Medacta Aktie

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Medacta Full Year 2025 Results Conference Call. [Operator Instructions]

At this time, I would like to turn the conference over to Mr. Francesco Siccardi, CEO of Medacta. Please go ahead, sir.

Thank you. Thank you very much, and good afternoon, or good morning. Welcome to Medacta Full Year 2025 Results Conference Call. The slides of today's presentation can be found on the Medacta Investor Relations website, along with the media release. I would like to remind all participants that the presentation includes forward-looking statements, which are subject to risks and uncertainties. Listeners and readers are therefore encouraged to refer to the disclaimer on Slide 2 of today's presentation.

So after those remarks, I will now turn to Slide #4 of the presentation with the highlights of today's publication. We did report already our revenues, EUR 684 million with 18.5% growth in constant currency. The EBITDA margin in constant currency hit 29% and 27.9% in euro with an increase of 19.1% year-over-year. Medacta's net profit increased as well 31% year-over-year to EUR 95.5 million. And the Board of Directors is proposing a dividend per share of CHF 1.1 with an increase of almost 60% year-over-year.

We did comment already on the top line revenues. So I will fly through the next slides relatively quickly. As we said, 18.5% in constant currency in 2025. Now bringing our CAGR for the last 4 years, 2021 to 2025 period at 17.4%, a very, very strong performance, significantly outgrowing the market more than 4x.

If we move to Slide #6, we just reiterate again, which are the key pillars of our above-market growth. We clearly focus on differentiating innovation with the aim of really impacting and improving patient outcomes in a health care sustainable way. We support the introduction of this innovation in the market with a strong focus on medical education and training for surgeons worldwide. And as we need to expand our sales force in different geographies, the constant hire of new talents across all the different business lines and the different geographies.

If we move to Slide #7, we can repeat again the growth rate we experienced in the different geographies. We did grow 15.2% in the EMEA region, 19% in North America, 23% in Asia Pacific and 42% in Latin America.

We move then to the business line growth contribution on Slide #8. Our Hip grew almost 12%, Knee slightly above 20%, Extremities at 46% and Spine at 12%, all those growth rates are in constant currencies. To be noted that the Knee business line surpassed the Hip business line for the first time in 2025, Knee representing 42% of our revenues, Hip 40%; Extremities 10%; and Spine 8%.

Digging a little bit into the different business line. The hip definitely benefit from our focus on minimally invasive procedures, in particular, Anterior Minimal Invasive Surgery, which has been our flag products for many years now and is now reinforced by additional platforms introduced into the market.

And on the next slide, #10. We can see the very strong performance of our Knee, growing at almost 21%, clearly benefiting from Medacta focus and the introduction of the concept of kinematic alignment, Medacta has definitely been the first company to push this concept in the market, and we are today still the only company with a dedicated and specifically design Knee, the GMK SpheriKA, which is clearly pushing our sales in a very significant way.

If we move on Slide 11, we can see our performance in Spine, slightly above 12%. And here as well, we focus on innovative products, mainly associated with our MySolution platform. And the focus is clearly on personalized medicine with techniques and technologies like the NextAR Spine or the Rod Optimizer.

Last but not least, our Extremities business line on Page 12 with a very good 46.2% growth year-over-year. We did benefit as well from last year acquisition in the Sports Medicine sector with the Parcus move and the constant expansion of our Shoulder Arthroplasty platform associated with our NextAR technology as well.

I would now ask Corrado Farsetta to go into the margins and into the P&L. Thank you.

Thank you, Francesco. Moving to Slide 14. Yes. Let me now review the financial figures of 2025. And the gross profit increased by almost 15% to EUR 459 million, reflecting the strong growth in revenues. Operationally, we continue to deliver efficiency improvement, supporting the resilience of our margins, which remained solid at more than 67% despite a negative FX impact of more than 1%.

Moving to Slide 15. Here, you can see 3 lines. As usual, the gray line shows the long-term trend of our profitability, excluding translational effects since 2019. The yellow line represents our reported EBITDA margin, and the red line shows the EBITDA margin in constant currency for the year, which is then comparable with 2024 performance. As shown by the red line, in 2025, the adjusted EBITDA margin reached 29% in constant currency with an expansion of about 2% versus prior year, confirming the continued improvements in profitability and the strong operating leverage of this year and in general of the company over the years.

Despite the negative FX impact of around 1.1%, the reported EBITDA margin was about 28%, expanding by 0.8% versus prior year. More broadly, looking at the long-term trend based on 2019 FX rate, which is the gray line, our adjusted EBITDA margin highlights the structural and significant margin expansion achieved in recent years.

Moving to Slide 16. Here, we see the net profit for the period reached EUR 95.5 million compared to EUR 73 million last year, which is an increase of more than 30% year-on-year. And this includes also the one-off effect related to the acquisition completed at the beginning of 2025.

Moving to Slide 17. The strong growth of the company has required and continues to require additional instruments, facilities and production capacity. And this is where our investments are focused. Total CapEx amounted to EUR 137 million last year, mainly related to instruments, as always, EUR 78 million, land, buildings and production capacity, EUR 35 million and research and development for EUR 15 million. Investments in facilities and production capacity reported under other tangibles include the expansion of our production site here in Rancate and new fully automated warehouse and logistics hub in Italy.

Moving to Slide 18. You can see here our robust cash flow generation. In 2025, the cash flow from operating activities reached EUR 153 million, reflecting the strong profitability and the solid cash generation of the business, thanks to focus on the effective usage of all our assets. This allowed us to largely self-finance our investment program for EUR 137 million, as just discussed. And as a result, the free cash flow increased to EUR 16 million in 2025.

Moving to Slide 19. Our balance sheet, as you see, remains very solid with the leverage in 2025 down to 0.88x the EBITDA of the company. Over the past 5 years, you see the red line is the average ratio, which was around 0.94, confirming our disciplined financial profile and the strong capacity to support our growth.

The last slide from my side is the dividend per share as Francesco said, the Board is going to propose a dividend of CHF 1.1 per share, representing an increase of about 60% compared to the prior year.

And with this, I will now hand over to Francesco for the outlook, 2026 and midterm and some final remarks.

Thank you, Corrado. The outlook is reported on Page 22 of our presentation. For 2026, Medacta is targeting a revenue growth in the range of 10% to 14% in constant currency and an expansion of the adjusted EBITDA margin of around 50 basis points versus prior year, which we closed at 27.9% in constant currency, subject to unforeseen events. We did expand our midterm outlook as well. And the revenue compound annual growth rate for the period 2024-2027 in constant currency is expected to range now between 12% and 15%, with a gradual improvement in constant currency and subject to unforeseen events. We just reiterate as well, the situation in terms of tariffs. Medacta remains not impacted by the U.S. tariffs, and we continue, of course, to monitor the development of this situation together with the rest of the global world.

Last point on Slide 23. My key messages is to highlight once again the excellent and continued above-market growth of 18.5% in constant currency year-over-year. This results from our strong focus on differentiating innovations that really have an impact and improve patient outcomes and health care sustainability. This innovation is sustained by medical education and personalized training for surgeons, which allows us as well to expand our sales reps and team across the different geographies and across the different business lines.

The effect of this expansion and careful execution is that we can maintain very strong financials. We have seen a very strong soar of our profitability, operating cash flow and dividend. The expansion of the adjusted EBITDA while growing at this pace is really extraordinary. The record net profit of EUR 95.5 million, which represent now 14% of revenue. An increase of our operating cash flow by more than 42% to more than EUR 150 million. And as we said before, a proposed dividend increase of almost 60% to CHF 1.1 per share. And our goal, which is reflected in our short and midterm guidance is to continue to outgrow the market for the foreseeable future.

I would like to thank for this excellent performance, once again, all our employees worldwide, of course, all our customers that continue to believe in our products, all of our suppliers and partners worldwide. Thank you. Thank you, really, to all of you for the support.

I think it's now may be time for Q&A.

[Operator Instructions] The first question comes from Sam England of Berenberg.

And the first one, can you just provide some color on what's changed over the past few months to support the increase in the midterm revenue guide? I suppose in particular, which segments or geographies are now expected to perform better than your previous expectations to support the raise?

And then also around the midterm guide, you're now guiding to a gradual improvement in margins. So can you talk about the shift in messaging there and why you're expecting margins to expand? I think previously, when you talked about it, you said you'd rather reinvest in the business to drive growth as opposed to letting margins expand. So is there a shift in focus implied there? So a little bit of color around that would be good as well.

Thank you, Sam. So we have -- I will take the second question on the marginality expansion. We have seen that under an operational point of view, we can really achieve what we want to achieve in terms of growth with, at the same time, the ability to slightly expand margins. We were maybe a little bit cautious when we provided the previous guidance, and we wanted to have a little bit of space to operate, but we believe we can achieve our midterm top line guidance, while at the same time, expanding margins.

This means that we did identify, for example, some important synergies, stronger synergies between Shoulder and Sports Medicine and Joint and Sports Medicine, both in terms of medical education, in terms of sales force, in terms of marketing. And those are not only positive under a practical point of view, but they do actually have an impact under a P&L point of view.

I would maybe like to ask Corrado to take on the midterm CAGR because it's probably more mathematical than anything else given our past performance.

