Earnings Call: Q1 2021

Feb 8, 2021

Dear ladies and gentlemen, welcome to the conference call of Kaltseis Meditech AG. At our customers' request, this conference will be recorded. As a reminder, all participants will be in a listen only mode. After the presentation, there will be an opportunity to ask questions. May I now hand you over to Sebastian Spiederick, Head of Investor Relations, who will lead you through this conference. Please go ahead, sir. Yes. Good morning, ladies and gentlemen. Thanks for joining our call today about the three months of fiscal year 2021. My name is Sebastian Frerichs. I'm Director of Investor Relations. And with me, as usual, are our President and CEO, Doctor. Ludwig Wanns and our CFO, Justus Wehmer. I would like to hand over to our management now to give you an intro about the first quarter. And afterwards, we look forward to taking your questions. Ludwin, please go ahead, sir. Yes. Good morning, ladies and gentlemen. I'm Ludwin Monst. Welcome to Carlsbad's Meditec's three months twenty twenty one analyst conference. On Slide two of this slide deck, you see the outline of today's conference call. I will start the presentation with an overview about our three months results. And afterwards, my colleague, Justus Demer, will provide you more details on the financials in the next section of the presentation. The third section will provide you some hopefully interesting market data on the COVID-nineteen crisis. And finally, I will close with an outlook. So let's have a look at the overview on Slide three. You might remember that we were a bit cautious with our outlook for the first quarter in the last call. The reason was a slow start into the fiscal year in October. However, things improved very much over the course of the quarter, and we are quite happy with the results. We ended the quarter with revenues of €369,000,000 and this is pretty much the same number we reached in Q1 in prior year. It is important to note that we had some negative currency effects and that the pandemic is still having some negative impact mainly on the top line. On a constant currency basis, revenues reached EUR $379,000,000, which corresponds to nearly 3% growth. We saw a particularly positive development in Asia, but also relatively stable development in the other regions, EMEA and Americas. Let me note that the markets of our two SBUs are impacted by the pandemic differently. While microsurgery is still significantly behind prior year, OPT is growing again, driven by recurring revenue. In other words, while patients are being treated and procedure numbers are mainly back to normal, capital investment is still lagging behind. This is where I'll provide you more details on the growth drivers in just a few moments. Before that, let me mention that our EBIT margin increased to 19.9% versus 15.4% in prior year. The outstanding development is due to relatively high sales figures, a positive product mix, a favorable regional mix and last but not least, a significantly reduced expense base. The OpEx reduction is due to lower sales and marketing expenses, in particular, as the fall trade shows were all virtual or digital. Furthermore, our cost reduction initiatives resulted in lower general and administration costs. Our net income reached about EUR 46,000,000, which corresponds to earnings per share of EUR 0.52. In prior year, we had EUR 0.43. So overall, as you see and hopefully agree, a positive business development despite of the pandemic. Now I will hand over to my colleague, Justus, who will discuss these figures more in detail. Justus, please. Yes. Thank you, Ludwig, and good morning. Welcome also from my side. I'm now going to give you a more detailed overview of our financials, starting with the performance of our strategic business unit, OPT, ophthalmic devices. Revenue came in for OPT with €283,000,000 compared to prior year, a reported increase of 5.2% and at constant currency, 8.2%. Particularly, the recurring revenue contribution was again quite strong. Equipment sales also saw improvements, especially towards the end of the quarter and finally generated an almost stable result for Q1. In our Refractive business, we are seeing an excellent development, but also IOLs have been doing well after the slower month in Q3 and Q4 of last fiscal year. We see new growth in the APAC region, more on this later on our slide on regional developments. OPT EBIT margin increased significantly compared to last year to 19.4% due to the sales development combined with a positive mix situation and as Lupin mentioned, substantial reductions in our OpEx, especially in our discretionary expenses. Let's move to MCS. Microsurgery delivered an improved performance given the actual circumstances with revenue of roughly €85,000,000 versus €100,000,000 in the previous year. The revenue gap of around 14.7% or at constant currency 12.3 did further shrink considering the much weaker results of the second half of fiscal year twenty nineteentwenty twenty. Remember that in Q4 of our last fiscal year, we were still more than 30% down. In addition, we are seeing intake normalizing with nearly stable order entry in the quarter, particularly the month of December having come in quite strong. This is giving us confidence recovery for the next few months. EBIT margin is still at a solid level, supported by cost awareness in our organization, though down on the year, of course, given the top However, corrected for currency headwinds, both EMEA and Americas are basically at par with previous year levels. So improvements are clearly visible across all regions. Americas revenue of €102,000,000 represents