 12 to 24 months more visible presence of competition. At this point in time, we are aware of some clinical testing that is being conducted on one device by a Chinese company.

But from our expectation, until that is really then being a launched product ready to be served in the market, we would anticipate that this is rather something for the next fiscal year than for this fiscal year. The bifocal sales with a new product, whether they restarted, no, they have not yet restarted. And that's also a bit of a headwind for this fiscal year because as you remember, our expectation was for this tender to take place already in March, April. Now it's pushed out to June, July. That means until the new tender starts, we will not see sales of this lens.

And then we have the question on the U.S. demand on equipment. Let's be specific here. We clearly see more headwind in the diagnostical product portfolio, where we also have had to increase prices following the tariff implementation last year. And we all know that this is the most price-sensitive market segment, and we clearly could see that there were some projects being pushed out. On the other side, if we look at the microsurgical portfolio in the U.S., I think we overall see that it is trending per our expectations and providing some good opportunities when we look at the order book for continued growth throughout the second half of the year. And I think there was -- can you help me on the -- there were 2 more things...

On the infrastructure, did you comment on this one...

On the infrastructure...

[indiscernible].

Yes, I think that is all included there in this EUR 40 million. And as I had tried to explain in the previous answering of the question and then we had...

I think we did answer it all. In the case there was anything missing, Davide, please let me know again. I would move on to the JPMorgan questions. So first of all, do you have an update on the new CEO? I'm sorry, these are from David Adlington from JPMorgan. Thank you, David, for submitting them. Do you have an update on the new CEO? Second one, do you expect any revenue impact from letting up to 1,000 employees go? Third one, 21% of sales are in China. How much did they contract in H1? What's your midterm expectation for China? And final one, H1 margin was only 6%. The guidance of 8% to 10% for the adjusted EBITA margin implies a meaningful recovery in the second half? And what's that based on, what key drivers?

Yes. I would start with the CEO. Maybe talk a little bit about the revenue impact, then you chime in on the China. And maybe I can comment a little bit on the second half. So on the CEO, well, the search is, I would say, going accordingly to the time line that we set before. So I can pretty much stick to what I said before. We hope to be able to announce my successor by the end of this fiscal year, the latest. I would say -- nothing more I can say here in detail. I hope you [indiscernible].

On the revenue impact of the colleagues, we will have to let go. Of course, we're going to try to minimize that. If it's related to some product lines that we might discontinue, there could be an impact, but that's revenue is one side. EBIT is the other one. Of course, that is there to improve the EBIT. There's not much more we can say right now because that would go too much into detail of what products we plan to discontinue. But overall, also when it comes to the sales organization, we will certainly not cut areas where we will then have unnecessary reductions in revenue. Actually, the opposite. We want to strengthen our revenue growth by implementing more stringent sales and commercial organization. That would be my comment on the first 2 questions. Maybe you want to say something on China and...

Midterm expectation in China, I'd say, again, let's go by segment. For our refractive business, I'd say that we volume-wise would clearly see further growth. But as I said before, we have baked in some caution in our guidance in terms of margin [ development ]. There is some -- if you want to say so, some counter impact that we are forecasting there. But overall, we would still think that there is growth opportunity for our portfolio. In the intraocular lens sector, that, of course, remains more difficult at this point in time. Again, in terms of volume, I would be somewhat -- especially in the monofocal area might well be that we can actually gain there in terms of volume, but the price impact, of course, is most likely going to have, again, some offsetting impact here. So more difficult to predict. But as I also said before, we have made here some caution reservation in our model.

On the recovery in the second half of the year, what are the drivers for that? I think number one, as everybody knows, we definitely see that we have the summer peak for our refractive business in China ahead of us and with a higher portion of SMILE pro capable lasers, we would -- even if procedure numbers may not grow as strong, but we would think that we should benefit from the higher margin of the treatment packs post SMILE pro. We would also see as a contributor in the second half of the year, of course, the MCS order book that we are now turning into revenues.

And last but not least, again, let's remind everybody that one of the key headwinds was the currency in the first 6 months. And that, from our current predictions, will not play a role in the second half of the year, and that will obviously be another contribution to the recovery.

And we balance that essentially, that's with the risks that we -- that still remain, geopolitical risks, essentially, consumer climate remains weak, et cetera. IOLs we talked about. So essentially, we balance the upside to the downside.

I think there was one data point missing. Maybe I didn't read the full question. This was basically the H1 trend in China. This was down single-digits in the Chinese market. I will now call up -- we will do the following. I have a question from Bernstein, from Deutsche Bank and from RBC, and we'll try to get your audio in. If not, I have the written questions e-mailed. So Susannah from Bernstein, we'll start with you, so we can try to unmute you. And in case it doesn't work, I have your questions here to read them out.

Yes. So we try to get to Susannah Ludwig.

Great. Can you guys hear me?

I can hear you pretty well.

No, we can't. Okay. Sorry about that. I would...

Okay. We get questions via e-mail from Sebastian.

I will read them. So these are from Susannah and Richard from Bernstein. First question, your restructuring program is targeting savings roughly equivalent to what you expect to deliver in adjusted EBITA at the midpoint of your guidance this year. So basically, the restructuring program is as big as the current EBIT. What gives you confidence in the delivery? This is obviously a sharp change for the organization. How will it impact morale in the organization? Given the complexity of the program, is it fair to assume that in the new CEO search, experience with transformation of this nature is a criteria?

Yes. Maybe the first question about [ confidence ]. Well, the confidence comes from a couple of areas, right? In my previous life, I've done a couple of those programs, and I'm sure you have seen or done some of those as well. First of all, it comes with the confidence in the measures, right? How well are they analyzed? How much do you believe the numbers that you see in those and how much detail is put in there?

My impression there is a lot of diligence was put in there. We also had some external support that made sure that we got challenged there to do that. The organization that was involved, my impression is, was quite diligent in doing that. And the most important thing is saw the reason for doing that because looking at the numbers in the last quarters and, actually, even a few years, people understood why this is there. And that's a good basis for the second part, the confidence, because you're going to have to make sure that the people are coming along.

When it comes to the leadership, we had some conversations already. My impression is the leadership understands it, wants to continue or contribute and help on that. The questions that we got typically are how can we help.

So now the next step, and that will happen this -- actually right after this call, when Justus and I will address the whole group and the whole team, is that together with this extended leadership, we will guide our group, our team through that. And for that, we also have support implemented support for our leaders in terms of change management and making sure that they can guide, essentially, their employees through that. So with that, I would say that's as professional as I know you can set up a program like that. So my confidence level that we will go through that is fairly high, of course. To be very open there, we have to make sure that this time of uncertainty, we will keep short because, of course, we want to focus on what really matters, and that's our customers. The second question was about complexity of the program, right?

Yes. Basically, is that -- in looking for the new CEO...

Yes, of course...

[indiscernible] experience.

Yes. Well, yes, exactly. That's one important aspect of the new CEO, clearly, because the program is not over yet by announcing it, right? It actually starts. And as you can imagine, there will be a lot of work. And here and there, some measures might not happen, and we're going to have to find other measures or regroup and do that.

So of course, we're looking for a person that is not going to give up on that. That's very clear. That's part of the selection process and was tested. And of course, we are also looking for program that -- for a person that looks beyond that because this program is in part also growth. But of course, we have other ambitions for Carl Zeiss Meditec. So we're looking for a person that can do both of that. And the people I've seen, that we look at, they can achieve that. Thank you for the question. Very good question.

Okay. Thank you, Andreas. I come to Falko from Deutsche Bank. Falko, we can try to unmute you on audio. If not, I read the Qs here.

Yes, I just ask Mr. Friedrichs to unmute. He's dialed in by phone.

Can you hear me?

Yes. We can hear you.

Okay. Excellent. Firstly, to what extent are you impacted by the Middle Eastern conflict? And are you able to mitigate or pass through higher costs? Then secondly, what was the refractive procedure growth in China in the second quarter? And how good is your visibility on this summer peak season at this point? Could it be a better one again? And then lastly, more over the near term with regards to the start of Q3, are you optimistic that the Ophthalmology business can grow positively again on organic sales growth in Q3?

So I can start with -- Falko, it's Justus. The Middle East conflict is, in terms of energy costs and associated impacts, is not really of that much relevance because, as you know, we are mainly an assembly company and energy costs for -- in our total bill of material is not such a decisive factor. However, it is fair to say that the Middle East region is a very good market for us. And typically, in the last years has

[Audio Gap]

grow with high-single-digits, partially double-digit rates. And there we clearly right now suffer with a slowdown in order entry and the headwind, as everybody can imagine, from the uncertainty in that region when it comes to the war. So therefore, not as much in our total cost of goods sold and impact, but more right now on the top line in terms of headwinds for our growth in that region.

The refractive growth, I think you wanted to understand for the second quarter. What I can say in terms of procedure growth for the first 6 months, we do see a up to mid-single-digit growth rates in procedures, which is, as I said before, quite encouraging. But there is this associated uncertainty, and that leads to your question about the summer peak confidence. I don't -- as I say before, I don't want to be here too optimistic on everything. So because the -- in the bigger picture, not so much things have fundamentally changed in China.

So therefore, yes, we clearly would expect a reasonable summer peak, but I don't want to generate here too much expectations for any miraculous, enormous growth potential. And I think the last portion of your question was organic growth for OPT. But I was not quite sure, Falko, did you refer specifically to Q3 or generally going forward?

Yes, I was referring to the third quarter now.

Organic growth in third quarter, yes, as I said before, with our expectation that currency will not play a major role, and therefore, the headwinds on the top line should remove by and large. And our typical seasonal pattern of a stronger second half of the year, yes, I would say that it's probably a fair assumption that we should be returning to organic growth in Q3. And if not in Q3, then certainly into Q4.

Okay. And as a quick follow-up, can you share how much the Middle East is in terms of your sales exposure for the group?

Let me quickly see. I have some backup notes on this. And -- but I don't have it. Here it is. Here it is. So it's a low-single-digit portion of the group revenue. And so right now, we are seeing a decline anywhere in the mid-single-digit numbers versus last year.

Okay. The next one e-mailed questions are from RBC from Charles Weston. So Charles is asking, please, can you split out what you're seeing in Ophthalmology as like-for-like pricing, mix and volume? The second one is, are you flagging major CapEx investments as part of the infrastructure announcements? The third one is, is the KINEVO 900 S cycle now inflecting? And can you give some visibility specifically on the neuro order trends? The last one is on DORC. How is DORC performing on a stand-alone basis? And are these synergies on track with the initial business case?

So split of entire OPT in terms of pricing, mix and volume, I mean, that's a rather complex question for 3/4 of our revenue. And with the factors that we mentioned before, and NVBP, where I currently -- as I said before, we are assuming some pressures there with the refractive business where at least going into the next years, we would probably see some pressure on margins based on competition arising. So I'm not sure whether I can give you any sensible answer for the entirety of that business here. I think overall I try to take the key industry factors. I think we clearly would see continued demand growth for the business, yes, simply driven by demography, I think as everybody is aware. And against that, we clearly see some pricing pressures.

And in terms of mix and our portfolio, as you know, where we are increasingly having the consumables in the portfolio, and then now also in our instrument business, I would say that by and large, we would still end up, even with pricing pressure, on a different mix with the top line growth. I think I can only leave it on that level here. Otherwise, we really have to go business sector by business segment. CapEx investments associated with the ProfitUp program, yes, indeed, there are some. And I think at this point in time, it's probably fair to assume that it is somewhere a mid-double-digit million euro amount associated with it. Mainly, of course, relocations into China, but also beyond that, as we had said, some investments in a so-called best cost country location outside of China.

KINEVO inflection point was the third question. Yes, we do clearly -- if you mean inflection to the positive, then I'd say, yes, clearly, we see that materializing. And in the neuro area that you were specifically asking for, we do see a good -- as I said before, a good project pipeline. The order book has been growing, and we are actually preparing for a pretty strong second half of the year for MCS and with KINEVO being a major component of that. DORC overall, I think we are still very happy with the

[Audio Gap]

integration is continuing. We do see synergy effects. We do, however, also, that is fair to say, still see that the ramp-up of operations to basically catch up with the enhanced demand, respectively, the requirements to, basically, develop the new territories that are now covered by the Zeiss organization, that is still providing partially challenges. But I think overall, we are confident that we also in the second half of the year will have likewise, as we had in the last year, a strong development for DORC. I think that's it.

Okay. So as we are almost up on time, just checking if there's any last question on the phone by e-mail, I don't have anything currently anymore.

So this is the moderator speaking. There are no questions in the telephone line or on the audio line in this call. So therefore, I hand over to Mr. Frericks.

Okay. Then thank you very much. And again, apologies that we had some difficulties. I hope we still did get to answer every question. And of course, the IR team is available next days and weeks, and we'll also be at a number of events in May and June to be facing your questions and look forward to the discussions with you.

It's an exciting time for us, and we hope to remain in dialogue with as many of you as we possibly can over the next weeks. Thank you for sticking with us. Thank you for the good discussion and questions, and we look forward to keeping in touch and the next regular call is in early August. So look forward to that. Thank you very much.

Thank you.

Thank you.

Good morning, ladies and gentlemen, and welcome to the three months '25/'26 analyst conference of Carl Zeiss Meditec. My name is Sebastian Frericks, I'm the Head of Investor Relations. Our CEO, Andreas Pecher; and our CFO, Justus Wehmer, will present the three months results and guide you through the financials and some prepared remarks. After the presentation, we look forward to the Q&A.

I would like to hand over to Andreas. Please go ahead.

Thank you. Good morning, dear analysts and investors. Welcome to the three months '25/'26 analyst conference of Carl Zeiss Meditec AG.

Maybe some of you know that I've been at Zeiss Executive Board Member since January 2022. Back then, in the very early part of that month, Meditec was valued above EUR 16 billion. Now it is valued at below EUR 2.5 billion. This is not acceptable for all of you and also not for Zeiss. Zeiss has taken the biggest loss of all above EUR 8 billion since then. And the new low point also is in the level of trust when we have to withdraw our full year guidance on January 22. The minimum I can do is to apologize, which I want to do personally and on behalf of the Management Board. I assume more important for you and also Zeiss as the main shareholder is that we reverse the trend and build up trust again by working on our business performance and meet what we said before over and over again. For that, we need to strongly focus on execution now.

We will talk about how business conditions have evolved since our last update in December 2025 and what the key building blocks are for the remainder of the fiscal year. Justus will address these topics in more detail later in the presentation. And of course, following the presentation, we'll be happy to take your questions. But before that, Justus and I will walk you through the quarterly overview and financial results.

So, let me start with an overview of our first quarter performance. Well, to cut it short, this was not a good quarter, and we're not happy with the results. We had a weak start to the year with both revenue and EBITA coming in below the prior year, driven primarily by currency headwinds and an unfavorable product mix with weaker sales of refractive treatment packs as well as intraocular lenses in China, which weighed on margins. Revenue for the quarter amounted to EUR 467 million, representing a decline of 4.8% year-over-year. On a constant currency basis, revenue declined by 2.1% year-over-year, driven primarily by movements in the U.S. dollar. When fully reflecting all currency headwinds, FX effects amounted to EUR 20 million. FX-adjusted revenue was relatively flat at minus 0.7%. And beyond the U.S. dollar, these currencies -- currency impacts were mainly related to the Chinese yuan. In this adjustment, we are also eliminating all currency effects related to the exports into the ZEISS Group global distribution network.

The revenue decline was visible across both equipment and consumables. The quarter was impacted by a soft start into the fiscal year following an exceptionally strong equipment delivery baseline in September last year. And in China, we also saw revenue loss from bifocal intraocular lenses following the withdrawal from the current VBP tender as well as delayed sales of refractive treatment packs due to the later timing of the Chinese New Year holidays.

