Afternoon, this is the CARUSCO conference operator. Welcome and thank you for joining the Medacta Group SA First Half 2025 results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing *N0 on their telephone. At this time, I would like to turn the conference over to Mr. Francesco Siccardi, CEO of Medacta Group SA. Please go ahead, sir.
Thank you very much, and good afternoon or good morning. Everybody, welcome to Medacta Group SA 2025 half-year results conference call and live webcast. The slides of today's presentation can be found on the Medacta Investor Relations website, along with the media release. I would like to remind all participants that the presentation includes forward-looking statements, which are subject to risk and uncertainties. Listeners and readers are therefore encouraged to refer to the disclaimer on slide two of today's presentation. After those housekeeping remarks, I will now turn to slide four and start with the highlights of today's publication. We have already presented our top line H1 revenues, $344.1 million, corresponding to an increase in constant currency of 19.8%. Our adjusted EBITDA margin for H1 in constant currency reached 29.6%, which corresponds to a rise of 27.5% over the last year period.
The net profit for the period amounts to $60 million, a significant increase of 58% over H1 2024. We confirmed our outlook both for 2025 and our midterm outlook. If we go on slide five, we can appreciate even more the considerable above-market revenue growth that Medacta Group SA has been able to deliver over the last five years. This growth represents more than 4.5 times the market. Medacta Group SA is consistently delivering above-market revenue growth. On the next slide, slide number six, we can see why we are delivering those remarkable results. Clearly, the most important one is our ability to constantly innovate in a way that really impacts and improves patient outcomes. At the same time, we are able to sustain the healthcare system in terms of providing solutions which are adoptable and sustainable.
This innovation is sustained by education, medical education, fully personalized to our customers, the surgeons, so that they are able to adopt this innovation in a safe and effective way for the patient. The combination of great products with great service allows us to attract a lot of good and experienced, safe people. This is the third pillar of our above-market growth story. Those are exactly the success factors behind our H1 results. If we move to slide number four, we can see again the split of our sales across our geographies. I will not spend too much time as we presented those results already in July, but we can see a very, very good growth rate across all our geographies: Europe, United States, Asia-Pacific, and Latin America.
If we then look at the split of our product mix, you can see again a very good performance across all our business lines. Our more mature and core product lines like hip grew around 11.5%, knees almost 24%, extremities, which include shoulder and sports medicine, 44%, and spine almost 19%. We can see a very, very good performance across all our business lines. Quickly, an overview of how this performance compares with the market growth on the hip side, with a strong focus on anterior minimally invasive surgery. The growth corresponds to almost three times market growth. If we look at the knees on the next slide, number 10, we can see a growth focusing on kinematic alignment and the unique and first KA-optimized implant, the GMK SpheriKA, that allowed us to generate a growth which corresponds to more than five times the market growth for the first semester.
Spine, again, a big focus on personalized technology, both through our NextAR and MySpine, allowed us to grow five times faster than the market in a market that we know is very competitive and therefore a remarkable performance here as well. The extremities, as I said before, include shoulder arthroplasty and our sports medicine business line with a remarkable 44% year-over-year growth and again, significantly above market growth. I would like now to introduce Corrado Farsetta, our CFO, to go over our P&L details. Please, Corrado.
Thank you, Francesco. Let's have now a look at our key financials. We start with this first slide where we see the gross profit that in the first semester this year reached €235 million compared to the previous period of €119 million, representing an increase of 19%. The gross profit margin was 68.3%, pretty much in line with the previous year when it was 68.5%. Moving to the next one, here you see the adjusted EBITDA margin represented by the red line. You see that this year the adjusted EBITDA margin at constant currency reached 29.6% compared to 26.9% of the first semester 2024. This represents an increase of 2.7% versus previously. In euro, the EBITDA adjusted increased to €98.8 million, representing an increase of more than 27% year over year. As we say, the acquisition of Parcus Medical was a good achievement also from an accounting perspective.
This is reflected into our unadjusted reported EBITDA that was equal to €110.5 million, including a positive net one-off of €12 million coming from the benefit resulting from the acquisition of the Parcus Medical company. Moving to the next slide, here we see the net profit. Before tax, the net profit was equal to €68.6 million compared to €44.7 million of the previous year. Thanks to these €12 million of positive from the acquisition, the effective tax rate was lower than the previous period. We registered 12.5% this semester compared to 15% roughly of the previous period in 2024. As a result, the net profit for the period was €60 million or 17.4%, representing an increase of around 60% versus the previous period. Moving to the next one, here we see the CapEx.
