Good morning and welcome to the Carl Meditec AG Analyst Conference regarding the nine months 2024-2025 results. At this time, all participants have been placed on the listen-only mode. The floor will be open for your questions following the presentation. Let me now turn the floor over to Sebastian Frericks, Head of Investor Relations.
Good morning, ladies and gentlemen, and welcome to our Nine-Month 2024-2025 Analyst Conference Call. I'm Sebastian, I'm the Head of Investor Relations of Carl Zeiss Meditec , and with me today are our CEO, Maximilian Foerst, and our CFO, Justus Wehmer. They will present you the prepared remarks on the nine-month results, and we are happy to discuss some strategic topics and look forward to the Q&A session with you. With no further ado, I'd like to hand it over to you, Max. Please go ahead.
Thanks, Sebastian. Ladies and gentlemen, good morning, and it's really my pleasure to welcome you to our Nine-Month 2024-2025 Analyst Conference of Carl Zeiss Meditec AG. Let's start with a brief look at today's agenda. It will begin with an overview of the group results. Then, Justus will provide more insights into the financials, and we'll also cover some key points, including a high-level assessment of where Carl Zeiss Meditec currently stands, the status and growth opportunities in our attractive business, and D.O.R.C. integration, and some recent innovation highlights. I will then conclude with our outlook for the fiscal year 2024-2025, and following the presentation, we'll open the floor to questions. First of all, I'm pleased to report a strong order entry, solid gross revenue, and a slight increase in EBITDA in the first nine months. Orders reached EUR 1.7 billion, marking a 23% increase.
FX-adjusted gross was in the same range. Even after adjusting for FX and acquisitions, orders rose by 16%, reflecting a robust growth trend in orders across all regions. Order backlog stood at EUR 431 million, further elevated compared to the end of Q2. Revenue reached EUR 1.6 billion, an increase of 8% compared to prior year. FX-adjusted revenue grew at a similar level, with FX and acquisition adjusted revenues slightly above previous year. Q3 alone also showed organic growth, with revenue up 2% at constant currency, plus 3%. Recurring revenue is at an all-time high, accounting for 51% of our total revenue. We made good progress on both new product launches during Q3. The VISUMAX 800 rollout in China began in March, with the first placements in May, and by the end of June, already over 50 devices had been installed, with a total order book of over 100 units.
SMILE Pro 2 has been gaining increased relevance in the market, supported by excellent clinical results and highly positive customer feedback. The KINEVO 900 S, which had a slow start early in the year, showed increased deliveries in Q3 and has a strong open order book. Most of the production constraints and some earlier software quality issues have been fixed by now. We expect momentum to accelerate significantly in Q4. After a strong winter peak in refractive procedures during Q2, the market in China softened again in Q3, showing a decline in underlying consumption. However, volumes still remain slightly ahead of last year's level on a year-to-year basis. EBITDA came in at EUR 175 million, up 3% compared to the previous year, despite headwinds such as the impacts of U.S. tariffs and weaker FX rates. Note also that last year's figures included a one-off EUR 18 million gain from the Topcon settlement.
In Q3, U.S. tariffs had a mid-single-digit euro bottom line impact. Although new pricing was introduced at the beginning of July, targeting a 10% U.S. tariff level, most of the order backlog is still at pre-adjusted prices, meaning the P&L impact of the new pricing will only begin to materialize in September and October and does not fully capture the 15% burden just yet. In other words, we anticipate an additional tariff burden in Q4, but are quite confident we can mostly pass it on into the market for the rest of the next fiscal year. EBITDA margin was at 11%, moderately below last year's 11.4%. Adjusted EBITDA margin, however, improved to 11.1%, up from the previous year's 10.2%. This positive development was driven by the D.O.R.C. consolidation, growth in the refractive segment, and strict cost control, despite pressures in the equipment business segment.
Now I'd like to hand over to Justus for a deeper dive into the financials and SBU figures.
Yeah, thank you. Thank you, Max. Good morning. Welcome also from my side. Now I'm going to give you a more detailed overview, starting with the performance of the SBU of Ophthalmology. We achieved EUR 1,251,000,000 revenue in the first nine months, representing a +9% increase at constant currency, +10%. Adjusted for currency and acquisition, revenue remained slightly positive. In Q3, we saw only moderate growth due primarily to relatively higher comps and foreign exchange headwinds. Looking at the nine-month period, the D.O.R.C. consolidation has been a key contributor to top-line growth. In China, we continued to see solid volume growth in our IOLs, while refractive consumables showed slight growth year to date, despite a softer performance in Q3. As we discussed in the last earnings call, refractive procedures linked to military enrollment in China drove Q2 results.
In Q3, the summer peak so far came in a bit below last year. We believe this is mainly to be phasing of military demand, but also continue to observe a weak consumer climate. Importantly, the Chinese market continues to favor premium procedures. SMILE Pro is commanding top-tier pricing, thanks to strong clinical results and clear technological differentiation. We've seen recent commentary from China-listed hospitals expressing positive sentiment about the ASP uplift and the broader premium market trend, driven in part by SMILE Pro. Despite the decline in procedure volume during Q3, we haven't seen trade downtrends anymore. Overall, procedures prices in the market remain pretty stable. In our own mix, in the recent months, SMILE and SMILE Pro have been picking up now to slightly above 70%.
As Max mentioned earlier, the VISUMAX 800 installed base has already surpassed 50 units in Q3, and we are on track to ramp that up to probably somewhere around 100 units in China by the end of the fiscal year. Overall, the refractive market in China continues to reflect broader macroeconomic conditions, which remain cautious. We'll continue to closely monitor the latest trends. EBITDA margin has seen an improvement of +1.6 percentage points, reaching 10.6% compared to 9% last year. D.O.R.C. consolidation, growth in refractive consumables business, and cost saving in OpEx, including lower R&D and lower D.O.R.C. integration costs, were accretive to this improvement. In terms of revenue split, Ophthalmology contributes 78% of total revenue. Within Ophthalmology, recurring revenue now accounts for 60%. Microsurgery sales recorded EUR 349 million, a +1.6% increase year- over- year, similarly at constant currency base.
Top line grew +10% during Q3, at constant currency +12%, with even stronger order entry. The Neurosurgery business continues to remain soft, largely due to the ongoing product cycle transition to the KINEVO 900 S. Deliveries of the new system are progressing in a favorable direction, and we expect it to contribute more meaningfully to the top line going forward. The EBITDA margin, however, declined to 12.3%, down -7.3 percentage points from last year's 19.6%. This contraction was mainly driven by an unfavorable product mix, with the high margin neurosurgical category still much weaker than last year amid the new product transition period. In addition, U.S. tariffs and adverse foreign exchange rates added further pressure on both the gross and EBITDA margin. OpEx was higher due to increased marketing and higher IT expenses. In terms of revenue split, Microsurgery accounts for 22% of our total revenue.
Within this, 19% comes from recurring revenue streams such as service contracts, drapes, and instruments. Let's look at the regional development. Top line growth was recorded across all regions, and order entry growth was even stronger. Revenue in the Americas reached EUR 407 million, marking a 15% increase compared to last year. At constant currency, growth was +15%. The increase was mainly driven by the consolidation of D.O.R.C. as well as organic growth. Revenue for EMEA reached EUR 483 million, up 12% at constant currency, +13%. Excluding the D.O.R.C. contribution, revenue would have shown a slight decline compared to a strong prior year. Solid underlying growth in core markets such as Germany, UK, and Nordics contributed positively. Revenue for Asia-Pacific grew +2%, reaching EUR 710 million. The positive trend continued in Southeast Asia and India. China and South Korea remained stable, though Japan was below the prior year's level.
