Ladies and gentlemen, welcome to the Straumann Group Q3 2024 results conference call and live webcast. I am Maria, the conference call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing Star and One on your telephone. For operator assistance, please press Star and Zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Guillaume Daniellot, CEO. Please go ahead, sir.
Thank you, and good morning or afternoon to all of you, and thank you for attending this conference call on Straumann Group's third quarter results. Please take note of the disclaimer in our media release and on slide two. During this conference, we are going to refer to the presentation slides that were published on our website this morning. As usual, the presentation and discussion will include some forward-looking statements. As shown on the agenda on slide three, I will go through the highlights first. Yang, our CFO, will then share the financial details. After this, I will provide you with an update on our strategic progress and outlook. We will both be happy to answer your questions at the end of the presentation. Let's start with our highlights and move directly to slide six.
In the third quarter, we were able to deliver strong results and make progress in our key strategic areas. We achieved strong organic revenue growth of 11.2% or CHF 586 million. While we continue to see different market dynamics in the regions, we have continued to gain market share across the globe. This brings us to a total of about CHF 1.9 billion for continued operation in the first nine months of the year, or 14.5% organic revenue growth. One of the highlights of the third quarter was clearly the performance of the EMEA region. Its double-digit organic revenue growth of 11.4% was driven by all business segments.
The second key highlight was the global launch of Straumann Sirius , our competitive wireless intraoral scanner, which will help us to grow in the mid to entry segments. The third important highlight, which I will come back to later, is our continued investment in manufacturing capacity to support our growth across all the different regions. Thanks to the progress we have achieved in the first nine months, we confirm our outlook for the full year 2024, and with this, let's have a look at the regional development on slide six. In the third quarter, the specific patient flow dynamic per region remained almost the same as the previous quarters. As mentioned, the EMEA region performed strongly and across all business segments, with countries like Germany, Italy, and Spain as main revenue growth contributors. In implantology, the challenger brands showed double-digit growth and new innovations were launched.
Orthodontics supported the strong performance in the EMEA region, growing at a double-digit rate and winning new customers with some among the orthodontic specialist community. Looking at North America, we see a less dynamic picture due to the effects of the unfavorable macroeconomic environment. The high interest rates have led to financial constraints for stakeholders such as patients, dental practices, and some of the large dental service organizations impacting the patient flow in the U.S.. This has resulted in fewer patient consultations, limiting the growth of the number of implant cases. While the patient flow was slow, the region is still delivering growth. According to our estimates, we have then continued to gain market share in implantology in North America in both the premium and the challenger segments during this third quarter. In parallel, the orthodontics business also faced a soft quarter.
On the other side, the Latin American regions once again delivered consistent double-digit revenue growth. The local challenger brand, Neodent, remained the main growth driver, with markets like Brazil and Colombia contributing significantly. In addition, the orthodontic business performed strongly and entered markets like Argentina and Costa Rica. Finally, Asia Pacific was the fastest growing region, despite a gradually normalizing baseline in China. You might remember that last year, the VBP demand significantly accelerated patient flow in the country, which heavily influenced the region's performance. In China, both implantology premium and challenger segments showed strong growth. Asia Pacific outside of China showed also double-digit revenue growth, driven by markets like Thailand, India, and Malaysia. Intensified education efforts, including congresses and courses, significantly drove the expansion of the challenger brands in those countries. And with this, I hand over to Yang to provide additional details on the financials.
Thank you, Guillaume, and hello, everyone. On slide eight, you can see that our nine-month revenue reached about CHF 1.9 billion, which corresponds to a double-digit organic growth of 14.5%. The FX effect in the third quarter is similar to the second quarter and amounts to CHF 85 million in the first nine months, showing the strong currency headwind of about 5% on our top line. The effect of mergers and acquisitions added CHF 21 million, which is due to the acquisitions of our distributors in the Baltics and Poland and AlliedStar in China. This resulted in an adjusted nine-month revenue base of CHF 1.6 billion.
Despite the single-digit organic growth in North America, the group posted very strong double-digit growth globally, which underlines the strength of our strategy of regional expansion and a very diverse portfolio. Slide nine takes us to an overview of our performance by business segments for the third quarter. The Implantology business was very successful across the regions, further boosted by many innovations we launched this year. Overall, the premium segment grew mid-single-digit and the Challenger brands double-digit. We were able to gain market share in all regions, including North America, where the implantology market was soft and patient flow was slow. Asia Pacific, strongly supported by the VBP effects in China, showed the strongest growth rate in both the premium and Challenger brands. Following the successful launches in North America and France, our new innovation, iExcel, was pre-launched in Germany, Italy, and Spain in the third quarter.
The orthodontics business showed strong momentum globally, except for NAM, where the environment was challenging. In the EMEA region, we closed the DrSmile transition in the third quarter. Our B2B ortho brand, ClearCorrect, continues to pick up fast due to the team's strong execution and an intensified focus on specialists on top of our general dentists. LATAM performed very well, and APAC is also making great progress, although at a much lower level. The digital business grew well in general, while the growth rate was slower in the US in the third quarter due to high digital sales in the previous quarter. We launched our Lightstar in China at the beginning of this year, and the demand for the intraoral scanner continues to show very strong momentum. With this, I will hand over to Guillaume to provide an overview about our recent achievements and strategy.