As we said several times, in this business, growth means primarily new instruments and expansion of production capacity. If you look at our CapEx, we see the usual big slice in that view represented by instruments, €36.2 million, representing by far the biggest chunk of our CapEx. The second big chunk of CapEx is represented by other tangibles, where you can see there primarily the expansion of our buildings, production facilities, offices, and the logistics hub in Italy. Both instruments and other tangibles are, let's say, CapEx driven by growth, representing more than 80% of our total CapEx. Research and development capitalized was equal to €5 million, more or less in line with the previous period. Today, this year, we have roughly €5.2 million of CapEx in financial CapEx, including the price paid for the acquisition of the company of Parcus Medical Limited.
Moving to the next one, we see the operating cash flow. The cash flow generated by operating activity remains robust and sufficient to finance our investments. In particular, this semester, we registered €73 million compared to €42 million of the previous period, explained basically by the expansion of our EBITDA and some improvements in mileage and lower requirements of working capital. This €73 million of cash flow generated was more than enough to finance all our CapEx that we just discussed and to generate a smaller positive free cash flow of €8 million this semester. Moving to the last slide, you see here that thanks to the ability of the company to self-finance the growth, the leverage remains very low. In the first semester of this year, it was 0.9 times the EBITDA compared to roughly one time of full year 2024.
I would say pretty much in line with the average over the last five years, where the value for the last five years, the average is 0.95 times the EBITDA. I believe this is my last slide, now I'll hand it over to Francesco for our final remarks.
Thank you. Thank you, Corrado. I would like just to go over our outlook that, as I said before, has been confirmed. For the 2025 outlook, Medacta Group SA is targeting revenue growth in the range of 16% to 18% in constant currency, and an adjusted EBITDA margin of around 28% before any currency effect. This includes the recent Parcus Medical acquisition and is subject to unforeseen events. In terms of midterm outlook, the revenue compound annual growth rate, the CAGR, for the period 2024-2027 in constant currency is expected to be in the range of 10% to 14%, and an adjusted EBITDA margin targeted to be around 28% before any currency effect. The last comment is on the tariffs. Medacta Group SA remains not impacted by the U.S. tariffs, but we will continue to monitor the development of the situation as it can be quite volatile.
In conclusion, the key messages for this H1 call are to underline the significantly above-market growth of Medacta Group SA, 19.8% in constant currency, which is a direct result of our strategy. A big focus on innovation, innovation that can deliver both in terms of improving patient outcomes and making the healthcare system more sustainable. This innovation is well supported by medical education and personalized training of our customers, the surgeons, and a further expansion of sales reps and team all around the world. The expansion of EBITDA margin was quite remarkable in H1, reaching in constant currency 29.6%. Our aim continues to grow above the market for the foreseeable future, as our midterm guidance underlines. As usual, I would like to thank in particular all our employees for those fantastic results, but as well our clients, our suppliers, and our partners worldwide. Thank you very much for your attention.
I think we can now open the Q&A, and both of us are available for the rest of your questions.
Thank you. This is the CARUSCO conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press *N1 on their touchstone telephone. To remove yourself from the presentation, please press *N2. Please pick up the receiver when asking questions. Anyone who has a question may press *N1 at this time. First question is from Sam England, Berenberg.
Hi guys, thanks for taking the questions. On the first one, could you just give us a bit of a sense for the impact of geographic mix on margins in the first half? I think historically markets like the U.S. and Australia have been higher margins, so just wondering if you saw a benefit there given the stronger growth than in Europe. Looking ahead, do you think mix will be a tailwind on margins given the growth GMK is driving for you, particularly in the U.S.? The second one on here, just wondering if the momentum you saw in H1 has continued so far in H2. You're well above market in the first half, but comps obviously have happened a bit as we move into H2, so I just wanted to get a sense for how you're thinking about growth there for the rest of the year. Thanks.
Yeah, I can maybe start with the second question. As you said, H2 last year was very, very strong, so we definitely have a tougher comp in H2. At the same time, we still see a good momentum in terms of top line, and that's the reason why we increased our guidance for the year. In terms of gel mix, I think Corrado can give you a little bit more color.