Looking at the revenue mix, equipment accounted for 52%, consumables for 37% and services for 11% of total revenue in the quarter. Order intake reached EUR 471 million, down 9.7% year-over-year or down 6.9% on a currency-adjusted basis, which is mainly related to the strong year-end close in September 2025. Our order backlog increased to EUR 405 million at a slightly higher level compared to the end of last fiscal year.

Now turning to profitability. EBITA came in at EUR 8 million, a 77% decline versus the prior year, resulting in an EBITA margin of 1.7% compared to 7.2% last year. The significant decline was mainly driven by negative FX effect and unfavorable product mix and negative operating leverage as our cost base remained largely stable while revenues declined.

So, now I'd like to hand over to Justus, who will provide you with more background and will discuss the SBU figures in more detail.

Yes. Thank you, Andreas, and also a warm welcome to all of you from my side. So, as usual, I will briefly walk you through ophthalmology performance first and afterwards, microsurgery.

So we had a weak start, driven mainly by refractive phasing and a loss of bifocal IOL sales in China. Let's start with the revenue. Reported revenue came in at EUR 357 million, which is down 5.1% year-on-year and foreign exchange adjusted basis, revenue declined by 2.4%. The performance was impacted by several factors, of course, currency headwinds, as already explained by Andreas, strong equipment sales at prior year-end, which created a much slower start in the following month and later phasing of refractive treatment pack sales due to the later occurrence of the Chinese New Year vacations. And ultimately, the loss of the bifocal IOL sales in China, where we have reported that we lost there the right to participate with one lens category in the tender.

One item to highlight here is the potential bifocal IOL scrap risk associated to what I just explained and estimated at around EUR 8 million in total, which will fall in quarter 2. This will be treated as a nonrecurring impact, and it's worth noting that registration of the successor model is progressing well. The chance seems good to receive the license before the start of the next tender.

Moving to EBITA margin. The EBITA margin declined to minus 0.4%, representing a 5.2 percentage-point decrease year-on-year. This was mainly driven by a 1.9 percentage points decline in gross margin, largely due to the currency effects and an unfavorable product mix. The OpEx ratio weighed on margin by additional 2.8 percentage points, although [ obsolete ] expenses remained stable as particularly the changes in APAC currencies cannot be locally hedged with most of our OpEx in euro.

Finally, looking at the revenue split, ophthalmology accounts for 76% of total OPT revenue. And within ophthalmology, consumables represent 46%, equipment accounts for 45% and service contributes 9%.

Turning then to microsurgery. Overall, we saw a margin decline, mainly driven again by currency headwinds and an unfavorable product mix. Revenue reached EUR 110 million, which is down 3.7% year-on-year. On a currency-adjusted basis, revenue declined by a more moderate 0.9%. The softer revenue performance despite a relatively modest comparison base is largely explained by exceptionally strong deliveries towards the prior fiscal year-end, which created a pull-forward effect. In addition, we saw an unfavorable mix with slower deliveries of neurosurgical microscopes following the strong year-end close in September '25, which not only impacted revenue phasing, but also weighed on profitability. The EBITA margin decreased to 8.7%, representing a 6.5 percentage-point decline year-on-year. This was mainly driven by a 5.5 percentage-point decline in gross margin, reflecting currency effects and unfavorable product mix and the amortization of capitalized R&D related to KINEVO. In addition, the OpEx ratio weighed on margin by around 1 percentage-point, while [ obsolete ] expenses remained stable. Looking at the revenue split, microsurgery accounts for 24% of total revenue. And within microsurgery, equipment represents the largest share at 79%, service contributes 15% and consumables account for 6%.

Let me walk you through our regional development. Overall, EMEA remained stable, while we saw softer performance in the Americas and APAC. Starting with the Americas, the region accounts for 25% of group revenue. Revenue came in at EUR 117 million, down 13% year-over-year, with currency-adjusted revenue declining by 6%. This reflects a weaker investment climate, driven largely by heightened geopolitical volatility and a decline in key markets, including the U.S. Overall, demand momentum in the U.S. remains subdued during the period as a consequence of overall tariff-related price increases.

Moving to EMEA. EMEA represents roughly 37% of group revenue and showed a largely stable performance. Revenue reached EUR 174 million, moderately below last year, while currency-adjusted revenue actually grew slightly. This resilience was supported by growth in selected markets, particularly in the Middle East. At the same time, core European markets, including Germany, Spain and the Nordics remained broadly sideways.

Finally, Asia Pacific region, APAC represents 38% of revenue, with China contributing 18% in this quarter. Revenue amounted to EUR 178 million, down 3% year-over-year, with a currency-adjusted decline of 2%. Performance across the region was mixed. China remained stable, while India and Australia showed positive trends. This, however, was offset by weaker revenue in Japan and South Korea, which weighed on the overall regional result.

Turning to the P&L. Margins came under pressure in the quarter, while operating expenses remained broadly stable. Gross profit declined to EUR 227 million, with the gross margin decreasing to 48.6% from 51.4% last year. This was mainly driven by currency headwinds, a lower contribution from neurosurgical microscopes, IOLs and refractive treatment packs as well as higher amortization of capitalized R&D expenses related to KINEVO.

Looking at operating expenses. Total OpEx was flat year-over-year at EUR 226 million. However, as a percentage of sales, OpEx increased to 48.4%, reflecting a negative operating leverage. As a result, profitability was significantly impacted, both EBIT and EBITA declined sharply. Earnings per share decreased to minus EUR 0.06, driven by the sharp EBIT decline and negative financial results, primarily due to higher interest expenses. On an adjusted basis, adjusted earnings per share was EUR 0.03, excluding noncash valuation effects on contingent purchase price liabilities while exchange rates and hedging results were not adjusted.

The next table provides a brief overview of the bridge from EBIT to EBITA and to adjusted EBITA. Regular amortizations on purchase price allocations amounted to EUR 7 million in Q1, including D.O.R.C. effect of EUR 6.5 million and smaller effects from former acquisitions. In terms of special items, the current quarter includes legal expenses in connection with the lawsuit related to former IanTECH in the U.S. On the contrary, the prior year benefited from a one-off gain from public grants received in China for our IOL production. Adjusted for special items, EBITA amounted to EUR 10.3 million, with a margin of 2.2%, significant decline compared to previous year.

Next, we have a quick overview on the cash flow statement. We saw a clear improvement in operating cash generation. This improvement was mainly driven by a strong reduction in receivables, particularly from third parties as well as income tax refunds, which reflect the weaker operating result in the period. Cash flow from investing activities also improved primarily due to lower investments in property, plant and equipment compared with the prior year. Financing cash flow declined, mainly impacted by the reduction of liabilities to the ZEISS Group treasury. By end of Q1, net financial debt decreased to EUR 282 million at a lower level compared to a year ago.

And now I'd like to hand it back to you, Andreas.

Thank you, Justus. So let's move to key topics and outlook. I will outline the main triggers behind the current guidance suspension and also share my recent impressions from a visit to China that happened last week. Then Justus will illustrate the key building blocks shaping our outlook for the remainder of the fiscal year.

So let me briefly explain what has changed since December 2025 and why we decided to temporarily suspend guidance in January. Well, let me start with the bifocal IOL situation in China. As we communicated at the December '24/'25 analyst conference, full year conference, our bifocal IOL was withdrawn from the existing VBP tender. As a result, it cannot longer be sold to public hospitals under that framework. While the product license itself remained valid, there is still, of course, ambiguity around the VBP withdrawal, and we were still assessing whether limited sales to other markets for the private sector are feasible. At the same time, the treatment of existing inventories remain unclear. In a worst-case scenario, this could require a partial recall and scrapping of stock. We're now seeing only limited resale opportunities for bifocal IOLs more broadly as this product has been removed from the reimbursement scheme following the withdrawal of VBP qualification. So, since January, we have negotiated a partial recall with external distributors in Carl Zeiss China, which will result in an estimated earnings risk of around EUR 8 million for Carl Zeiss Meditec.

Second, moving to VBP and competitive dynamics. Our assumption in December was that the second nationwide VBP tender would put some pressure on IOL pricing, but to a lesser extent than the first tender as we learned from other peers, which are subject to consumables VBP. Meanwhile, we've identified the competitive landscape has intensified more than expected. In multifocal categories, several Chinese competitors have successfully passed registration, increasing price competition. As a result, we now expect pricing pressure in premium IOLs to be tougher than previously assumed. Beyond IOLs, competition in equipment is also starting to heat up, supported by expanding local procurement policies.

And finally, on equipment demand, we're currently seeing weaker demand in the U.S. and broader Americas market, particularly in the ophthalmology segment, this seems to extend beyond the impact of the strong September deliveries, causing a slower start into the new fiscal year. Based on this, internal sales forecasts have been adjusted to reflect a more cautious CapEx environment for the fiscal year.

While putting all this together, regulatory uncertainty in China IOLs, higher competitive pressure and softer equipment demand, we concluded that temporarily suspending guidance was the most responsible step until visibility improves. We will update the market as soon as conditions stabilize and assumptions can be reliably quantified. We're currently working very hard in defining measures, and we'll update you as soon as possible, latest with the half year reporting as previously promised.

But before I close and hand back to Justus for the outlook, let me talk briefly about China with a more long-term view. I just came back from, I would say, intensive visit in China last week. And I was meeting there, of course, government officials, for instance, the Shanghai Party Secretary, Chen Jining. He's one of the -- well, he is the highest ranking official in Shanghai. We also had the corporate size, Greater China headquarters campus construction launch ceremony. And of course, we did that alongside many of our customers, the local officials, and lastly, I met a number of our customers, particularly the Aier Group and its CEO, Mr. Li, and of course, our team.

And let me be straight in assessing the long-term competitiveness of Zeiss in China. We currently are in a period of, let's call it, vulnerability, not having localized our manufacturing fast enough. The transfer of manufacturing for key consumables and equipment is happening as we speak, and we will be largely completing this over the next 2 years. We have all the support we need from our local team and from the local and regional officials, and I will personally look over this. We expect to be strongly competitive again across our portfolio with our state-of-the-art production facilities in Guangzhou and Suzhou. Having the strongest brand in ophthalmology in China, keep in mind, Zeiss is even more recognized from a brand point of view in China, as in Germany, very close relationships with our key customers and an excellent reputation in the Chinese market from consumers to set that on brand recognition to doctors, to the government. And this can also be demonstrated by the largest ever infrastructure investment corporate ZEISS has made in China today. That, of course, also benefits Carl Zeiss Meditec.

Now back to you, Justus.

Thank you, Andreas. So let me now outline how we are thinking about the timing of new guidance and the main factors that will shape our outlook. At a high level, we continue to see several external headwinds, including trade barriers, regulatory changes, a softer consumer environment and currencies, which are putting pressure on this fiscal year. Right now, we don't foresee any alleviation of these headwinds in the near term.

There are 3 groups of internal factors we are monitoring closely. First, swing factors, which could move performance either way in the near term. This includes the timing of the successor bifocal IOL registration and launch. We have already received, as we mentioned before, positive signals and currently expect to receive the license around March in time for the new volume-based purchasing tender. We are also awaiting the outcome of the VBP tender expected in April or May, which will have an important impact on our IOL business. And lastly, refractive procedure demand around the Chinese New Year period, which will provide a good indication on overall market sentiment. In the first quarter as well as extending into January, our refractive consumption data indicates continued stability, whereas the market was quite weak overall based on our data. We are satisfied about our relative outperformance, but currently cannot count on a growth outcome to offset other pressures in the business.

Second, nonrecurring items. In Q2, we expect the scrapping of certain old bifocal IOL inventory. As just explained, we have agreed with Carl Zeiss China and external distributors to take back a certain quantity of intraocular lenses, which will cause a burden of around EUR 8 million to gross profit in the second quarter. We are developing our strategy and reprioritizing R&D projects, which will likely have an impact on IP and cost allocation. And in addition, we anticipate one-time reorganization-related expenses that will mainly affect the second half and beyond. As we have said in our release on January 22, more details on measures will be presented with our half year report.

Third, key positive drivers. We expect continued momentum from the VISUMAX 800 and the associated SMILE pro rollout in China, further global traction for the KINEVO 900 S. So overall, while near-term volatility remains elevated, we see both risks and clear operational levers. Once these swing factors crystallize and the one-offs are better quantified, we will be in a much stronger position to provide reliable guidance. Timing-wise, no later than our half year results.

And with this, I'd like to conclude our presentation for today, and now we look forward to your questions.

Yes. Thank you so much for the presentation. We will now move on to our Q&A session. [Operator Instructions] And we have already received a question, Mr. Reinberg.

Oliver Reinberg from Kepler Cheuvreux. Just 3 questions, if I may. And the first would be on China refractive. I mean, obviously, the kind of Chinese New Year season is starting soon. And given you have just been in China, can you just provide some kind of feedback, a, what you have seen in terms of stocking ahead of the event and also what kind of feedback you get in terms of the expectation for the season from your clients?

Secondly, just on the counteraction you're going to take. I mean, obviously, you're going to execute the plan that was developed before. Can you just provide some kind of flavor to what extent you also consider to accelerate these kind of measures given the kind of current earnings pressure?

And then thirdly, just on China and the political background. I mean, buy-local has been a theme for quite a while. Can you be a bit more specific in which equipment parts you specifically see this kind of pressure and whether there's also anything happening in the refractive space. I mean, obviously, there's so far no local competition to SMILE, but if there's any kind of push towards LASIK or anything here?

Thank you, Oliver. I can probably take the first 2 questions and Andreas...

I can probably take the second and take the third one.

Yes, exactly. So, China refractive, yes, you're absolutely right, Oliver. We are actually -- as we are sitting here entering into this Chinese New Year vacation period. And in a nutshell, I think the stocking into the distribution channel is right now tracking on a level that is, I'd say, within our expectations. It is comparable to last year's level, but the proof is then in the pudding. The proof is ultimately in the consumption during the vacation period. And I think only once we know that, we will really have a good indication whether our assumptions for this year's overall consumption are actually correct or maybe higher or outperformed or underperformed.

On measures, I can tell you that we are in full steam, so to speak, in the assessment and the decision-making process on what needs to be done. But I have to ask for your patience. As you know, there we have to follow a governance protocol. And we also, frankly spoken, also don't want to share anything premature here in public and clearly also not to feed our competitors with information that might be interesting to them. And on the Chinese political pressure, I think...

Maybe I can add to the second one, Oliver. Thanks for those questions. Well, that was the main reason why I stepped in, right, that we don't want to lose the time here. And we talked about that in December already. First measures have been implemented, for instance, the commercial organization that's being rolled out now. And of course, the other items, we're working together as a team to make sure that we develop those plans as fast as we can. That's clear and implement what we can implement. And for other things, we, of course, need the governance. That's clear. So rest assured that this is one of my and the whole team's highest priorities.

Now coming to your third question, well, let me first comment with sort of a general statement. What we observe is typically there is buy-local policies for areas where you have local competition coming up, of course, because it makes sense, right? Other things have to be imported. We observe that specifically in the diagnostic areas, and there is some risk in ophthalmic areas. The good thing is we have all this in our hand. We can localize. I mean we have large really good infrastructure in China. We have the right people. I just met them again last week that can do that, and we have the willingness to do that. And in addition, we also have the support from the local governance and officials. I spoke to them last week. They really want us to be successful in this market. So I would say we have everything in place to counter that and take on competition as it arises.

And do you see any risk that this kind of political pressure is also moving toward private space of refractive?

I wouldn't say political pressure. I mean, you can call it political pressure. In the end, it is the will to localize manufacturing in parts R&D. And if you follow that, our impression is we have a very good position in that market. And by the way, that's something that I also see in other businesses of size. This is not just in medical. I mean we have that in our vision business as well. And what we see is, as long as we follow those rules, we have a very strong position in those markets. I mean vision is #1, for example, in China. And there is, of course, strong competition. So we have the means to do this and of course, work with the officials to make sure that we can do that.

Thank you so much, Mr. Reinberg, for your questions. We move on to Mr. Jon Unwin.