Yes, sure. So basically, the revision of the guidance, the CAGR is the result of the super strong performance in 2025. The guidance that we gave for 2016 -- 2017, sorry -- 2026, sorry again. And for 2027, it's just the -- okay, we believe that the picture, the framework is not going to change. So basically, based on our 3-year plan, the result of the top line expansion in 2027 will be then based on this CAGR -- 3-year CAGR between 12% and 15%. So it's just an arithmetical calculation, taking into account that 2025 was already achieved. The guidance for 2026 was given. So the result based on what we see in the future, it should be between 12% and 15%. This is what we think is just an arithmetical update.

The next question is from Ed Hall of Stifel.

A couple from me. Just firstly, on the profitability, and I appreciate you don't break it out in terms of subsegments, but is it still fair to assume that the smaller units, Extremities and Spine are operating at negative margin? And if that is the case, when do you expect these to turn positive? That would be my first question, and then I'll follow up afterwards.

Yes, I can take this, of course, under a qualitative point of view, Spine is not a negative contributor. It is dilutive versus the core business, if you consider Hip and Knees, but it's not negative and actually is improving year-over-year. So that is maybe another element I should have mentioned before talking about margin expansions.

The Extremities is -- we basically have two product lines within extremities. It is one, which is the Shoulder Arthroplasty, which is extremely positive in terms of contribution margin. And then we have a Sports Medicine, which is in an earlier stage, and it does require probably more dedicated sales force. And I mentioned that there are some synergies, but it's definitely still negative, and it will remain negative, although reducing the negative profitability year-over-year while we scale this business.

So it is still fair to say that the smaller business line are dilutive, but Spine is not negative. And within Extremities, only Sports Medicine is still negative, but it is very small.

Perfect. That's really clear. And then just another question on sort of CapEx expectations for this year, given a lot of the expansion that you've done in your facilities in Switzerland is coming to an end. I'm curious as what that would look like as things stand today.

Yes. I don't think -- and frankly, actually, I hope it will not come to an end because it will mean that we are significantly slowing down. As you know, the CapEx we are referring to, both manufacturing capacity and instruments are growth-related CapEx. So we have quite ambitious plans ahead of us for the next 5 to 7 years. We definitely need to continue to finish at least our expansion plans here in Europe. We will continue to feed the market with instruments associated with new customers generation. We do have new products launching expected in the second half, end of the year.

So we don't expect at all a decrease in our required CapEx. We might have a little bit more color in the future, in the next maybe early call at the end of H1 to share with the market a little bit more details of what we expect to do in the upcoming years in terms of CapEx needs and opportunities. We see a lot of opportunities, and we are very happy actually to invest in our growth. We have a very good, in our opinion, return on invested capital, and we are not afraid to invest in our future.

The next question comes from Sandra Dietschy of Octavian.

Yes. I have also a few, maybe I'll take them one by one. Sorry to follow up again on the margin topic. But given what you just mentioned, is it fair to say that kind of the majority of the improvement is coming from scaling up the currently dilutive segment like the Spine and Sports Medicine? Or do you also expect margins in the core Hip and Knee business to improve from the current levels?

So thank you, Sandra, for the question. We actually see both effects. We definitely have still margin improvements on the core business of Medacta, the Hip and Knee. We do see as well as I was mentioning, a less dilutive effect from Spine. Shoulder is definitely continued to expand as well. It's a marginality. And from those core business, we can now finance fully our Sports Med.

So it's both the effect of decreasing dilution of the smaller lines and still significant expansion on the core Hip and Knee side, both under a manufacturing and operational point of view, vertical integration point of view in manufacturing still and some leverages because we still have some markets like U.K., Spain, Italy, Germany, where we are growing very, very fast, and therefore, we can see some leverage on the fixed cost and improve marginality at country level.

Okay. Super. Then one on your U.S. business. Now excluding the impact from Parcus, I estimate that organic growth in the U.S. was in the mid-teens range last year and that was certainly supported by your strong exposure also to the ambulatory surgical centers. Now you previously indicated that this ASC segment could grow around 25% annually that you have some 40% of your U.S. business is already generated through this channel. Now just from this tailwind from the ASC segment alone, that should make it relatively straightforward to sustain a mid-teens growth in the U.S. Is that the correct way to look at it? Or are there any factors that could make it more challenging to have such a growth level going forward?

Yes. Unfortunately, it's a little bit more challenging than just automatically following the market trend simply because of sales force expansion. So without sales force, you cannot capture this transition from hospital to ASCs. We have been actually further expanding our percentage of revenues in ASC versus hospital in the U.S. We are around now 45% compared to previous year, and we expect this to continue to be the case.

But you really need to think about sales force expansion as a key necessary driver for our growth in the U.S. We are covering between 2% and 3% market share in the U.S. We need boots on the ground to really spread Medacta message and cover surgeons that are transitioning from hospital to ASCs. But as well, we are starting, for example, to work with prominent academic centers, large hospitals.

So it's all about distribution. I think we have very good products across the different business lines that prove their ability to improve patient outcome, but we need salespeople and sales force. And that's the constant game for us across the different geographies and in particular, in the U.S., hiring and hiring and hiring good talent salespeople, which are happy to jump on board and sell our product ranges.

Perfect. Appreciate the details. And then I have a very quick one for Corrado on the tax rate. As it was just last year, a little bit higher than what I had expected. Can you help us what's a good tax rate level to assume going forward for Medacta Group?

Yes, sure. Sandra. So let's say, the increase in 2025 is attributable to some, let's say, transfer price optimization policy that we have implemented at group level, which means that basically some of our tax assets that we accrued in the past have been now released in 2025. And given the higher tax rate in the other countries, this has generated an increase in the average group tax rate in 2025. This can be considered as a, let's say, a one-off effect because it's not that we are going to review again significantly our policy, but this was what has happened in 2025. For 2026 and 2027, I think that we should go down to 16% more or less, we should be confirmed for the next 3 years.

The other change that we are still not able to judge in terms of let's say, impact on our tax rate is the application of Pillar 2 from 2028. It is not feasible because today it's not still 100% clear how this will be implemented in Switzerland. We don't think it's going to significantly change the tax rate from 2028 onward. But I would say that definitely 2026 and 2027, we should go back to 16% more or less.

The next question comes from Michelle Büchler of Zürcher Kantonalbank.

I have a question on geographic expansion. Could you give us some more color on the efficiency gains we can expect from the Italy facility? And also, I saw you mentioned a new subsidiary in India. Do you have plans on expanding to India?

Yes, I can take this question on the -- I guess you are referring to our new operation facility, the distribution center in the southern part of Europe. This distribution center would potentially have a decrease in some of our shipping costs for southern part of Europe and a decrease as well in net working capital in stock that is currently distributed across different warehouses in the southern part of Europe, Italy, Spain, Switzerland, Austria, et cetera.

We will be able to concentrate most of the stock in one location, reducing net working capital requirements and at the same time, as I said, potentially reducing our shipping cost. So we will probably see an impact more in '27 than in '26, but it's definitely something that will help us to improve and constantly increase our margins. So that's a good thing.

Regarding India, if I address your first point, India will be, of course, a new venture. We are starting from scratch. Our products are not yet cleared under a regulatory point of view. It might happen every -- any day now, any week, any -- but you never know with the regulatory, you can wait another quarter or maybe it's tomorrow.

In any case, we are ready. We have prepared the market. We have hired some key people. We lined up distributors. We started already to train surgeons on cadaver labs, and we can expect a good start. We have seen a very good appetite for our products in the Indian market, which is a rapidly growing market, probably around 10% to 12% per year growth. Prices are okay in line with some of the European markets. So we can definitely start to compete, and we are ready to roll off.

The next question is from Graham Doyle of UBS.

And just one for Francesco and then a couple of quick ones for Corrado. Francesco, just on Knee, it's been incredibly strong. And we are seeing some launches from some of the bigger competitors over the course of this year. Do you think that there are more kind of catch-up launches and you're still ahead? And is there anything in the pipeline on Knee that makes you quite excited in terms of your own development?

And then just quickly, Corrado, on the guidance. So the midterm guidance around EBITDA, nice to see that sequential improvement. But would you expect EBIT margins to improve, so after accounting for D&A? And then is it fair when I look at the top line guidance, when we just work out the math that we should expect something like 10% growth in 2027, if you hit the midpoint.

And thank you, Graham, for the question. Just to make sure I address your first question on the Knee correctly, which are the launches you would like me to comment about and to position our Knee versus our competitors? Just to make sure we have seen the same thing.

So there's a couple of things from Stryker here, and we're seeing a new platform from Smith & Nephew. So as with the landmark piece, is one that's a little interesting. It's not -- it doesn't look to be quite the same as what you guys have. It looks slightly different and maybe not as much functionality. But just to get a sense of how far you think the gap is between what you guys currently offer and where the competition is? And also generally, what are you working on next because you have led the way.

Yes. So if we talk about Stryker, they have been presenting the last academy a couple of weeks ago, an expansion of their portfolio, which brings them in par with what Zimmer and DePuy, and Smith & Nephew already did 3, 4 years ago with their medial congruent insert. That is what they are about to launch and frankly, it was about time, because they were the last, let's say, to join the club of the medial constrained liners, which are still quite a bit different compared to our first-generation Ball-in-Socket design, which was Sphere and still a generation behind compared to SpheriKA which has been further adapted in its shape of the patellofemoral joint. So some elements of the components of the design, which have been clearly adapted to kinematic alignment.