Thank you very much, Yang. Then, let's move on to slide 11 to talk about recent achievements and strategic updates. As you know, our estimated addressable market is around CHF 19 billion, which leaves us with huge growth opportunities in all segments. Our strategic compass is designed to capture this market potential, and innovation, education, and digitalization are the key pillars to success across all business areas. I'm pleased that we continue to make good progress in the third quarter along all those three dimensions. On slide 12, you can see our recent innovations that help us support clinicians to be successful with both clinical treatment outcomes and driving dental practice growth in the most efficient way. In implantology, one of the most important innovations is iExcel, the new premium implant system for both bone and tissue level treatments.
It offers the unique benefit of four distinct implant designs with the simplicity of one single implant system. Another important recent launch was Unique in North America, which received very good feedback. Unique is our cloud-based, on-demand prosthetic service that allows dental laboratories to outsource planning, design, and manufacturing of patient-specific customized abutment, bars, and full contour crowns . In the digital space, we pre-launched Straumann Falcon, our first compact and portable navigation system for surgeries, that guides dentists in their surgical procedures in real time. Finally, our latest launch, which I will come back to later, is our new intraoral scanner. This scanner will help improve the clinical journey and is an important part of our digital strategy. Last but not least, ClearCorrect. In orthodontics, we focus on seamlessly integrated digital workflow for the treatment of ortho cases.
The continuously further developed software, ClearPilot, now allows for a more intuitive and user-friendly treatment planning experience and enables clinicians to treat more advanced cases. All those innovations are important puzzle pieces in a clinician journey, and critical in supporting clinicians to be successful with both clinical treatment outcomes and driving growth of their dental practices. Let's move to our education pillar on slide thirteen. Education is crucial for both clinical excellence and market penetration. In the third quarter alone, we showcased our full range of solutions and brands to more than 3,500 existing or potential customers at large events across the globe. The largest event hosted by Straumann Group was the International Esthetic Days in Mallorca, Spain, which gathered about 1,400 dental professionals from across the EMEA region.
For these three days, world-class experts shared their latest clinical expertise and held multidisciplinary treatment discussions. For the first time in this setting, the focus of this congress was on the full range of implantology brands and digital solutions, as well as orthodontics. The event was a great opportunity to showcase our complete solutions and how they can be connected within our digital workflow and the Straumann AXS platform. Apart from large multi-day events, we expanded also our education efforts to address specific clinical topics with smaller groups of clinicians, mainly involving hands-on sessions. In the Asia Pacific region, many courses took place in our new partner centers in Malaysia and India, which were well received by all the participants. Our ongoing investment in education and enhancement of clinicians' skills enables us to continually increase the market penetration of implant therapy.
With this, let's move to slide fourteen and talk about digitalization. At the International Esthetic Days in Mallorca, we introduced Straumann Sirius , our new intraoral scanner designed to offer a competitive solution in the entry-level segment. By launching this innovative intraoral scanner, we aim to cover all price points in the IOS segment and continue increasing our install base. Compact, lightweight, and wireless, SIRIUS offers high scanning speed and accuracy, efficiently processing digital data. Its seamless integration with our digital platform, Straumann AXS, improves the clinical digital workflow, and with this, the overall clinician experience, driving a more streamlined and connected approach to patient care. Let's move on to slide fifteen. As mentioned earlier, intraoral scanners like SIRIUS are an important entry point for the clinician journey, as they offer a seamless connection into our cloud-based Straumann AXS platform.
We are creating this platform with our mission in mind to become the most customer-centric oral care company. Therefore, it is designed to capture the entire clinician journey from diagnostic, treatment planning, to patient communication, and will connect our software solutions such as coDiagnostiX, SmileCloud, and ClearPilot in the future. Moving on to slide 16, I would like to celebrate the first anniversary of EdgeUp. Digital transformation is not just about technology, it is a lot about people. This is why one year ago, we launched EdgeUp initiatives, an internal education platform to help our employees embrace the opportunities of digitalization through workshops and courses. We also encourage colleagues to use our so-called Digital Lab, a space to explore cutting-edge digital tools.
All of this has been a great success in the first 12 months, with more than 1,400 employees worldwide improving their digital skills through workshops and courses, creating a solid foundation for all teams. We are convinced that this digital mindset is one of the key conditions for becoming a digitally powered, successful oral care company. This is why we are further rolling out this program to our colleagues in sales and operations to help grow their digital proficiency, and I'm already excited to see the future results. On slide 17, I would like to speak about the continued significant investment we make in our future growth. In September, we laid the foundation for our third Neodent factory in Curitiba, Brazil. This new greenfield facility will cover a total of 40,000 sq m, and is scheduled to be operational by the end of 2026.
The third Curitiba site will further support the global expansion of our leading challenger brand, Neodent. We also continued our global network expansion in Asia Pacific by investing in additional capacities. The ramp-up of our China campus in Shanghai is well on track. While we are still in the validation process phase, production of the first semi-finished product has started. With this, let's move to the full year outlook on slide 19. While we expect the current geopolitical and macroeconomic uncertainties to continue and lead to different dynamics in our regions, we remain confident that we will continue to gain market share within our estimated globally addressable market of CHF 19 billion. Going forward, we'll continue investing in capacity expansion, digital transformation, and more go-to-market activities. With what we have achieved so far this year, we can confirm our outlook for 2024.