I actually just had a quick follow-up on Oliver's question on the equipment and the buy-local policies. You mentioned it was mainly in diagnostics, but also in other areas of ophthalmology. Is that all other areas of ophthalmology, so refractive, cataracts and microscopes or one more than the other? So just a quick follow-up there. I'm just interested how order intake has progressed in Q1 and Q2 for microsurgery. Obviously, we saw strong deliveries in the fourth quarter, but have orders progressed well so far year-to-date? And how do you feel about the ability to deliver those in the rest of the year?

Maybe I'll take the first question. Thank you for those questions, Jon. Well, it depends in terms of the competition. I would say, generally, it's probably the highest on the cataract side, right? Then microscopes, I would see that more on the lower end coming in. And then the third one is refractive. That's the way I see it. And the good thing is we have a strong position in China. Zeiss overall is more than 7,000 people working for us in China. We see what's going on in the market. We can react. Essentially, we have the control over that. We can localize things quickly. Of course, you all know medical has regulatory restrictions, that's clear, but we can do that, and we're willing to do that. and one after the other. And this is nothing new to Zeiss generally. In general, I mean, we've seen that ambition as well. Years ago, we reacted and we're #1 there.

Fine. Then your question on MCS order intake and outlook. I think, yes, the first quarter has been soft, but I just spoke yesterday with the management of that division, and they are totally confident that they will make their numbers and volumes. The funnels, the project funnels are full. The order entry comes in. I obviously can't disclose here data for the current quarter. But I think what I want to convey to you is that for MCS, as we had said in December, for this year, I think that we will clearly benefit from the global roll-in of the KINEVO 900 S and the PENTERO, good sales volumes that we have seen last year, end of last year, also going into this year. So therefore, I think overall, for MCS, we are currently pretty confidently looking into this year.

Thank you so much Mr. Unwin for you questions. We now move on to Mr. Marchesin.

I hope you can hear me well now. I have 3 questions, 2 on refractive. The first one is about the rollout of VISUMAX 800. So last year was better than you initially expected in China. Can you just make a comment how Q1 has continued and where are you right now? Second one is also you said that in China, refractive was stable. Can you comment whether this stable is related to volume or value as SMILE pro implies some positive ASP effect?

And the last one is you also said in your comments that the planned delivery of neurosurgical instruments was slower than expected. Is it something that you see is just temporary? Or do you see that it will spill over more towards the further quarters?

Maybe on the first one, just you saw the picture that we showed, the one with the right background. That's actually me and our team standing together with the management of Aier Group and unveiling one of the VISUMAX pro systems, the SMILE pro systems. Just as a highlight there, they are dearly waiting for that, and they were really, really happy to have us roll that out. But that to just sort of highlight and Justus will go more into the numbers.

Yes, Oliver (sic) [ Davide ], happy to share with you that we are going into this year and order entry is currently trending nicely. We are in a neighborhood of 50 VISUMAX 800 in our books for China, out of which already more than 30 have been shipped and installed. So that, I think, is a pretty solid number after the few months that we are in this new fiscal year.

And then your second question, what I was referring to the stable was the procedure numbers. And just to also comment maybe on your underlying question, we still see a good pickup in SMILE pro treatments. And from that perspective, I also can confirm that by now, we do not see any further deterioration of margin in the market. So hopefully, that covers your question.

And sorry, and you had one on MCS. Once again, I wouldn't derive out of Q1 any conclusions that would indicate softness or weakness for MCS for this fiscal year. As I said, the funnels are very solid. And we also know that this category in the hospitals, so neurosurgical procedures is a money-making procedure. And therefore, we clearly expect that there will be a robust market demand for this year.

Thank you so much Mr. Marchesin. We have a question by the number with the last of digits of 219.

It's Jack Reynolds-Clark from RBC. I hope you can hear me. I had 3, please. So the first is on European core market weakness. Could you run through which subsegments specifically are impacted, i.e., was it refractive versus kind of cataracts versus D.O.R.C.? What do you think is driving the weakness? And do you think it's temporary or longer term?

The next is on the U.S. So do you -- or does the ongoing weakness in the U.S. change how you view the attractiveness of the U.S. market for you from a bigger picture perspective in the longer term? And then my third question was on the CEO search. Could you update us on where you are with this and share any kind of developments around your thinking about what it is that you're looking for?

I'll take the third one.

Yes. Jack, it's Justus. So on the core market segments in Europe, actually, I don't know whether that was maybe mispronounced or misunderstood in my statements because actually, we are not so, how should I say, unhappy with Europe. As I said, we have some regions that still grow nicely and some regions, Germany amongst them, which have a more sidewards development in the first quarter. But that I would not yet take as indication of a softness of the business. So therefore, really nothing particular to point out here.

I think if I look back on the 8 years that I'm now here with Meditec, Europe is always a mixed bag. You always have due to local politics and so on, you always have different investment behaviors across the board between South and North and East and West. But I think overall, we have always been able to, in total, then grow year-over-year in Europe. So therefore, really nothing that I would point out here, especially since you were asking about any particular business sectors of ours.

The U.S., the weakness that you have commented on, of course, we are not happy with it. But first of all, we have installed in the U.S. a new head of our sales organization, a very industry-known veteran who has also worked in his history partially for some of the major U.S. competitors of ours. So, yes, it's an environment in which we have probably more hostile competitors than in other markets. But we -- I don't think that we should give up on it. And there is products in the pipeline, as you know, whether it's the hydrophobic trifocal lens, which we would expect by next year as well as the VISUMAX 800 flat cutting modality, unfortunately, only also next year. But I think the completion of our portfolio should actually in the next year give us some better opportunities or provide better opportunities for us to be in the U.S. in better shape. And on this third question, I think...

Maybe build on the question. Thanks, Jack, for those questions. Justus and I spent 3 weeks ago, we spent a good week in the U.S., of course, talking to customers as always, we always do that, but also to our team. And the new person heading our U.S. sales organization is not coming from the outside. He was at other companies before he came from another one of our markets and has a, yes, a proven track record of bringing a lot of value to those markets. That is, I would say, one of the first changes that came out of the new organization, the new commercial organization. So, as you see, we're in full swing of changing things, as I would say, to the better.

On the CEO search, well, shortly said it's in full swing, right? I said before, I personally have a strong interest in keeping that short as my family. But, joke aside, we all have an interest, right, to make sure that we have the long-term person in there. So we are currently looking outside and have actually several candidates. And of course, I hope you understand that we cannot disclose anything more precise today, and we'll announce this as soon as possible. But it will be a person that, I would say, has a solid track record in the medical industry.

Thank you so much for your question. We're moving on to Mr. David Adlington.

Three, please. So, firstly, I just wondered, you indicated you put through some price increases in the U.S. to offset tariffs. I just wondered how much price you have put through and whether you're thinking about changing your strategy on price there.

Secondly, on gross margins, obviously, quite a big impact from both foreign exchange and an increase in R&D amortization. It would be great to get your thoughts on how gross margins might evolve from here through the rest of the year.

And then finally, with the VBP on multifocals coming through, I just wondered what you expected the price impacts to be? And any thoughts around where volumes might go?

David, I start, and Andreas, you just if you have anything that you want to highlight and I didn't cover on it.

Price increases were, in total, probably in low single -- high single digit. It varies a little bit from category to category. But overall, you can say that cumulatively, it is a high single-digit number of price increase. And of course, that you have to compute it on our transfer prices and therefore, in the end, to offset for the tariff barrier, you basically have to then calculate it backwards from your speed price. And that is something like, as I say, high single digit.

But you have to understand to build on that, David, that this hits in the U.S., the very important category of diagnostical products. And the diagnostical product, a, is anyways a very contested market. And secondly, you may say so, it's a market where in an environment like this, price increases, uncertainties on tariffs, some optometrists and ophthalmologists will simply delay their decisions. If you have a field analyzer, if you have an OCT or so, typically, it's something where you can also hold back for a while until you have more clarity on your investment decisions. And that, I think, is overall explaining the situation that we are in. So, hopefully, with a little bit more stability in the transatlantic relations and disappearing sentiment that there might be more movements happening, then we hope that the investment appetite will return.

Gross margin, you were asking on, I think, what exactly we are anticipating for the remainder of the year. We clearly would see that the gross margins will recover with higher portions of consumables kicking in over the course of the year with the one caveat that I want to highlight and that leads to your third question on the VBP. Obviously, that also is a function of how aggressive pricing will be reduced in this second round tender.

Frankly spoken, the only thing you can refer to is analogies from other consumables in the medical sector in the past. Typically -- again, typically, the second and third tenders were not as brutal in terms of the price impact. But now we have an unknown factor as outlined in our presentation. And also, please understand that I will not give you any detail on our expectations, what others do because as you can imagine, this is competitively sensitive information, and I don't want to have anybody speculating on how we would respond.

Yes. Nothing to add. And frankly, nothing I want to add to the last point here as well.

Thank you so much for your question. We're moving on to Ms. Susannah Ludwig. You may speak now.

Susannah, if you speak, we cannot hear you yet.

Can you guys hear me now?

Yes.

I have 2, please. First, can you confirm if sort of long term, there will be any benefits to COGS from the shift to manufacturing in China and when you would expect to be sort of fully ramped on this shift to manufacturing in China?

And then second, I wanted to follow up on what has changed from December to January when you pulled the guidance? So, first, on China, I guess, why had you originally believed that the price cuts would be softer in the VBP? I know you cite the Chinese companies passing sort of registration, but Eyebright had a trifocal approved since January 2025. So had you anticipated that they would be part of the tender? Or were you thinking there was a chance that they would not be? And then on the U.S., were December sales weaker than anticipated? And was that what led to the weaker internal forecast? Or was there something else?

Susannah, let me start with the last one. And in the week that we pulled the guidance, there was a pretty hefty discussion on Greenland. And within that discussion, there was at least a serious threat by the U.S. administration that there would be additional, on top of all other tariffs, additional 20% on products out of Germany going in the U.S. So that, of course, would have dramatic impact on our business. And as I said before, the U.S. is our second biggest market, and it's almost 90% device market. So therefore, that explains why this discussion at that moment in time was playing a significant role also for our ability to assess how the U.S. market may develop or not develop.

On your question on our expectations for the tender, I think in a nutshell, one Chinese competitor in a tender in a category is already changing things, but we also have seen in the past that the Chinese authorities for good reasons, always try to distribute and don't want to be in a situation in which then suddenly one company is not able to fulfill the entire volumes that have been allocated. So with one player in the game, we were still reasonably confident that our strategy could fold out in a way that it would and therefore, was part of the guidance expectations that we published in December. However, learning then that at least a second player, Chinese player, will be participating with just recently approved lens that can, of course, once again change the volume allotments significantly. And that is one of the key reasons.

And your first question was on the long-term benefits of -- Andreas?

I can start and you can chime in. There's 2 aspects when it comes to localization in China. The first one, and I think it's the more important one, an urgent one is to make sure that we have access to the market. That's why once those regulations come in, actually are anticipated, we can do that and essentially localize and make sure that we have access to that. The second one, of course, is a question about cost of goods. In general, there is a potential of doing that. And the question is always that we are taking is, are we taking step one means localization together with step two, and that's something that we have to assess essentially also in terms of cost and timing considerations.

So, typically, there is a potential to be very clear. And sometimes we do that right away with step one. Sometimes we do that in a step afterwards by localizing also the supply chain.

Great. That was very helpful. Can I just follow up in terms of the U.S.? Could you confirm, I guess, just how December performance looked versus October and November?

Susannah, sorry, I missed on that one. I think there is -- within the quarter, nothing in particular that I see. Probably October and November were weaker than December. That's the only pattern that I could share here with you. But I think -- I don't know whether this answers precisely your question, but that is what I...

Thank you, Ms. Ludwig, for your questions. We're moving on to Mr. Graham Doyle.

Yes. So this is a very complex system versus what we're used to. So it's -- and the UBS tech doesn't always allow me. So it's good you can hear me. Right. I've got 3 questions, please. So, firstly, I think when I was speaking to Sebastian earlier, he was talking about the UV biomaterial being a part of the issue in terms of the registration for the bifocal. And of your -- and I estimate of your sort of EUR 70-ish million revenue of IOLs in China, how much is not based on the UV biomaterial, just to get that?

And secondly, just on D.O.R.C., could you just give us an update on how new instruments placements went in Q1? And then lastly, it's a sort of a bigger question. I know you don't often talk about the pipeline, but I think this would be a pretty good opportunity to do, which is, say, R&D as a percentage of sales has been well above the rest of the sector. And we obviously have seen some innovation, but it will be good to get a sense as to what really excites you. So rather than talking about the cost cutting, what excites you in the pipeline today that we might see in the next 1, 2, 3 years that can drive future growth for the group because you've got a great track record in R&D. So it would be good to get a sense as to what's in there.

Graham, may I -- just your second question, I missed that one because I was taking notes for the first, sorry.

Sorry. The second question was just on D.O.R.C. in terms of new unit placements, how has that progressed in Q1?

Okay. So, on the UV biomaterial, we're actually in full swing of transitioning. I think it's right now probably more still in the neighborhood of 50%, but actually of the total business volume. But actually, with the one lens that we are expecting to hold the paperwork of the registration in our hands in a couple of weeks, we then actually would have, going forward, completed the transition. And then we have the portfolio on UVE.

The D.O.R.C. placements, I think overall, just yesterday, had a discussion on it. We are still growing year-over-year nicely and in full swing of rolling out now also the D.O.R.C. portfolio into Asian markets. Last year, as you may remember, we were focusing first on U.S. and Europe, some European countries. Now Asia kicks in. And we actually also see in some of our key accounts that are loyal, refractive and partially cataract customers, also now high interest in the D.O.R.C. portfolio. So, overall, I think we are quite happy with the development.

And I think on R&D, Andreas can talk.

I can say a couple of words on that. Well, thank you, first of all, for stating that we've been having a good track record on innovation. Of course, that's the core of the company, right? That's the core actually not just of Carl Zeiss Meditec, but Zeiss, an innovation-driven company. Let's do the following. That's -- how about we talk a bit more about that when we do the May -- latest in May when we do the half year results and show you a couple of the highlights. There's highlights in both the OPT and the MCS pipelines that I'm excited about. They actually go beyond that. That's -- we're always looking at short, midterm innovations, but we're also looking at the long-term innovations where we think we can go into even new markets.

The one thing that I'm focusing on right now also is to make sure that we get a higher efficiency and effectiveness of our R&D. You've seen the R&D expenses going up in the last couple of years, which is good. It can be good if you get the right output. And that's one of the things that I'm focusing in my time also here and together, of course, then with the SBUs, I'm sure my successor is going to focus on. So what I want is return on R&D investment, and I want to increase that even more. That would be my statement. And sorry for not telling you any of the exciting products yet, but it's maybe better to also do that and see them.

Thank you so much Mr. Doyle for your questions. We're now moving on to Mr. Falko Friedrichs.

Three questions, please. And the first one, do you have an update on when exactly the VBP implementation for IOLs is expected to go live? My second question is on the downturn in Japan and South Korea. Can you add a bit more flavor on the specific market dynamics you've seen over there and what the expectation is for the rest of the year? And then third and last, can you share your high-level view on what we should keep in mind when modeling sales growth and margin dynamics for the second quarter?

Falko, update or your question on go-live of the VBP, again, it's -- there is no official statement at this point in time when the tender is published. And therefore, it's all speculation. I think last time between the tender publishing and then the actual roll-in, there were several months in between, and it started with single provinces applying it. And then until it was rolled out across China, I think it almost took 2 quarters. Assuming this year, this process is swifter, then maybe it's only 1 or 2 months before it becomes effective. But since we don't know the date, and I mean, what's reasonable to assume is, clearly, Chinese New Year is basically now. So it will be then most likely not within the next 2 weeks, then we are already almost crossing into March. And as we said, our team expects the tender being published anywhere March, maybe at the latest April. And then counting on that, probably a period until it's becoming fully effective of whatever, 4, 8 weeks, maybe 12, that would be our estimation at this point in time.