So at the moment, we know they are starting to work on -- and they understand that they need to redesign their knees. And I believe this will give us at least another 3 to 4 years, especially in Europe even longer of a window where we think we can definitely show how our different design is superior.

So talking about the future, we are working on our future generation of products as well across Knee portfolio, technology portfolio, Hip portfolio, and we definitely look forward to come out with the next improvement, hopefully, when our competitors will try to catch up in 3, 4 years. But as we all know, innovation is a very dynamic definition. If you stop to innovate, you become a commodity and an older product relatively soon. So we cannot stay still and we are already very, very active in developing the next generation.

I hope I addressed your question, and I would then leave the floor to Corrado.

Yes. Yes, sure. So let's speak a bit about the midterm guidance. So we wanted to update both top line, of course, and the EBITDA margin. I will start from the top line again. As you know, we have done 18.5% in 2025, which means that we have also guided for 2026, 10%, 14%. So let's say, the following scenarios. If we say that we perform 10% in 2026 and 10% in 2027, then the midterm would result into something in the region of 12% in the 3-year plan, in the 3 period.

If we perform 14% in 2027 and 14%, high end of the guidance in 2027, then you will finish to 15% more or less. So that's why we updated the range in the way we have said before. So basically, I believe that something in the region between, say, 12% and 15% is what we really expect based on the results and the guidance on 2026.

Speaking about the EBITDA margin expansion. If you remember, we guided in 2024 to be stable at 2024 EBITDA margin. Then last year, we updated the guidance. We increased this to 28%, which was already an expansion. Now based on this year, very good performance, we decided to update and guide again to further expansion in the coming years because there is, let's say, more or less 0.5 point coming in 2026 and something similar in the region of 0.5 point again in 2027.

So what we could see is an expansion of this size between 2026 and 2027. We didn't want to give a precise number because we believe that in this case, the constant currency is difficult to apply because we are basing our calculations on 2024 currency rates, which we understand is difficult for you to follow. That's why we guided as a gradual expansion in 2026 and '27.

Just -- it was very clear on the revenue, so that's super helpful. Just on the margin, what I meant was more -- it totally makes sense that EBITDA margins expand, but EBIT, so after you account for the cost of depreciation and amortization, would you expect EBIT margins to expand as well?

I would keep something similar in terms of expansion. So more or less, the same expansion of the EBITDA margin, you could use the some expansion for the EBIT margin. More or less, we believe that the D&A should stay more or less in line with this year over the next years. So that's why I believe that the EBIT expansion should be aligned with the EBITDA margin expansion.

[Operator Instructions] The next question is a follow-up from Ed Hall of Stifel.

It was just a question on this year's guidance of 10% to 14% in constant currency. If I do the math on last year's absolute revenue that you added on a constant currency level, it was around EUR 100 million to EUR 110 million. Now if we look at this guidance for this year, the absolute number added, is a bit of a step change down. So I was curious as to what are the reasons for that? Is there a layer of conservatism in there? Is there product launches from competitors that you're taking into account? Or is there something that I am missing on that analysis? Any clarity there would be amazing.

I think that to give for granted that every year, you can add EUR 100 million just because you did it the previous year. It's a little bit simplistic. So as I said, we do have really to find and to feed sales force expansion, and that's a constant effort. So it's always a challenge to find those people at the speed we want. We think that 10% to 14% remains very challenging. We do not expect, frankly, the market to continue to be that strong. We have seen some markets as well with some price reduction that has been announced in France, in Belgium, in Japan. So you have to consider that as well. So there are some elements that call for a little bit of cautious. And I think 10%, 14% remains a very substantial growth rate, especially again, compared to the market and to our peers.

Can we do better? I think it's very challenging to do better, but we have been positively surprised ourselves in the last 5 years. But I'm happy to be surprised by our performance every year, frankly. But this is a number that we think is solid. It's challenging. It's difficult. It's a battle every day to go and take market share. And we are ready to fight this battle, of course, but we don't give it for granted. So the past year performance is not predictive of the future year performance, as you well know.

Sorry, Ed, just another point. There was an acquisition as well last year. So let's consider that as well when you look at the absolute numbers.

That was the last question. Gentlemen, back to you for any closing remarks you may have.

No, I would like, once again, to really thank our team across the globe, our customers, suppliers and partners because it's always tough to grow at this pace, and we try to do it in a very diligent way, which is even tougher. So congratulations to all our team members worldwide and a big thank you for all our customers and suppliers. Thanks a lot. Thank you for your attention and speak to you soon.

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

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Medacta Full Year 2025 Preliminary Unaudited Revenue Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Francesco Siccardi, CEO of Medacta. Please go ahead, sir.

Thank you very much, and good afternoon or good morning. Welcome to Medacta Full Year 2025 Preliminary unaudited Revenue Conference Call and live webcast. The slides of today's presentation can be found on the Medacta Investor Relations website along with the media release. I would like to remind all participants that the presentation includes forward-looking statements, which are subject to risks and uncertainties.

Listeners and readers are therefore encouraged to refer to the disclaimer on Slide 2 of today's presentation. So after the housekeeping remarks, I will now turn to Slide 4 and start with the highlights of today's publication. We are very, very pleased with our continued outstanding growth performance across all geographic markets and business lines against a strong prior year comparable.

The growth of Medacta surpassed 18.5% in constant currency and slightly above EUR 683 million reported. The key drivers of our growth remain the same, very strong focus on differentiating innovative products, pushed into the market and sustained by very personalized and effective medical education and constantly expanding our team, both in the market and in our headquarter.

Last year, we hired 258 new employees. If we move to Slide 5, we could see how the performance of 2025 has been even stronger than the group revenue CAGR, which was 17.4% between '21 and 2025. This performance represents a very good growth, basically 4.3x the market growth. So very, very pleased with this overall performance.

As I mentioned, the key pillars are extremely relevant for our forward-looking performance, and we continue to focus on differentiating innovation, education and personalized training of surgeons and team expansion, and this is true across all our portfolio.

On Slide 7, you can see the geographical mix growth. The European market, EMEA grew above 15%; North America, around 19%, 23% in Asia Pacific and over 42% in Latin America. All those growth rates are in constant currency. The geographic mix remains pretty much stable. 48% of our revenues are generated in EMEA, 30% in North America, 20% in Asia Pacific and 2% in Latin America.

If we now look at the business line performance, once again, we have -- we're very pleased with the overall performance across the business line, almost 12% growth in constant currency for our hip portfolio, over 20% for our knee, over 46% for our extremities and over 12% for spine. 2025 has been the very first year where Medacta knee sales surpassed hip sales.

So in terms of mix, we have 42% of our revenues associated with knees, 40% with hips, 10% with extremities and 8% with spine. On Slide #9, we can see a little bit more in detail the strategy behind our hip growth. It remains anchored in our AMIS experience. It is anterior minimal invasive surgery. It is definitely a procedure that continues to drive growth in the market. And we have seen especially an outstanding growth in Asia Pacific and North America with almost 3x market growth in 2025.

On Slide #10, we can see the same analysis on the knee, over 20% year-over-year growth, and this is linked to our strong focus on kinematic alignment, and the introduction of the GMK SpheriKA, the first and only KA-optimized implant so far. We have seen a very, very strong performance in North America and in EMEA, closely followed by Asia Pacific. And this growth represents 4.6x the market. So very, very good performance on the knee side as well.

In spine, we did grow at over 12% year-over-year. We have been focusing our strategy on technologies. So selling our hardware, our screws, our cages really by using technology as a key driver for our market penetration. NextAR, NextAR Rod Optimizer, MySpine, all those are key elements behind our growth in spine. And this growth, again, represents 3.5x the market growth. So it's, again, a very, very good performance.

Last segment of our business is Extremities. We had a very strong acceleration compared to the CAGR of last year. This has been impacted as well by the acquisition of Parcus, which has been closed this year, and it does contribute only in this subcategory. 46% year-over-year growth.

Medacta Shoulder System is definitely a key element of this segment and the combination of our implants with our technology, NextAR, again and MyShoulder are a key pillar of our strategy. The Sports Medicine portfolio strengthened a lot with the acquisition of Parcus and both segments recorded sales more than 3x the market growth in 2025.

The outlook, we put it here just to remind for those that are not familiar with the 2025 outlook, we had a 16% to 18% in constant currency. We are very happy to end up the year slightly above our outlook. And as usual, we will communicate future outlook in March together with the full year results of 2025.

The key messages for this call are very clear, and we've been able to continue to grow above market for 2025 with a revenue growth of 18.5% in constant currency. And this result, again, is driven by the 3 main pillar of our growth, differentiating products that improve patient outcomes and health care sustainability.

Those products are supported by medical education and personalized training of surgeons. And we continue to penetrate the market by further expanding our sales rep and the team. Our aim continues to be the same, so to continue to outgrow the market for the years to come.

And before opening the floor to Q&A, I would like always to thank our employees, our customers, our suppliers and partners worldwide that sustain this outstanding performance and tremendous growth. Thank you very much. Thanks.

[Operator Instructions] Our first question is from Sam England, Berenberg.

Can you talk a bit about the ex U.S. rollout of GMK SpheriKA and how traction is looking with surgeons there? I suppose interested to know if interest in kinematic alignment of the technique is the same as it has been in the U.S. and whether the surgeons funnel is evolving in a similar way to the U.S.