a decrease of minus 6.4%. But at constant currency, this is almost stable with only 0.2% lower than previous year. The U. S. Was heavily impacted by the strong dollar devaluation versus the euro. So the decrease was minus 8%, but at constant currency, this was only minus 1%. Latin Americas in total actually with a slight increase. However, Brazil is still heavily affected by pandemic and could not yet return to growth. EMEA with €109,000,000 overall, a slight decrease as reported of minus 8%. However, constant currency almost exactly on the level that we have seen last year. And of course, the lockdowns in Europe still show a very heterogeneous development. However, except for Italy, all major economies are back to growth, and we have seen, for example, in Germany but also Spain, really nice recovery with high single digit, even double digit growth. France is back to growth. And U. K. Is extremely strong versus last year. But there, we also clearly see some impact of pre Brexit sales that drove sales in our last quarter. APAC came in at €158,000,000 revenue, which is a growth of point 5% or at constant currency 6.6% China with 15% growth South Korea also strong again and Japan improving but still on a lower level than in the previous year. However, markets like India still remain heavily affected by the pandemic and still show a significant year over year decline. So let's have a look at the P and L. Gross margin slightly increased with 56% compared to previous year, supported by favorable regional and product mix effects from OPT that were in part, however, offset by a weaker microsurgery contribution. We have seen a significant OpEx reduction in total. R and D, however, increased due to excuse me. I there's was just some noise. I hope you could hear me. I repeat the sentence. So R and D increased due to continuous investment in strategic development projects, mainly in the field of surgical ophthalmology and digitalization, though in absolute terms expenses are down slightly from previous quarter. Sales and marketing expenses decreased significantly as was already mentioned by Ludwig. In particular, discretionary costs like travel, entertainment, advertising, trade shows were down. We continue to go virtual for a good part of our customer interactions as mentioned before, and this is clearly the largest effect regarding our OpEx trend. EBIT of €73,000,000 above prior year's €57,000,000 and EBIT margin at 19.9% versus the 15.4% last year at this time. But please note that this margin results from a somewhat unique constellation in Q1. On the one hand side, we have seen a solid sales recovery. On the other side, in many countries, our sales operations are still mainly digital. We do not expect this to be the prevailing scenario through this fiscal year. With Life returning to some normality in summer, we should also see our sales and marketing expenses increasing stronger. A quick look at our adjusted EBIT. The EBIT margin point 8%. There are rather small effects related to purchase price allocation, and those are related to depreciation in both periods. And we adjusted the onetime effect related to the sale of the property. Cash flow. The operating cash flow came in with €41,000,000 while above above last year's €26,000,000 significantly driven, of course, by the positive EBIT and also positive working capital development. We saw here a significant increase in accounts receivables, of course, due to the sales development. On the other hand, we decreased our inventories. Cash flow from investing activities is mainly some payments and intangible assets. Here, we have the China production that we are ramping up and with property and sorry, with equipment and all the installations in the plant. Cash flow from financing activities mainly influenced by changes in receivables and payables on our treasury accounts, and our net liquidity improved to €730,000,000 Yes, thank you very much. And with that, I hand it back to Lupin. Hello? Mr. Monza, are still on mute? Hello? Yes, Justus Wehmer. I I we may have just lost Lerpin for a moment here. Maybe we we continue with with the slide I would suggest, and she probably did have a moment. Yeah. I would think so. So then I just take over here, and we go in our highlights section. And here, we would like to discuss some market development in light of the pandemic. So we are moving to Slide 12. This slide is an update of a similar one that we showed actually in our analyst conference in December. As you know, cataract surgery is a so called elective procedure because the surgery can be postponed for a while without negative impact on the patient. As elective surgeries were canceled in most countries at the height of the first wave of the COVID-nineteen pandemic in '20 markets dropped significantly. As you can see from the chart, we estimate that the global IOL market volume dropped by almost 60% at the peak of the crisis from the average level of 2019. The data was collected by MarketScope, a well known market research firm for the ophthalmology market. Market recovery began in summer with some Asian countries such as China and South Korea leading the way. Recovery was faster in The U. S. And in Germany than in many other parts of Europe such as France, Spain or Italy, which were heavily impacted by COVID-nineteen and took more time to recover in the first wave. You can see that in the 2020, global IOL volumes recovered mostly and reached almost the 2019 average baseline. The figure was down a mere 5% from Q4 twenty nineteen. As you would expect from our previous remarks, Asia Pacific and The Americas are leading the recovery, while