Japan, South Korea, my perspective would be that with the focus that we are having on these markets, and I think we shared this in earlier calls and also some registrations, especially for products in Japan. Here, for example, the VISUMAX 800, just to mention one very important product. My expectation clearly is that over the course of the year for Japan, we should see some growth. And Korea, as you know, is already a strong market. There's always a little bit of fluctuation. But again, overall, for Korea, I would also not be too negative on our total outlook for the year.

Maybe on Japan, just keep in mind, we still have a fairly low market penetration in Japan, which I would see as an upside.

And I mean, high-level question on sales growth for the remainder of the year. Quite frankly, if we -- and now we are back to the rationale on cutting or revoking the guidance. At this point in time, I don't have the data points to give you a sales indication. The project funnels look decent. But if we have a big blast from the tender outcome that can be painful and can take away quite a bit of potential on the top line. And likewise, if the winter peak or the performance of the winter peak is, as we said before, one key indicator for the remainder of the year, also something where, I'd say, in 4 weeks, we can comment on that more comfortably. And therefore, I don't want to start speculation here and now.

Justus, my last question was more referring to the second quarter now, the sales and margin dynamics.

In the second quarter, here, I would pretty much probably refer you to our typical seasonal patterns. And with the caveat that we, as we said, have potentially the scrapping issue, but that we would consider as a one-off. But typically, the second quarter is compared to the first quarter, a better one. And at the moment, I would also assume this will be the case in this fiscal year.

Thank you very much, Mr. Friedrichs, for your question. We're having another question by Davide Marchesin. Hello? Can you hear us? We unfortunately cannot hear you.

Maybe we can move on to another question while you're figuring out the microphone situation. We have another question by Jon Unwin again.

I just had 2 follow-ups, both actually on equipment. The first one is on cataract equipment, so like phaco machines and biometers. Can you maybe just talk a little bit about the sort of regional trends that you're seeing across the U.S., Europe and China? Because I think there was a comment that the cataract equipment was a bit weak in Q1. And also, are you seeing any increased pressure from new competitor launches, specifically in phaco machines that we've seen recently? So that's my first question.

And then my second question is on diagnostics. On my numbers in diagnostics for FY '25, it seemed like this business declined quite significantly, maybe even like low double digits. So is that correct? And do you see this sort of similar level of decline in FY '26? And maybe you can help us understand how much of the pressure there is general market weakness, a result of your own price increases and just general delays of the market? And have you got any intention to simplify the portfolio in diagnostics just to focus on say CLARUS and CIRRUS?

Jon, on cataract first, I think U.S., as we are or have fairly, frequently commented, we are certainly not where we are since we do not have this bundle capability. I think outside of U.S., Europe and China, I would see us trending pretty decently. So nothing that we observe in particular changing as impact by new machines being offered by competition.

On diagnostics, yes, it's the most contested market. That's correct. And obviously, the price increase in the important U.S. market is not helpful. And -- but it's still early in the year. And there, we also have a bit of a seasonal pattern in this business. So therefore, I would still expect recoveries in the course of the year. We also have with the commercial organization, clearly more focus on this portfolio and the associated efforts in selling this portfolio.

On the simplification on the portfolio, you probably understand that this is nothing that we're going to share certainly not on speculation or indicating on any specific products, that certainly nothing that we want to read about than in the public, yes. So I'll leave it there. Andreas, anything?

I mean it's an obvious question. That's something that obviously we always do. It's part of normal business to always look at your portfolio, where do you add and where you take out. That's -- yes, no specific comment on that one.

Thank you so much for your questions. Mr. Davide Marchesin, do you have any possibility to unmute yourself because I sent you the invitation and I can see that you're unmuted, but we cannot hear you properly.

If not, we can give feedback to the IR team as well, of course.

Yes, exactly. Maybe it's better to place your questions to the IR after this meeting or you can put it into the chat box and I can read it out loud for you if it's too much trouble. Unfortunately, we cannot hear you. Oh, but I can see in the chat that you just placed your question there. I'll read it out loud.

The U.S. was significantly down in the first quarter, minus 12.7% organic. You are the only one company reporting such weak results from the U.S. and all the others are reporting strong equipment investment cycle, example, Siemens and Philips. What are the specific issues you're facing there?

Thank you. I think I almost gave the answer already. The diagnostical portfolio in the U.S. is one where we typically see the highest sensitivity in terms of prices and price increases. And whereas if you are referring to companies like Siemens Healthineers and their portfolio, they are typically in categories similar to our KINEVO, for example, where reimbursement policies are more favorable and therefore, investment decisions are then made less dependent on price swings. So therefore, I think that, to me, is basically the key difference here that I would highlight. And maybe, again, if you look carefully on the last quarter of the previous fiscal year, there was a very, very strong August and September in the U.S. for devices, and that was always somewhat at the expense of Q1.

There are 3 more questions by Mr. Marchesin. The second one is the IOL business is just EUR 80 million annual revenue or just slightly above 3% of the group revenues and should be a significant component of your weak performance.

I think there is a misunderstanding. The 80 million refers to the IOL volume in China. So that for clarification. So therefore, I'm not sure whether knowing this now, whether the question remains the same. But otherwise, frankly spoken, then maybe it's good to follow up with the IR team because it's a little bit difficult to communicate right now.

All right. Thank you so much. I'm going to read out the last question. Is there the possibility of a buyout of your company by Carl Zeiss? Just to know if there is a technical possibility.

Maybe I'd comment on that one. Actually, that's something I wouldn't want to comment on to not feed any speculations or get into sort of insider information.

Okay. Thank you so much. By now, we have not received any further questions. So, ladies and gentlemen, if there are some, please raise your hand and I will happily unmute you.

As there are no further questions, I would say we come to the end of today's earnings call. And with this, I would hand over again to Mr. Frericks for some final remarks.

Thanks, everybody, for joining, for asking questions in this call and the discussion. Please reach out to the IR team for anything that may have not gotten answered completely or maybe coming up in the next few days. We'll be around talking to sell side and buy side over the next few weeks quite a bit. So look forward to that and to hear you again on our next call at the very latest on May 12. Bye-bye.

Thank you. Bye-bye.

Okay. So welcome everybody to Frankfurt. Thanks for joining us today -- the conference today for our year-end. I think it will surprise nobody if I'm -- I say we planned it a little bit differently in light of this week's news. I'm delighted to have Andreas with us, CEO of the ZEISS Group and as of January 1, our new interim CEO at Meditec as well. And Justus, of course, was always planned to be here today. So no, thank you very much for joining us. Also, warm welcome to everybody joining us online for this year-end conference, our numbers out this morning.

We'll first, as you would typically expect, go through the financials, go through the outlook for fiscal '25, '26 and after that you will have Andreas do a bit of a strategic review on a high level of Meditec, how -- and, of course, then you can ask us with questions on both items afterwards. So it's not a very complicated agenda. We'll have the presentation, we'll have the Q&A afterwards, and we'll -- we can have some lunch afterwards and continue the conversation a little bit. I wanted to let you know that Andreas, because this was all a bit spontaneously and improvised, you will unfortunately not be able to join for lunch. So you'll only be here for the Q&A session to use the opportunity to fire away questions during that period. And Justus and I and the IR team will, of course, be there afterwards as well for you. We will do -- in the Q&A, we'll take questions from the room and also take online questions. Technical commentary. The microphones need to be switched on so that when you later speak to us, that people who follow us online can also hear you.

And with no further ado, I'll pass it on to Justus first to walk us through the financials.

Thank you, Sebastian. Walking over here. And welcome to all of you here in Frankfurt in the room. Thanks for having made the trip over here. And of course a warm welcome to everybody who has dialed in, wherever you are. So dear analysts and investors, welcome to our annual analyst conference for the fiscal year '24, '25. Let me begin now with an overview of the past fiscal year.

Our fiscal year '24, '25 results show solid revenue growth and strong order entry along with a slight uptick in EBITA. Let's start with a look at the order entry. We achieved EUR 2.288 billion, representing a growth of 18.2% year-over-year. On constant currency, order entry increased by 19.1% and by 13.9% when adjusted for both FX and acquisitions. We saw a robust order trend across all regions, with the order backlog remaining at an elevated level of EUR 380 million.

Let's turn then to the revenue. Revenue reached EUR 2.228 billion, which is up by 7.8% year-over-year. Breaking it down, equipment sales grew by 2.3% while consumable sales grew 15.2%. By category, equipment accounts for half of our revenue, consumables 41% and service 9% which -- and I think that's something to highlight. This is a new all-time high and the first time we achieved 50% of our revenue with recurring items.

FX adjusted growth was 8.6% and FX and acquisition adjusted revenue was slightly above prior year by 3.3%. In Q4, we saw particularly strong momentum with revenue up by 8.3% and foreign exchange adjusted by 10.4%. Key drivers of this growth included solid VISUMAX installations in China, the accelerating ramp-up of the KINEVO 900 S, while refractive procedures in China remaining largely flat overall. Finally, EBITA came in at EUR 258 million, which represents a 3.5% increase compared to last year despite, and that I want to highlight, despite headwinds from U.S. tariffs which have cost us a bit more than EUR 10 million during the fiscal year, and negative foreign exchange effects which presented an earnings headwind of more than EUR 20 million for the entire year. That, however, is unfortunately continuing into this year and the absence of a one-off gain of EUR 18 million from last year's Topcon settlement.

So this represents an EBITA margin of 11.6%, slightly below the 12% in the previous year. Adjusted EBITA margin was 11.6%, up from 11.2% last year. The main adjustment here being Topcon in last year's base. Organic operating expenses was below prior year, mainly due to R&D savings as we had promised to you.

Let's take a closer look at our strategic business units and regional performance. And here we are. And we start, of course, with Ophthalmology. Revenue reached EUR 1.724 billion, an increase of 8.5% year-over-year. On a foreign exchange adjusted basis, that corresponds to plus 9.3% growth and 2.3% when adjusted for both foreign exchange and acquisitions. We achieved only modest growth in equipment amid a continued restrictive investment climate. Consumables grew more strongly mainly because of DORC, but also there was solid volume growth in IOLs, especially in premium IOLs.

VISUMAX 800 installations in China progressed well. Refractive consumables in China remained stable with a slightly more favorable mix, even though the overall consumer climate still remained rather weak in our view. EBITA margin increased by 1.3 percentage points to 10.9% driven by better operational leverage and full year DORC consolidation. In terms of business split, Ophthalmology accounted for 77% of the group's revenue. Within Ophthalmology, consumables accounted for 51%. Together with service revenues, recurring revenue now stands at a record high of 59%.

Let's move on to Microsurgery. Revenue increased to EUR 504 million, up by 5.7% compared to the previous year and exchange rate adjusted growth was 6.6%. After what had been a really, really slow year during the first 6 to 9 months, we finally saw much stronger momentum in Q4, and I think we had guided for that with top line acceleration of more than 16% and very strong order entry as well. KINEVO 900 S ramp-up continued successfully toward year-end, contributing to the strong performance. EBITA margin declined by 6 percentage points to 14%.

Main reasons included overall unfavorable product mix with delayed deliveries of KINEVO 900 S and also a significant impact of tariffs and foreign exchange. Please everybody be reminded that, of course, the U.S. market is extremely important for the KINEVO or for the Microsurgery division. In addition, OpEx were higher due to increased marketing and G&A expenses. Finally, looking at the revenue split, Microsurgery accounted for 23% of total revenue. Within Microsurgery, equipment still represented the majority at 81% of its revenue. Yet we are making good progress here with our recurring revenue as well, with service as well as the drapes and instruments business achieving excellent growth.

Let's then move on to the regional development. Overall, growth was recorded across all regions with APAC contributing the largest share at 45% including 25% from China. Revenue in Americas came in at EUR 579 million, up 8.7% year-over-year or 10.4% foreign exchange rate adjusted. Growth was supported by both organic performance and the full year DORC consolidation. Order entry overall rose, but following tariff-related pricing measures in Q4 we observed some slight weakness late in the year. As some of our competitors have also been referencing, we believe overall market climate to remain quite weak and price action by foreign companies in reaction to tariffs are certainly not helpful.

In EMEA, revenue reached EUR 658 million, an increase of 12.5% year-over-year or 13.6% currency adjusted. We saw solid growth in key markets like Germany, the U.K. and the Nordics. APAC revenue was EUR 991 million, up 4.4% year-over-year or 4.6% currency adjusted. We had good growth in Southeast Asia, India and Korea while Japan declined. As discussed before, it certainly hasn't been a strong year in China, but final results showed some stability in refractive and cataract compared to a weaker 2024.

Let's now look at the overall P&L. We delivered stable profitability while keeping underlying operating expenses and impact of U.S. tariffs under control. We delivered EUR 1.175 billion in gross profit with a margin of 52.8%, essentially stable year-over-year despite headwinds from negative currency movements and U.S. tariffs. Excluding DORC, underlying OpEx actually declined year-over-year mainly driven by lower R&D spending and reduced DORC integration costs. G&A expenses increased slightly due to the DORC consolidation and higher IT costs.

We have mentioned that we are introducing a new ERP system S/4HANA and that requires additional expenses in that area. R&D expenses were lower year-over-year reflecting disciplined project prioritization. Earnings per share came in at EUR 1.61 and adjusted earnings per share at EUR 1.90, down 3.9% year-over-year. Earnings per share declined despite the higher EBIT. This was mainly due to negative currency hedging results and lower interest income. The prior year also benefited from a one-off positive effect related to reduced contingent purchase price liabilities from the CTI or formerly known as IanTECH acquisition.

Let's quickly look at the adjusted numbers. EBIT increased to EUR 223 million, up 14.8% year-over-year. The amortization of purchase price allocations mainly relates to DORC at EUR 26 million and former acquisitions of EUR 8 million in the reporting period. In other special items, prior year included the already mentioned one-off gain from the Topcon settlement. There have been only very moderate adjustments during the fiscal year. Adjusted for special items, EBITA improved to EUR 259 million with an adjusted EBITA margin of 11.6%, a slight improvement compared to the prior year.

Turning then to our cash flow statement. Operating cash flow came in at EUR 210 million, slightly below last year. This was mainly driven by an increase in working capital, in particular higher accounts receivables as well as higher interest payments. Investing cash flow was significantly lower at EUR 91 million compared with a high outflow last year related to the DORC acquisition. During the reporting period, CapEx was also lower. Tangible and intangible CapEx amounted to 3.4% of revenue compared with 7.4% last year. Financing cash flow was minus EUR 109 million, reflecting dividend payout and a decrease in treasury payables. By contrast, last year's strong inflow was mainly driven by the shareholder loan associated with the DORC acquisition. Net financial debt at EUR 277 million remained below last year.

Now I'd like to provide the outlook for fiscal year '25, '26. And you know me a little bit. Before we turn to revenue and margin guidance, I would like to highlight the key risks and potential upsides we anticipate for fiscal year '25, '26. On the risk side, we expect a potential negative currency impact year-over-year at current exchange rates in the low double-digit millions. In China, we foresee continued pressure from volume-based procurement of IOLs, especially in the multifocal category, which could lead to considerable price reductions. As you all know, the second nationwide volume tender is due most likely somewhere March, April.

Last month, Chinese regulators have told us that one of our successful bifocal intraocular lenses needs to be reregistered and the old product can no longer be sold to public hospitals under the old VBP tender. While there's nothing wrong with the product, it was initially approved in the year 2015 and then reapproved in the year 2020 and it has been sold for all those years and safety data is excellent. We have been quick to launch the required reregistration process. And hopefully, we'll be there in time for the new tender that we expect in the spring. Our Chinese team is now withdrawing some of the old product from the market, creating a scrap risk for a number of stocks of the old product also in the low double-digit million euro.