And then the second one is just around the hip business. Can you talk a bit about the drivers of the continued elevated growth there, why you think growth continues to be above the market and whether we should expect similar dynamics in 2026? And then also on hip, if there's anything in the innovation pipeline there that you think can sustain that above-market growth beyond 2026 as well?

Yes. Thank you, Sam, for the question. Concerning SpheriKA and KA, which are very much linked, we do see tremendous interest on a global scale in the U.S., of course, but actually was even stronger in Europe. So despite the fact that KA has been invented by a U.S. surgeon, it did really gain more traction first in Europe, then it's coming back to the U.S.

Australia and Japan are extremely focused on that technique and that philosophy. So I would really consider KA and SpheriKA a global trend, and we are starting to see some of our emerging markets showing a lot of interest, India, for example, where we are starting -- we are about to start. We see a lot of potential there.

On the hip side, there are several effects. I would say, number one, there is a pull-through effect that the knee does to the hip. We experienced exactly the same effect back in the years when we were leading with the anterior approach and AMIS, many customers, then they were following on the knee side.

Now our sales force, which is the same sales force and very often the same customer for hip and knee, they are leading with kinematic alignment and SpheriKA. The hip portfolio is very robust. There is quite a lot of innovation, the triple taper stem, NextAR Hip, which has been just approved in the U.S. and Australia.

So the pipeline is robust, is rich, and there is a very nice pull-through effect driven by the sales force and by the surgeons accepting our products in one or the other portfolio. Anterior approach remains a key driver. There are still markets where anterior approach is definitely underpenetrated.

And I think Medacta is very well known to be a very, very strong player when it comes to anterior approach with medical education with a package of implants and instruments and services, very well trained and focused sales force. Medical education is second to none.

So those are the key drivers behind our hip sustained growth as well.

Next question is from Edward Hall, Stifel.

I have a couple here. Actually, back on the large joint and hip and knee. I was wondering if you could sort of drill into the drivers of growth when we're talking about the surgeons, if we're thinking about the incremental surgeons being recruited versus continued support from your -- let's say, your current base that are already adopted. That would be my first question.

And then just on U.S. and penetration into the ASCs versus the broader market. I'd be curious to hear your thoughts here and how your P&L is positioned and then what you see the outlook of the ASC versus the rest of the market in the midterm.

Yes. Thank you, Edward. So there is -- when we come -- when we talk about growth, new surgeons versus existing surgeons growing, we always create or divide our growth, our budgets into 2 buckets, the new surgeons and the surgeons that have started the previous year and they're ramping up.

In 2025, of course, we had both those effects, but the new surgeons are contributing more, if you want, to the following year and the carryover is what contributes the most to the 2025 year. This is the case as well probably for 2026. So in 2025, we have seen a very, very strong adoption and ramp-up of new surgeons, but the largest contribution is always coming by the one that has started in 2024.

But this is a cycle, and we are very keen in keeping our buckets of new surgeons full. The pipeline is very, very full. And we're very pleased with the interest that we see in the market when it comes to hip and knees and knees in particular.

If we talk about the U.S. ASC versus hospital-based business. Our products are particularly well suited for the ASC market because we have developed those products basically starting from Europe, where the health care system is definitely more under pressure when it comes to efficiency, to pricing, et cetera. And we naturally see a lot of success in the ASC. But I would say that the reason why our ASC penetration is faster and higher than hospital is basically access.

So the surgeons that are convinced to use our products, they very often work both in an ASC and in a hospital. In an ASC, they decided to try our products and the process to enter the ASC is significantly shorter than the process to enter into a hospital, which is mainly driven by maybe contract negotiation, reduced vendors numbers, making trials and the bureaucracy is much stronger.

But we see a good penetration in hospital as well, both with our efficient solution, with our technologies. I mean our offering is working extremely well on both ends. And we think we can continue to enter into both segments of the market in the future.

Clear. And maybe just one follow-up would just be on the -- you talk about expansion of sales reps and teams. I mean what would that look like in terms of headcount or SG&A growth?

Yes. We always say that if you take the number of new employees that we share with the market, let's say, a rough calculation is 50% is in the country and 50% is in the headquarter. And this gives you a rough idea, although, as you probably know, in the U.S., we do have a hybrid sales force. So there are both direct and agents.

And so a portion of our market penetration is not visible in the headcount expansion because it's simply achieved through new agents. So that's an important additional information that you should consider.

Next question is from Sandra Dietschy, Octavian.

I also have two. The first is on the single-use instruments in knee, which appear to be a clear differentiator. And I assume they're also an important growth driver for the Knee segment. Now could you share your perspective on the current adoption levels of these single-use instruments and also how significant you expect them to be in driving the knee growth going forward? And then my second question is on the spine business.

My understanding is that the spine business is currently transitioning in the U.S. from an agent-based model to a direct sales force. To what extent did this transition contribute to the deceleration we have seen in growth in the second half of last year? And how is the transition progressing these days?

And then, of course, I would be keen to hear what the level of profitability uplift we should expect once the transition is complete.

Thank you, Sandra. So I will start with the single-use instruments. It is a very unique offering in the market despite the fact we've been developing this product almost 10 years ago. We have been refining it quite a lot.

The knee is growing fast. The share of single-use is following quite a bit around 25% of our knees are today implanted with efficiency, which means it's growing at a high pace as well.

And our goal is to further increase the utilization of single-use because we see quite a lot of value for customers, for the ASCs, for the company as well. We gain flexibility in delivering instruments to the market, which are not always forecasted.

So we -- under a supply chain point of view, it's a very nice tool to have. And as I said before, it's very unique. It works extremely well even when coupled with technology because only a few instruments are then required.

So the surgeons, they see even more value there. So we're very pleased, and we continue to expect further expansion and utilization, and we are constantly fine-tuning and improving those instruments because there are really a lot and a lot of surgeons using it.

On the spine side, what you have mentioned about going from agent to direct, I think we need to give a little bit of additional color here. So this is happening in the U.S. and in the U.S. only because in the other markets, we are already only direct. It is a transition that we experienced as well on the joint side. When we started, we were 100% through agents. And now we have this hybrid configuration.

The spine was exactly the same. We were 100% through agents. And now by refocusing on the technology, we are not abandoning our indirect channels, especially the good agents that we are working with, and we want to continue to collaborate with. But we are focusing our expansion more using technology, which has to be well supported by the company. And if we do so, we want to go direct in those accounts. And by doing that, we have more control. We can probably better focus our -- or increase our revenue per case, which is very important in spine because often agents, they have more than one company in spine, while if it is a Medacta employee, we can try to focus as much as possible on Medacta products only.

And then if we drive technologies, we can really differentiate ourselves. And last but not least, we can definitely decrease the cost of sales, which in spine, they can be as high as 40% of commissions, which is something many of the small and midsized companies, they pay in order to make sure they get attention and priority for their products.

And this is something you have to do when you don't have differentiated products. While if you focus on technology, you can definitely drive better cost of sales. So this is the reason. I know there are companies that have more than EUR 200 million in revenues in spine in the U.S., and they don't even break even.

As you know, we don't like this philosophy. We want to grow in a profitable way, and this strategy is going into this direction. It might slow down a little bit for a while, but we are confident because we have seen it on the joint that the long term will pay back.

[Operator Instructions] Next question is from Michelle Büchler, ZKB.

Could you provide more details on the expected FX impact for 2026? And are you implementing on hedging some of that? And also, you mentioned some new automated warehouse in Italy. Could you see a meaningful impact on the margins anytime soon?

And then my last question would be, could you give some more color on the rollout of the GMK in Japan, Canada and the U.K.? And what is your strategy for ramping up these markets?

Yes. If you don't mind, I will start with the last question, the GMK SpheriKA you're referring to has been rolled out in Japan and the U.K. this year. It's really behind the growth we have seen in those markets as well. Japan, in particular, is a market where if you actually think about Japanese population and their leg alignment, they are very often in the varus.

So this kind of alignment that benefits the most from kinematic alignment, and we see a very, very big traction there. U.K., the same. Canada is a small market. SpheriKA specifically is -- I'm not even sure if it is introduced already, but it's definitely not something that is going to impact heavily our P&L.

Concerning margins expansion, FX effect, hedging, we will go definitely more in details in our next conference call in March, where we will analyze in detail the FX effect on 2025. There are some actions which have been already implemented in 2025 and some in terms of hedging, but in terms as well of operational activities that will increase the natural hedging to the dollar.

And the last qualitative aspect you touched upon is the new automatic warehouse in Italy, which is not yet up and running, but we do expect and we do see the potential to definitely go in the right direction of decreasing distribution costs in the southern part of Europe at least.

And again, I would defer additional comments on the marginality and operations to our March call.

Next question is a follow-up from Edward Hall, Stifel.

Just a couple of follow-ups from me. I think one is more qualitative, but just given, obviously, the outstanding growth you've seen this year and just contextualizing it with your midterm guidance, is there anything to dictate that we would see a slower rate of growth for this year?

Or should we see an updated midterm guide? And then just finally on pricing in APAC. I know Australia has been weak in quite recent years. Has this been impactful or sympathetic to growth in 2025?