Let's have a look at the P&L lines. Gross margin with 52.7% was slightly below previous year's level due to unfavorable product mix, including volume-based purchase-related price cuts in IOLs and softer neurosurgery business amid the transitionary period. Excluding the D.O.R.C. consolidation, underlying OpEx were down by around EUR 18 million year- over- year as a result of cost control. This reduction was mainly driven by lower R&D expenses and lower D.O.R.C. integration costs. The underlying OPEX ratio came down by -0.3 percentage points. Administrative expenses increased due to the consolidation and rising IT expenses related primarily to our ongoing SAP investment. All in all, EBITDA was moderately up as a result. Net income declined from EUR 108 million to EUR 89 million, and earnings per share from EUR 1.32 to EUR 1.02, a -24% drop compared to last year.
This was driven by a lower reported EBIT, including the amortization of intangible assets from purchase price allocations and negative financial results, including negative foreign exchange hedging results and lower interest income. Finally, adjusted earnings per share came in at EUR 1.24, down -8% year-over-year. The adjusted figure excludes non-cash valuation effects on contingent purchase price liabilities in the financial result. As a reminder, the foreign exchange hedging result remains unadjusted as it should offset over time with foreign exchange influence on operating results. This table now provides a brief overview of the bridge from EBIT to EBITDA and to adjusted EBITDA. Regular amortization on intangible assets from purchase price allocations amounted to EUR 22.3 million in the first nine months, including D.O.R.C. effects of EUR 19.8 million and smaller effects from former acquisitions.
As for other special items, last year primarily contained a one-off gain of EUR 18 million from the Topcon settlement. Stripping out the special items, adjusted EBITDA amounted to EUR 178 million, a +17% increase. The adjusted EBITDA margin rose to 11.1%, slightly up from 10.2% last year. Now a quick overview on the cash flow statement. For the first nine months, operating cash flow increased to EUR 66 million compared to EUR 57 million last year. This increase was mainly driven by lower tax payments, despite a rise in working capital. Investing cash flow rose to EUR 8 million, driven by a decline in treasury receivables, while lower CapEx investment in the first nine months, both tangible and intangible CapEx together represented 3.6% of revenue. Last year's outflow was primarily related to the D.O.R.C. acquisition. Financing cash flow declined to EUR -58 million, mainly due to the dividend payout.
Partially offset by an increase in treasury payables, last year's inflow was primarily related to the shareholder loan for the D.O.R.C. acquisition. By the end of the first nine months, net financial debt remained at EUR 384 million, slightly down from the prior year level, which is mainly refinanced through a shareholder loan from the parent company. With that, I'll hand it over back to you, Max.
Thank you, Justus. Now let me make a few comments on my view on Carl Zeiss Meditec AG after having transitioned into the CEO role. In the last couple of months, I visited our key sites and talked to our teams. First and foremost, I will say that this current fiscal year has turned out to be quite a difficult one, as had been expected when we first gave our forecast. However, the strong recovery in order entry and successful launch of major new products I see as important progress in bringing our business back on track. It is my near-term priority to bring this fiscal year over the finish line in a good way, but this requires still quite some attention. Let me also make a few comments on my agenda for the next fiscal year and beyond.
I am still intensely focused on the run-up to the fiscal year end. It will be a high-level overview at this point. We will then go in to present it to you in a more detailed agenda again at the time of our full-year results in December. Now let's move into the key topics. I'd like to provide more insights into our strategic focus, highlight our position in refractive, comment on the opportunities and status in connection with D.O.R.C., and provide updates on the progress of several other products. First of all, Carl Zeiss Meditec operates in highly attractive markets, supported by powerful long-term trends such as the aging population, the worldwide surge in myopia among young people, and the more active lifestyle of older people and their willingness to invest in their own quality of life.
We also benefit from the expansion of healthcare coverage in underserved regions and categories, such as in our cataract and retina business. There are, of course, also headwinds that affect us as well as the rest of the industry. That will be quite familiar to you. Most notably, the geopolitical conflicts and trade wars, increasing regulation and consolidation, and more low-cost players. I'm convinced that Carl Zeiss Meditec has exactly the right strategy, and our workflow approach leads to a sustainable gain in recurring business and high-value consumables and services, which will be accretive to our profitability. That said, we need to really make the most of our big growth opportunities. We have the strongest brand in ophthalmology, both in B2B as well as in the consumer-facing products.
We need to make the most of it, and one of my key priorities will be to improve the commercial access to local markets where our presence is varying across countries and regions and where we have many untapped or not fully developed opportunities. The product portfolio we have today is very strong, and we can get more out of it, and the innovation pipeline is very well-filled for the next few years. I am particularly confident about the midterm outlook for our refractive business, and I'll give you some reasons why in a moment. We have the market and innovation leadership in China as well as globally. Outside of China, our growth opportunities remain huge. Even though the economic cycle has been a headwind lately, our market shares are performing strongly, and the VISUMAX 800 cycle will carry us a lot further.
Similarly, there is a big opportunity in leveraging the D.O.R.C. portfolio to its full potential, especially by bringing D.O.R.C. to key markets. In order to execute, we will need to be highly focused on our company's need to be agile. The work on increasing R&D productivity will continue and be refined, always with an eye on the customer and their needs. Looking at our operations footprint, we can make it more efficient. As a result of acquisitions and of running sites in a very decentralized way, we have way too many production sites around the world today. My ambition is to return the company to market-beating revenue growth. In the strong categories such as refractive and surgical, we need to increase targeted investments in order to drive faster growth and improve local market access.
However, we will find ways to further trim expenses in the weaker areas to secure our midterm profitability targets, applying tight expense control where needed. Moving to refractive and in light of recent and upcoming product approvals, I'd like to first address some recent concerns about the competitive landscape in the China refractive market. I'd like to share my view on ZEISS's strategic position and long-term competitiveness in this market. First of all, China continues to be a powerhouse in refractive surgery, accounting for at least 50% of global procedures, which are estimated at 5- 6 million annually. Zeiss holds a strong position here, capturing at least 50% of the Chinese refractive market, especially through our SMILE, SMILE Pro, and LASIK platforms. This share has actually gone up slightly throughout the downturn of the last two years. We've observed a few developments on the competitive front.
A Chinese local brand introduced its own phakic IOL, while a German company recently received regulatory approval for the flap cupping option of its full femtosecond laser platform. In addition, a couple of other companies are currently in the pipeline seeking approval for lenticular extraction-based solutions, including a Chinese player. None of these does yet have a significant impact on the market, and because we can roll out VISUMAX 800 largely before these competitive impacts will become noticeable, we remain in a favorable competitive position. Besides still having the most advanced products, our competitive strength is reinforced by our strong brand recognition. According to a global ZEISS survey, our brand awareness in China stands at 72%, even higher than in Germany and far above the global average. Strategically, ZEISS remains the only total solution provider in the market, supporting clinical applications, procedure development consulting, education, and social engagement.
We are also the only company offering a full range of surgical platforms. Not to mention, we pioneered the evidence-based guidelines for lenticular extraction procedures. For over a decade, we have consistently served the market with a highly dedicated team and exceptional execution capabilities. Our offering is well-segmented to serve a wide range of patient budgets, from RMB 14,000 for LASIK to above RMB 25,000 for SMILE Pro. Notably, SMILE Pro continues to gain traction in the premium market, offering advanced outcomes and strong acceptance from both doctors and patients. Innovation is the core. We are marketing broader applications such as PRESBYOND for presbyopia and SMILE Pro for hyperopia. Our unique ZEISS refractive workflow covers the entire patient journey. Nobody will have such a wide application spectrum anytime soon.