We are confident to achieve an organic revenue growth in the low double-digit % range, and profitability in the 27%-28% range at constant 2023 currency rates. Now, I would like to open the questions and answers session. If you have a question, please press star and one on your phone to join the queue. As usual, we kindly ask you to limit the number of your questions to two, in order to give other participants a chance to ask their questions within the available time. Chorus Call , can we have the first question, please?
Our first question comes from Richard Felton, GS. Please go ahead.
Thank you. Good morning, and thank you very much for taking my questions. My first one is gonna be on the U.S. So could you perhaps comment in a bit more detail about the current environment you're seeing for your business in the U.S.? Specifically, I'd be very interested to know what has driven the deceleration versus H1, and is there any shift in the trends that you've seen through the quarter? Then sort of following up on the U.S., I mean, looking ahead, what do you think needs to happen to see more robust trends for the dental market in that country? That's the first question. Then the second question is on the rollout of iExcel in Europe. So I'd be interested to hear more what the customer feedback has been. Then obviously, you know, financial performance in that region was strong in Q3. How much benefit in financial performance are you already seeing from the iExcel launch, or is that more to come in future quarters? Thank you.
Thanks, Richard. Yeah, U.S., then lower patient flow as we have expressed. I think we have seen that deteriorating over the year, overall 2024, and I think it's the high interest rate, which is constraining both sides of the market. I would say one, directly at the patient side with a lower capability to spend, and of course also on the treatment provider side and some of the large dental service organizations as an example, which are, of course, tightening a little bit the OpEx and doing much less advertising than they have been doing in the first half, as an example, to drive then actively this patient flow. Then this is what we have seen over the quarter.
Did it worsen during the quarter? I would say not specifically. It has been a rather soft development, and in order for this to change, as you asked, we think that obviously we need to see those kind of interest rates going down as it has started. We think that it needs a, you know, a little bit more decrease in those interest rates, and we believe that it's going to continue by the end of the year. Everyone expecting that the Fed will continue then to drive down their interest rate, and then adding a couple of quarters to have that impact on the consumer spending being, let's say, improved. We should see some then the tailwind back for supporting the market.
Now, this being said, we are still growing in the U.S. . That's why we believe we are gaining, again, quite some significant market share based on what we have heard from different input left and right. And we are going to continue investing in our capability to gain share, because when the market is going to be, of course, more supporting the overall demand, we would benefit from that share gain, especially from a new customer acquisition standpoint. When it comes to iExcel, the customer feedback on in Europe, in EMEA, is similar to the one that I've started to use in the U.S. , very, very positive.
I just, you know, I can phrase one feedback I've heard from one of the good customers that I met in the past week, which is like it's a Straumann home run, the way it has been expressed, and really pleased with the versatility and the ease of use of the system, and especially the fact that it simplifies how to process the different sterilization and the handling of the overall system for the staff. And for this, obviously, as it's not easy to train staff in the dental side, I think they are also valuing a lot this aspect of the system, not only clinically, but also a lot about how to manage it within the entire practice.
What is the share of the iExcel in the performance of EMEA in the third quarter? Non-significant. We have just pre-launched iExcel in Germany, Spain and Italy during the third quarter. It has been done only actually end of September, early October. Then for the time being, there is no impact of iExcel in the EMEA sales.
Very clear. Thank you.
The next question comes from David Adlington, JP Morgan, please go ahead.
Morning, guys. Thanks for the questions. Maybe just firstly on the guidance, obviously, your decision not to raise the guidance despite the year to date signifies a significant slowdown potentially in Q4. Just wondered if you're actually seeing any slowdown there that you're concerned about or just your usual conservatism. And then specifically within the U.S. , I don't want to get too granular, but maybe just in terms of your expectations about how the U.S. election might see some potential further hesitation through Q4. And then just as we think about FY twenty-five, just wondering how you think about the growth dynamics, maybe by segments or regions, as you approaching twenty twenty-five. Thank you.
Yes, David, I think, yeah, on guidance, you know, we are the only thing that we say is that we are confident for Q4. I think we are seeing trends that are still in the regions where the patient flow is still dynamic. We don't expect really any significant change in the dynamic in the patient flow from most of the regions. Then, while we are not anticipating significant deterioration in U.S. , we are not anticipating significant slowdown in the rest of our regional performance. And that's why we look confidently at the end of the year, and we'll see exactly where it land for the full year.
But for us, that was also the fact that we were wanting to confirm the guidance with a lot of confidence, but does not mean that we see a very significant change in kind of Q4 dynamic. When it comes to U.S. election, it's always difficult to analytically define if there is any impact on the demand with regard to the third quarter. Yes, of course, election is having an impact in the fact that people are not focused on the business, but a lot talking about this political, let's say, important event. But I do believe that the interest rates are having a much more important impact than any of the, you know, political election implication.
And that's why I would phrase it not very significant, even though it will be better when, you know, the results will be out, and people can come back to really focusing on the business. For twenty twenty-five, of course, it's too early for us to give any guidance of twenty twenty-five. We'll do that after first having seen of what's going to be on Q4 run rate. But again, I think we are looking confident with all the new products that we are having to release on both digital side, but also the full rollout of our iExcel in all geographies. And yeah, we see our SIRIUS also being able to have a full year run in addition to our TRIOS, then the development.
Then we are confident for 2025, but it's too early to give any really clear perspective about what it's going to be.
The next question comes from Hassan Al-Wakeel, from Barclays. Please go ahead.