Yes. I mean if I -- and we have seen the Australian dollar, Japanese yen weakening over time. Of course, when you talk about reported numbers, you do see a negative impact. There's a little bit we can do in terms of hedging there as well, but not so much. Overall, those are markets where we still see a lot of room for growth, a lot of interest for our products and then the effects we have to deal with it.

In terms of midterm guidance, we are going to talk about 2026 and the midterm guidance in March. So as you have seen, we have been performing extremely well, and we had to upgrade our guidance for the last 2 years in midterm, midyear, and we will come back to you with updates on the midterm guidance and 2026 guidance in a few weeks. So give us a little bit of time, and we will answer 100% to your question.

Next question is a follow-up from Sandra Dietschy, Octavian.

I also have a quick follow-up on LatAm, where you had a very strong performance of more than 40%. I appreciate that this is coming off from a relatively low base, but could you elaborate on between this drivers behind the performance, in particular, to what extent was the growth driven by geographic expansion within that region?

No, I would say it's primarily driven by further market penetration in the key markets where we are already present. We did add a few smaller markets, but the key markets in Latin America are Brazil and Mexico. And then, of course, you have Argentina, Chile, all the smaller markets, but we are actually mainly, I would say, expanding into those large markets with a marginal contribution from expansion into new geographies.

What we are doing as well is introducing new product lines, which were not available into those markets. I'm thinking about the shoulder and thinking about the spine. And very often in those regions, the regulatory path is quite demanding.

ANVISA, which is the regulatory body in Brazil is one of the toughest. And once you go through, you have really a good market to penetrate. And we use the same strategy, the same products that we are using in North America and Europe and Asia Pacific. So those are very well-performing products with strong strategy, and we are probably entering into segments where other companies are maybe less focused on, and they tend to sell maybe slightly more less innovative products.

We don't do that. And maybe that's the part of our success in those markets. But as you pointed out, we start from a small base. So it's slightly easier to have those stellar growth rate. So next year, we will see what we can do. But a small base, high percentages, I always tell my guys that they don't have to get overexcited not because the base is small.

[Operator Instructions] Mr. Siccardi, there are no more questions registered at this time.

Then I would like to simply thank everybody for your time today. And once again, I would like to thank our employees for the really fantastic performance of 2025, our clients and customers for their support and suppliers and partners worldwide that supported our growth. So thank you very much, everybody.

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

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Medacta First Half 2025 Results Conference Call. [Operator Instructions].

At this time, I would like to turn the conference over to Mr. Francesco Siccardi, CEO of Medacta. Please go ahead, sir.

Thank you very much, and good afternoon or good morning. Everybody, welcome to Medacta 2025 Half Year Results Conference Call and Live Webcast. The slides of today's presentation can be found on the Medacta Investor Relations website, along with the media release.

I would like to remind all participants that the presentation includes forward-looking statements, which are subject to risks and uncertainties. And listeners and readers are therefore encouraged to refer to the disclaimer on Slide 2 of today's presentation.

And after those housekeeping remarks, I will now turn to Slide 4 and start with the highlights of today's publication. We have already presented our top line H1 revenues EUR 344.1 million, corresponding to an increase in constant currency of 19.8%. Our adjusted EBITDA margin for H1 in constant currency, reached 29.6%, which corresponds to a rise of 27.5% over last year period. The net profit for the period amounted to EUR 60 million, a significant increase of 58% over H1 2024. And we confirm our outlook both for 2025 and our midterm outlook.

If we go on Slide 5, we can appreciate even more the considerable above-market revenue growth that Medacta has been able to deliver over the last 5 years. This growth represents more than 4.5x the market. So Medacta is consistently delivering above-market revenue growth.

On the next slide, Slide #6, we can see why we are delivering those remarkable results. And clearly, the most important one is our ability to constantly innovate in a way that really impacts and improve patient outcome. And at the same time, we are able to sustain the healthcare system in terms of providing solutions, which are adaptable and sustainable. This innovation is sustained by education -- medical education, fully personalized to our customers, the surgeons, so that they are able to adopt this innovation in a safe and attractive way for the patient.

And the combination of great products with great service allows us to attract a lot of good and experienced salespeople, and this is the third pillar of our above-market growth story, and those are exactly the success factor behind our H1 results.

If we move to Slide #4, we can see again the split of our sales across our geographies. And I will not spend too much time as we presented those results already in July, but we can see a very, very good growth rate across all our geographies, Europe, U.S., Asia Pacific and Latin America. If we then look at the split of our product mix, you can see again a very good performance across all our business lines;

our more mature and core product lines like Hip grew around 11.5%, Knees almost 24%, Extremities, which includes shoulder and sports medicine, 44% and Spine almost 19%. So we can see a very, very good performance across all our business lines.

Quickly an overview of how this performance compares with the market growth. On the Hip side, with a strong focus on interior minimal invasive surgery, the growth corresponds to more -- almost 3x market growth. If we look at the Knees on the next Slide #10, we can see growth focusing on kinematic alignment, and the unique and first KA optimized implant, the GMK SpheriKA that allowed us to generate a growth which correspond to more than 5x the market growth for the first semester.

Spine, again, a big focus on personalized technology, both through our NextAR and MySpine allowed us to grow 5x faster than the market in a market that we know is very competitive and therefore, a remarkable performance here as well. And then the Extremities. Extremities, as I said before, they include shoulder arthroplasty and our sports medicine business line with a remarkable 44% year-over-year growth and again, significantly above market growth.

I would like now to introduce Corrado Farsetta, our CFO, to go over our P&L details. Please, Corrado.

Thank you, Francesco. Let's have now a look at our key financials, and I will start with this first slide where we see the gross profit that in the first semester this year reached EUR 235 million (sic) [ EUR 235.1 million ] compared to previous period of EUR 190 million (sic) [ EUR 197.7 million ], representing an increase of 19%. The gross profit margin was 68.3%, pretty much in line with the previous year where it was 68.5%.

Moving to the next one. Here, you see the adjusted EBITDA margin represented by the red line, you see that this year, the adjusted EBITDA margin at constant currency reached 29.6% compared to 26.9% of the first semester 2024. And this represents an increase of 2.7% versus previously. In euro, the EBITDA adjusted increased to EUR 98.8 million, representing an increase of more than 27% year-over-year.

As we say, the acquisition of Parcus was a good achievement also from an accounting perspective, and this is reflected into our an adjusted reported EBITDA that was equal to EUR 110.5 million, including a positive net one-off of EUR 12 million coming from the badwill resulting from the acquisition of the Parcus Company.

Moving to the next slide. Here, we see the net profit -- before tax, the net profit was equal to EUR 68.6 million compared to EUR 44.7 million of previous year. Thanks to this EUR 12 million of positive from the acquisition, the effective tax rate was lower than the previous period. We registered 12.5% of this semester compared to 15% roughly of the previous period in 2024. So as a result, the net profit for the period was EUR 60 million or 17.4% representing an increase of around 60% versus the previous period.

Moving to the next one. Here, we see the CapEx. As we said several times in this business, growth means primarily new instruments and expansion of production capacity. And if you look at our case, we see the usual big slice in that view, represented by instruments EUR 36.2 million, represented by far, the biggest chunk of our CapEx.

The second big chunk of CapEx is represented by other tangible, where you can see there primarily the expansion of our buildings, production facilities, offices and the logistics hub in Italy. And both instruments and other tangibles are, let's say, driven -- CapEx driven by growth, representing more than 80% of our total CapEx.

Research and development capitalized was equal to EUR 5 million, more or less in line with the previous period. And the -- today, this year, we have roughly EUR 5.3 million of CapEx in financial. CapEx including the price base for the acquisition of the company of Parcus Medical.

Moving to the next one. You see the operating cash flow. So the cash flow generated by operating activities remains robust and sufficient to finance our investments. In particular, this semester, we reduced EUR 73 million compared to EUR 42 million of the previous period, explained basically by the expansion of our EBITDA and some improvements in -- let's say lower requirements of working capital. So this EUR 73 million of cash flow generated was more than enough to finance all our CapEx that we just discussed and to generate a small positive free cash flow of EUR 8 million this semester.

Moving to the last slide. You see here that, thanks to the ability of the company to set finance the growth, the leverage remains very low in the first semester of this year, it was 0.9x the EBITDA compared to roughly 1x of full year 2024, and I would say, pretty much in line with the average over the last 5 years, where the value for the last 5 years, the average is 0.95x the EBITDA.

I believe this is my last slide. So now I'll hand it over to Francesco for our final remarks.

Thank you, Corrado. I would like just to go over our outlook and that as we said before, has been confirmed. So for the 2025 outlook Medacta is targeting revenue growth in the range of 16% to 18% in constant currency, and an adjusted EBITDA margin of around 28% before any currency effect. And this includes the recent Parcus acquisition, and it's subject to unforeseen events.

In terms of midterm outlook, the revenue compounded annual growth rate in the CAGR for the period 2024, 2027 in constant currency is expected to be in the range of 10% to 14% and an adjusted EBITDA margin targeted to be around 28% before any currency effect. The last comment is on the tariffs. Medacta remains not impacted by the U.S. tariffs, but we will continue to monitor the development of the situation as it can be quite volatile.