From patient education, planning, treatment, to result analysis, it all contributes to more precise outcomes and adds further value to both surgeons and patients. We are committed to advancing the frontiers of technology in this space. In this context, I'm confident for China to continue to do well. As to where the fastest growth will come from in the future, I would, however, mainly point to outside China market opportunities. So far, much of our discussion around the refractive business has centered on China, but now let's shift our focus to opportunities beyond China. Over the past 10 years, ZEISS procedures have grown at over 20% CAGR, significantly outperforming the mid-single-digit growth of the global market. This map illustrates the market shares of ZEISS procedures in key countries, as well as the rollout progress of VISUMAX 800 by region.
Outside of China, we've also seen strong market penetration in South Korea and Southeast Asia, where Zeiss holds a solid position. Some of the market data in this latter part of the world is of lower quality, but we'll continue to see significant upsides, both through market expansion as well as share gains. There's still room for growth in large markets like India and the United States, where our market share remains comparatively low. In markets such as Japan, the refractive market remains largely untapped for us. Also, our share in EMEA is just above 20%, despite having strong relations with many KOLs, mainly due to slow turnover of the existing installed base.
There are some signs of a pickup with VISUMAX 800, and given current myopia trends and improving patient education, it's only a matter of time for this market to grow and our share to benefit likewise, as we have the most modern product offering. All of this underscores one thing: there's still substantial growth potential in these markets. On the other hand, we've made strong progress with the global rollout of VISUMAX 800. As of now, it makes around 20% of the global installed base of around 2,500 units. In China alone, from March to June this year, in only four months, we've placed over 50 devices, and SMILE Pro has passed 10,000 procedures. This also reflected our product mix shift. SMILE Pro now takes up 18% of total procedure volume, a strong sign of premiumization. By regions, VISUMAX 800 launch in EMEA was most advanced.
Its installed base already accounts for approximately 40% of all VISUMAX. This ratio in Americas is around 20%, and in APAC, still below 15%. Strategically, we'll continue to focus on underpenetrated markets, accelerate VISUMAX 800 rollout, and expand into broader applications like presbyopia and hyperopia. We are confident that the continued rollout of VISUMAX 800 will further strengthen ZEISS's market position in the years ahead. The slide highlights the strong performance of D.O.R.C. in the reporting period and outlines both the integration progress and strategic roadmap ahead. First, D.O.R.C. was a solid contributor to the group's growth for the first nine months, delivering profitable growth well above the group average. We've seen a strong expansion in the commercial funnel, thanks to effective integration of the sales force and rising customer demand, especially for EVA NEXUS.
I can share with you that most of our KOLs and customers across the board are very excited about the combined offering of ZEISS and D.O.R.C. and instantly understand the value and innovation we can bring to the market. In APAC, interest has surged. Although APAC currently accounts for only about 10% of D.O.R.C.'s revenue, distributor access has greatly increased this year, indicating strong future potential in this key market. Now, looking at the near-term integration targets, we're working to increase the installed base of EVA NEXUS, especially in high-potential dual accounts in vitrectomy. We're also capturing strong sustained market demand with a focus on increasing market share across all regions. A key focus is expanding regional coverage, particularly in underpenetrated markets in APAC, with Japan and China as top priorities. To support this momentum, we're also working to boost supply robustness and scale capacity accordingly.
Looking ahead, we have a clear roadmap in place. We plan to leverage our strong market position in the OPMI segment to further drive the growth of EVA NEXUS. At the same time, we already set a joint innovation roadmap in motion, which will help us further differentiate our product offering in the market. Ultimately, we want D.O.R.C. to upgrow the market sustainably and profitably. Let's take a moment now to highlight some of the recent achievements across our portfolio, reflecting our ongoing commitment to innovation and excellence in medical technology. First, we're proud to share that VISUMAX has been awarded the prestigious Berhold Leibinger Innovationspreis . This award recognizes outstanding advancements in laser technology. VISUMAX, along with SMILE, has transformed minimally invasive eye surgery for delivering high-precision computer-controlled laser treatment. To date, this method has been used to treat over 10 million eyes worldwide.
Next, D.O.R.C.'s ILM- Blue received NMPA approval in China. This product helps surgeons visualize and safely remove the inner limiting membranes during vitrectomy procedures. This approval marks ILM- Blue as the first D.O.R.C. posterior dye available in China, with over 900 procedures performed globally. Moving to Microsurgery, the PENTERO 800 S has received NMPA approval in China. This system is specifically engineered to meet the demanding requirements of neurosurgery, spine surgery, plastic and reconstructive procedures, as well as ENT surgery. What makes this especially significant is that it's the first high-end microscope developed and manufactured locally in China. This achievement marks a major milestone in the localization of advanced medical equipment, underscoring our commitment to innovation and long-term growth in the Chinese healthcare market. Finally, we've reached a major milestone in cataract care. Over 2 million cataract surgeries now plan to use the ZEISS VERACITY Surgery Planner.
This digital solution enables U.S. clinics and operation rooms to make data-driven decisions, improving patient outcomes. It also reduced time spent per eye by up to 60% compared to traditional paper planning, a massive efficiency gain. Together, these milestones underscore our strategic focus on innovation, global access, and improving clinical outcomes through technology. Now let me talk to you about the guidance for the fiscal year 2024-2025. This is unchanged from the last quarter. For the fiscal year 2024-2025, guidance will remain unchanged. Revenue is expected to show moderate growth, driven by the stabilization of recent order intake and the full-year consolidation of D.O.R.C.. The amount of organic growth will depend heavily on macro conditions. EBITDA and EBITDA margin will develop stable to slightly higher compared to the prior year.
It is encouraging that we are slightly higher on EBITDA at the nine-month level, while we have a solid order backlog. As aforementioned, U.S. tariffs had a mid-single-digit million euro impact during Q3. As we have implemented pricing measures for the U.S. market as of July 1, the large order backlog still needs some time to clear. Also, as the new pricing will begin to materialize in September, we expect a similar level of tariff-related margin erosion in Q4. The introduction of 15% trade tariffs by the U.S. on imports from Europe is impacting earnings in the current fiscal year. Through targeted pricing strategies, these effects are largely intended to be passed on to the market following the initial price adjustment on July 1. We are evaluating traditional features measured to further mitigate the impact. The next round of adjustment is scheduled to take effect in the next fiscal year.
For the remainder of the year, a further depreciation, particularly of the U.S. dollar and Asian currencies, has not been factored into the forecast and represents an additional risk. Cost discipline will remain in place. It's encouraging to see the underlying reduction in OpEx as the business returns to growth. For the long term, a gradual EBITDA margin increase is targeted in subsequent years, supported by growth in recurring revenue streams. Sustainable potential for EBITDA margin is seen in the range of at least 16%- 20%. Lastly, before we go into our questions, and since I am speaking to you for the first time as CEO of Carl Zeiss Meditec , please allow me to make a comment about the share price. I feel very strongly that at this current level, it does not reflect the true value of the company.
I understand that there are, of course, reasons, chief among them the decline in our profitability over the last couple of years, of why we are trading at seven to eight-year lows in terms of revenue multiples and far below some of our competitors in ophthalmology. For the future outlook of the company, however, that represents an opportunity that by turning around profit margins and revitalizing growth, we have what I believe is a significant valuation upside. Let me reassure that I will work hard on that turnaround and on delivering that opportunity to shareholders. This is, of course, with the full support of the ZEISS Group, for whom the listing of Meditec continues to be of high importance. Therefore, we take very seriously the shareholder feedback about the governance processes, as well as the relationship with the Carl ZEISS Group and executive compensation.