We also anticipate potentially intensifying competition in refractive. Though no direct launch preparation by a Chinese competitor are being observed as of now, we continue to monitor government policy changes in that market, too. We are very clear-eyed about China, which, as you know, is a very significant portion of our revenue today. We have to massively speed up localization of product to defend our market access. In addition, potential trade barriers between the EU and the U.S. including risk from the Section 232 topic as well as uncertainty around U.S. health care and hospital budgets remain external factors to watch closely and which could cause risk to our U.S. revenue.

On the upside, there are several opportunities that could positively impact our performance. We may see stronger adoption of SMILE pro in China on the back of good growth of the installed base during '24, '25 and a successful entry into the refractive market in Japan. The start into the new fiscal year has been rather sideways, but we are currently in the off-season for refractive procedures. As you all know, the first really meaningful indicator for the business will be the spring peak around Chinese New Year vacation. We could further benefit from above-average growth in the DORC business, particularly in APAC where we are now rolling in the marketing and sales integration. Microsurgery will have more steady performance, in particular from the ongoing product cycle of KINEVO 900 S, and with that and hoping that our supply chains will hold that could potentially provide additional revenue upside.

All in all, for fiscal year '25, '26, we expect organic revenue to grow by a mid-single-digit percentage range corresponding to reported revenue of approximately EUR 2.3 billion. EBITA margin is expected to increase to around 12.5% supported by an improved product mix driven by higher recurring revenues in particular from the refractive laser business and the DORC portfolio within Ophthalmology as well as by growth in Microsurgery. However, it's important to note that this guidance does not contain a margin of safety for potential impacts from current geopolitical uncertainties, trade barriers or regulatory changes such as the ones that I just outlined to you. Such factors could require organizational adjustments or measures related to our global footprint and value chain which may result in additional nonrecurring effects.

Restructuring-related one-off payments can be expected, but it is too early to provide a precise estimate. We will update you as we move into the second quarter on this topic. Similarly, our ongoing R&D reprioritization, which started already under Max's tenure, could lead to one-off items during the fiscal year if certain projects were to be stopped. We currently expect these nonrecurring effects to total up to a mid-double-digit million euros amount. As the exact impact remains uncertain, they are not included in the EBITA guidance that you see here on the slide. We continue to provide updates and transparency as these items evolve.

Looking at the midterm horizon of 3 to 5 years, we expect organic revenue to grow in the mid- to high single-digit percentage range. Over the same period, we anticipate a gradual improvement in our EBITA margin moving toward our target range of 16% to 20%, and you will hear more to that in a moment when I hand it over to Andreas. But before I do so, let me close on a more upbeat message. Losing Max unexpectedly is clearly a setback for us and I -- as you know, I'm 8 years in that role with Meditec and I can speak here also on behalf of the top management of Carl Zeiss Meditec. But I can also tell you that in the last days, we, as the leadership team, together with Andreas, have already spent significant amount of time to ensure that we are now moving ahead and that we are not losing time. We have a plan on how to make the business more competitive, a strategy that we want to execute upon. And we are determined to not lose any time in making the necessary changes while a long-term CEO can be found.

And with that, I'd now like to hand it over to Andreas, our interim CEO as of January 1 and CEO of ZEISS Group, to talk about the strategic view of where Meditec is today. And let me highlight again that I'm really pleased, Andreas, that you could make that happen today on really, really, really short notice because, as you can imagine, his calendar is pretty tight.

So with that, Andreas, I hand it over to you. Thank you.

Yes, thank you, Justus. Good morning, good afternoon, good evening, wherever you are on the planet. Well, let me introduce myself, Andreas Pecher, I'm the CEO of ZEISS Group and the designated interim CEO of Carl Zeiss Meditec as of January 1. Warm welcome. I'm really happy that I could make it happen already to be here today.

Well, following the decision of Max's departure, of course, our Supervisory Board immediately launched a search for successor. I said that on Tuesday already. And ideally, this process will be completed before the end of this fiscal year. But as you know, that would be the ideal, and we're working on it to make that happen as fast as possible. My goal as the interim CEO is above all to ensure management continuity as well as team and strategic continuity. I do highly appreciate Max's contribution to ZEISS Group for many, many years. He's been with the company for 30 years. And during his tenure as CEO of Carl Zeiss Meditec, he did initiate very important changes at Carl Zeiss Meditec, including new sales organization to drive commercial excellence, a review of our R&D portfolio as well as a review of the global footprint. And from my perspective, these initiatives are entirely sound and need to be continued, and I will ensure that they move ahead at full speed.

And as the CEO of ZEISS Group and interim CEO of Carl Zeiss Meditec, I can assure you that the Supervisory Board and the ZEISS Group fully support these initiatives. So being here also with the other hat gives an opportunity to talk a little bit about one of the shareholders. So just briefly, let me talk about that. And given our ownership structure, ZEISS Group is a long-term investor. So our aspiration is to drive sustainable, profitable growth to foster innovations that benefit society. That's what ZEISS Group is trying to do. And just to make sure that everybody understands what ZEISS Group is.

I heard the comment I did on Tuesday about my -- I'm fully aligned with my family to make this interim as short as possible. There were questions whether my family would be ZEISS. No, the ZEISS Group is not involved at all anymore. Mr. Abbe donated that 1889 into an endowment completely. The family exists, they're doctors and whatever, but they have no whatsoever connection to the ZEISS Group. We're an AG, German AG setup, fully professional, regular boards, anything else. Just like that, just like Carl Zeiss Meditec AG, except the share is owned by the endowment. They also own SCHOTT, by the way. So they have 2 assets.

And of course, Meditec is a great business for ZEISS. Actually, it's at the core of the portfolio. See that here with the numbers that we have. And I do fully acknowledge that the last couple of years have been tough. And there is no doubt in my mind that the business is fundamentally sound and operates in excellent markets. And keep in mind, ZEISS is a deep tech company at its heart. Don't know if anybody heard of EUV. That took us many, many years to get there. And that's one of the -- some people call it chokepoint technologies in digital. So we are, by heart, a deep tech company. And we do, of course, have a pipeline of innovations coming all the time. That's our history. That's one of the cores of what we're doing. And that's shown by being 4 times the finalists in the German Future Prize handed over by the German President the last 5 years, 2 times winning it.

Having the CES Innovation Award, et cetera, et cetera, I could continue like that. And just looking at the innovation pipeline across our businesses, Meditec, of course, stands out. Also, ZEISS Group remains committed to investing in the Meditec business. The stock listing provides an important platform for further growth and creates advantages for both Meditec and the ZEISS Group. And while in the end it's really all upon us to create more value for all the shareholders. So now let me talk a little bit about the aspirations for the coming years.

At Carl Zeiss Meditec, our aspiration is clear. Just like the ZEISS Group, we also want to deliver sustainable, profitable growth while creating long-term value for the patients, customers and, of course, the shareholders. And our aspiration is to not only grow but to outperform the markets by making disciplined investments, improving commercial excellence and also by achieving more balanced geographical mix. Just looking at the historical development you can see that until fiscal year '22, '23, we had a nice growth pattern and, I would say, healthy margin levels. Throughout the summer '23 and fiscal year '23, '24, we experienced a slowdown in revenue alongside a significant decline in margins. This was largely driven by macroeconomic headwinds such as, of course, restricted hospital CapEx and low consumer confidence for elective procedures.

Additionally, several internal factors contributed to this situation including de-stocking of refractive consumables. Also, regulatory changes and restrictions such as volume-based procurement of IOLs in China and tariffs in the U.S. were headwinds to our business. During the years of strong growth, we also made substantial investments in CapEx and certain R&D projects as well as targeted M&A with arguably somewhat mixed results. In the past fiscal year, we have returned to a modest growth trajectory, also margin levels remain under pressure. And for fiscal year '25, '26, as Justus has already spoken, we expect revenues of around EUR 2.3 billion and an EBITA margin of roughly 12.5%, of course, excluding potential nonrecurring items.

And for the midterm, over the next 3 to 5 years, we're committed to delivering a mid- to high single-digit organic revenue CAGR. A key focus will be to increasingly diversify our revenue base by growing faster outside of China to achieve a more balanced geographical mix. At the same time, our surgical businesses including cataract, refractive and retina are expected to grow above the group average and become stronger drivers of group performance. On profitability, our ambition remains unchanged. We aim to reach an EBITA margin in the range of 16% to 20% over the midterm. And this is also what ZEISS Group expects from Meditec.

So let's take a moment of self-reflection and review the environment and markets we operate in. So what you see here is our strategic positioning matrix which maps our businesses by market attractiveness and competitive strengths, both dimensions, high, low, medium. And well, strong product innovations have allowed us to become market shapers in several key areas. For instance, surgical visualization and refractive laser surgery. Furthermore, recent portfolio additions, for instance, with the acquisition of DORC have significantly strengthened our competitive positioning, giving us access to new markets and improved positioning.

However, despite these successes, some selected product categories, including diagnostics, continue to struggle to deliver their full aspired value. And additionally, our focus on commercialization has not been strong enough to capture the full potential of our technology. This has limited our ability to fully leverage the portfolio. In a way, we're ambidextrous, right? We have, on the one hand, a very, very well-trained arm on innovation, strong muscles. And on the other hand or the other arm, in this case, we have one that still requires a training camp, let's call it this way. So moving forward, improving commercialization and unlocking the value in these areas will be a key priority as we strive to accelerate growth and profitability.

Also allow me to highlight a few key strengths. Of course, our strong presence in profitable growing markets, our position as a digital first mover, powerful product portfolio and brand, and a highly qualified workforce, global workforce. Our market-leading workflow strategy further differentiates us. Well, it's rooted in customer needs. That's where everything starts. And it strengthens our position and expands our recurring revenue stream. And we'll continue to work on workflow strategy, and I won't go into the details here today.

But I always like to focus first on the things that we have directly under control. So we might have many strengths, and I personally rather focus on the areas where we must improve in order to not only safeguard our financial position, but to also ensure long-term success. And to be frank, our long-term strategic investments have not yet delivered the commercial success we expected. Examples include our digital portfolio and our investments in phaco. These initiatives are promising, but the returns have been slower than planned.

We're also seeing declining innovation efficiency. Our broad and sometimes unfocused investment pipelines have limited our ability to convert innovation efforts into profitable outcomes. Well, isn't that the difference between invention and innovation? That's what I tell our R&D folks all the time, innovation delivers money in the end and inventions is great for science. But we're a company and we want to have innovations that make money and, of course, also benefit society.

And I've already stated that we're not fully capturing the market potential that is available to us despite having strong and competitive products. So the commercial focus needs to improve. And finally, our functions remain fragmented across different geographical locations and there might be good historical reasons for that. The consequence is that the fragmentation leads to lower efficiency and effectiveness. So you can see we have our work cut out for us. And I believe with a disciplined and well-coordinated execution, we can establish a solid basis for reinforcing our financial resilience and ensure long-term success.

Now have a look at the -- let's have a look at the outside world. While there are a number of megatrends that continue to support the long-term growth of our industry, we must also recognize that a number of restraining forces are becoming increasingly prominent. So on the one hand, we have aging populations, advances in digital technologies, industrialization of health care providers and the shortage of qualified medical personnel. All that drives demand for more efficient, standardized and innovative treatment solutions. So that's great for us.

However, on the other hand, alongside these positive drivers, we're facing a set of challenges that are growing in scale and complexity. Geopolitical conflicts, I think everybody just needs to open the newspaper every day. And rising local content requirements. These developments are forcing us to adapt our global manufacturing innovation footprint, and they introduce additional uncertainty in our long-term planning. And cybersecurity has become a significant regulatory challenge across the medtech sector. So we have increasing requirements for data protection, system resilience, and that places pressure on product development, compliance and operational processes.

Then, while risks in China, our key market, are increasing, we are experiencing a growing local competition, tighter regulatory frameworks and lower consumer confidence in recent years. Of course, all these factors impact both market access of new products and revenue predictability. And the U.S. tariffs continue to represent a notable risk for our growth ambitions in this strategically important market. They influence prices, pricing competitiveness and our ability to scale certain products. Also, supply chain risks are rising against the backdrop of geopolitical tensions. And taking all that together, these restraining forces create a more complex environment requiring greater agility and more deliberate strategic adjustments as we move forward. And of course, we need to drive localization of products much faster. We heard that already before to be very clear there.

So let me walk through the three strategic vectors that will drive our growth and profitability going forward. They do align very closely with the ZEISS Agenda 2030, which is the agenda for the whole ZEISS Group. And namely there is four elements: customer at the core, speed, truly global and high-performance team size. I think that fits very well with also the challenges and the work that Carl Zeiss Meditec has ahead of itself.

So first of all, customer centricity. This means that we will place the customer at the center of all commercial activities we do. It's about ensuring that every function, including sales, marketing, service or product management works in a coordinated and aligned way towards delivering real value for our customers. We want a deep understanding of our customers' needs, a faster reaction to their feedback and a more seamless experience across all touch points. And by driving greater responsiveness to customer needs, we build trust and long-term partnerships which in turn supports sustainable, profitable growth.

The second vector is focus. Here, our goal is to sharpen our priorities and concentrate on activities that have a clear and direct market rationale. This includes placing strong emphasis on innovations that respond to real customer requirements and contribute meaningful to revenue generation. At the same time, we must be disciplined about reducing or discontinuing aspirational projects that may lack clear strategic alignment. Just to be clear, that doesn't mean we're stopping innovation, but it means that we're doing innovations with purpose and guided by evidence and by the needs the markets have that we serve.

And third, we need to see more speed and efficiency. To remain competitive, we will selectively optimize our processes and nurture a culture that empowers our people, at the same time, expect performance and enables fast decision-making. This is all about removing unnecessary complexity, shortening cycle times and ensuring that the organization moves quickly. By doing this, we not only improve our internal efficiency and effectiveness, but also become more agile in responding to customers and market shifts. I think that's very important in the setup that the world is these days and can be a competitive advantage.

Together, these three vectors will guide our decisions, our resource allocation and our behavior. And we implement them consistently across the organization. And with that, I believe we will unlock meaningful impact for both our customers and our business and ultimately then also for our shareholders.

If I look at the recent few years, our market environment has changed a lot, and that requires us to rethink how we operate as an organization. This curve that you see here outlines the path we're taking from scaling through transitioning and ultimately back to profitable growth. Up to 2023, our focus has been on scaling for growth. Following very rapid growth in our consumables business in the 2010s years and coming out of COVID, we needed to adapt our structures to counter increasing complexity. And then during this period, we implemented new organizational structures to support expansion beyond our established anchor products, we made significant investments, e.g., expanded our manufacturing capacity, enhanced R&D to diversify our portfolio and strengthen our digital capabilities to ensure workforce -- workflow solutions.

We also heavily invested in workforce and talent base. However, not all these investments have translated into the level of strong growth we wanted and expected. However, it's important to note that this foundational work was essential to prepare us for broader opportunities and to ensure that we have the capabilities needed for this next stage. So since 2024, we began to see a rapid and I would say initially unexpected market weakness. And this year, in the next few years, we're in the necessary transition phase. This is where we must adapt to, of course, rapidly evolving market dynamics and increasing regulatory complexity.

And our priority here is to revise our existing structures, portfolios and footprint. And these adjustments allow us to respond effectively to developments that are challenging our profitability. After this, we expect to see the benefits of our efforts. And this is the phase where we expect to return to healthier growth rates and renew our profitability ambitions. Also, this all will help us reap additional benefits from our innovation pipeline. And we are confident that in the long term, these strategic actions that we're taking now will bring us back to the strong upward trajectory.

So in the end, it's always nice to talk about strategy. That's very nice. What ultimately matters is implementation and results, and that's what we're focusing on. If you look at it, of course, long-term strategy sets the direction, that's important. More important is that several important steps are already underway. And for us, it's of paramount importance that we do not lose the momentum. And this is a big part of why I decided to take the interim CEO job myself, even though it's additional work, but it's important. I want to make sure that no time gets lost and the Meditec management team gets what it needs to move ahead. And as I've described, we have a strong R&D capability. That's really the core of ZEISS and also Carl Zeiss Meditec, but we don't have yet the equivalent commercial arm.