In conclusion, the key messages for this H1 call is to underline the significantly above market growth of Medacta 19.8% in constant currency, which is the direct result of our strategy, big focus on innovation, innovation that can deliver both in terms of improving patient outcome and make the healthcare system more sustainable. This innovation is well supported by medical education and personalized training of our customers, surgeons and a further expansion of sales reps and team all around the world.

The expansion of EBITDA margin was quite remarkable in H1, reaching in constant currency, 29.6%. And our aim continues to grow above the market for the foreseeable future as our midterm guidance underlined. As usual, I would like to thank, in particular, all our employees for those fantastic results, but as well our clients, our suppliers and our partners worldwide.

Thank you very much for your attention. I think we can now open the Q&A and both of us were available to address your questions.

[Operator Instructions] First question is from Sam England, Berenberg.

The first one, could you just give us a bit of a sense for the impact of geographic mix on margins in the first half? I think historically, markets like the U.S. and Australia have been higher margins. So just wondering, if you saw a benefit there given the stronger growth in Europe? And then looking ahead, do you think mix will be a tailwind on margins given the growth given the pace driving for you, particularly in the U.S.?

And then the second one on Hip. Just wondering if the momentum you saw in H1 has continued so far in H2, you are well above market in the first half, but comps obviously tough a bit as we move into H2. So I just wanted to get a sense for how you're thinking about growth there for the rest of the year?

Yes, I can maybe start with the second question. As you said, H2 last year was very, very strong. So we definitely have a tougher comp in H2, but at the same time, we still see a good momentum in terms of top line. And so we -- that's the reason why we increased our guidance for the year. In terms of geo mix, I think Corrado can give you a little bit more color.

Yes, sure. Let's say, normally, we expect depending on the level of the P&L, you can have positive or negative effect because when we speak about gross profit, average selling price minus industrial costs, of course, we said several times Australia by far is the most profitable market and then U.S. and then the other countries.

And when we move down to the EBITDA margin, this could change, and we have seen and we know that there are big balances in terms of EBITDA margin between countries. In general, things I would say that this period in this semester, given the, I would say, well balanced growth of our regions, we have registered a very small, I would say, negligible effect from the geographic mix growth. So I think it is not worth to mention it.

Next question is from [ Michael Bähler ], ZKB.

So my question is the gross margin declined by around 20 basis points from last year. Was this mainly due to FX effect?

Yes, sure. Basically, that is the FX that we have registered in this semester.

I would say this is the net effect of the FX. The FX was actually a little bit higher than that, but was compensated by a good economy of scale as previously mentioned.

Next question is from Sandra Dietschy, Octavian.

I also have 1 on the margin. In H1, your adjusted EBITDA margin was very strong with 29.6% in constant currency, yet for the full year, you guide for around 28%, which implies quite a drop in the second half. You mentioned relatively low sales and marketing costs in H1, but maybe beyond higher Congress activity, where else should we expect increased investments in the second half that drives such a margin decline?

And then I also have a question on the U.S. manufacturing. Back in April before we were aware of the Nairobi Protocol, you mentioned as one way to deal with the tariffs would be to expand the U.S. production and maybe also to increase the utilization of the Parcus facility in Florida or even broadening your manufacturing footprint.

Now that you benefit from the tariff exemption, how do you view your U.S. manufacturing strategy now? Are you still considering expanding local production perhaps for reasons beyond the tariffs or yes. And thoughts on that would be very much appreciated.

Okay. Sandra, let me take first your question about margins, and then Francesco will respond to your question on the U.S. manufacturing. So the first semester, we said 29.6%. This was the EBITDA margin of H1 2025, and we are now targeting a full year 28%. So the first semester, there are several factors that we should take into account in order to understand the evolution of our EBITDA margin.

The first one is the acquisition of Parcus. The first semester was only partially including this event because the acquisition was completed, say, in April. So in second semester, you will see a full-year effect of the dilution, which is bigger in the second semester than the first semester because of timing, full effect versus a partial effect.

A second effect that we normalize, it is not -- it has nothing to do with, let's say, productivity or fixed cost, but it's just an effect of seasonality of certain costs that we didn't receive in the first semester that we expect to receive in the second semester. So we have booked them, and this is also a negative component in the second semester that we don't have in the first one. And then you always have, as we said several times, the third effect, which is the full effect in the second semester of the hirings that we had in the first semester. We hired people during the first 6 months that have a full cost effect in the second semester.

So without being too much detailed, but if you take all these effects, let's call it, time effect out from the first semester, you go back to roughly 28%, which is our guidance for the full year, and which is more or less in line with the second semester profitability that we expect to reach.

Okay. Can you give us a hint on what's the dilutive impact of Parcus on the full-year margin?

No, let's say, we don't disclose this, but let's say it is not that big. It's not a very big number. You can see that we are guiding anyway, 28%, including this negative. So the number, the effect is not that big.

And Sandra, I will take on the second question about the U.S. plant. So you are correct. We do have a manufacturing plant currently focused 100% in sports medicine coming from the Parcus acquisition in Florida. This is a good asset to have in this moment because the situation remains uncertain.

And even before, we were talking about tariffs, we were starting the possibility midterm to further expand our manufacturing in the U.S. for various reasons, the U.S. represents 50% of the joint global market in value. It is almost 60% of the global market for sports medicine and spine.

So if -- as we are reaching our saturation capacity in Switzerland, and this saturation should basically hit in 28% to 29%, depending on our growth rate, we were already planning where to go next in the U.S. with our natural answer to that. And this is still our decision and this is something that we are starting to actively focus on because in order to, let's say, be ready in 2028, 2029, you start to plan and view in the next couple of years at the latest. So you need to have a good plan, construction permits, et cetera. So the U.S. manufacturing remains definitely part of our future growth plan.

[Operator Instructions] Mr. Siccardi, gentlemen there are no more questions registered at this time.

Thank you very much then, everybody, for your participation. I would like once again to thank as well all our employees, customers, partners and suppliers for their support, and I look forward to speaking with everybody soon for our full year results in June month. Thank you very much.

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

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Medacta Group's First Half 2025 Preliminary Unaudited Revenue Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Francesco Siccardi, CEO of Medacta Group. Please go ahead, sir.

Thank you. Thank you very much, and welcome, everybody, to this conference call. I'm here with Corrado Farsetta, our CFO, and Anja Pomrehn, Investor Relations.

And we can probably start on Slide #4 where we see the relevant numbers. In terms of top line, we reached EUR 344 million, which represents almost 20% growth in constant currency, or 19.2% in local currency. I'm very pleased, of course, with top line growth. And this is very much linked to the core pillars of our growth, which remain always the same. So first mover innovation [indiscernible] thinking innovations, which is the core of who Medacta is. This innovation is very well supported by our medical education and personalized training of our customers, surgeons worldwide. And this resulted as well in both a short term 2025 full year guidance upgrade and midterm guidance upgrade as well.

If we move to Slide #5 we can see how this first semester of 2025 represented further acceleration [indiscernible] already very sustained between H1 '21 and H1 2025. So, as I said, almost 20% in constant currency. This represents a very good performance which is between 4% and 5% higher than growth, market growth.

If we go to Slide #6, we can see the 3 pillars of our growth, the 2 I mentioned before. So the out-of-the-box innovation, which is actually very relevant across all our core lines. Those innovation are well supported by our medical education programs. And at the same time, thanks to this success, I would say, both in terms of products and services, we are constantly expanding our sales team. And as a consequence, of course we need to expand our operations all over the world. So those are the three core pillars of our growth and all are relevant for our both short-term and midterm growth.

If we move to Slide #7, we can see the geographical split of our 20% growth. And very pleased with the overall performance across all geographies. We had an exceptional growth in the past in Europe. So it was difficult to continue to keep up with the space, but with almost 16% growth. The EMEA region, which is almost 50% of Medacta geographical split [indiscernible] quite a bit at 21.5%. This is basically the U.S. market. And Asia Pacific as well, more than 25% growth, mainly driven by the very strong performance in Australia and in Japan. And then the smallest segment, the Latin America where we are expanding very rapidly, almost 48%. So this is the geographical split. And as you can see, it's very strong performance across all geographies. So we have very well distributed growth across those regions.

If we move to Slide #8, we can see the same 20% growth split across the product lines. And our Hip portfolio grew more than 11%, 11.5%, very good performance in more of a Medacta mature market. The Knee is close to 24% in H1. Extremities 44%, and Spine close to 19%. So once again, extremely pleased with the performance across all the key product lines within Medacta portfolio.

Maybe digging a little bit more into the details on the product portfolio, if we analyze on Slide 9, the double digit growth in Hips, we can mainly attribute this growth to our continued focus on Anterior Minimally Invasive Surgery, which remains a very attractive platform across all our geographies. And in particular of course in our ambulatory surgery segment within the U.S. But at the same time, we've seen another strong acceleration in both [indiscernible] the performance as well. This 11-plus percent growth represent almost 3x the market growth we expect for 2025 full year. So, again, very pleased with this performance.

On slide 10, we can see the notable expansion we have in Knees. And this is very much linked to the overall ecosystem we created around Kinematic Alignment, which is based on our GMK SpheriKA, our new and first KA-optimized implant. It's a very unique design with some features that are unique at the moment in the market. And it is sustained, not only of course by the originality of the implant design, but as well by technology. So our digital platform accounts for almost 40% of our GMK implanted or knees implanted worldwide, and single use instruments. And most important, of course, our medical education associated with this innovative and personalized technique, which is delivering a very good clinical benefit which is becoming more and more well sustained by the scientific literature which is coming out from different sources worldwide.