behind. It is possible that there's going to be some pent up demand in a few of these lagging markets once the impact of the pandemic subsides. However, we find it very hard to predict the timing and quantity of this effect. The discussion is probably somewhat premature at this point in time. Let's turn to the next slide. This again is also an updated slide from our December presentation highlighting the heterogeneous regional developments and particularly the relative strength of the APAC region. The graph illustrates the relative performance of the three regions quarter by quarter in comparison to the performance one year ago. Therefore, representation eliminates the cyclicality of the business. You can see how APAC, as our largest region, outperformed all other regions throughout the crisis. APAC is the dark blue bar. The region returned to growth in Q1 twenty twenty one the first time since the beginning of the crisis around a year ago. Looking ahead, we expect APAC to generate further growth as the region is already closer to normality than the Western Hemisphere. But also for the total of the three regions, we see an encouraging positive trend, and we assume this to continue. Do you hear me now? Yes. Lukin, yes, are you back? Yes. I apologize. I had some technical difficulties here, but it looks like it's working again. So thank you, Justus, for presenting the highlight topic, which I believe is quite interesting to see how things developed. And I believe that's a good data actually to predict how this trend will continue. And that's my transition to our last topic, which is the outlook. So please have a look at the outlook, Slide 15. We are convinced that the medical market remains to be attractive in the mid and long term and that the drivers are intact. This is true for both our businesses, microsurgery and ophthalmology. Therefore, once the COVID-nineteen crisis will be over in the mid and long term, the market should return to sustainable growth. For fiscal year 2021, we expect to return to growth in both sales and EBIT, we assume the current recovery trend in sales and profits to continue. When modeling the full year for 2020 and 2021, please keep in mind that one of the main drivers for the strong Q1 EBIT, namely the relatively low level of sales and marketing expenses, is unlikely to be sustainable for the full year, and it is more likely in our view to expect a cost normalization in the second half of the year. However, as we cannot predict the cause of the pandemic, it's currently not possible to put this into numbers. Now in the midterm, we expect to return to free prices level of revenue and a profitability of sustainably above 18% for the EBIT margin. This was also our guidance in the past, so we confirm this midterm guidance. Given the strong start into the fiscal year, it is possible that we might even reach the target range of the EBIT margin within the current year already. However, this would require that the lower level and the favorable product mix would continue, which we cannot know for sure today. We will likely update you with a better and more precise guidance around the time of the half year reporting. Now ladies and gentlemen, this concludes our prepared remarks, and we are now happy to take your questions. I hand back to the moderator to explain the procedure. Thank you very much. Ladies and gentlemen, we will now begin our question and answer And the first question we received is from Patrick Wood of Bank of America. Questions. I have two, please. So on the first one, thank you for the IOL market share data as always. You know, obviously, looking at the growth that you guys had in OPT and the split of that, it seems fairly clear that you must be making some fairly considerable share gains within things like IOLs at the global level. I guess the question is, do you think that that share gain is more a function that you're far more exposed to APAC than some of your peers, or do you think within the markets you operate, you're still taking share? So that's my first question. Then the second question, I'm just curious in terms of, you know, the end clinics as you're looking at them and the surgeons, is pricing holding stable? Or are you seeing some price discounts that people are putting through to stimulate demand and get consumers back to the clinic, or is pricing remaining slightly stable? Thanks, guys. Yeah. Thanks for your questions. On the first one, yes, as we have been growing faster than the markets were for quite a while, we are gaining market share. And I mean, these days, in the midst of the pandemic, it's very difficult to really compare reliably as the various competitors have different regional mix. Right? And so the impact of the pandemic on the competitors is also different. And I would say the comparison is probably not as reliable as usual, and this is why I would be very careful to now read shifts of market share from the data. That's just premature, and I believe we need to wait until things return to a more stable situation. But overall, it's certainly true that our strong growth in APAC drives our market share in that region. And it's basically the same what I said for the entire world. I guess we have been growing much stronger than the market in APAC for quite a while, so we definitely must have gained market share. That's that's for sure. So, yeah, that's probably all I have to say to that one. Regarding pricing and discounting, actually, I'm not aware of of large changes in in pricing, and I believe the price situation is currently stable. As you see and could see from our market data, the procedures are mainly back