I am also open to considering further capital returns in the future. If our financial situation allows for it, this will be weighed against the M&A pipeline and investment needs for the business to be sure. Currently, there are more constraints than we used to be because of the D.O.R.C. acquisition. As our earning power grows and free cash generation grows, we will have more options at our disposal. Lastly, let me thank those of you listening who are shareholders and long-term owners of the company for the patience and trust you have placed in Carl Zeiss Meditec. I will work hard on your behalf. I look forward to the dialogue with you. Thank you.
Thank you very much, and I'll hand back up to the operator for the Q&A session.
Thank you very much. Ladies and gentlemen, if you would like to ask a question, please press 9 and star on your telephone keypad. In case you wish to withdraw your question, please press 3 and star. Please press 9 and star to register for a question. One moment for the first question, please. First up is Jack Reynolds-Clark from RBC Capital Markets. Over to you.
Hi, there. Thank you for taking the questions. A couple from me, please. First, how are you seeing refractive surgery volumes in China progressing so far in Q4? Then, kind of following on from that, what are you hearing from customers about the outlook for procedures into next year? I appreciate your order book looking strong as well across the rest of the business. If China refractive surgeries do remain challenged into next year, can you give an indication of how you expect sales across the rest of the business to develop? On the ex-China refractive opportunities, which markets do you see the quickest wins? What do you need to do to drive growth in these markets? What timeframes are you looking at there? Thank you.
Okay, thanks a lot for the question. I'll take those, Jack. First of all, how do I see refractive surgery procedures moving along in the end of this fiscal year? Basically, what we are seeing is after a strong Q2, which was driven very much by the military topic, we've had a slowdown in the market. This slowdown has now moved into what I would say is a lower summer peak than usual. We are confident on a stabilization in the market in basically August and September. What's important to see here is actually in this environment, we've actually been gaining market share. If we want to look further in the future, I think the real indicator will be consumer confidence in China and how this continues. To be very honest, there's a lot of uncertainty. What we do see is a bottoming out of the market.
The very good news, I would say, is the price reductions we had seen in the last months have now stopped. The players in the market are really looking at premiumization of protecting their margins. This is why we're seeing a very good uptake and drive of our VISUMAX 800, which fits perfectly into the strategy. Over the next fiscal years, I would say we will see a stable market in refractive surgery in China, not a further decline, but we will only see a substantial uptake when really consumer confidence comes back into the market. This brings me to your last topic. In our planning today, we are looking at growth and growth of markets actually outside of refractive in China. Clearly here, I see substantial opportunity in other markets.
I would like to name here beyond, how should I say, Southeast Asia, in particular Japan, where we have been historically very underrepresented, but traditionally is a market with strong potential for refractive surgery. Also India, where we have quite a big market in low price, but where we have an opportunity to rebuild this market. These would be my comments on your questions.
Sorry, just to follow up on the ex-China refractive opportunities, what do you need to do from an organizational perspective to drive that growth? What timeframes would you expect those to come through? Thank you.
It varies very much from different markets because of situations in terms of approvals. We are now entering into a very hot phase in Japan where we can really actually start launching SMILE and VISUMAX 800, which was not possible in the last years because we've received approval. Here we are in the process of actually building up our capability in the team and finding the right partners with whom to work to drive the market. In India, it's a different topic. We've been approved here. It's more of working together with the local sales organization to drive up and launch, how should I say, more of a commercial program.
I'll be very honest to you, this will be part of the strategy for Carl Zeiss Meditec t o have a much stronger focus, as I was saying earlier, on commercialization, supporting our distribution network, and also reaching out to end consumers, in particular in the elective procedures, which you see, such as the case of refractive surgery.
Super clear. Thanks very much.
Next up is Oliver Reinberg from Kepler Cheuvreux. Over to you.
Yeah, good morning. Oliver Reinberg from Kepler Cheuvreux. Three questions if I may. Firstly, just in China, can you just specify what volume you have seen just in the summer treatment period so far? Also, given the kind of muted consumer sentiment, what do you actually see currently in terms of willingness to buy VISUMAX 800, given summer comes to an end, Chinese news is still sometimes out? Are orders still really coming in in China for this kind of product range? Question number two, just in currencies. Can you specify current spot rates? Are they embedded in the guidance, or will the guidance be at risk if spot rates do not change? Also, if these current spot rates remain unchanged, can you just give us any kind of flavor of what the earnings headwind will be for 2026, please? Thank you.
Okay, thanks a lot. I'll take the first part of the question, and then I'll hand over to Justus concerning the exchange rate. Back to your question, what we've seen in the last months is actually after a strong winter peak, we had a much softer summer peak. Traditionally, I think there's been a transfer from treatments to the winter peak from the summer peak because of the change in the military uptake regulation. We see actually negative growth in the market of refractive surgery on the summer peaks, on the summer months. We will expect an improvement in August and September as there is a second level of uptake for militaries coming in. We expect, as I was saying, in August and September compared to prior year to have the same number of treatments in the total market. In this market environment, different players have reacted differently.
We have actually seen that we are growing faster than the market and have been gaining market share. Most of the other players have actually lost market share. This is back to, and it comes to the second part of your question, what we've seen in the last two years in the Chinese market is as consumption slowed down, there was intensified competition between our customers, which led to price erosion of the procedure in the market. Now we've clearly seen a shift in the market where the players in the market, I'm talking about our customers here, are really trying to support the prices of the procedure in the market and are looking at opportunities on how they can regain and rebuild the pricing in the market.
This is where actually our VISUMAX 800 comes in very, very nicely, and we are really working together on our customers on the price positioning of the procedure to rebuild their margin. This is coming very successfully. As I was saying earlier in the call, if you look at it in the China market, we launched in May. By the end of June, we've already done 50 installations, all among our key customers. The return has been very positive. They've managed to generate the pricing reach which they wanted to have. We have orders coming in very nicely, and our expectation now is to be hitting about 100 installs by the end of the fiscal year. I hope that answers your question.
Thanks so much.
Yeah, Oliver, Justus here. On your question on the foreign exchange impact, just to give you a bit of flavor, we are currently seeing for the second half of the year foreign exchange impact on the top line in the low double-digit million euro amount and somewhat lower, but also double-digit million bottom line impact. That is considering current spot rates. That is also, by the way, the reason why we are cautious in terms of our guidance and are currently rather seeing that we are coming in at the lower end of the guidance, which means basically a rather stable EBIT and not a slight growth as we had in our earlier projections. Anything beyond that in terms of devaluation of the U.S. dollar would, especially U.S. dollar, but obviously also other currencies, that would come basically as an additional risk.
For the next year, we are, for our models, working on the current rates, roughly EUR 1.15 for the U.S. dollar as the base assumption. Again, it remains to be seen whether this is going to be confirmed then in the next year as being a reasonable assumption, but it is what it is right now, and with that, we are working. Does that help you?
It does, but do you have any kind of flavor? I mean, it's obviously the U.S. dollar, also the kind of Chinese currency at current spot rates. What is the headwind to EBITDA for next year from an analyzation perspective? Any idea?
Frankly, too early to tell. I think, Oliver, let's take that question with the December discussions. Right now, I'm not yet really fully having everything basically in front of me to answer that question.
Thanks very much indeed.
Welcome.
Next up is Oliver Metzger from ODDO BHF.
Yeah, good morning. Thanks a lot for taking my questions. The first one is on microsurgery. You reported still weak neurosurgical volume. Just as an update for us, do you see still it's the clinic CapEx, it's the interest rates, which factors do you regard as reasons for a major headwind? Second, you highlighted in your market overview that some low-cost players, competition has arised. Could you be more specific how the dynamics have changed over the last two years in your view? Finally, we saw a few days ago the takeover of STAAR Surgical by Alcon. What's your view about the competitive dynamics?