Yeah, sure. Let's say normally we expect that, depending on the level of the P&L, you can have positive or negative effects because when we speak about gross profit, average selling price minus industrial cost, of course, we say several times Australia by far is the most profitable market, then U.S., and then the other countries. When we move down to the EBITDA margin, this could change, and we have seen and we know that there are big balances in terms of EBITDA margin between countries. In general, I would say that this period in this semester, given the, I would say, well-balanced growth of all our regions, we have registered a very small, I would say, negligible effect from the geographic mix growth. I think it is not worth to mention it.
Okay, great. Thanks very much.
Thank you, Sam.
Thank you, Sam.
Next question is from Michelle Bookler, ZKB.
Hello, thank you for taking my question. Good afternoon. My question is, the gross margin declined by around 20 basis points from last year. Was this mainly due to a fixed effect? Thank you.
Yeah, sure. Basically, that is the effect that we have registered in this semester.
I would say this is the net effect of the effects. The effects were actually a little bit higher than that, but was compensated by a good economy of scale, as previously mentioned.
Next question is from Sandra Dietzky, Octavian.
Yes, good afternoon and thank you for taking my question. I also have one on the margin. In H1, your adjusted EBITDA margin was very strong with 29.6% in constant currency. Yet for the full year, you guide for around 28%, which implies a wider drop in the second half. You mentioned relatively low sales and marketing costs in H1, but maybe beyond higher congress activity, where else should we expect increased investments in the second half that drive such a margin decline? I also have a question on the U.S. manufacturing, as back in April, before we were aware of the Nairobi Protocol, you mentioned as one way to deal with the tariffs to expand the U.S. production and maybe also to increase the utilization of the Parcus Medical facility in Florida or even broadening your manufacturing footprint.
Now that you benefit from the tariff exemption, how do you view your U.S. manufacturing strategy now? Are you still considering expanding local production, perhaps for reasons beyond tariffs? Any thoughts on that would be very much appreciated. Thank you.
Okay, Sandra, let me take first your question about margins, and then Francesco will respond to your question on the U.S. manufacturing there. The first semester we said 29.6%, this was the EBITDA margin of H1 2023, and we are now targeting a full year 28%. The first semester, there are several factors that we should take into account in order to understand the evolution of our EBITDA margin. The first one is the acquisition of Parcus Medical. The first semester was only partially including this effect because the acquisition wasn't completed, say, in April. In the second semester, you will see a full year effect of the dilution, which is bigger in the second semester than the first semester because of timing, full effect versus a partial effect.
A second effect that we normalize, it has nothing to do with, let's say, productivity or fixed costs, but it's just an effect of seasonality of certain costs that we didn't receive in the first semester, but we expect to receive in the second semester. We have booked them, and this is also a negative component in the second semester that we don't have in the first one. We always have, as we say several times, the third effect, which is the full effect in the second semester of the hirings that we had in the first semester. We hire people during the first six months that have a full cost effect in the second semester.
Without being too much detailed, if you take all these effects, let's call it time effect, out from the first semester, you go back to roughly 28%, which is our guidance for the full year, and which is more or less in line with the second semester profitability that we expect to reach.
Okay. Can you give us a hint on what's the dilutive impact of Parcus Medical on the full year margin?
No, let's say we don't disclose this, but let's say it is not that big. It's not a very big number. You can see that we are guiding anyway 28%, including this negative, so the number, the effect is not that big.
Okay. Thank you.
And Sandra, thank you. I will take on the second question about the U.S. plant. You are correct. We do have a manufacturing plant currently focused 100% on sports medicine, coming from the Parcus Medical acquisition in Florida. This is a good asset to have in this moment because the situation remains uncertain. Even before we were talking about tariffs, we were studying the possibility midterm to further expand our manufacturing in the U.S. for various reasons. The U.S. represents 50% of the joint global market in value. It is almost 60% of the global market for sports medicine and spine. As we are reaching our saturation capacity in Switzerland, and this saturation should basically hit in 2028 to 2029, depending on our growth rate, we were already planning where to go next, and the U.S. was our natural answer to that.
This is still our decision, and this is something that we are starting to actively focus on because in order to, let's say, be ready in 2028 to 2029, you start to plan and build in the next couple of years at the latest. You need to have a good plan, construction, permits, etc. The U.S. manufacturing remains definitely part of our future growth plan.
Okay. Thank you.
Thank you very much.
For any further questions, please press *N1 on your telephone. Mr. Siccardi, gentlemen, there are no more questions registered at this time.
Thank you very much. Thank everybody for your participation. I would like once again to thank as well all our employees, customers, partners, and suppliers for their support, and I look forward to speaking with everybody soon for our full year results in two months. Thank you very much.