to normal, so there's no reason to to do anything on on pricing and no no need from my point of view. And on the equipment side, again, the the reason that this is slow is not price. Right? The reason is that customers might have different priorities for the time being, and so price will not help here. So to make a long story short, no. We do not see major changes in pricing. Very clear. Thanks for the answers. The next question received is from Scott Barter of Berenberg. Your line is now open, Please go ahead. Yes, good morning. Thanks very much for taking the questions. I wonder if you could share some thoughts about the gross margin development this fiscal year. I think your first quarter started on the gross margin level a little bit lower than I would expected considering the strong mix you received from consumables and recurring revenues. And of course, I'm mindful of the fact that there will be some sort of delayed recovery in your lower margin capital business. So I just wonder if you could talk about the moving parts on gross margin please for the full year. Second question, again, related to margin, the operating margin, clearly very difficult to forecast all these moving parts. I don't think Zeiss has ever started with such a strong margin as you have this quarter. But if we look back this time last year, your SG and A marketing costs were, I think, annualizing at €330,000,000 €340,000,000 or so. And if we do the same exercise this year, I think those costs are, euros 50,000,000, 60,000,000 down on a sort of an annualized basis. So I'm just trying to understand really, again, what would be a reasonable expectation for selling and marketing to the best of your guidance? And should we consider when we look into the next year, you back to at or above twenty nineteen SG and A levels? Thank you. Maybe I'll start with the second one and Justus, you take the first one afterwards. Scott, thanks for your questions. So I to end to start with the last question you asked, will we return to the pre crisis level in next year? I would say yes for for several reasons. There's a lot of talk about, changes of, travel behavior of more virtual versus personal meetings and all that. I would not expect that to have a significant cost impact. Quite in contrary, I believe that now, as many shows did not happen for for more than a year, we will even see rather increased traveling and and potentially even higher cost. So, again, it's a fair assumption that the the cost structure that we had in pre crisis will be the same after the crisis. The the question is how fast will we return to that, and that depends on the further development of this pandemic. Right now, as you correctly say, it's that's a very unusual structure that we have. I would expect that to continue for the next quarter. And from today's perspective and again, that might change. But from today's perspective, I would expect a normalization of the cost in the second half of the fiscal year. But again, that's very difficult to predict. Lucius, what are your thoughts on the gross margin question? Yes, Scott. Would honestly, if you compare where we were, for example, a year ago, and if you now look at our mix, you could actually say that, first of all, margin is almost exactly where it was And what happened, typically higher contributions from MCS didn't come in given that the business was lower, as we have just reported. But that could basically be offset by the higher recurring portion. So looking forward now, obviously, the key question is, and I think we made some comments in our slides, is the recurring revenue currently somewhat, let's say, overheated by a portion of pent up demand? And that is difficult to foresee, and we really like good data for that. So what does it mean for the outlook? I would really not significantly expect margins to develop dramatically different assuming that MCS will recover over the course of the year, but likewise, the recurring revenue portion should potentially, in terms of its percentage of total revenue, level down again to the portions that we typically see, you know, whatever, 33%, 34% of total revenue and not as most recently, you know, where it is four or five percentage points higher. So from that perspective, I do not structurally believe that we should see such a dramatic difference for gross margin through the course of the year. That's very helpful. And perhaps just one quick follow-up, if I may. Doctor. Munzo, I mean, impressive balance sheet dynamics now with net liquidity of over 700,000,000 Have there been any opportunities that have unfolded throughout this crisis, that makes, M and A or acquisitions more likely in your mind over the next twelve months? Thanks. That's I mean, we this question is often being asked. However, I believe that the crisis has little impact on the M and A market. This does not mean that we are not active in that field. We are actually, and we look at everything that's around and available, and we follow our M and A strategy as we've done over the last years. So we will not invest in things that do not fit our strategy. And we're a bit cautious here, but there's nothing new. And again, it's not that through the crisis, companies run into difficulties and sell off their company. That that's not the case. Right? So I believe it's just normal M and A level as we've seen that for the last years. Thanks so much, indeed. The next question received is from Falko Friedrichs of Deutsche Bank. Questions, please. Firstly, on the microsurgery segment. Could you share a bit more color on the order intake that you saw in the fourth quarter in the first