Morning. Thank you for taking my questions. Firstly, can you please talk about the ClearCorrect performance? You highlight a softer orthodontics business in the U.S. . Is this incrementally worse versus Q2, and how are you seeing this fare globally? You also talk about customer wins on the specialist side, Guillaume, in orthodontics. Can you elaborate here, please, and talk to some of the feedbacks, the feedback that you are receiving from specialists and how you think that this will be a feature for twenty twenty-five? And then secondly, could you talk about the China market and how you think about better affordability sustaining double digit growth into next year, despite all the macro concerns we continue to hear about on a daily basis on the consumer front? Thank you.
Yeah, thanks, Hassan. Coming to ClearCorrect, was it incrementally worse in North America? I would not say so. I would say it was more or less worse in the same line. Let's say that we were growing rather than on the soft side in North America in clear aligner. It was, of course, a little bit softer than this, but we don't see a significant difference. Then we have also, once again, on a rather low base, and that's why we keep acquiring customers. We have had some of our customers doing a little bit less volume, but all in all, I think we have not seen a very significant difference versus the second quarter.
When it comes to global, we are still growing double digits on the ClearCorrect side. I think we are still very pleased with our progress on this one, and we see that our go-to-market investment are really paying off, and then we will continue as such. Yes, we are seeing some specialists using ClearCorrect more and starting to gain some customers on this segment. We see that also by the increased complexity of the treatment we are treating, by the increased number of clear aligners that we are manufacturing per case, which is really demonstrating that we are going into those more advanced cases and creating more confidence at the specialist side. Now, we are very often with those specialists just, you know, starting our journey and having still some
So far, a limited number of cases with them, but I think that's our goal, is to raise confidence, to increase our penetration step by step, and I think we are on the right direction on this one. Exactly as we expressed a couple of quarters ago, we feel that ClearCorrect is ready now, for the specialist segment, and while it does not cover, you know, everything, from an indication standpoint, it covers enough, you know, that we can have those relationship developments, with this important part of the clear aligner market.
When it comes to China, well, we have not done any guidance also for 2025 when it comes to the Chinese market, but you know, I was again in China last week. We still see a significant demand coming to the practices. We see that the patient reservoir that are still seeking for treatment. It's important. What is very important for us to be able to continue then generating a very significant growth is not only to be able to develop and invest in our go-to market still on premium, but also making sure that we are serving the all price segments with our eco line.
And we are actually here developing further projects to be able to drive this offering that will cover all the different price points, and especially all the different customer groups in all the different geographies of China. You know that it has been a lot of development in the tier one, tier two cities. We see a lot of development now also on tier three cities, but where expectations are sometimes a bit different. And this is why we are really, really here focusing on customer needs as always, and being able to deliver then through our Shanghai campus, through our different partners, exactly the value proposition, which is allowing us to cater to all the different patient segments.
Very helpful, Guillaume. If I could just follow up just on Q4. I mean, is there anything else other than tough comps explaining the implied deceleration in guidance? I know you're talking about guidance confidently. And is Q4 a better proxy for next year, given the China dynamics that you just talked about and the comps that get tougher? Or is there anything, to your mind, that should drive an acceleration in twenty-five on Q4? Thank you.
Hassan, for the timing, it's difficult for me to answer your question because I don't see Q4 yet. Then I would tell you if Q4 is a good proxy for twenty twenty-five as soon as you know we believe that Q4 will be reflecting what we see from a trend standpoint. What we can say again is if there is nothing that would come on top of what we're facing at the moment when it come to macroeconomic environment, then we believe that the trend should be continuing. We see robust trend in EMEA, robust trend in Asia Pacific, and again, it's not only China, which is also very important to express. We have all the different Asia Pacific countries doing also very well, where we're investing.
We see Latin America, that should be also growing, you know, significant growth, and we all expect, you know, then the North America, to be, then better, in twenty twenty-five as interest rate will go down. Then, that's what I would be able to express when we see twenty twenty-five, but, we are still expecting Q4, to share our view on how twenty twenty-five would be with regard to the latest Q4 trend.
Perfect. Thank you so much.
The next question comes from Maja Pataki, Kepler Cheuvreux. Please go ahead.
Good morning. Also from my side, just quickly, one question on the North American market, and then something on the outlook for twenty twenty-five. Guillaume, you said that you have not detected a deceleration in North American growth throughout Q3, and, you know, that Q3 overall was rather stable. But we have seen a slow and steady deceleration throughout the year. Granted, you do not have a crystal ball, but is your conviction higher that we're gonna see an acceleration of growth going into twenty twenty-five, or do you believe that we're standing at a fifty-fifty with a potential deceleration continuing into twenty twenty-five? That's my first question.
And then the second question, looking at the potential mix on which regions are gonna contribute to growth in 2025, do you believe that even if the U.S. would see another deceleration in growth, you'd be in a position to improve your core operating margins on a constant currency level? Thank you.
Yeah, Maja, I think, you know, I on the U.S. side, I would say that we have not seen decelerating this over the year, because if I remember well, our Q1 was around 3%, then we have our Q2, that was sequentially improved, and then we have Q3, which is once again a little bit lower. What we can say is that they are here when we are coming to small numbers. We see that patient flow, which is not very dynamic, but we see also the digital equipment, which is playing a role here. And then in the second quarter, the digital equipment added then a couple of points to growth, which is not the first quarter, because the first quarter is typically not an equipment sales quarter.