Okay, thanks. Quite a few questions. I'll take them one by one. In terms of the MCS, I think if we look at the trend, we launched two very nice products globally, the KINEVO 900 S and the PENTARO 800 S. If we're honest, in many cases, the uptake at the start was slow, particularly in delivery. This was more for internal reasons of the company rather than market reasons. I'll be very honest here. We had some quality issues on the software side, which slowed down our ability to launch at the speed which we wanted to do so. That explains to a certain extent the slowness. What we're seeing now in the developments is actually order entry is really very, very positive and going in the right direction. Now we're really in the process of ramping up our capability to deliver.
In a way, I think it's not a market-driven topic. The slowness came actually from internal topics, and we have solved most of them right now and already kind of back on track at that level. That's concerning the MCS topic. In terms of low-cost players, the topic of low-cost players is in particular something which we are experiencing in China, and then to a lesser extent also a bit in India. I would say in India, this is nothing really new, whereas in China, what we're seeing is a very potent mix of not only low cost, but also very decent technology. I think we're seeing this through the complete medical industry. This is not specific to ophthalmology. If we now look more specifically on our product lines, there's been quite a lot of discussion and chatter on different Chinese companies.
I would differentiate between intraocular lenses and refractive surgery. Very clearly in the intraocular lens space, the Chinese manufacturers have entered the market and are doing so quite actively. You see this across the complete range of IOLs. Here, it's less of a cost topic because the prices are regulated. Fundamentally, we're all working within the same pricing environment. In refractive surgery, we see now plans of Chinese startups coming with potential products in the refractive surgery market. There are even some which are working on lenticular extraction. I am only mildly concerned. I think we have to take this extremely seriously because we've seen what Chinese innovation companies can do. In the environment of refractive surgery, there is also a very substantial impact on, how should I say, clinical application and experience with patients and optimization of the process. It's not a pure technology play.
There's a lot which is based actually on experience working together, and this is something you can't do without having substantial cases, which means even someone coming with a perfect technological product won't be hitting the road running and will need several thousands of patients to bring them up to a level where they have a product which is competitive in the market. We are taking this seriously. We are looking very closely. In the end, refractive surgery is an elective procedure where the level of trust in the procedure, the brand, and the company which is presenting it is primordial. This is where, as ZEISS in particular in China, we have a very, very strong position. Not to be underestimated, we are following it very closely. Currently, in the midterm, from a business aspect, not too worried yet at that level. Your topic about STAAR Surgical.
Of course, we're all interested in what's happening in the space. I think it's a very interesting and understandable move of what Alcon has done here. Alcon is, I think, trying to expand their procedure base and to be able to offer a broad opportunity. I think for them, it's also an effort to, how should I say, get back into a positive dynamic in the Chinese market, where basically they've been facing a lot of headwinds in the last years. It will be interesting to see. I would say there's a complementary impact between STAAR and Alcon. STAAR has been losing a lot of traction recently in the Chinese market, also facing local competition. I see less of a topic in China and more of an opportunity for Alcon outside of the Chinese market.
As you know, myopia is becoming more and more of a topic globally, also outside of the APAC region. I think a solution like STAAR Surgical offers is interesting also outside of the APAC region. This is potentially an option for Alcon. We mustn't forget ICL and refractive surgery are more complementary than they are competitive. If you're looking, the optimal area for laser refractive surgery is with patients who will have mid-range myopia, and with an ICL product, you're looking at very high myope. They are actually more of a complementary than a competitive impact. This would be my comment on the situation right now, a very interesting move, fully understandable from my side on the side of Alcon.
Okay, great. Thanks for the answers.
The next question comes from Julian Ouaddour from Bank of America.
Hey, hi. Good morning, everyone. Thanks a lot for taking my questions. I have three. The first one is just a follow-up to Oliver's question on China competition. You don't seem too worried about the midterm in terms of competition in the country, brand awareness, let's say, like higher technology on your end. Should we understand that you don't expect volume share loss from the current peak of 50% over the midterm or any kind of pricing pressure? I'm just asking to understand what is included or not in your midterm margin guidance on your side. The second question is, can you comment a little bit about the upcoming new run for VEP in IOL in terms of expectations for further price cuts? As you were also mentioning, a bit more competition from local manufacturers. I think you also mentioned their coming premium IOL.
Your thoughts here will be super helpful. The last question for me, can you give us a bit of color about D.O.R.C. momentum in vitrectomy, especially just following Alcon launch this quarter? Has your conversation with surgeons changed since then, or do you feel the need to change your pricing policy just to secure some volume? Any comment again? Super, super helpful. Thank you.
Okay. Back to the Chinese competition and more specifically to the Chinese market. If you're looking for [Qua], this is embedded in our midterm strategy. You have to see this very clearly product line by product line. If I'm looking in classical diagnostic equipment, if you're looking at OCT, HFA, these types of products, then very clearly this is a substantial increase linked to the buy local policies, which is impacting our growth. This has been factored into our models for the growth in the future. In the IOLs, which I spoke about, we are actually also quite well positioned midterm as ZEISS to be a local player in the China environment. As you know, we have quite a substantial manufacturing footprint in China, which means I think we are strategically well positioned to be actually treated as a local supplier.
In the IOL environment, the cost advantage of the Chinese manufacturers is not particularly large. It is less of a cost battle and more of a feature and positioning battle. The fact that whether you can manufacture locally or not has basically a gatekeeper function, which our expectation is could be part of the concept in the upcoming volume-based purchasing. It is not only a topic about pricing, but also a topic about localization and level of localization, where I believe at the current time we're the only global player who's well positioned on this. The timing is not yet clear on the upcoming volume-based purchasing. The expectation right now is that it will not be as dramatic and brutal in terms of price reductions as we've seen in the past. As you know, this is a third wave of volume-based purchasing for IOLs.
We had the first wave, which was regional, then we had the last one, which was the national one, and now we're coming into the second national one. We see very clearly also within the China environment that within the healthcare community, voices are coming up against volume-based purchasing because in some other medical areas, the government went too far and basically there's been a trade-off between price and quality and where basically, in some cases, there have been quite a few topics where prices went down too much so that actually the quality providers moved out of the market. We see now in the discussions on the next range of volume-based purchasing, the Chinese government being much more sensible of keeping players in, keeping the environment, and being more reasonable in their pricing expectation. I would say we're looking at it. We will have a strategy.
We will follow the strategy of premiumization because this is the biggest impact we see out of the volume-based purchasing that with reduced prices, the hospitals are shifting their portfolio from standard IOLs into more premium IOLs, and this fits well into, how should I say, our profile and products portfolio. Finally, your last questions concerning Alcon's Unity. To be very honest and quite surprisingly, there's been a lot of talk in the market. We have not seen any impact of the Unity launch specifically if we're looking at actually our project pipeline. Our project pipeline for the EVA NEXUS is continuing to grow very positively. At least as of yet, it has not really been impacted by the launch of Unity. This could have varying reasons.
One of them is that Unity, at least at the current moment, is priced relatively high and that we're seeing it mostly going into replacement of the Alcon installed base. Right now, we don't have it, but of course, I see Unity as a very serious competitor. Technologically, Alcon has upped their game, but also we are extremely confident on the capabilities of the Nexus procedures. Also, the advantages we have now of bringing this in the whole process together with the operating microscope. We've seen actually no impact on our current projects running. At the moment, we're seeing a very nice acceleration of, how should I say, the potential for the EVA NEXUS on a global level, which most probably, to be honest, is driven by the fact that now the EVA NEXUS has access to the global sales and distribution capability of the ZEISS Group.
That's the main lever for growth right now. I hope that answers your questions.