quarter, sorry, and the growth expectations for this business and maybe even provide an indication when this business could return to top line growth again? Then secondly, on your refractive laser business, could you share a bit more color on your launch in The U. S. And how that is progressing versus your initial expectations for this launch? And then the third question is a bigger picture question on your anticipated product launches. Now I look at it, it seems you're planning to launch your IOLs in The U. S. There could be a new phaco device. There could be devices coming from your ENTTEC business. There could be a new refractive laser equipment coming. And combined with all of the new microsurgery devices you launched, now I don't recall a time when your company had so many promising launches planned at the same time for a single year. And I understand that you probably cannot be too specific about each launch and the exact time lines. But thinking bigger picture, what do you think are the implications of all these launches this year for the growth of your company over the next two to three years? Any qualitative insight would be very helpful. Yeah, mister Rutgers. Thank you. I would suggest I start with the refractive and and the product launch question and just as you afterwards take the order intake question for microsurgery. Second question was on refractive, the launch in The U. S. Well, overall, and we touched on that a little bit also in our last conference call, we feel that we are making some good progress in The U. S. Market. It looks like the only growth in terms of treated patients that The U. S. Market in refractive is currently seeing is coming from SMILE. And that's certainly good news, and that will hopefully attract more attention to that new procedure, and this is why we are optimistic going forward. The other positive news, and we also talked about that briefly last time, is the U. S. Military, which is currently using also SMILE. I again apologize that we cannot give you specifics about that for confidentiality reasons. However, the treatment the of soldiers by by military certainly has very high standards, and this is why this might also drive the the market development. So overall, yeah, it's meeting our expectations. And we've always said and we've always expected this to be a mid- to long term development. So there will not be a fast development. Customers will just slowly move into that new technology. We've seen that in other markets as well, including China, by the way, including South Korea. But we were at that point of market introduction just many years ago. And this is why today, China and South Korea are by far more developed in terms of new technologies in refractive lasers than The U. S. Yes, the product launch question indeed is a difficult question, and you answered it yourself a little bit by saying you cannot give specifics. No. I cannot give specifics, but let's try the the big picture here. It's true that we have quite a a strong product pipeline, but Meditech calls us Meditech has ever had that because innovation is really the lifeblood, if you like. It's it's the the most important driver of growth. And and this is why we continue to invest. And I I really would like to to say that also during the crisis, even in our worst month, we continue to invest in research However, there is, of course, an impact on our R and D programs, mainly, by the way, because we do not have access to the clinics to do clinical trials, which we always need when we develop your new product. And that in the one or the other occasions slows down our R and D programs a little bit. And this is why it's also difficult to say how things will develop. But nevertheless, nothing has been canceled. There are some delays, nothing major, but it it just happens. The the impact on business development, again, you you the reason why CallBright's Meditec has been growing stronger than market for years is our innovation activity, and that will continue. And you should not expect that the the product, which we have in the pipeline, change the picture entirely. We will just continue to grow, hopefully, at a good pace, a similar pace as in the past. And so I would not expect a fundamental change of our position or our growth rate. It's probably going to continue. The one or the other area, both of business segments but also region wise, it might accelerate the development, but we we are not in a position to to go into these details today because I cannot announce product launches. So I hope that helps. Yousus, maybe you can go into the first question on order intake microservices. Yes. Yes, absolutely. I will do that. So maybe first, region wise, because you were asking color on order intake in Q1. I think regionally spoken, the good news is that we have seen actually from all three regions an uptake in order entry. So that kind of provides also confidence that this will then also continue into the current quarter, and we actually see the first indications for this. Secondly, please keep in mind that the approval for KINEVO, which is an important contributor to the MCS growth for China, we only received late in the basically last quarter before corona hit China, so basically a bit more than a year ago, which meant that once we actually had hoped that we could then develop our funnel and projects in China. We kind of obviously were then stalled through the lockdowns. And that means that we are right now pretty confident that the penetration in the Chinese market with KINEVO will actually carry good order entry now in this year and also then turn, of course, into revenue. Therefore, your