Then that's also why we are saying that we don't see a significant deterioration or a deterioration of patient flow, but we see that still very, very soft. We don't expect, again, North America coming into 2025 and the Q4 to deteriorate versus where it is today. But now, as expressed a little bit earlier, there will be as soon as interest rates will go down and having a kind of a six months period in order that the impact of those decrease of interest rates could be perceived at the patient level and having more discretionary income to spend.
And also actually, which is one of the important effect being accepted from a credit rating standpoint, which is, of course, preventing some of the patients to then go through the procedure because they are currently then having interest rates too high versus what they are earning today, then it will of course then support better the overall market. And I would say that that means that this is where we think it should happen in then the 2025 in the course of the year. Now when it comes to our product mix, I think we are, you know, anticipating this product mix.
It's already, you know, starting from 2023, the second half that we have seen that China was, of course, much higher than volume growth and much representing much more growth share versus the rest of the regions. Then we have North America that have been less dynamic, and obviously we are anticipating this for adding all the cost efficiency program internally and being able to continue pushing our operational leverage capability to keep being able to come up with the operational improvement. This in parallel, we all keep as expressed, investing significantly in growth moving forward because we do believe that when it comes to innovation, education, and digitalization, those are the three areas that are creating the difference and allowing us to have very significant performance versus peers.
And in order that we can maintain those market share gain level. This is very important for us to keep them catering to the demand, as we said, from manufacturing standpoint, but also driving new technology on the digital side and still helping to grow the pie in all the different geographies with education.
Thank you.
The next question comes from Graham Doyle, UBS. Please go ahead.
Good morning, guys. Thanks for taking my questions. Just one on the U.S. and then maybe one on China. Just in the U.S. , I kind of noticed in Q1 and Q2, you talked about stable patient flows. So is it reasonable to assume that patients have gotten worse in the Q3? And did you see that sort of get worse through the quarter or not? And maybe just to your kind of experience, Guillaume, how would you contextualize the U.S. market now versus, I say any point in the last kind of five to ten years in terms of your optimism on a return to growth and consumer sentiment? And maybe just a quick one on margins.
I think you've helpfully given us the FX impact in previous quarters and on terms of the constant currency margin. Would you maybe just give us a refresh of that as well, please? Thank you very much, guys.
Yeah. When it comes to U.S. and Q3, what we have seen also into twenty twenty-four is, as you know, the patient flow has been slowing down. We have seen also, and this is quite a difference versus the past, the dental service organization has been the one pushing significantly in opening up the market, with investing into that market in both advertising and pushing also their clinicians, doing a lot of implant education. And what we have seen also is then it's less advertising and then less patient flow generated from a push strategy from those dental service organizations.
We have seen also less of this, which means that, this has impacting some of the market demand as well, than the-- especially when it comes to that larger reconstruction that would be full arch or even kind of large aesthetic cases. How I feel about the U.S. market moving forward, I honestly, I'm positive. I think it's really, and we have seen that from an interest rate sense standpoint, and, as soon as interest rates will go down, which has a, again, a major impact when you look how much the U.S. households are into, you know, credit and how much they are financing a lot of their purchase for credit, then the interest rate increase have a very significant impact on discretionary income.
And as soon as this weight will not be there anymore, or at least it would have been reduced significantly and that they could enter into positive credit rating, I think we will see then this positive demand trend going up significantly. Then, that's where I think all hope that the Fed will continue decreasing the interest rate and the faster, the better, in order that consumer confidence and especially consumer consumptions will go back to a much higher level. But I really do think that with those interest rates, my personal thinking, that I see then the U.S. positively moving forward when we'll have those effects. Yang for
Yeah.
Do you want to go ahead?
Okay. So Graham, if I come back to your second question was related to the margin. Yes, you're right. We did guide our constant currency margin between 27% to 28%. Your question might be around the effect that we guided-
Yes
Early in the year, huh? So we said it would be anywhere between 100 to 200 basis points when we got into the year. And if you were to ask us right now, I think it's probably around the mid-range of where we guided. Of course, I mean, we don't have a crystal ball. We will not know where it lands in quarter four, but this is what we see so far.
Pretty, that's super. Let me just a quick follow-up. It sounds one of the things that that's clear through the call is your kind of conviction on what how important interest rates are to demand. I'm just sort of wondering, right now, obviously, there is some pressure in the U.S. but, you know, employment has been pretty high. And obviously a consequence or a reason for re-lowering interest rates is unemployment. I mean, do you, which of those two drivers do you really think would drive demand? Is it employment? Is it lower interest rates, even if you have higher unemployment? 'Cause it feels like based on what you're saying, you're very tied to what's gonna happen with the interest rates, which
Mm-hmm
doesn't feel like something we've had to worry about in the past.
No, because for us, interest, employment did not move so dramatically. You know, when you look at the employment is a really significant challenge. As soon as an employment rate is increasing, then we see a very significant impact. We have not seen huge challenges when it comes to employment, but we have seen step by step, then, this kind of demand slowing down because of those interest rates going up, you know, on a regular basis. Then that's where, of course, we want the employment rate, or we need the employment rate to stay stable or even to improve further, if needed. At the moment, what is, we believe, slowing down the market, is much more the capability for people to finance treatments.
and that's one of the reasons why, you know, they are just in standby and expecting prices to go down, thanks to having, of course, less interest payments and also having the capability to go to credit in a easier way with reducing their current burden.