So first, we've taken a major step by introducing a Chief Commercial Officer, training camp essentially, you can call it that way. Effective as of December 1, we will have a dedicated commercial unit that is fully responsible for driving our global revenue. Now we have a unified customer interface that brings together sales, sales-related digital and services. And our sales structures are becoming flatter and enabling faster decision and greater efficiency. Also, this new structure gives us clearer accountability, a stronger commercial alignment across the regions and the ability to accelerate growth with greater consistency.

Second, as a consequence of the R&D review, we have also repositioned our digital organization. Our digital business unit has been reallocated into the SBUs, the strategic business units, which allows us to increase efficiency, strengthen the collaboration and ensure that digital is embedded directly within our business lines. And this move brings digital closer to customer needs and closer to our innovation cycles. And our operations footprint review has started. I just reviewed it this week. Our goal is to identify opportunities for consolidation and higher efficiency across our network. And as this work progresses, so will we provide updates on the insights that are coming up.

So as you can see, our transformation is already in motion. We already started for a little bit already, and this is only the start. There's more to come. So I'm confident that during this fiscal year we will share more insights into our strategic realignment and you will be informed, of course, in due course. So with that, I'd like to conclude my presentation and look forward to your questions. And first of all say thanks for your attention and pass back to Sebastian.

Okay. Thanks, Andreas. So yes, Jack, why don't you kick it off?

It's Jack Reynolds-Clark from RBC. I had two, please. One kind of near-term focused and one slightly longer-term focused, both regarding margin. My first question does have a few parts. I was wondering if you could walk through the building blocks for EBITA margin guidance for next year. You mentioned that some of the unknown political and regulatory risks are not included, but I wasn't sure if other headwinds around the IOL withdrawal in China and VBP are included. So if you could just run through that.

Then a second part to that, VBP, could you just run through what your latest thoughts are on the potential kind of basically what's going to happen and what the impact is going to be on your business there? And then moving on to the midterm guide, could you talk through your latest thoughts on delivering that 16% to 20% EBITA margin? Did I interpret the slide later on in the deck that actually it might not be till 2028 where we start to see that kind of come through more meaningfully.

Yes, Jack, I think I take that, hopefully you can hear me now. The walk-through on the building blocks and happy to do that. So maybe we start with the write-down of some R&D projects that decisions have not been finally taken, but that could amount to a lower double-digit million euro amount during the course of this year.

The restructuring, as you may call it, that still remains to be decided in detail, so we cannot yet share any further quantification at this point in time. It's simply too early, but we will keep you updated on that. The IOL topic that I was mentioning, there is a potential scrapping risk that also can be low double-digit million amount. And this, however, is still unclarity with regards to the question whether we can potentially sell in other markets this material because we have -- that is a little bit the ambiguity in the regulator's decision in China. While they have basically taken the admission to sell this product under the existing or running VBP, they have not taken away the license for the product. So that, therefore, leaves some room that is currently being investigated on what potentially could be still done and what these lenses could be used for. So -- but it could, in the worst case, certainly become, as I said, low double-digit million euro hit.

Your other part of that question was aiming at the -- our expected impact of the next VBP. And there's also related uncertainty. Number one, as we mentioned, we are currently in the process to already run through the reregistration for the product that would replace the one that I was just talking for. But it looks right now a little bit like a photo finish. From the data that we know we will have the approval by NMPA for that lens by end of February, early March, but it is unclear when the new tender is going to be opened. In a worst-case scenario, we could see the tender being opened without us being able to basically pitch with this new lens being included. And that is certainly, again, a headwind that is too early to be at this point in time, quantified, but that's something that we have to keep on our list. I hope that gives you a little bit of color on those building blocks.

On the mid-term question, I can make a few comments and Andreas, if you want to build on that. I think what we want to convey today is basically that we think we have a portfolio that is stronger than ever before, yes. We do have, for example, and we didn't really mention it here in the presentation, we have the excimer laser MEL 90 approval in the U.S. since a couple of months and although you could argue the investment climate in the U.S. has been rather soft but there's a huge market potential for that laser in the U.S. because, as you know, excimer lasers in the U.S. are widely spread and the registration for that product we have now in our hands since a couple of quarters.

We have, through the DORC acquisition, I think a very nice completion in our vitrectomy business. And actually, again, although we didn't mention it specifically, but the DORC growth rates in the last fiscal year have actually been above our own expectations. So therefore, there could be some upside out of that business. And going forward with it and driving our ever-increasing portion of recurring revenues, I think that will certainly bring us in a position to get into the 16% to 20%.

So now the question is in this environment where regulatory policies become more and more weapon in free trade, we have to accelerate the efforts to keep the market access, especially in China. But if need be, and nobody knows how Section 232 is going to run -- to end up with, but also in the U.S., we need to provide and maintain the access to these markets. The two markets in total are 50% of our business. And we will make a lot of effort to keep this access because if we are not present in the Chinese market, Chinese competition will come after us and all the rest of the world.

And that, Jack, is the -- how should I say, the other uncertainty here. We now have to very carefully go through our list of priorities for accelerated localization, as Andreas has lined out in his speech. And that is, let's say, it's a rather complex exercise. And again, to quantify by when all this is going to be completed is a little bit tough. But the key question is or the key message for you is we have a great and admired position in the Chinese market, and we will do, not going to say whatever it takes, but maybe actually I could say whatever it takes, but we do a lot to ensure that we keep that market access for us.

Maybe I can, 1 or 2 things...

Sorry, we cannot hear the question online.

Now my mic -- is my microphone on?

Yes.

Now it is.

It's not a question. It's still the answer.

I'm still answering. So first of all, we're in very good markets. That's clear. We have a great portfolio and this geopolitical topic that is coming up the last couple of years, of course, it's a headwind, but it's not necessarily only a downside, right? Because if you are better reacting towards it than your competition, you do have an advantage. And that's -- just to add that, that's why it's important to also look at the speed, the agility of the organization and make sure that we are focused on the customer and react better. Ultimately, you don't have to be perfect, you just have to be better than your competition. That's our goal, of course, to support all that to make out of this great portfolio in the great market something that's actually beating also the competition.

Falko and then Oliver and Lauren.

It's Falko Friedrichs from Deutsche Bank. My first question is a quick clarification on the wording of the midterm EBITA margin target, is the plan to increase the margin towards the 16% to 20% over the next 3 to 5 years? Or do you plan to be inside this range in 3 to 5 years? My second question is on the phasing of growth and your targeted margin expansion in fiscal year '25, '26. Will this likely be a more back-end loaded year again or rather a little more evenly split? And could you give a first glimpse into how Q1 is shaping up?

I can take that. So my perspective is I want to be inside and that's clearly -- so inside the 16% to 20%. And that's clearly the aspiration. And it's, by the way, also in line with the aspiration of the ZEISS Group's perspective to -- you would have probably said it anyways, Andreas, but just to ensure that it's not only you expecting that, it's him also expecting it in his main role, if I may say so, yes?

Other role.

Yes, in his other role. The back-end loading and the start into the fiscal year, I think we had historically -- and I mean, if you have carefully looked at the Q4 numbers, you have seen that Q4 has been crazy and September has been the craziest of craziness in terms of volume that we have delivered into the markets. And it was simply a culmination of many factors. So not only the typical, let's say, year-end race optimization from sales target achievement motivation, but it's simply also because we had the skewing in the Microsurgery business, which was heavily geared towards the last weeks of the year.

However, like always, once you have done this, you kind of fall in a somewhat of a slump and that is what we are actually seeing right now. So I would probably not expect a miraculously wonderful first quarter. And therefore, the back-end loadedness, and I tell you, Falko, I hate it. I wish for once that I go on summer vacation and I can relax and say we have done it, simply doesn't happen. It's always photo finish. And I'm a little bit afraid that you will see that happening this year again.

Oliver?

It's Oliver Metzger from ODDO BHF. Three questions. One, first, also a follow-up on Falko's question. On Microsurgery, you had technically a tough year. Now with Q4, you made more positive comments which sound encouraging. Could you just describe whether really you see the worst is over now or we technically have to wait until '27 until your portfolio is -- U.S. is more complete?

Second question on China, it's the 25% of sales are still meaningful. Midterm, you target a higher share outside of China. So just as a rough understanding how to go there, do you expect that China as a market will remain challenging also for midterm and therefore just the other markets technically grow normally? Or do you see China turn to a better but simultaneously higher growth outside of China?

And the last one is, Justus, focus on innovation with more purpose. If you bring that to a more financial perspective, would you describe your R&D spend just as too high or looking back your R&D productivity as too low?

Okay. So Microsurgery, and interrupt me, Oliver, if I don't hit the nail of your questions. So yes, Q4 was very dynamic, and we see the dynamics continuing. Again, as a little recap, you all remember that we had KINEVO and PENTERO brought into the markets in spring of last year, and then we had a software bug, and therefore, we were somewhat stalled for 3 months to have efficient demoing. And for these products, demoing is basically the first step in the conversion from a lead to an order and then ultimately a revenue that we have overcome. The funnels are nicely filled now, and the business management is really upbeat that those 2 products will carry throughout a year. That should see solid growth. And the only caveat is that we need to ensure that the supply chains can keep up. That's -- hopefully, that answers your question.

China, I can give a few comments. And Andreas, happy for you to add. I mean, overall, I think this market is going through a transition where you will see much stronger local competitors across the board of the entire portfolio. You have in diagnostics competitors, you have in the implant competitors. And I think it's clearly safe to assume that it's probably only a few years until we will see companies entering the refractive laser business. But beyond your innovation capabilities, let's not forget, especially in the latter businesses that I mentioned, it's your application competence, it's your service, your customer dedication and focus. And if Max was sitting here, he would probably tell you that I think 5 years in a row, the Chinese organization has won the award for the best service whatsoever.

So what we have also learned, and in some markets, the hard way, is that you can have a nice product. If the surgeon doesn't get the training and doesn't feel 100% comfortable with the equipment, you will not get to the rate of utilization of the systems and you will not see the consumer business kicking in at the levels that you want to have to have this steady stream of revenues and contribution. So having said that, that means I think we have the infrastructure there, and we have a very good acceptance in the market by our customers. Will that make us bulletproof? No, and we can't get complacent by no means. But I think we are in a pole position, and it's up to us to make use of it. And Andreas?

Yes. Maybe I'll just add a couple comments on that. Since in this case it's Carl Zeiss that has the China organization. ZEISS in China has more than 7,000 people. So that's a lot of people and that's a lot of good people. Of course, they're not all working for Meditec. Specific, it's a lot of good people. We're super highly recognized. Before April 1, I started my other role. Before that, I spent a lot of time traveling the world, also spent some time in China and talked to a lot of customers. We're very well recognized in China, outside of China. So we do have this asset. We have very good people. We have the infrastructure to do that, and we have the recognition also of the government to be a company that contributes.

So I think it's up to us to do the best out of that. In the end, if you don't play in China, I think can be risky. That's our view. We see that in other businesses as well. Maybe some other industries in Germany have seen that as well. You better be there, you better play there, you better make sure you learn there, you grow there. And then at the same time you grow in the other growth markets which specifically are Southeast Asia and India. That's sort of the next growth markets. And that's, of course, it's a dual strategy, right? Make sure you grow in China, make sure you hold the competition at distance, ideally beat them and then you win in Southeast Asia and in India.

On your innovation question, so first of all, I think it's not only investors listening in here, but the transcripts will be read by all our R&D people. And therefore, first of all, I will tell you that we have extremely smart, extremely hardworking and bright people across our R&D organization all over the world. So what we do have, and that's a fact, and this is not a ZEISS-specific problem that we see since corona, let's say, a lower productivity, if you measure it in terms of patent recognition and so on. And there's some trends that you can clearly see that come especially in creative productivity that do not necessarily -- that are not helped by more home office and things like this. That's simply a matter of fact. And this is, I think, where we clearly from our company need to work on to regain that productivity levels.

But let me also maybe highlight that it's also management task, and I think you have heard this several times today that we help the teams to focus because if you have people stretched over several projects at the same time you are just losing focus and you're losing productivity. And that is more on management. And that's why some people may not like if we are talking about stopping projects, but I think you will have a return on other projects in the pipeline.

Lauren, please.

Lauren Mitchell from Goldman Sachs here for Richard Felton. I have 2 on OPT and then one sort of more broader question. Firstly, on OPT, just in terms of China refractive, what did China procedures end up sort of year-on-year? Was it sort of in line with the expectation for roughly 2%? And what is baked into your guidance for next year in terms of China procedures? Second question is on VISUMAX. We know you've done sort of roughly 100 units this fiscal year after launching halfway through. Building on that next year and the pricing premium that's associated with SMILE pro and the consumables, how should we think about the contribution to organic growth from that consumables as the utilization of that procedure ramps?

And then a longer-term question, Andreas, really appreciate your perspectives and observations on some of the endeavors that maybe haven't paid off and appreciate the transition phase that you spoke to. I think last year when there was sort of changes at the management level of both the ZEISS parent group and of Meditec, there was sort of some hope that maybe there would be sort of scope for more meaningful change perhaps in terms of both costs and portfolio optimization. I know you mentioned something like diagnostics, which, if I'm not mistaken, was loss-making this year. So my question is, in this sort of CEO transition, how should we think about the company's ability to execute on some more meaningful changes within the business in this period?

On China refractive, I think we said it actually in the presentation that overall we have seen slight growth in the procedure numbers in China, but really slight, but more meaningful for us is that we have seen, especially in Q4, then now the pickup of the SMILE pro procedures. And that, of course, is carrying higher margins on the procedures. So having said that, the expectations for the fiscal year that just started would be by and large that we -- again, there's no major changes in the global economic environment, no major changes in consumer confidence, but with the investments that have been made in the VISUMAX 800, and Sebastian, correct me if I'm wrong, but I think by the end of the fiscal year we had achieved almost 100 deliveries into the Chinese market.

So these lasers are now kicking in as they are being -- as the surgeons are being trained on. So we would basically, if you want to say so, on the total number of procedures, see a qualitative improvement with a higher utilization of the SMILE pro lasers in the field. So that in itself should give us, hopefully, a little bit of tailwind on the margin. But in volume, I'm reluctant here to give you any sort of too positive expectation. Yes, I think I hope I have covered your questions or do you have -- had any specific further question on the VISUMAX 800?

Maybe just on the contribution in terms of utilization, how you see that evolving throughout the year?

October, November is not a good measure. We -- I think the numbers were higher utilization in October on the lasers, November, lower utilization. But as I said earlier, the moment of truth is the spring peak. Thank you.

Yes. And to answer your more broader question, well, the short answer would be, yes, that's exactly what we want to do to broaden it. That's what actually Max and the whole team were there to do. And I brought some example. One is digital, by integrating that into, where the business is happening means into the SBUs, this will be more meaningful. Means more effective, potentially reducing the R&D cost, but more importantly will be driving the results that ultimately our sales folks need.

And then looking at the portfolio diagnostics you brought up is clear. I mean, just putting that up, you see where your stars are. And the other ones, of course, you have to take a look at. And that's clearly a focus to look at and make sure that there's a reason why we have a certain business. And frankly, there are all options on the table. Doesn't mean that you sell or not. Certainly what will be very important, there will be and are already very pointy questions asked to the business to make sure that we have a plan to get the overall portfolio up. And that will also be a means in addition to many others to get us between the 16% and 20% ultimately.

Okay. We'll take one more from -- or 2 more from the room, actually. Maybe we -- yes, let's start with you, Sven, and then go over. And then we'll take some online questions. And afterwards, we do another round in the room, if that's okay for everybody.