If we move then to the next slide, the next vertical is Spine, almost 19% year-over-year growth. As we know, Spine is a very, very competitive market with a lot of players, a lot of focus only Spine players. So to outgrow the market more than 5x is definitely a very good performance. We rely on our technology here again, our MySolution ecosystem where with both the MySpine, the 3D printed guides, and the NextAR Spine modules which are clearly driving our success and our ability to be different and add value to our customers through our technologies. And we're very pleased. And this was a very important confirmation that our strategy is actually well-perceived by our customers worldwide. So we had a very good success in EMEA, in APAC, and we are accelerating quite a bit in the U.S. So we are very pleased with that line as well.

Last but not least, with this 44% year-over-year growth is our Extremities segment. This includes both our shoulder arthroplasty as well as our sports medicine segment. The sports medicine of course profited from our very recent acquisition. We mentioned 1.2% of our 20% growth at group level was associated with the Parcus acquisition. This is a U.S.-based company that Medacta acquired late in March. And this excellent acceleration of course is partially driven as well by this contribution. But the core and organic growth remains close to basically 35% year-over-year. So very, very good performance. And testament that the combination of both our arthroplasty with NextAR continues to drive significant market share gain, and our sports medicine strategy starts to gain momentum as well. And this is something we expect to continue in the next semester.

If we move to the Slide 13, we can see a little bit more in details the outlook upgrade, both for 2025 and for the midterm outlook. So for 2025, we have increased our revenue growth guidance from 13% to 15% range now to 16% to 18% in constant currency. And at the same time, given the extra marginality and contribution margin associated with this acceleration, we can forecast an adjusted EBITDA margin of around 28% while previously was 27%. So this is of course before any currency effect. It did not include the recent Parcus acquisition. And of course, if something changes drastically, it is -- remains subject to unforeseen events.

At the same time, we have seen, as I mentioned to you, that some of the verticals are extremely well-accepted in all the geographies. So we feel we are able to upgrade our midterm outlook as well. And in terms of top line, the constant currency revenue growth is expected now to be in a slightly higher and larger range. So low double digit to low teens, so 10% to 14%. And the adjusted EBITDA margin targeted will be around the one of 2025, so 28%. And this is, I think, an important update for all of us.

So the key messages for us for after this first semester 2025 is that Medacta continues to surprise even ourself in terms of the ability to achieve a very, very strong revenue growth close to 20% in constant currency in this H1. This is absolutely linked to the significant innovation that Medacta is introducing in the market. It does introduce it in a very responsible way and effective way through medical education. And this attracts not only new surgeons but as well constantly new salespeople that are expanding our ability to reach the large markets that are still underpenetrated by Medacta. Probably our Knee portfolio or Hip portfolio, which is the largest market share we have is now touching maybe [indiscernible] global market share. So there is still quite a lot of room for growth both in our core lines and even more so in our smaller lines like spine, shoulder, and sports medicine. So our aim, given this success and the ability to further penetrate the market, is to continue to grow significantly above the market for the quarters, semesters and years to come.

Last but not least, I think especially after such a strong performance I would like really to thank all our employees which are going through some growth-related pain, our clients, our suppliers, and [indiscernible] worldwide that are absolutely critical to sustain such a considerable growth. So that's all from my side and will be happy to take any questions.

[Operator Instructions] The first question is from Dylan van Haaften of Stifel.

Congrats on a really solid result. So a couple from my side. So maybe first for you, Francesco. So if we look at the guide, clearly for first half is a very strong result, and the guidance uplift of 300 basis points reflect that. But if we look at the second half, outside of sort of a slightly tougher comp in large joint, how should we be thinking about sequential trends into the second half? And then I've got two follow ups.

Yes. As you said, last year semester was exceptionally strong, especially in the last month of the semester across multiple lines. And if you wanted the very strong result in H1 is somehow a consequence of this acceleration. So we have a very, I would say, a more difficult comp in H2 2025. At the same time, we remain very positive about the trend and the momentum, but a little bit cautious simply because the past performance is not the always the great or the best indicator of future performance, we all know. And so I think 16% to 18% is an exceptional performance in orthopedics as a full year performance. And I think if we can achieve that, I think we will be definitely extremely, extremely pleased.

Can we do a little bit more? I am not sure. That's the guidance we are confident on at the moment. And as I said, I think this is extremely aggressive. I remember at the beginning of this year, 13% to 15% was considered quite aggressive by some investors and myself. So now we're just very pleased with the results and we feel comfortable in adding some top line guidance for 2025 in a very aggressive way.

Perfect. And then maybe moving on to Knee, if we look at the composition of the growth, so how much of that growth is trade-ups from sort of converted kinematic surgeons? Guys that have used the previous iteration of the SpheriKA. And so how many are these new surgeons essentially starting up? That'd be very interesting to know.

Yes, I would say that the growth you see is 99% driven by new surgeons because the pricing premium of GMK SpheriKA over GMK is relatively, it's not significant at all. So this is clearly driven by new surgeons acquisition by far. And I think in H1 you will see on the CapEx side. So the instruments that have been introduced in the market have been significant as well, is absolutely driven by new customer acquisition.

Very clear. And then my final question is just on the EBITDA guide. I know this is a top line print, so I hope you forgive me, but since you upped the guide I'll try anyway. So could you just quantify, not talking about the actual EBITDA number which will come later, but can you just quantify the effective tariff impact you guys have sort of seen per quarter or per semester? And also, help me understand, because I mean, at the face of it, with the FX headwinds and the tariffs, you'd expect maybe to be -- there to be some margin pressure, and you guys are increasing the guide on the adjusted level. So I just want to understand what is kind of driving that. And if you could just help us quantify, just so we can put that into our models for the second half as well.

Yes, I think it is very important to state that all Medacta products at the moment are not impacted by tariffs. So under the Nairobi Protocol, Medacta products are tariff-exempt. But this remains a very important aspect. We've seen some comments and some analysts still ranking Medacta within companies at risk for tariffs. I don't understand it why. But so far we have not been impacted. And the Nairobi Protocol under which Medacta products should not be exposed to tariffs at the moment are somehow of course helping us to further expand our margins. We can go more in details of course in our full year or media results, but that is, I think, a very important clarification point that I'm happy to address. So I forgive you for your question. Actually I thank you for that.

Perfect. So just maybe just one more clarification question. So just on Extremities, could you tell us what the Parcus contribution was and effectively what the pure organic component was in Extremities?

Yes, so if you take the top line, which is 344%, so 1.2% of our growth was associated with the acquisition. So it's basically, let's say, let's call it EUR 3.5 million, EUR 3.6 million. If you now go and look at the Extremities growth, you can see the growth rate. So it probably would've been 35%, 36% pure organic. And this is a combination of our core Medacta Sportsmed products, but the vast majority of it is our Medacta Shoulder arthroplasty system.

The next question is from Sam England of Berenberg.

So the first one's just on Hip, growth obviously stepped up pretty notably in 2024, so just trying to understand if there was any particular geography that performed better than expected here, or whether you did anything particularly notable around sales and marketing to drive the acceleration. And then I suppose, did sort of ASC shift in the U.S. also benefit in Hip as well, given that you called out demand for minimally invasive surgery as a driver in Hip.

And then the second question is just around the decision to upgrade the midterm revenue guidance. I was just wondering whether it was sort of confidence in any particular vertical for the medium term that's changed, or whether it's just the generally strong momentum you're seeing in all product categories that led you to upgrade that guidance.

Yes. So I think we went back to the foundational success of our Hips in many of the new or existing geographies, I would say. So we simply realized that we stopped to sell our core products. And while there are still significant segment of the market which are extremely interested, so if we think about Japan or Australia where Medacta has been somehow selling [indiscernible] so many years, we thought the momentum [indiscernible] we simply restart [indiscernible]. And we are seeing there is still tremendous appetite for the introduction of anterior approach. The same applies to the U.S. with the ASCs, to the European markets, especially in certain areas. If we think about the U.K. or Spain, Medacta is growing faster, but from a smaller base. So they've been much less exposed to anterior approach, and it's a much smaller segment of the market. So there's still a lot of appetite for the Hip as well. So it's not really a [indiscernible] change in the product. It's just a revamping of what we know has been working and this provided a very good [indiscernible] new products as well coming on the Hip side, but I think we can maybe comment about it [indiscernible] September, October once more news about new product introduction will be released.

The ambulatory surgery centers in the U.S. are clearly further expanded. So this a trend that [indiscernible] we are offering there. We are introducing more services in order to help surgeons to drive efficiencies from the 6,000-plus existing ASCs in the U.S. We have seen other companies are focusing more on helping surgeons to build new ones, which is something we do as well. But I think it's much faster and much less capital intensive to help surgeons to further accelerate in a profitable way the transition from hospital to ASCs, and that's where we see a lot of momentum. I believe [indiscernible] your 2 first question, Sam, I don't know if you wanted to -- for me to point out area.

The next question is from Aisyah Noor of Morgan Stanley.