Thanks. Just maybe for the first one on China competition, I was more referring to refractive given the importance of refractive in your profit in China. I mean, all the new competition, especially like the Find Vision, for example, could it put some price pressure on, like on SMILE, and in terms of market share, given your reach a peak of 50%? Any risk there to see lower volume because there is more competition, like more players in this market?
What you see in the China market, it's a very segmented market across the different price ranges. You go all the way at the top on basically the ICLs, and then you go all the way down for, how should I say, LASIK procedures. SMILE is in the upper mid-range. Our expectation, we have some of our competitors which are playing kind of in the lower-end pricing. This is not the area we are in. That will be the area which will be hit first, how should I say, by the Chinese. The premium suppliers or those who are going on quality and trust will not be the ones focusing on Chinese suppliers, maybe only partially in some of the public institutions for basically political reasons that they have to buy a Chinese product.
We're looking at some of our competitors will be the first to be actually hit by this, not us currently.
Perfect. Perfect. Thank you very much.
The next question comes from Falko Friedrichs from Deutsche Bank.
Thank you and good morning. Three questions for me, please. Firstly, what makes you confident that you can achieve even the lower end of the EBITDA margin guidance for this year? Second question, without obviously providing firm guidance, are you confident that you can see more meaningful margin expansion again next year? Thirdly, can you share your view on the latest IOL and equipment benchmarker developments by region? Thank you.
Hi, Falko. Justus here. I think I'm happy to take the first two questions, and then the third one, Max, maybe you want to take. What makes me confident? I think the confidence is basically building on the order book and the momentum in order entry that we have seen. Especially MCS has a major catch-up ahead of them. However, that is nothing unusual. For OPT, likewise, as we said before, we still have something like roughly 50 VISUMAX going out to the market.
until the end of the fiscal year. Obviously, I'm sure you're referring to the question of, will the summer peak be strong enough to ultimately bring us to the guidance? That, admittedly, has always a level of uncertainty. On the other side, just building or referring to some of the statements that Mark has made, that we would, from the most recent market information directly from our Chinese sales organization, actually think that this is seeing procedure rates at a level that should bring us to what we have been guiding for. Provided that there is no massive turmoil in the world that is radically weakening consumer confidence, even below the current still rather soft levels, I think, from my perspective, their assessment of the situation is the best level on which we can build our modeling.
Therefore, I think, for lack of having better data, I build our projection on this. That is basically where the confidence comes from. Last but not least, overall, our seasonality of the business or the organization at least is used and prepared, both operationally, logistically, and then ultimately on the sales and service side, to ensure that installations are all being completed so that revenue recognition can be taken. Margin expansion here. Obviously, this is the key question that you all have to ask. Again, I'd say the overall market, macroeconomic environment is one which makes predictions increasingly harder. Again, we are all hoping that we get now some stability on the U.S. trade discussion. As I'm saying that, we can already almost perceive that the U.S.-Euro deal is already being opened up again. There remains a lot of potential negative impact.
I would, however, say, and again, building on the momentum in order entry, building on the rejuvenated product portfolio with the VISUMAX and the KINEVOs , and the PENTERO, not to forget, and even the ARTEVO. With, you may say, four flagship products now rolling into the next year, having overcome their teething problems, I'd say that should give us a somewhat tailwind that ultimately, hopefully, will stabilize our business further. If on top of it, the Chinese overall recovery of the business is getting a bit of tailwind, then I think I could build a bridge to a margin recovery. As you can tell from the way I'm describing it, there is a lot of uncertainty associated to it. I think there was a question on the IOL.
Yeah.
Equipment.
I'll take that. It's quite a broad question, so I'll stay at a relatively high level. I think generally, if you're looking at the IOL market, there are some, how shall I say, overarching global realities. First of all, this is a, how shall I say, consistent, slowly growing market in terms of procedures at a global level. We do not expect any big variances in the procedure numbers at a global level, and that's similar basically also region by region. It's driven basically by the needs and aging population, which is positive, and we just see more and more of it. Especially in the APAC area, we see a higher increase simply because the availability of the procedure is higher. If we go now more specifically in the U.S. market, we've had a couple of changes.
I think you've probably heard about the CMS reimbursement cut where it seems we'll be seeing a 3% cut in the reimbursement of Medicare for cataract procedures. I do not think this is going to have a substantial impact in the market. What it will do is accelerate the general trend in premiumization, which we are seeing and which we are seeing at a global level where basically we see spheric and classical aspheric IOLs getting less and less, and we see more and more multifocals, whether it's bifocal, EDOF, extended, all the different kinds of more premium lenses have growth. This is going to accelerate that trend in the U.S. market, but not generate a fundamental shift. I think in China, I spoke already quite extensively, so I have nothing to add to my other comments.
Europe, we see the same trend for premiumization, but a consistent, solid market in kind of a lower single-digit growth perspective. I think where we see the most movement and opportunity is probably in the India market and the rest of Southeast Asia where we see real growth in the market. We see the early signs of a shift for premiumization, and this will be very interesting for us in the India market where we have a very strong presence in terms of our commercial teams. To be honest, with the very low prices which were existing in India, we were not really playing in that market. We are now getting, on some levels, quite competitive, and this is an area we are planning to support in the coming years to get good access to growth in that market. Hope that helps clarify for you the question.
Thank you. Just briefly on the equipment side, mainly focusing on the U.S. market, what are the latest trends there?
In cataract?
Yes, just in general, cataract, but also on your diagnostic side, for instance.
I think the U.S. market is extremely interesting at the moment. There's quite a lot of change going on. I think it's more we see a greater and greater focus actually on the efficiency of procedures, how we can get procedures done in an efficient way. It's less of a topic now of pure individual device technology, but actually how the doctors can manage more procedures at a lower cost in a certain period of time. This is where actually our whole strategy of workflows and digitalization is coming in. I spoke in our discussion early on about VERACITY. We see these are the type of concepts and options which are seeing a very keen uptake in the U.S. market as the healthcare providers are really trying to increase their efficiency as they move along.
Okay. Thank you.
The next up is Susannah Ludwig from Bernstein.
Good morning, and thanks for taking my questions. I have two, please. I guess just first on microsurgery and sort of the margin was quite low in the quarter. Could you just quantify a bit sort of the different impacts? I think it was mainly product mix, but how much did either tariffs or FX play a role as well? How should we think about the evolution into next year? You know, can we expect this to return to the 20%+ margins we've seen historically? Second, on VERACITY and sort of digital digitalization, you guys have been very successful as sort of a leading player in cataract digitalization. Can you talk a little bit about how you plan to monetize that and sort of what sort of avenues for monetization there are going forward?
Hi, Susannah. It's Justus. I take the MCS part, and then, maybe, Max, do you want to then take the VERACITY question? On the margin decline on MCS, I would pretty much say it's a mix of the factors that you mentioned, where the most important impact is, of course, the product mix, where we simply have seen in the first half of the year very slow entry of the premium class, KINEVO 900 S mainly, portion of the mix. I'd say, in the total margin reduction that you see, that is clearly representing more than half of this reduction. The remainder, I'd say, is pretty evenly spread between the factors that you mentioned: foreign exchange, tariffs, and then last but not least, we do have the amortization kicking in for the IP that we build on KINEVO.
Obviously, that, in the first nine months of the year, has not yet seen the corresponding revenue and margin contribution. That was weighing somewhat harder. All these factors together are basically the reason for the reduction. The return to 20%, I would say the answer is yes. We would see definitely that this business can return to that margin, and with the order book building up, and referring also to my answer to Falko on the margin expansion going forward, clearly MCS is expected to be a key contributor to that margin recovery. Yeah. Definitely. And VERACITY, Max?