Okay. Thank you so much for the color. I appreciate you taking the extra questions. Thank you very much.
The next question o f course comes from Daniel Jelovcan, ZKB, please go ahead.
Yeah, good morning, also from my side. One topic not covered so far is Japan. You haven't really elaborated on Japan. I mean, did the currency, you know, this carry trades shock and so on, did that have an impact? Or maybe with certain lag in Q4? That's the first question to Japan. And the second one is Align Star in China. You mentioned in the press release that the uptake was strong. Can you elaborate a bit more on Align Star? I mean, does that go to the big practice or broad-based acceptance and so on? That would be nice. Thanks.
Mm-hmm. When it comes to Japan, I think, we, Japan has been positive, for us. Good growth in line with, you know, what we were planning and, with our expectations. No, we have not seen any significant disruption in our positive growth trend in Japan, on the, let's say the different feedback also from clinicians or with regard to patient flow. Honestly, nothing specific, I would say to report, except that trend has been consistent with what we have seen before on the positive side. When it comes to Align Star in China, yeah, the-- China is, as we are all hearing, from all the different industry, it really, really adding a strong focus on digital technology.
There is a lot of investment in China about digital capability development. We see a lot, of course, of AI companies developing, but also a lot when it comes to dental, about digital capabilities, when it comes to equipment and software. A lot of future leader in this space will be coming from China with all the development that we are seeing, and especially the expertise that they have been able to gather in that space. That's why we are really pleased with the Align Star partnership and acquisition that we have done to help us then the opening of the market on digital technology, and especially in China, where they are all adding CBCT scanners in a dental practice, but the penetration of intraoral scanner was yet quite low.
Then we want to position ourselves in this also significant opportunity, but with a scanner at a much lower cost base, because this is really what the Chinese customers are expecting. At the moment, we are seeing significant positive trends still in China when it comes to digital equipment acquisition, and this is why then we have started at, yeah, I would say, midyear, early this year, and the trend have been very dynamic. We are above what we were expecting to sell in the China market, and we will continue doing this, even though we will need to continue also innovating, because the innovation rate in China is very dynamic, and there are also other competitors than Lightstar in this market.
which is, you know, good also for keeping us on our toes when it comes to being competitive in the dental digitalization disruption trend that we're seeing all around us and also in all the different regions.
Okay, thanks much.
The next question comes from Oliver Metzger, Oddo. Please go ahead.
Good morning. Thanks for taking my questions. First one is also on the U.S. . So can you describe the dynamics more from the supply side? So some quarters ago, it was only about the more complex cases, but this effect should have already annualized to a certain extent. So if you think about the different subdynamics, do you still see higher pressure coming from the complex cases, or do you see more an overall weak demand? Second question is orthodontics in Europe. So how important is the increase of share sales at Impress to a positive development? Thank you.
Yeah, thanks, Oliver, for the question then. In the U.S. , yeah, I think the, you know, it has started with a higher pressure of complex cases on the demand side, by the nature of the procedure, this is really the high ticket items. Then they are all in between $25,000-$35,000 per cases, which has been the first one to be impacted. As expressed during our second quarter, that we have seen and first quarter as well, we have seen this expanding in a little bit, let's say, smaller indications, like a couple of implants or also in some area single implants. But I would say at the moment, we don't see the worsening trend on those single cases.
But we have seen or, or as expressed also earlier, then, lower advertising investments from some of those, the large dental service organization. Then all in all, that's why we have witnessed a much slower market than previous year, and we believe it will continue like this. Complex cases will still be significantly impacted, and I think we still see much less pressure on the single case or the simple cases because of the price level being obviously much lower. When it comes to Ortho EMEA, there is no impact from Impress because and we have not yet started to supply at a large scale basis as we were closing the deal.
We are going to do that in the quarter to come, and we don't have this particular effect for the first quarter on our ClearCorrect ortho business.
Okay, that's helpful. Thank you very much.
The next question comes from Dylan van Haaften, Stifel. Please go ahead.
Good morning, guys. Thanks for taking my questions. So just a clarification from my side. I noticed that you changed your clear aligner market share estimate from around 5% to around 3%. Is that? Could you confirm that's 100% DrSmile DTC related? And could you also maybe just recap the numbers that are underpinning this, and could you also confirm that you gained share on a like-for-like basis, ex the DrSmile DTC business, and maybe, and I think one of my colleagues, peers asked this as well. Maybe just give us a better sense of what the underlying geographic trends are. Thank you.
Yes, Dylan, then I can confirm, we moved down our 5% market share on clear aligner down to 3%, just because of the DrSmile , then the divestiture. When it comes to Ortho, when we look at our Ortho clear aligner growth rate right now with double digits, we believe we are getting share when we look at the overall clear aligner market segment overall trend. Where we believe we are winning the most share are in EMEA and Latin America, we're a significant double-digit growth. We are having also positive growth in Asia Pacific, but at a much lower scale, meaning that while there are some market share gain, but it's not very significant.
I think, when it comes to North America, our estimation is that we have been performing a bit above market, but I think also not significantly to claim share gain.
Excellent. Thank you very much.
The next question comes from Hugo Solvet , BNP Paribas. Please go ahead.