Sven Kuerten from DZ Bank. Would you say that the margin improvement for next year is exclusively based on Microsurgery? That's first question. And secondly, do you think that at the end of your forecasting period in the midterm, it's possible to come close to the very high historical levels in Microsurgery or is that not on the table any longer?

I would actually not entirely bank my hopes for next year on Microsurgery, if I understood your question correctly. As I said before, I still do see in the U.S. market. I just was in touch yesterday with our Head of Sales in the U.S. And as I mentioned earlier, with the MEL 90 approval, where we have not yet really benefited from in the last fiscal year, that certainly could become a good driver for an improvement in ophthalmology next year. The VISUMAX 800, let's not forget, the 100 systems that we ship to China is not the end of the story, so to speak. The Japan market penetration with refractive is actually only starting now. So there is, I think, more than Microsurgery to the entire guidance story baked in.

If I understood the second leg of your question correctly, you were referring to when do we see Microsurgery margins hitting plus 20% again. It's obviously mainly a mix question and I am careful here, but I would obviously anticipate for this year an improvement in the Microsurgery margins beyond what we have seen last year simply for the fact that we now have a funnel which is filled and hopefully a better mix over the year than we had last year. So I hope that answers your question.

All right. Yes. Then please go ahead with one more from the room.

It's Wolfgang Lickl from Apo Asset Management. A very much -- a focus question on refractory business in China on a kind of more long-term view. We are talking a lot about demographic developments, people getting older. I could imagine that means a typical client or patient for a refractory surgery being more young and then we have declining birth rates. So the number of people who could have the service are declining. Maybe we have some increase in penetration, but could that business -- because you are an equipment manufacturer and maybe the installed base is still growing, maybe the amount -- number of treatments is growing, but the additional number of lasers the market needs is declining and then you have a declining business as the equipment manufacturer. What's your opinion? Is this a wrong thinking from my side?

You see, first of all, myopia treatment is nothing that is secluded to people between, let's say, 20 and 30. So there is well -- until you are 40, 45 people are going for the treatment. And let's also not think statically about laser vision correction because we are focusing right now on myopia. Why? Because myopia requires a rather -- let's put it this way, a rather slim diagnostical investment. And then the treatment itself is typically not requiring a lot of tailoring to the patient's requirements. Of course, you are measuring the eye and do all the biometrical work, but then you basically program the laser and shoot 2 eyes equally with the same focus and done.

What we are not considering is the presbyopic market. And the presbyopic market is basically guys like me, and it's rather younger people here in the room, but many others in more, let's say, my generation who are actually either wearing bifocal lenses, glasses or use other means. And this market is pretty untapped. And why is it untapped? Because if, as a surgeon, you have the choice between going for the bread and butter and basically patient always happy going home and never seeing again business with the myopic treatments versus the presbyopics, which are people where you have to exactly understand what is the visual preference profile of a patient, where people will say, I am a guy who is doing a lot of whatever.

I'm a golfer, I want to see my golf ball on 200 yards out there. Therefore, I want to have the focus more in the long range and not in the short range and so on. So there's much more diagnostic work and a more demanding patient. And that has been, if you have the choice between myopia treatment and presbyopia treatment, has been a bit of a, let's say, a hurdle. And I would tell you that I think this presbyopia market is a huge untapped market potential that I still see for China.

And just to build on that, having an installed base there, of course, gives you an advantage, right, on the machinery, but also with the relationship with the doctors. That also brings in the diagnostic picture. There is value, of course, of having that. And let me just add another one. It's not only China. Myopia is actually, according to United Nations, one of the largest -- I mean, it's a pandemic, more or less. So there is -- besides opportunities in China, we see a lot of opportunities, specifically also in Asia because that has to do with the setup of the eye of a typical Asian person. Southeast Asia, India, there's other things as well like cataract are very strong. So we do see, besides China opportunities, large opportunities outside already.

Okay, then I think we take a moment of pause in the room. If somebody has a follow-up, we'll take another go at it in just a moment, but I first ask the operator if there are any online questions in the queue.

Yes, there are. Thank you, Sebastian, and thank you very much for the presentation and your time for the questions, Andreas and Justus. We have two raised hands. One is from Jon Unwin, and you can start your microphone, Jon. This takes a moment to unmute. Jon, we will come back to you later. I will go over to Davide Marchesin.

I have 4 questions, 2 regarding the last reported quarter and the other 2 regarding the full year guidance. So starting with the last quarter numbers. I see that in Ophthalmology in the quarter, you reported 11.6% EBITA margin. So down sequentially from previous quarter, 13.2%, despite reporting an increase of revenues. I will understand why the margin of this division was down quarter-on-quarter, if there is some specific reason?

Second question regarding the quarter regarding the R&D. You reported EUR 92 million R&D, so significantly up from the previous quarters which were running below EUR 80 million. I think the average in the previous quarters was like EUR 78 million. So I want to understand what we should expect going forward. So if the R&D run rate is more like EUR 80 million or more like EUR 90 million? Then regarding the full year guidance, the first question is on the mid-single-digit organic growth. So in the last quarter, you reported organic growth of more than 10%. In the first quarter next year, you will have a very easy year-on-year comp. I want to understand why you are guiding for such a significant slowdown of organic growth if there is some issues you are kind of anticipating in some business or products?

And finally, full year guidance on margin, you reported, I would say, a very low margin in Microsurgery. So assuming next year a partial normalization of Microsurgery profitability would explain essentially all the 100 basis points expansion of the margin at the group level so implying essentially a flat operating margin for the Ophthalmology business. So looks like there is some margin of conservativeness in the guidance on the margin evolution. Tell me if maybe I'm missing some elements in terms of the margin evolution.

Davide, it's Justus. So I have my go on your first question on Q4. I'll start with the portion on R&D. So you're asking EUR 92 million in the last quarter versus a run rate which was closer to EUR 80 million in the other 3 quarters. It is a little bit of a historical pattern. If you look in the disclosures of previous years, you will see that we somehow always have it somewhat skewed to the last quarter when it comes to the R&D run rate. So therefore, I think nothing peculiar to mention here other than simply that come to end of the fiscal year, everybody is basically getting final bills from consultants and external partners, which are working with R&D. So more importantly, your expectation going forward, EUR 80 million or EUR 90 million you were asking. I pretty much guide you on expecting a rather flattish total R&D expense number for the year to come and the distribution over the 4 quarters is most likely to look similar to what you have seen this year.

You were asking on OPT EBITA level in Q4 and why it was down. Frankly spoken, I would refer or open it to Sebastian to chime in. But I think there is a little bit of mixture or mix effect because the last quarter for OPT and so it was this year is typically a very strong device quarter and especially in the U.S. And you have seen that we had good growth in the U.S. last year. And in the U.S., it's mainly a diagnostical business and then the high portion, especially once we have such a strong Q4 of diagnostical products in the mix are actually somewhat margin diluting. But Sebastian, anything to add that would be worth mentioning?

Maybe 2 details just to add but what -- the product mix indeed is the main reason in the fourth quarter, also there was an increasing impact of U.S. tariffs because we did have the price increase on July 1 and then second step in August once we knew that it was going to be actually the 15% and not the 10% but because of the 2 to 3 months order time, the backlog time, these prices did not kick in yet economically for us in the fourth quarter. So we -- this took some margin out of our microscope business, in particular, and the Ophthalmology division.

And lastly, there was about a EUR 2.5 million, let's say, onetime or special impact in terms of scrapping of some therapeutic laser parts. I'm hesitant to call it a complete one-timer because these things can happen every now and then but we need to clean up a topic there with that impact of EUR 2.5 million. So these taken together contributed to the weaker margin in the fourth quarter and the stocking pattern for refractive typically benefits Q3 a bit more than Q4.

Yes. Thank you. And then your question on the guidance, asking why we are guiding single digit and after the strong Q4. I mean, again, Q4 is always strongest quarter in the year, and therefore we shouldn't basically simply linearly then continue with the same growth rate. But just to bring our own guidance into perspective, I think we clearly have seen from public data, from competitors' data that the ophthalmic market growth is more seen now in the neighborhood of depending on the currency, around 3% and 3.5%. So with our guidance, we are, therefore, basically saying we are maintaining the -- our market share, growing with the market or even slightly beyond. And that is pretty much in line with what we have always guided in many, many years.

And then you said if MCS is recovering to a normal year, why don't we have then more margin expansion on other businesses? I mean, I think we allude to it in our presentation that there's an NVBP in China and that has nothing to do with the IOL license topic that I mentioned. But there's an NVBP ahead and that will certainly be putting, again, pressure on prices for our IOLs in China. I think, as I said, there's uncertainty on the question on how is the American market developing in light of this Section 232 and potentially even higher tariffs on products that are coming or that are being imported. And there's, therefore, a little bit of carefulness in our guidance that is indicating that maintaining margin levels in this environment may already be somewhat challenging. So I think that's, in a nutshell, the answer.

Okay. So moderator, could we take another try with Jon from Barclays. He's dialed in through the phone, so maybe if there's a way to unmute the phone. As a backup, I have the questions here, and I can read them out in case there continue to be problems.

Thank you very much. That would be nice, Sebastian, because questions via telephone cannot be submitted. We apologize for any inconvenience.

Yes, no problem at all. I read them then. So first question from Jon. Can you confirm that you exited the year with 70% -- 72% product mix in China SMILE versus LASIK? Is that also the right split to think about for the new year, but that of this -- out of the 72%, a higher proportion will be SMILE pro? That's the first one. The second one on Microsurgery, a bit similar to the question that Davide asked. What is your growth expectation for MCS next year? And how much of that is already in the backlog? And then on margins, is the Q4 level the right level also for the full year '26 to think about? And the final one, on the digital business, has putting the digital business unit into the SBUs resulted in cost savings in R&D yet? How should we think about R&D expense year-over-year?

Okay. Thank you. So first question on the share between SMILE and LASIK. And again, I assume this refers directly to China. Yes, I would confirm that we have seen the bottoming out of the shift from SMILE to LASIK. And therefore, I think the assumption of 70%, 72% mix is probably the right one. And as I mentioned earlier, now the key is to drive up the SMILE pro portion within that 70-something percent. MCS growth expectation, I think I can keep that rather short. We do expect here up to a mid-single-digit growth rate for next year.

Then profitability of Q4 level, right, for next year. I'd say potentially, yes, with -- on the -- and that's why we mentioned the risks and the upsides on it, provided that we are not hit too hard with additional exchange rate issues, and we said there is a risk. Right now, the trends are clearly not in favor of the euro. And you all know that with a high export rate of our products, the currency can make a big difference. But assuming exchange rates are somewhat milder in their development then I think a Q4 level or slightly better is probably not the wrong assumption. And R&D expense I think I answered before, I'd say, as a ratio, you should expect it to rather go sidewards.

Okay, so I pause for a moment. Just any questions in the room? Yes, Volker, please, and then Richard.

Yes, I have a question regarding the Japanese market. We saw the yen heavily declining in the last 5 years and you mentioned that you want to enter the market with more refractive activities. How should we think about the pricing capability with this exchange rates? And is it then a growth market for the coming years?

I would start with the statement that ZEISS has maybe in Japan an evenly strong -- potentially even stronger brand reputation than in China or in many other places. So that gives us some hope that even though we do see this exchange rate weakness of the yen versus the euro, but that the market perception for our products being at a premium price, that this is not putting us completely out of business there.

And then secondly, let's not underestimate that in the Japanese market for our product portfolio you can argue why didn't you do that prior. But at some point, we are also opportunistically acting. And if you have a great business in China, you are wondering how many millions do I spend on registrations in other countries. But we do feel that there's an underserved market in Japan and that there's an opportunity and that we are obviously with our refractive lasers always have some opportunities to bundle and do the pricing a little bit smart so that the cash flow for the clinic is optimized.

Maybe add a little bit to Japan on the brand and then also on this market, specifically for Med. ZEISS was already in Japan well before Nikon was founded. I heard one reason why Nikon was founded was because ZEISS was there and the Japanese government realized the importance of having optical know-how. By the way, the most favorite binocular of the admiral of the Japanese Navy back then was ZEISS binocular. So there's quite a brand recognition in Japan that certainly helps us.

And then just to add what you said, specifically, if you look at the laser market in Japan, there had been some issues many years ago, don't know exactly when they were not involving us, but involving others. So I think that can be an additional advantage for us that we have actually a solution that is perceived as safe. And so we see a good potential there.

Okay. Then, Richard, and then we'll do another stab at online questions.

Richard Hombach from Bernstein asking on behalf of Susannah Ludwig. So the first question, on the localization of products, could you confirm what products are currently made in China, what you're considering shifting, and what the time line to implement the shift would be? Would there be any cost benefit once manufacturing has shifted? Second question, in the 12.5% EBITA margin guidance, what is the assumption on the incremental impact from tariffs? Is there a net headwind? Or are tariffs offset by price increases?

Okay. I'll start with the second part. At this point in time, we are expecting tariffs to stay where they are and therefore offset by the price increases that we have gone through last year. Clearly, especially referring here to the U.S. and we have three price increase rounds in the U.S. had and the last one just became effective, I think, in October. So therefore, yes, at this point in time, our guidance assumes basically neutral impact of tariffs.

On localization, what do we produce today already in China? We produce in China IOLs. We produce in China some of our ophthalmic microscopes. No, sorry, I correct myself on our surgical microscopes, PENTERO, yes, correct. And in terms of what do we think we want to shift and until when? Frankly spoken, I'm not going to disclose here what we are going to shift. Our competitors would love to know that. And therefore, I leave it here.

And how long it's going to take? Again, is, of course, a function of the question what ultimately we decide to do, but you can know or you know we do have both a consumable factory which is brand new and very capable in terms of the local competencies. And we do have for how many years in Suzhou, the assembly and so for probably 30 years or so, at least as long as I'm with the company, which is more than 20 years, we do have an assembly where we have a really -- a very capable team that know our products across the ZEISS portfolio. So that certainly can be used.

I think it's -- in the end, we have the receiving team. I talked about it before. Overall, the group level, more than 7,000 people in China. It's a decision to do things and then we do it.

Yes. The registration part, however, and that, of course, everybody who knows our business, that is most likely the trickier one. But then again, since we are not talking about having to basically build from scratch, but can basically integrate it in existing facilities, that will make registration somewhat easier. But again, that is the big caution -- the piece of caution here that, of course, we have to undergo.

Okay. I think there might be more online questions. Can we take a look at the queue again, please?

There are two more online questions. It's David Adlington's turn.

Can you hear me?

Yes.

Perfect. Great. Most of my questions have been asked, but maybe a slightly bigger picture question and a follow-up. Just given the challenges of the last couple of years, has that changed the way that you built up the guidance for this year? And then following on from that, what have you assumed in your guidance for Chinese VBP? Have you assumed that your new product will be approved in time for the tender or not?

David, I'll take the question. Yes, for the NVBP, we -- yes, indeed, we have assumed that we have the registration for that lens, number one. And the reason being, let me make that comment, we are already in the final leg of the registration and there is -- the regulations by NMPA clearly define the time frame until then the approval has to be given, and that is 60 working days. And therefore, we know that by the latest, at the end of the 60 working days, we will have that registration. So it's not completely, how should I say, naive that we assume that if the tender comes out in spring as we have as a working assumption that we then will have the registration for that product.

On the bigger picture, you said with our history and experience, whether the guidance is reflecting some of it. A bit of a nasty question, yes. So let me answer it this way. I don't want to convey to you that this is a completely derisk guidance here and that, in fact, we are much more optimistic and that's not the case to make that very clear. And I took the time deliberately to talk about the risks and the headwinds that we see there. But I also will tell you that in the last 4 years, I twice had to disclose profit warnings. And I very well remember the conferences after our profit warnings, and they do not rank among the most beautiful days in my life. So I want to keep it to the minimum to come back and disappoint all of you another time, although no promises that I can make here. It all depends more on external factors, I think, than on internal factors. But if that helps you to calibrate the guidance, then yes, hopefully, it does.