My first one is a little bit similar to Sam's last question. So it's on the midterm guidance upgrade. It wasn't that long ago that you presented to us your 2027 targets. And I remember back at your full year results, you had anticipated a bit of a slowdown going forward. So just curious what changed between now and September to give you this confidence on the durability of your growth? Is it the customer feedback, surge in win rates? If you could quantify any metrics that you're seeing today that leads you to believe the 14% or the top end of that growth rate is achievable out to 2027? Could it include acquisitions, for example? So that's my first question.

My second question, also on the midterm guide, maybe for Corrado. You didn't mention anything on CapEx. Can you just confirm this is unchanged from your prior kind of 5-year average around EUR 300 million? And how are you thinking about the capacity requirements to fund this growth between Switzerland and the U.S.?

And then the third question is on Spine and the 19% growth, which is clearly significantly above market. We know that the market is not growing this fast. So what are you seeing -- what is it about your product portfolio that's resonating with your customers? And where are you taking market share? Is it from traditional procedures or perhaps other augmented reality solutions?

Yes. Thank you, Ayesha. I would say what we have done -- I will take the midterm guidance and the Spine question. I will leave to Corrado the CapEx one, otherwise he is going to relax too much. So the midterm guidance, what we have done is basically based on 2 aspects. We have seen a significant acceleration in the top line. So 10%, 12% was probably correct and very much in line with this 13%, 15%. And we all know that the larger a company becomes, the more challenging is to keep up with the same percentages. At the same time, if we now have a top line, which is between 16% and 18%, there is no reason why we should see this momentum slowing down significantly from this rate down to 10% to 12%. So we felt it was more in line with what we see in the market. Some of the products which are extremely successful in some geographies are not even introduced or available in other geographies simply because of regulatory reason.

If we think about the Knee, just to name one of the key verticals of Medacta, we just got it cleared in Japan. So we start from scratch there. And it's not yet cleared in Australia. Those are 2 examples of where we think and we believe we can [indiscernible] new geographies, the same type of strong momentum we have seen in other markets such as Europe and the U.S. where we have already launched.

We know that our pipeline as well remains strong with some significant add-ons across several verticals, the knees on the technology side, the hips with new implants, new technologies. So we're talking about 2 to 3 years, '25, '26, '27 where we had some good confirmation that our innovation is very well perceived. And we hope and we believe we can continue to see an accelerated growth. So we felt comfortable in increasing the top line range. And of course, we do expect maybe a higher top line in '26 and maybe tapering down in '27. But personally, frankly, I was expecting a slowdown since many, many years, and we are not slowing down, so it's not a problem, very happy with.

The Spine. Spine is another vertical which is doing extremely well, as you said, in a very competitive market that is not growing as fast. Pricing pressure, a lot of competition. I think what is really differentiating Medacta is the combination between implants and technologies, which puts Medacta in a different category despite our size. So we are one of the, let's say, maybe 10 companies that are able to provide implants and technologies at the same time. And this is absolutely critical to differentiate yourself. You enter with NextAR with the optimized rod solution, and then this results in a pull-through across all the product lines. We have some bundled programs which are happy, but it all goes back to the foundational pillars of the growth of Medacta, which is out-of-the-box innovation when it comes to products, meaningful innovation, especially in spine is -- it's not always the case. But if you have meaningful innovation sustained by good medical education, then the results follow. And then, of course, to sustain this growth, the CapEx must follow. But here is maybe when Corrado can give you a little bit of guidance on the ratios between growth and CapEx.

Yes, sure. Thank you, Francesco. Ayesha, this is Corrado speaking. So you're right, we didn't touch the CapEx, but basically we don't guide on CapEx. But what I can say is that the ratio that we mentioned several times in the past, which is basically EUR 1 of additional revenue, EUR 1 of CapEx, is more or less confirmed. There could be some variability in these numbers driven by exceptional investments, for example, now with the buildings, with the expansion of our production facilities. But basically this is a ratio that it is confirmed.

As always, the biggest chunk of our CapEx is composed by instruments. And as Francesco said, since we are having a lot of new surgeons, you will see again a big number in terms of CapEx for new instruments. This is basically confirmed. And we expect this not to change over the next years.

Back to the point that the ability of the company to fund this CapEx, I would say, definitely yes. The cash flow generated from our operating activities is really robust. And if you take the numbers also of the past, you will see that we are able to self-finance all the investments we need to sustain even this very strong growth rate. So this is more or less the, let's say, the ordinary picture. The leverage is very low. So even in a case where we would be not able -- and it is not the case, but not able to finance the CapEx amount with the cash flow from operating activities, the very low leverage will give us, in any case, room to expand the debt and again, to finance this CapEx. But this is not the case, and we don't think it's the case for the -- will be the case for the next years.

The next question is from Daniel Jelovcan of ZKB.

Two questions. The first one is focused on the Hip. So you didn't mention -- you mentioned outstanding growth in North America and APAC. So obviously, the question is EMEA was obviously below that. Was there any reason? Or it's just because probably your market share in Hip is already significantly stronger than in other regions?

And then when I look at the results of Stryker, which is probably the gold standard, but I mean, they grew 14.1% in the first quarter in hips in constant currencies, and [indiscernible] report tonight second quarter, don't misunderstand, but they are much bigger and you grew 11.5%, which is also much better than the market. But the question is, could you grow more like Stryker with your size? Or I mean, I think you know how I mean the question. First one.

Yes. Thank you for the question, Daniel. I think I will be happy to grow as much as Stryker in the Hip organically. I don't believe it was fully organic

[Audio Gap]

comment eventually on that number. But I believe Stryker is a very good company. They're doing an excellent job, and they are definitely significantly smaller in hips versus knees. And I believe their programs of bundling as much as they can is helping them. They're doing a great job. And that's what it is. I don't mind how they grow, I do care about how we grow, and we're very happy about this 11-point-something percent. If you look at Johnson & Johnson, which is another very large, very competitive company, they had significantly growth in Q2. We will see, actually tomorrow, I believe in the next days, everybody else will publish their own results, and we will be able to compare. But I'm sure that we are taking significantly -- significant market share.

And I am even more confident that with the new products and new technologies that we are introducing on the Hip side, we can even further accelerate our market penetration in U.S., in Australia, in Japan and as well in Europe, where you correctly said we have already a very significant market share in certain markets. We are around 20% in Switzerland. We're #1 in Austria. We have more than 10% in France. So of course, to keep up with those rates in Europe is a little bit more challenging, but we're very happy with the overall results.

And last question, do you know your Medicare exposure indirectly, of course, in the U.S.? How many patients are reimbursed by Medicare? Or is that a number [indiscernible] you don't have, but probably you have, but that would be interesting, especially when the blonde gentleman in Washington is doing another move.

Yes. Yes. So the -- let's say, Medacta patient population reflects the one of the U.S. market in the orthopedic space, I would say it's probably around 70% Medicare, 30% private. And this is the market, and the same applies to Medacta.

And is there any risk of cut? I mean, it's politically very difficult, I guess, but yes, I mean, how would you react?

I would say with the current president, there are many risks. And we will handle those situation as soon as they come. I would say when there are problems, there are always opportunities. Cuts in the Medicare hospital base will potentially create further acceleration in the ASC segment. The hospital will probably start to look more and more about efficiencies and offers that are sustainable under an health care system point of view, which is exactly our view. And we know we are extremely successful in very difficult markets like many European markets, and we know we can be extremely competitive, actually even more competitive than our larger U.S.-based company. So we will adjust faster and better if it comes. So I'm really not particularly concerned about any potential change. And as you said, this is always a big challenge when there are cuts in the health care system under a political point of view. So we will see what can [indiscernible].

Congrats as well to this great semester.

The next question is from Graham Doyle of UBS.

Can I just ask one question on the tariff point. It's quite an interesting point you make on Nairobi. I've just spoken with the other ortho peers, and they're not -- they're assuming they're not exempt, and but that might be on slightly like older information. So have you got legal clarification that's the case? And is that the way you fully expect to be for the remainder of this year? It would be good to get a little bit of a better understanding on that, please.

Yes. So -- yes, the [indiscernible].

Sorry, the line is quite bad. I don't know if you could -- we can't hear you.

You hear me well?

I think we can hear you. You're just cutting in and out a little bit.

Yes. So I was saying we just -- we received 2 independent [indiscernible] products within [indiscernible] in the U.S. Go ahead.

Sorry, Francesca, I think I'm getting from a couple of other people as well. I think you keep cutting in and out on your line. It's okay. I can speak to you after the call. That might be easier.

Francesco, can you repeat, please? Can you repeat once more the answer, please? The line was cut for some reason.

Yes. Anja, your line is good, yes.

So maybe, Anja, you can repeat, or Corrado. I mean [indiscernible] the situation, so.

Yes. Basically, we had just a confirmation from 2 independent law firms in the U.S., and they both confirm that our products are definitely falling into the categories treated and mentioned in the Nairobi Protocol. This is something which is clearly, I would say, understood and accepted in this sector. This is our understanding. But we are 100% sure that our products are not subject to tariffs.

Okay. No, that's very clear. As I say we might hear more from the other companies over the next few days and next week. It's just that there -- certainly the previous guidance that they have out is assuming that they are not exempt. So it's good you got that independent clarification.

[Operator Instructions] Mr. Siccardi, there are no more questions registered at this time.

Thank you then, everybody, for your time, and I look forward to speak to you all in September for our midyear results. Thanks a lot, everybody, and enjoy the summer.

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