... Hi. Hello, thanks for squeezing me in. I have three questions, please. First, on China, Guillaume, maybe can you give us an indication on what the growth rate has been in October in the country and any first discussion, thoughts around the potential round two of VBP in 2026? Second, on the U.S. , we're hearing it across other industries that insurers will likely become less generous next year. Would you expect this to change or impact demand dynamic, possible down trading in the U.S. into next year? And lastly, on EMEA, you mentioned intensifying customer acquisition efforts. I'm sorry if I missed your earlier comment, but could you maybe elaborate a bit on this? And is it a new higher cost of doing business, or is it temporary? Thank you.
Yeah. When it comes from China, while we are not commenting month by month growth rate, and October is not finished yet, I would say, but what we can say is that we don't see significant change in any of the trends we have seen so far. That's one of the reason we have been expressing that we are confident for our fourth quarter. When it comes to VBP 2026, you know, yet we have to learn more about what are going to be some of the rules, if they are changing any. We are, of course, anticipating some of them, one being that the requirement of adding local manufacturing should be one of the most important points that will be implemented in 2026.
And that's why we are really pleased to have done those investments earlier on and to have speeded up really our development there and to be fully ready for twenty twenty-six VBP with local manufacturing. We are in Q4 going to manufacture product that we will commercialize Class I product, which is all the prosthetics, and in the second half of twenty twenty-five, we'll be able already to have all registration for Class III products, meaning all the implants as well, then allowing us to have everything manufactured with regard to the VBP requirement, potential requirement in twenty twenty-six. And that's a lot of the work done to make sure that the VBP will not then lead to a very significant disruption from what we are expecting.
When it comes to U.S. insurers, yeah, we heard that as well. Now, you know that implants have almost no or very limited reimbursement in North America, it's almost all the co-payment or fully paid by the patients, meaning that we don't see these insurers change in reimbursement policy affecting significantly the demand in North America. And in EMEA, I think, could you help me say it again? You were talking about higher cost to do business for what you were talking about here?
Yeah.
Yeah, go ahead.
In the first release you mentioned intensifying customer acquisition efforts. Just wanted to
Ah, okay.
Get your view on whether it is temporary or it's just a higher cost of doing business and growing in the region.
No, it's not a, you know, it's not higher cost of doing business. It's investing in further growth. We are looking at leveraging then all the innovation we are doing. You know, in our business, innovation is the name of the game, and we are investing significantly in innovation. We have seen on the implant side with iExcel, on the digitalization side within our AXS platform, and still pushing, of course, all the different price points with TRIOS, which is innovative, also with 3Shape, and being also able to deliver then a better value proposition on ClearCorrect, with extended indication.
Then, the second aspect, to be able to bring those innovation on the market and gain shares is the sales force pressure, combined with education, which is allowing us really to gain those significant market share. Then on a regular basis, to make sure that we can keep growing, we are doing those go-to-market investments, now, in EMEA, for example, for the future iExcel launch, and this is where we expect then to keep our high growth rate, to pursue in the future.
Thank you.
The next question comes from Robert Davies, Morgan Stanley. Please go ahead.
Thanks for taking my questions. My first one was just on your earlier comments around rates coming down. Obviously, if you look on a year-on-year basis, in 3Q, rates are already somewhat lower than they were twelve months ago, yet even with easier comps, growth has slowed. So I just wondered, is that a timing issue in your view? You just kind of need to wait longer before customers sort of confidence improves, or is there anything above and beyond that? And then I guess, so tied into that, is just the risk that the U.S. growth goes negative in the fourth quarter. I mean, it's been slowing now for a number of quarters, and growth gets more difficult in terms of a comparison year-on-year in 4Q.
You mentioned there was, I think, a 2% impact from digital in the previous quarter. Can you give any color in terms of what your expectations are for that contribution in four Q? Is there any seasonality, or is there anything to read into that? Thank you.
Yeah, when it comes to the rate, I think the Fed has decreased their rate by fifty basis points, and fifty basis point is not enough to make a difference with regard to how much you know it has increased in the past. And we expect further decrease and of course you have a kind of time lag of six months you know that we see the impact for the households with having their interest rate burden being reduced.
That's why we still believe that we need some further reduction by the Fed and the six months timeline to be able to see an impact on the consumer spending and the appetite to go further with high ticket items such as, you know, full arch or large oral care treatments. When it come to US, no, we are still positive about Q4. Our current perspective is not having a decline in our business with regard to all the different opportunity we are also adding. You know, we are still having iExcel allowing us then to grow our share in the premium side.
We are still adding our Neodent challenger brands, which is growing at a really positive rate, and our digital capabilities to support our customers, sorry, being able to drive then further digitalization of their practice. While the market is of course not as supportive as it has been twelve months ago for the time being, we believe that there is still the capability to generate growth, although, you know, not as high as it was previously in North America.
Understood. Thank you.
The next question comes from Giang Nguyen from Citi. Please go ahead.
Hi, good morning. Thanks for taking my question. My question is on EMEA, very good impressive growth rate. I was wondering if you could break it down into volume versus pricing, and how sustainable do you think this growth rate is going forward? And then sort of the same question on Latam, if you could break down the volume versus pricing bit here, please. Thank you.
Yes, sure. It's mainly volume. You know, we can have potentially, you know, we have always expressed that, you can count something like 1 to 1, 1.5 in between 1-2% price points, meaning that all the rest is volume gain and volume growth, both for EMEA and Latin America. And when it comes to sustainability of the growth, we believe that we have a strong opportunity in both regions, thanks to the innovation that we have to deliver and has expressed the go-to-market investment that we have done. Yeah, we are positive about our capability to still grow EMEA and Latam at a higher than what we are considering from an overall market standpoint.