Yeah. I'll expand also a bit beyond VERACITY because in the end, that question is valid for a complete digital strategy. As you know, one of the major cornerstones of our strategy and our digitalization strategy is the development of workflows, which we are bringing in, one after the other. VERACITY is part of that strategy. We've had FORUM , how shall I say, as a product for a long time in the market, but we're in the process of upgrading and expanding it. You'll be hearing more about that later. Similar topics on the cataract workflow with EQ Workplace or, for example, also in refractive and tumor workflows. Fundamentally, your question was, you know, how does this tie in in terms of monetization? For us, we see two major avenues.
One, how shall I say, is the direct avenue, which is actually, you know, how do we directly monetize these services and products, and this we are doing a big push in terms of pushing for subscription fees. Historically, as I said, either been giving this away for free partially because the products were not completely finished or didn't have yet the, how shall I say, the capabilities or the feature set to be able to ask for a price. This has now developed. We're going from one-time sale or free of charge into subscription models. We've seen this is functioning very nicely, particularly when doctors see that they have an improvement in their efficiency.
This is the one direction we're looking, which is what we are going to be doing across all our digital product lines and across the globe with varying speeds depending on, how shall I say, the maturity of the markets we're in, and also the level of approval and of feature set which we have in those products. The second one, which I think mustn't be underestimated and which is extremely important, is as we become more and more in all of these single applications, a complete supplier and provider across not only the diagnostics, the instrumentation, but also the consumables, the whole workflows, and digital is actually the glue which is sticking it together and adding value for the practitioner to say, "If I stay within the ZEISS ecosystem, I'm much better off and much more efficient." There's an indirect impact. We see this, not on VERACITY.
I don't have numbers on that, but, look, for example, our experience in Germany, if I have a FORUM installation, on average, within that topic after having installed FORUM, I sell double the number of diagnostic units into that. Because you get added features based on basically a single standing unit, it becomes much more attractive for customers to stay within the ZEISS ecosystem because they get added value out of it. This is not a direct monetization, I would say, of the digital strategy, but it's a very powerful, indirect one. It's the same if you're looking at the EQ Workplace with Callisto eye. You have all the options to be able to actually do the right selection of a lens, and you have an advantage if you use the ZEISS lens. The whole topic comes and ties together, thanks to the digital strategy.
This will be a very big driver for us in basically not only gaining new customers, but actually getting a larger share of wallet of the existing customers, which from a business perspective, obviously, is basically reducing your go-to-market costs because actually with the same amount of sales outlay and presence, you actually have more products to be placing in there, and you can generate higher margins at lower cost.
Great. Thanks. That's very helpful.
The next question comes from Graham Doyle from UBS. Over to you.
Yeah. Morning, guys. Thanks for taking questions. I've got three, but at least one of them should be quite quick. Could you just confirm there's a few questions from investors this morning on that FX comment you made? Just to, like, absolutely confirm, the guidance for 2025 is based on the rates that you're seeing today. You're only flagging that if rates were to get worse, that would be a risk. Just to confirm that. The second question then is just the you talked about, a real focus on improving equity performance, kind of hints to things like margins and how you approach the commercial reality of the business. Should we expect an update on that in Q4? Is that really about maybe streamlining what you're doing in terms of R&D, for example, and taking that percentage of sales down?
Lastly, just when I looked at the comments, Justus just made around coming in at the lower end. So say EUR 250 million for this year at adjusted EBITDA. I've got consensus in my screen is like EUR 315 million for next year. I'm just thinking incrementally, you have tariffs, you've got FX, and you know, the Chinese markets, based on what you're saying in terms of the growth outlook, it's unlikely to be, you know, double digit or anything like that. I mean, is it probably sensible to think about next year as a similar sort of guide to this year as, you know, at least flat to slight growth to start with given the risk there? Thank you.
Graham, Justus here. I take the first and the last question, and then hand it over to Max. Again, to confirm on the FX guidance, we have included the EUR 1.15 there as the base for the guidance that we gave. Therefore, just confirming again, only if there is major deviation from that, that will be an additional potential downside. On your question on guidance for next year, quite frankly, I'm not yet willing here to comment on next year. I think from the statements that we made so far, you can already draw your conclusions that the still prevailing uncertainties with regards to U.S. trade tariffs, with regards to China, at this point in time, we'd rather wait until December before we have a bit more clarity on how things are ultimately coming out. I think we can give a more meaningful answer to your question then.
With that, I'd hand it over to Max.
Yeah. Thanks for the question. I think you've highlighted, if we look in the last couple of years, we've had substantial outlays in R&D cost. That's quite visible in the P&L. As I've come on board and have been going through the teams, running through the projects, what I'm realizing, to be very honest, is there's a whole bunch of very good innovation in the pipeline. There's also quite a bit of, I wouldn't even call them horizon three, but basically horizon four and five topics where I have my doubts on the direct, how shall I say, efficiency and return on investment of them. We've probably got a few too many balls in the air at the moment right now. I think the topic is, you called it streamlining R&D. I would call it more prioritization.
I think we've got a topic of, even if we slightly reduce the R&D outlay, put more money and bigger focus on products or projects which have direct returns, and which will have a clear and visible impact on our P&L in the short, mid, and longer term. We will probably have to, and we are, going to stop a few topics, which I would say are more engineers playing around. We don't have time, an opportunity for that. It's our duty for you to bring the profitability in the market. That's what we'll be focusing on. Pretty well spotted there.
Perfect. I really appreciate the clarity. Thanks a lot, guys.
You're welcome.
The next question comes from Dylan van Haaften from Stifel. The floor is yours.
Thanks, guys, for taking my question. All of my questions are on VISUMAX, especially in China. Going quickly through all of them, how many of the 50 that you guys installed this quarter were replacement? My second question is, is it correct that around 20% of the China VISUMAX cases, sorry, on the new VISUMAX 800 installs, is it correct around 20% are SMILE Pro, and where should we think this number goes? Thirdly, do you think the SMILE Pro premium versus normal SMILE on VISUMAX 500 is sustainable given there are other lenticular extraction products being launched over the next 12 months? Do you see any negativity on pricing in that gap? Thank you.
Okay. Let me, so all of the VISUMAXes, the VISUMAX 800s we are currently installing are extra capacity and are not replacement. We're not pulling out a 500 and putting out an 800. The installs are currently with our biggest trusted customers who have a clear, how shall I say, pricing and positioning strategy. The way we are going in China is clearly differentiating the market. We are not planning to do a phase out. The VISUMAX and SMILE Pro, and with the VISUMAX 800, you only do SMILE Pro, and with the VISUMAX 500, you can't do SMILE Pro. There's a clear differentiation in terms of patient and customer benefit and also of pricing. It's part of a segmentation strategy of the market.
Basically, the SMILE Pro is the optimal tool for our customers to be regaining or counteracting price erosion, repositioning, and capturing the segment of the market which has a willingness to pay. The VISUMAX 500 and the LASIK, we now have the flexibility to reposition and fight against the competition, wherever it's coming, so that we really make sure that we're using, how shall I say, the complete breadth of the market. This is being very much appreciated by our customers, and the uptake is very clear. This is, by the way, not only a strategy we are running in China. We're running this strategy in quite a few other APAC markets also, and it's been quite successful. Does that answer your question? I, okay.
Perfect. My other question, which is on the SMILE Pro cases. It looks like there's actually a decent amount of SMILE Pro representation overall of the total, let's say. How should we be thinking about that number in the whole? It's roughly 1% of annualized cases, I think, right now, but, you know, maybe, you know, could it end up in double digits, you know, t+1 ?