question about when do we expect MCS to return to growth, I would say we clearly are confident. If not in Q2, then certainly, once we move into Q3, we should be back to year over year growth numbers. And not only because we then have a fairly low comparison base because obviously Q3 of last year was already heavily hit by the pandemic, but also because we feel that then the business itself should be stabilized. Yes. Perfect. Thank you. And the next question received is from Markus Gola of Stifel Europe. So my two questions on China, both for you, Ludwin. The first one is on these Chinese reimbursement cuts. Is this so far only limited to monofocus? Or do you see any attempts of the Chinese government to reduce prices significantly for any other of your products groups? And related to the Monofocus, if prices of Monofocus go down, is it fair to assume that pricing for premium IOLs in that country needs to come down as well? My second question is a follow-up on the IOL pricing dynamics. In China, your main customers are large hospitals, and I believe most contracts are volume based. So if your volumes to these hospitals increase as planned, what level of price pressure do we expect here? And my last question is for Youstos. It is a follow-up on the margin trajectory, and you touched already on this in your remarks. So on the one hand, you expect an ongoing recovery in the revenues and EBIT. But on the other hand, the cost line is artificially low at the moment. So I guess how we should look at this is that second half will be lower than in the first half, right? And related to this, are there any extra OpEx investments you need to do in the second half of this year? Thank you. Yes. Thank you for your questions. I'll start with the China questions. To my understanding, the what's going on right now is an initiative of the Chinese government to reduce the prices in the public hospitals for IOL surgery and IULs in particular. And so it's and and as the the public hospitals mainly do monofocals. Right? And these are only partly paid out of pocket, and most of it is covered by by health insurance. I we we see this impact on the monofocals. And the premium IOLs are separate as far as I know. Separate means it's not the same hospitals. It's not the same volume contract. And so it's a different mechanism. And to the best of my knowledge, actually, that's independent of the the current tenders, which only includes monofocus. However, the so public hospitals tenders with monofocus. That sets the price level for monofocus in public hospitals. That might spill over to also private hospitals, although they not participate in these tenders. But it's difficult to achieve higher prices in private clinics than in public hospitals. So overall, the price level for the monofocus will come down. But again, I from all I know, premium lenses are a bit separate. I would not exclude that this happens at some point in time, but for the time being, the price level of the premium IOLs is stable. Overall, price pressure in China on the monofocus, and that's the second question, is really high, right, through the the tenders because tenders are all about price. And there's a lot of pressure in prices have already come down. I don't have a number, would need to to research, but, prices have come down, and I hope that it stabilizes now. The companies react differently. I don't know what the the major American players are doing. But in general, the only way to deal with that is to take cost out of the distribution system, so the different levels of distribution system, and that's what we are trying, and the others, I I would guess, are are doing the same. So, yeah, price pressure is very high. But for the time being, again, for us, we are okay, and we have a good cost structure there. And it's not a traumatic situation. And I mean, you've seen our profitability numbers, and we are in this process already. So we're okay. Okay. Markus, yes, on your the question on margin trajectory. I mean, first of all, your assessment, assuming that our OpEx being higher in the second half of the year is, of course, right, and that would obviously then provide more pressure on our bottom line EBIT margin. Of course, and please understand that in this specific scenario with a lot of uncertainty about the, let's say, the recovery pace of markets and whether there will be or not any significant hits in business due to mutations of COVID-nineteen and so on, I just want to caution you that obviously such statements are always somewhat difficult to make. But you were asking about the general perspective and what would drive potential OpEx increase. Assuming that business will continue or go somewhat according to our plans and assuming that at some point over the course of this year, we will prepare for some product launches where, as Ludkin said, there is of course some uncertainty in terms of potential delays due to corona. But it would clearly at some point mean that we will have to invest into sales organization ramp ups. That is clearly true for The U. S. That is partially also true for other regions in the world. And that will also mean some additional expense increase in sales and marketing. And last but not least, and I think nobody of us can really have a good assessment on that, but if normality returns, if traveling will be possible again, if trade shows face to face can happen again. Believe me, we obviously are preparing ourselves for that period and attempting to curb, of course, expense or some kind of travel euphoria that you may see in the organization. But we clearly will see there are some catch up