We will move on to Graham Doyle.

Hopefully, you can hear this.

Yes, we hear you well, Graham.

Sorry, it's a new system for me. Okay, so just one question. Again, it's on the guidance, Justus. So it kind of follows up on Dave's question and to your last comments. The last few years have been tricky because there's been a number of heads and tailwinds and so it's been hard to kind of forecast and largely H2 weighted. Now I'm just looking at the numbers, you've done like mid-250s of EBITA this year. The guidance implies EUR 290 million, so that's EUR 35 million. There's a EUR 15 million to EUR 20 million on my numbers headwind from FX. And then we've got this China scrappage thing, which may be difficult in terms of the comp of like EUR 10 million. So on that basis, and I know there's tailwinds, but it's like EUR 65 million of incremental EBITA to get to where we're going. What of that's in your control? You just talked about external factors, but what's actually in your control to get us there? It's a big number.

Thank you, Graham. So your mathematics are, of course, correct. What do we have in our hands? I said to start with that MCS clearly with basically rejuvenated portfolio and the KINEVO funnel nicely filled is clearly helping us. You also have seen that we start with a much better order backlog than what we had a year ago.

Number two, we -- although we are obviously cautious on the situation in China, but we also felt that considering that everything is, in terms of the economic environment, not really much different this year than what it was in the last 6 months that we were actually in that market environment, delivering almost 100 lasers into the Chinese market, at least as an indication, certainly was rather on the higher end of our expectations given the circumstances. And therefore, there could obviously be with a higher SMILE pro penetration in the market, there could be a little bit of a tailwind out of that. And as you know, that tailwind can be material. So that could obviously compensate for some of the headwinds.

And last but not least, the NVBP, I think we could prove that we have been acting pretty reasonably intelligent in the first tender, and we actually intend to do that again. And therefore, it's very early to talk about the result of a tender that still needs to come in. But at least, I'd argue, yes, there will be price pressure again. But we have also seen, and we said it 2 years ago to you all that it actually could also boost the market share and give us more market presence. And so from that perspective, maybe there's also a little bit of potential there. So that is some of the thoughts that I can share with you at this point in time.

May I add one comment, Graham, on your question on how to treat the scrap risk. We have not taken that decision yet. If it's the case that we get the reregistration done in time and we fully participate normally in the VBP and we then may end up depending on the analysis happening right now in negotiations with the external distributors of having to scrap some old product, we may classify it as a nonrecurring item in the sense of the adjusted EBITA. So it may not count towards the guidance. But we cannot tell you this for sure. I think we will know by Q2 -- sorry, by the Q1 report, we will know for sure how we treat it. So just to make that clear for all the analysts.

Maybe just going back on that, Sebastian, so you would have sold, call it, EUR 10 million last year, which you may scrap now. But the point is regardless, you won't sell it. It's unlikely you'll sell it in fiscal '26 if it's not registered, right? So that will be a EUR 10 million kind of headwind. That's more what I mean...

Exactly. The revenue impact that is clear. That is not a nonrecurring item. It's just if we basically move to a new product within the year and then we have to scrap parts of the old product. In that case, it may be -- we will break it down precisely by the time we have done the work and have the exact number. So these two things have indeed to be separated.

I have one more from Jon in writing or 2 more actually from Jon. The first one, I think we didn't quite fully answer it is, can you confirm if R&D expenses will be flat on a euro million basis or as a percentage of sales this fiscal year? The second one, which price cut are you assuming for the IOL VBP in, a, premium; and b, monofocal category?

R&D, I was referring to percentage as a ratio of revenue with the statement that I made. And for IOL, again, it's obviously a bit of guessing here at this point in time. What experience tells you is that for many of those tenders that happened in other medical fields of consumables, I think the strongest hit was typically the first tender and then it kind of -- tender by tender, it softened out somewhat. And I think that is probably the answer to your question without knowing, of course, who is going to participate and with what sort of tactics. But at least our expectation is, yes, there will be a hit, but we would see it or expect it to be lower than what we have seen with the first tender just by, as I said, by the experience that we have seen for other consumables.

Okay. Do we have any more online questions? Or if not, we go back to the room for the last chat follow-ups.

Thank you very much. No, we don't have any online raised hands.

Okay. Looking at the room, don't know if you're ready for lunch yet if there's any follow-up?

Okay. Then I think that concludes the Q&A session. Thank you, Andreas, Justus for -- and thank you for all for the discussion, also to those attending online. And yes, we'll stay around a little bit longer, Justus and the IR team for -- to have -- we'll invite you to have lunch out here in the hallway. And thanks again for joining us and the IR team is also available for questions and calls in the next days, of course. So looking forward to keeping in touch. And for those who we may not speak again, wish you a nice pre-Christmas period and then a very restful break and looking forward to continuing our meetings and talks next year.

Thank you.

Thank you.

Good morning, ladies and gentlemen, and welcome to the Carl Zeiss Meditec follow-up call regarding the CEO change announcement. [Operator Instructions] Let me now turn the floor over to your host, Sebastian Frericks, Head of Investor Relations.

Welcome. Good morning, and thank you for joining this short notice call. I'm Sebastian, I'm the Head of IR at Carl Zeiss Meditec. For our U.S.-based investors and also our U.K. investors whom it is quite early today, a replay and transcript of the call will be made available quickly after we conclude here.

Surely, all of you have read our news yesterday afternoon regarding the CEO change. With today's call, it is our goal to provide to you an outlook on how we intend to move forward in the short to mid-term with management as well on how we expect to achieve continuity and strategy in the future.

With no further ado, let me hand it over first to our CFO, Justus. In just a moment, we will also have Andreas, CEO of Zeiss Group and our designated Interim CEO as of January 1, make some comments on the situation. Afterwards, both will be available for some questions. Please note that this call will have to be concluded after about 30 to 40 minutes. So I will kindly ask you to keep questions short and to the point of the CEO change. We will not answer business questions today. These will be covered in depth in our analyst conference in Frankfurt on Thursday in just a couple of days. So over to you, Justus.

Yes. Thank you, Sebastian. And also from my side, I'm really appreciating that you took on this short notice the time to join this call. You will all have read the news that our CEO, Maximilian Foerst, is stepping down by mutual agreement at the end of December. The reason for this, as you have read in our news, is a recently concluded investigation into a violation of Zeiss' internal code of conduct. Before passing it on to Andreas, I want to highlight the following key messages to you as our shareholders. The investigation had absolutely nothing to do with Carl Zeiss Meditec AG.

Our financial statements for the fiscal year '24-'25, which we are due to release in a couple of days are not impacted and neither is our business outlook. There has been no financial damage to Carl Zeiss Meditec AG. Having worked alongside him for the last 6 months, I can state today that since Max became CEO in June of '25, significant change has already been initiated at Carl Zeiss Meditec. And that despite his unexpected departure, the last months have been key to guiding the company in a new direction. We are now looking to implement a very fast short to mid-term solution to make sure none of the speed and energy gets lost.

We are acting with the highest sense of urgency as we know our markets are currently very tough and performance over the last couple of years has been disappointing. I look forward to detailing the status of our change initiatives out to you in our analyst conference on Thursday. And now I will hand it over to Andreas to speak about the outlook and his planned interim leadership of Meditec. Thanks, Andreas, for joining us today.

Yes. Thank you, Justus. Thank you, Sebastian, for your remarks. Let me add some comments on how we are moving forward together. While it's the first time I'm addressing you as our shareholders and partners publicly, frankly, it would have been nice to have done that in a better context. For sure, I'm really looking forward to working with all of you as I will take over the interim leadership of Meditec in January.

Allow me to make 3 key points. First, management continuity will be assured. Speaking as the former Head of the Supervisory Board, my most important goal throughout this has been to provide an immediate succession for the Meditec Executive Board and extended management team to be able to make quick decisions and act decisively. Markets are not easy right now, and there is no time to lose. Second, the change at Meditec will continue at maximum speed.

In just 6 months, Maximilian Foerst has initiated a number of crucial organizational changes at Meditec that I fully stand behind, such as the creation of the new sales organization to drive commercial excellence, new priorities in R&D to increase speed and focus of the company as well as a review of the global footprint sites. These projects will continue without any interruption. The new leadership team is highly motivated to move ahead. Additional work on the organization or on expenses may be required and the executive team led by Justus is on it as we be assured that the changes kicked off under Maximilian are not a one-off but will continue. The Supervisory Board and the Zeiss Group are fully behind it as we were also in the past months, and I will personally make sure of that.

Third, my goal is to be acting as interim CEO until a long-term successor has been installed. Ideally, that can be done before the end of fiscal year '25-'26. We will consider both internal as well as external options and already have a number of ideas. Given the abrupt nature of Maximilian's departure, it has been my first priority to make sure the changes that were already happening and being planned under him will now be carried out successfully. In the meantime, we will be building the executive team for the future. I'm well aware that Meditec has been through a rough couple of years even before yesterday's news. Performance needs to be improved quickly. Top line growth needs to accelerate. Turnaround and profitability towards the midterm targets is critical.

In September, the Supervisory Board has given a strong backing to the Executive Board of Meditec to undertake organizational measures contributing to the mid-term targets of mid- to high-single-digit revenue growth and operating margins between 16% and 20%.

Targets for Meditec of mid- to high-single-digit revenue growth and margins between 16% and 20%. Just to repeat it. Now, it is upon the executive team to lay the ground and to make it happen. We have been discussing for some time on what is the best way to create value for all shareholders of Meditec, taking into account the feedback many of you gave us over the last year.

Let me be reassured you once more this work will be continued. In this context, I'm particularly happy that with Peter Kamarich, currently Head of our Audit Committee or actually until yesterday, the Head of the Audit Committee, a highly qualified financial expert of the Supervisory Board, has agreed to take over the Chairmanship while I serve as Interim CEO of Meditec. It's important to me that an Independent Board Member will take over this role for the interim phase while I serve as CEO. We both agree on the right way forward for the company, and I really look forward to working with him. So thank you for your trust and for your support.

Thank you, Andreas and Justus, for your remarks. We are now going to take some questions. Again, as a reminder, we are a bit short on time today, so I would ask everyone to just go with one question and keep it to the point of the CEO change. Strategy and business questions will be addressed in just a couple of days at our analyst conference, which will take place in present in Frankfurt just as planned, and you will also be able to follow it online for those who cannot travel to Frankfurt with both Andreas and Justus attending in person as well. We hope to see you there. So moderator, please open the Q&A.

[Operator Instructions] The first question at this point comes from Graham Doyle, UBS.

We appreciate the call as well given the short notice. Maybe give us a little sense as to what your ideal sort of candidate focus would be when you think of the next CEO. So Zeiss has been a growth company for a long time, but arguably, when we speak to investors, there's maybe too much investment in R&D versus maybe efficiency elsewhere. So there's this kind of trade-off between a return to driving growth versus also maybe a better cost focus and discipline on that side. And so there's also possibly a third leg as well, which is a diversification away from China. So what sort of focus would you be -- would you want your CEO to be looking at when you think of that role going forward for at least the next sort of 2 to 3 years, please?

I guess I'll take that question. Well, first of all, thank you, Graham, for that question. It's quite an important question. Well, I made the statement also here in the statement I just made. We were very much aligned with the progress that the team has made under the leadership of Maximilian. Actually, he was a very good person to lead this company. So what we are looking forward is, of course, we're looking external as well as internal candidates.

And just to make the point, that is also the reason why I -- one of the reasons why I stepped in. I want to make sure that we take enough time to have a good diligence on having exactly the right person. I think all the points you brought up are very critical and important that we're looking up for an external or internal candidate.

And essentially, we want to have a candidate that is -- has a strategic vision for Meditech to drive commercial and innovation excellence forward and also drive what we think are very good elements of the strategy forward. And for that, of course, you need somebody with a pretty broad background and what we're doing right now is starting very quickly the search for a successor. And my hope is that we will be successful there. I think you all know how difficult it can be, but our hope is and expectation is that towards the end of the fiscal year that we hopefully can present the successor.

The next question comes from Falko Friedrichs, Deutsche Bank.

My one question is, to what extent does it affect the way you're going to give guidance on Thursday? Will you provide the guidance you have initially planned? Or will you wait another quarter to provide it with the new CEO potentially already in place?

Hi Falko. It's Justus. No, we will not wait for a new CEO. We will guide you comprehensively and are looking forward to the meeting and the discussions with you. So I think it's worth being with us on Thursday, and thanks for being patient until then. Thank you.

And Falko, maybe I'd just add to that. One reason why I also stepped in is we don't have time to lose. We want to continue the path that the leadership team under the leadership of Maximilian have gone in the last couple of months, half year and more. And of course, this has been also fully aligned with me as the former Head of the Supervisory Board. That's one of the reasons why I stepped in to make sure we can continue that at full speed.

The next question comes from Susannah Ludwig, Bernstein.

My question is, you guys have scheduled a Capital Markets Day for March, and I was wondering if you still plan to go ahead with that? Or will you wait until the new CEO has been in place and has had some time to spend at the company and to think about his own strategy as well?

Hi Susannah, it's Justus. I think you hit the nail on the point, yes. It's frankly spoken exactly the discussion that we had late last night. We will carefully consider, but you are absolutely right, it may make more sense to wait with the Capital Market Day until we have a new CEO. I think it's then a more meaningful meeting. But be assured that in our regular earnings calls, we will keep you posted on everything that is of relevance to you. And I'm, of course, as well as Sebastian always available to answer your questions, yes. Thank you.

The next question at this point comes from Jonathon Unwin, Barclays.

This is maybe one for Andreas. Could you maybe just talk about how important you see Meditech as to the strategy of the wider Zeiss Group over the medium term and how you kind of feel about having a listed entity as part of the Zeiss Group?

Hi Jonathon, it's Justus. Just to reconfirm, you were asking about how important Meditec is for the wider strategy of the Zeiss Group. Correct?

Yes.

Yes. Okay. Thank you. Sorry, Jonathon, I didn't understand it first let me put it. Well, you probably know Zeiss a bit, right? Zeiss is a portfolio company. And being privately held, we have a wide portfolio of different businesses. And my role as the CEO of Zeiss, of course, there's a role of being a Zeiss Board member. There is a second role, and that is a role of a portfolio manager. So my role of Zeiss CEO, very closely with the CFO of Zeiss is to make sure that our portfolio elements at Zeiss are performing well. And now you see the different portfolio elements that we have, plus many investments we also make in the future. We, in this case, Zeiss AG. Meditec is a very important part of our portfolio, to be very clear. And frankly, we are not too happy with the performance in the last couple of years. So our clear goal is to make sure that the performance of Meditec is improving very quickly over the next months, quarters, years. So that's clearly my goal. And just to make sure there is, I would say, pretty much full alignment between Zeiss AG and the investors. I hope that answered your question, Jonathon.

Okay. So at the moment, there seems to be no further questions. [Operator Instructions] Okay. So I'll just wait a couple of seconds to see if there are any additional questions, but that does not seem to be the case. So there's one follow-up question coming from Falko Friedrichs.

I wanted to ask when exactly the CEO search started. Was that just yesterday, a couple of days ago? Or has that been ongoing for a little bit longer?

Well, let me answer that one. Let me answer it that way. It started as soon as it became clear that we have to search for a CEO. And be assured, we have a -- I also have a personal interest. Actually, my family does also have personal interest in making sure that quickly we find somebody. But of course, at the same time, we have to take enough time and diligence to make sure that we have the right person for the long term. That's what we've just talked about.

Okay. Again, at this point, there are no further questions. So I'd like to hand it back to you, Mr. Frericks.

Okay. Thanks very much for joining us this morning. And I hope that we can speak and see with many of you and see some of you in Frankfurt later this week to discuss the final results for '24-'25 and the business outlook. So looking forward to that. And again, thanks for joining. [indiscernible] will be made a bit later. Thank you, Andreas. Thank you, Justus. And take care, everybody. Bye-bye.

Thank you for the questions.