Oh, yeah. Definitely. Our conversion rate right now is about 30%. On sites where we've put a VISUMAX 800, in our initial assumptions, we were running with lower adoption rates. Actually, I mean, these are early days. I'll be very honest, but we're seeing, in specific customers, a higher adoption rate at a higher price point. Clearly, we see, how shall I say, SMILE Pro taking a substantial portion of the market. You're not talking single digits. You're talking higher double digit numbers.
Understood. Just getting back to that, just a clarification on the competition. If the competitors in lenticular come in, basically, you're more or less encumbered because of SMILE Pro to compete with them on normal SMILE on the VISUMAX 800.
You're going very much into detail here, but you can imagine, of course, if we've got several lenticular extractions, we've got a lot much more leeway to react in the market and counter competition.
Perfect. Thank you so much.
Next up is Samuel England from Berenberg.
Hi, guys. Thanks for taking the questions. The first one, you talked about offsetting U.S. tariff impacts with price. I just wondered, are you confident you'll be able to keep stable or grow orders whilst also increasing price in the U.S.? Which areas of the portfolio do you see the most scope for pricing increases, given you tend to be at the premium end pricing-wise anyway in the U.S. market? Are there any other tariff mitigations you can put in place other than price as well? To follow up on the question on the STAAR acquisition, you said ICL was complementary to refractive. I suppose, is the ICL market an area you'd ever want to get into yourselves, given your strength in refractive? I know there are other M&A opportunities out there that you could look to do. Thanks.
Hi, Sam. Justus here . I take the question on U.S. offsetting the tariffs. Number one, yeah, I think especially for our flagship products, ARTEVOs, KINEVOs, we clearly think that we have a market positioning which allows us to increase pricing. With this 15% tariff that we speak of, considering that we already had a first round of price increase a couple of weeks ago, anticipating another one for most likely the beginning of the next fiscal year. With that, I think we feel comfortable. In the diagnostics area, please remind that these products are mainly built in Singapore. Therefore, the EU tariffs do not apply. There we are talking, if I'm not mistaken, about 10%. You have to bring that in a perspective that most or key competitors in that field are also located in Asia so that we don't think that we have a relative disadvantage.
By and large, I therefore say we think we can somewhat hedge that impact for the next year.
I'll take your part of the question on STAAR Surgical. Yes, indeed, this is complementary, and this has always been, how should I say, a segment of the market which at ZEISS we've been looking at very closely. As you know, we don't comment on any potential acquisitions or any, how should I say, R&D projects we could have which are not yet ready for launch. Let me say that we are constantly looking at the market. In parallel, we do have internally the capability to develop an ICL. I won't go further than that.
Great, thanks very much.
We will now take a question from Davide Marquesin from EQUITA.
Hi. Good morning, everybody. I have two questions. The first one, regarding the Americas. In the first half of the year, you reported very solid, constant currency organic growth, probably in the region of around 10%. While in the last quarter, you reported a significant slowdown with growth down, I think, around 3.6% year- on- year. I want to understand why such a weakness in the U.S. market and what is the outlook for the rest of the year. The second question is a follow-up on the very weak microsurgery margin. You reported around 3% EBITDA margin, which is, I think, an all-time low. I don't remember a margin in this division as low as in this quarter. It's difficult to understand just the product mix causing such a big negative impact because otherwise, this would mean that part of your products are currently loss making.
I want to understand what is the outlook for the last quarter of the year, also considering the positive seasonality that typically you enjoy in the last part of the year, if we could assume around the 20% margin of microsurgery in the last quarter of the year. Thank you very much.
Davide, Justus here. I take this. Your question on the slowdown in the U.S., you have rightfully pointed it out. The reason is pretty obvious. The Liberation Day announcement was April 2nd. That, of course, has affected predominantly in the weeks thereafter some of the order placement behavior. Most people were basically holding back and trying to get first clarity of what ultimately will be the applicable rate. To answer your question completely, since we have now clarity on the situation, we do see a very strong momentum again in the U.S. order. We, I think, can pretty much confirm that this uncertainty was the reason for the lower Q3 numbers.
On MCS, and your question with regards to the outlook for the remainder of the year, I can only reiterate the order books are full, have been extremely dynamic in terms of orders being booked, especially in the last eight weeks, including the U.S. It's now basically up to convert it. We have the benefit of the higher per se margin on these premium products plus the operational leverage that we just didn't have in the previous quarters, and that should actually put us in a good position to reach, if not 20%, then very close to 20% margins going forward now.
Thank you very much.
I'm now coming to the next questioner. It is Anchal Verma from JPMorgan.
Hi. Good morning, and welcome, Max. Good morning, Justus. Just building on a few questions from earlier. The first one is on this year's guidance. Can you please confirm what's now included? I mean, previously, new launches were supposed to add to the top side of the guidance. Now, is it fair to assume that potential upside we would get to the guidance from new launches, including VISUMAX and KINEVO , is almost proposed to be offset by the FX and tariff headwinds? On the tariff headwinds, how should we think of tariff headwinds going into 2026, given when your new pricing will kick in, and what are the assumptions you've baked in?
The second one, and sorry to follow up on 2026, I appreciate you can't give us full guidance, but just trying to understand when we're building the bridge for next year, our understanding from your earlier comments was that there will be tailwinds from new product launches, and there's an element of expected market recovery. On the flip side, there could be headwinds from tariffs and macro going forward. Have we missed anything else in building that bridge?
Anchal, yeah. Justus here. L et's answer the last one that you mentioned. No, I think we haven't missed anything particular, at least nothing that I'm aware of today. The assumption on tariff impact for 2026, that is, actually, again, if things stay where they are, we think that we can pretty much compensate with the price increase that we have already put in place and the ones that we are intending to put in place soon. On your first question, yeah, indeed, ultimately, you have already given the answer in your question. You know, the upsides that we had mentioned were the China launch for the VISUMAX and the U.S. launch. The U.S. launch, as we all know, didn't materialize. The China launch happened, and of that, we are very happy.
On the other side, we have now the double-digit million headwinds from both the tariffs and the FX, and that is basically, again, bringing us back to the statement on the guidance that I made earlier. I think that's, in a nutshell, the answer.
Thank Justus. Thank you. Just to follow up on your question on 2026, it sounds like the tariff headwinds, you could manage them. What would be making you a bit more nervous on providing or expecting a decent margin recovery just on the back of new product launches? We're just trying to understand what the potential downside risk could be to next year's numbers given consensus is looking for around 140 bps of margin expansion for next year.
Anchal, I think I said it earlier. To me, there's so much uncertainty right now on the global economic climate, the potential retaliation to tariffs. We are not even yet clear on the full impact of the tariffs on the supply chains, which we haven't actually discussed at all in this call. That also may provide for some other factors that are playing into our margins. You know, without having that totally cleared out for me, I really don't want to start in early August a discussion about margins twelve months from now. Yeah.
That's totally understandable. It was worth it, right? Thanks so much, guys.
Next up is Richard Felton from GS . Over to you.
Thanks. Good morning. Maximilian, thank you very much for the high-level strategy update, and I'm looking forward to hearing more in December. I just wanted to pick up on one of the comments you made, which was highlighting your intention to strengthen investment in growth areas. My question is, how should we think about funding that incremental investment? Is it a case of moving costs around your P&L, or should we think about 2026 as a year of outright investment to reignite the top line growth? Thank you.
Okay. Thanks for that question. Clearly, the former, not the latter. We're not planning, how shall I say, a massive boost. I think if you look at our cost position right now, it's higher than where it should be. It's a topic about reallocation of resources in the right areas.
Very clear. Thank you.
There are no further questions.
Okay. Thanks, everybody, for joining our call. We look forward to reconnecting with you in the weeks and months ahead, and the in presence with some of you potentially in our December analyst conference.
Thank you very much.
Thank you.
Bye-bye.