effects. There are sales and application specialists who haven't been in direct touch with customers for a year or longer. And I think as much as I, as a CFO, would like to make sure that we keep and conserve some of our cost austerity, but I have to be realistic, there will probably be good reasons to also accept that we will have a significantly increased need to also, you know, see customers and therefore incur, again, expenses. So that will potentially also mean that there's some pressure in the second half of the year. So having said that, that is why I'm giving some caution here to not take the 19.9% of Q1 as a new baseline or anything like that. Yes. Fully understood. And Ludwin, just a quick follow-up. Do you see any attempts of the Chinese government to maybe reduce also prices in other business units, like your equipment for public hospitals? Or is this really just referring to monofocus as far as you can see? As far as I can see, it's really the monofocus. Yeah. Okay. Great. Thank you. And the next question received is again from Scott Baader of Berenberg. Just two questions, please. Wonder if you could give us a bit of an update please on where we are with the microsurgery conversion, if you like, of your previous system. I'm referring to Klinevo and Pantera, what the relative mix now is of new instruments sold for the group. Perhaps also just give us some sense of the dental segment with Truvato, how that's performing relative to neurosurgery? So just a bit more clarity about where we are with that business would be helpful. And second question, please, and just one in terms of expectation setting for your new upcoming cataract launches in North America. I think, you're looking to launch a new phaco system, towards the end of the year and your first monofocal IOL, if I'm correct. To what extent should we expect penetration of these launches amid an environment where it's a bit more difficult to do wet lab tutorials and so forth for phaco? I mean, is it a fair assumption that the initial uptake will be a slow one until the world normalizes and, you know, normal industry activities resume? Yes. Thank you, Scott. Micro surgery conversion was the first one. So I mean, we had and still have continued to manufacture both the Pantera and the successor product, which is the KINABO. Because in some markets, we did not have the approval for the KINABO, and that was mainly true in China. Joseph was talking about that before. So about a year ago, we got the approval for Kinevo in China, and now we see the the unit numbers of Pantera really dropped, and Kinevo is far higher now. We still sell the Pantera. You know, it's just positioned differently price wise in the market. I cannot make an announcement for discontinuation of the product. It's certainly rather at the end of it, I find why the KINDAVO is still pretty early. So yes, that's pretty much converted in terms of what we are selling. The devices in the market, I believe, there's still lots of opportunities. So what we typically see, and it was the same when we introduced the Pantera at that point in time, the predecessor product, it was called OptiNeuro. And, you know, it took ten years to basically change the the old versus the new product in the market. So customers basically replace their their their old product. And I I would expect the same to happen, Pantera, being replaced by the keynevo in the market, and that's a also a very interesting conversion. And there's still a lot of room. Right? And we we are still pretty much in the beginning of that kind of conversion. The Tibato is really developing nicely. So in terms of unit numbers, we are quite happy with that product. It's really hit the market. It's the middle of the market. It's it really has a very nice feature set, so it's very attractive for customers. So we see that picking up really nicely, so that's also going well. And the predecessor product has already been discontinued. The cataract launch, yeah, that's a difficult difficult question. As I was saying before, overall, the development programs tends to be floats down through the pandemic because we cannot do the clinical trials as planned. That's also true for the cataract launches, so it it rather takes a bit longer than we had hoped. But at the other on the other hand, and that's exactly what what you described, Scott, even if we were able to launch the product now, it would be very difficult to really do the demos, do the trainings, and and get a product out. And this is why it's okay. If it takes a little bit longer, you know, it's after the pandemic, it will be much easier anyway. So, yeah, if we would introduce it now, the uptake would be slow, and that's absolutely right. So, yeah, not much more I can say about that. Right? So I'm just hoping that we we are through the worst of the pandemic already and now see things really improve, and then it's a good time for market introduction when markets open up again. Understood. Thanks so much indeed. As we receive no further questions, I hand back to the speakers for closing remarks. Okay, ladies and gentlemen. So thank you very much for participating in our today's analyst conference. I again apologize the technical difficulties we had. In Germany, we had heavy snow last night, half a meter of snow in the streets. So it was difficult to get out today, and this is why we did not have the technical infrastructure as usual. That will, for sure, be different after the second quarter. So we are looking forward to talking to you again in May. Thanks for your interest in CarVerse Meditec, and take Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.