Thank you.
The next question comes from Falko Friedrichs, Deutsche Bank. Please go ahead.
Thank you. I have a question on China, please. How many weeks or months of good visibility do you really have for the demand in China? The reason I'm asking is that I think this earnings season, again, we've seen that demand in China can deteriorate very rapidly, right? Within a quarter, even within one or two months. So I'm just asking to make sure that we don't run into a similar scenario with you over the next two to three months. Thank you.
Yeah. First, you may know that we have then the going through distributor when it goes to our China distribution or China go-to-market. And we are actually paying very much attention to this on how much stock is kept at distributor level, meaning that we are always visiting customers and spending time a lot with customers, and especially DSOs that are really here at the heart of the growth we have been generating. You know, to give a kind of perspective, the China market is around 25% public hospital. We are going to have, you know, 30-35% of DSO, and then the rest will be smaller practices.
Then we are having very good understanding of the public hospital and the DSOs, because we have really regular, direct contact with them. And this is where we see that currently patient flow and activities are still healthy. Then we are not expecting any very significant downside, let's say, within the next one to two months, as I agree, that's been seen in other industries. At the moment we have, I would say, this kind of direct contact with those key customers that are generating quite a lot of volume, and we don't see any significant trend disruption in the foreseeable short-term future.
Okay, thank you.
The next question comes from Julien Ouaddour , Bank of America. Please go ahead.
... Good morning. Thank you for squeezing me in, and sorry, I got cut off. So if I like ask you to repeat yourself, just it's like, just let me know. But Guillaume, my understanding is that on North America, you basically like, let's say, like, are saying that demand might improve after the rate cuts and probably with a six-month lag. I'm just checking out the next year consensus, which is roughly 10%. Do you need the market to return to mid-single digit growth in twenty twenty-five to get to this number, despite I mean, I know you mentioned some let's say, like, product launches, but I mean, like, is it doable? And the next question, just on product launches.
So, iExcel, I feel that you're, I mean, you feel a bit more positive. Let's talk about the feedback you got in the US and now that you are having in Europe. Do you still think that you can take roughly 10% market share, like in the coming years, or can you even probably take, it's like further shares from that? Thank you.
Yeah, thanks, Julian. Again, for 2025, we'll see when we will be there after our full year results, because we need to understand a little bit the speed of cut rates that are going to be done by the Fed. And obviously, to be able to have a strong dynamic of getting back to high single digit in North America, we need to have a more favorable macro environment. Obviously, how fast it's going to be, I think this is still something that we don't know, and we are going to have some additional signal after the next Fed meeting, which is happening before end of the year.
Then that will give a little bit more insight into what will be possible to expect from an overall market growth, and to which we can add, obviously, our market share gain. When it comes to iExcel, yes, I think we, you know, sky is the limit, as always. We know that, thanks to superior product features and especially expected benefit from customers, we can really move the needle, and this is what we are seeing at the moment.
Now, obviously, our capability to push iExcel is going to be then the very significant when all the different market will have been launching the product or would have launched the product, meaning that it's going to happen in the next, I would say three to four months, because Q1, we will have then all the different European market that would have launched the product, and Asia Pacific, especially mature markets such as Japan and Australia, will come later. But when we will be in full swing, I think being able to achieve those 10% market share gain, that correspond to a little bit of more than 200 incremental, 200 million incremental, would be already a really big push for us.
But if there is space to take more, yeah, we will be able to drive that, of course. Let's say that in a year from now, we'll see where we will be, and we'll see what would be the total opportunity for iExcel moving forward.
Perfect. Thank you very much.
Today's last question comes from Shubhangi Gupta from HSBC. Please go ahead.
Hi, thanks for taking my question. So my first question is on China. Do you see any impact from the China stimulus program, especially on the digital solution business side? And second, just following up on North America, so, with interest rate cuts, you think growth will come back. Is the low consumer confidence just down to higher interest rate, or is it also like volatility before U.S. elections and maybe customers switching to other aesthetic procedures like GLP drugs?
Yeah, I think it's when it comes to China, we have not seen any impact. I think the digital trend is very solid when it comes to at least the intraoral scanner equipment acquisition in China. Then we have not seen any specific acceleration based on the latest Chinese subsidies or push for those kind of technology. But it's still, you know, at a very high rate of progression from this IOS penetration or market penetration.
When it comes to U.S. , yeah, we have heard if the GLP-1 could be a reason for having, you know, lower consumption or demand in aesthetic product when it comes to oral care than orthodontics included. At least when it comes to implant, we don't think that it has an impact for us significantly. While I know that the GLP-1 has been used also by a part of the elderly or more advanced in age patient group, I think the major treatment have been purchased by more younger patients.
Then it might have had an impact on the clear aligner, where anyway, our critical mass is not there. Then I would say that we can expect that it has an impact on our ClearCorrect sales, but I don't believe that it has an impact on implants yet, or at least very insignificant. We believe really those interest rate has been playing a role, and also seeing less advertising for some of the care providers, decrease some of the patient flow dynamic. Like with this, then I would like to thank you for being here with us and for your attention. We are looking forward to speaking to you again soon, and we wish you a very nice day and a warm goodbye from Straumann.