Dear ladies and gentlemen, welcome to the conference call of Medacta Group SA on the 2020 full year unaudited top line figures. At our customer's 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. If any participant has difficulties hearing the conference, please press star key followed by zero on your telephone for operator assistance. May I now hand you over to the CEO of Medacta, Francesco Siccardi, who will lead you through this conference. Please go ahead. Thank you very much for your introduction, and welcome to this full year 2020 preliminary unaudited top-line figures presentation. I'm with Corrado Farsetta, our CFO, and Gianna La Rana, our investor relator. If we go to the first slide, you can see Medacta did perform pretty well in the second half of the year, with a very good acceleration in the second semester that was able to almost completely compensate the H1 results. Full-year revenues hit CHF 302.5 million, only 2% on a constant currency basis behind last year. Given the circumstances, I have to say I'm pretty pleased. The second half acceleration, which is very important for us, was sustained by both the recovery of the waiting list, the so-called pent-up demand, but as well by a significant number of new customers acquired both during H1 and H2. The customer acquisition did come through basically three different sources. The continued marketing and medical education programs that were tactically changed and partially moved as well online, as well modified in its physical format by moving them in a more local basis and making sure we could perform in a safest possible way according to all the regulation. The other source of growth was the expansion of our product line in all the categories. Last but not least, the expansion of our sales force across all the geographies to sustain all the different product lines. If we go to the next slide, you can see how the performance of the second half of the year compares with the first one. The -1 2% H1 almost completely compensated by the almost 8% growth in the second half at constant currency. We will comment on the FX factor, which was negatively impacting our overall reported results. It is important to highlight that although the second half was definitely better than the first half of this year, at the end of H1, second half of October, November, and December, again, a second wave of COVID was negatively impacting the market, in particular in Europe, in U.S., and at a lesser extent, in Japan and Australia. We basically had a very, very good quarter three, and then again, impacted somehow less than before. We will see it in more details in the fourth quarter. If we move to the following slide, we can see the comparison by product line. You could see that the biggest negative impact in H1, as we have presented already, was in the hip and knee product business line. At the same time, the recovery that happened in the second half was good, and I am particularly pleased on the performance of the hip side in the second half, which was very heavily impacted in the first half. Knees were up as well, around 4%, and both extremities and spine did further accelerate in the second half compared to the H1 results. As a reminder, the last months of the second quarter were again negatively impacted by the second wave of COVID. If we then move into the geographical comparison, we can see, as we expected, that Europe, being the most impacted area throughout the year, was still generating the smallest growth in terms of the direct market, but still a good growth, 6%. U.S. did almost completely recover the backlog and the delay in H1. This was very much linked to the strong acquisition as well of new customers. The Asia Pacific was, in general, the least impacted of all the areas, with both Japan and Australia working very well, although those regions as well had negative impacts throughout the year, more on a regional basis. The rest of the world, which is our distributors market only, although it's a very small percentage of our business, around 3%, was heavily impacted simply because those are stocking distributors relying on their own stock, and during the pandemic, they found themselves in an excess of goods, which limited their need to purchase additional products in the year. If we go on the full-year revenue bridge by product line, we see that although the good performance in the second half, we still have a negative overall full-year impact on both the hip and the knee side. Extremities and spine did perform particularly well thanks to both, as I was saying, an expansion of our product lines, the very strong momentum those lines had coming into the pandemic, and especially the spine, the very good performance associated with new products launches and the very strong expansion of our sales force and distribution in the U.S. If we now then move by geographic area, we can basically see the geographical effect of H1 and H2. Europe is still behind with a -6%. It's important to note that even within Europe, there are important differences. The DACH region, so Germany, Austria, and Switzerland, have been performing significantly better than France, Italy, Belgium, Spain, and the U.K., with Germany even able to post a single-digit growth over prior year, while France, Italy, and Belgium were still negative double digit at the end of the year. This means there is still a significant backlog to recover in those countries. In the U.S., we almost fully recovered the H1 delay. Again, we still have areas negatively impacted by COVID, but those areas are positively offset by the recovery made thanks to the expansion of our customer base and increased market share, thanks to our expansion of product lines, of course, distribution, and a good result associated with our ASC strategy that particularly during the pandemic, has proven to be very relevant to continue to gain market share. Asia Pacific was a very good performing area. We could see a 9% growth in the full-year revenues, although, as we were saying, some areas in Japan and in Australia did see and did face some partial regional lockdown during the year. A very good performance with this 9% growth. Good customer acquisition, good marketing and medical education, and good sales force expansion. Then we come to the stocking distributors that, as I said, although they represent around EUR 8 million in revenues, they did relatively poorly because they rely on their own stock, they have excess, as we speak, of products, limiting their needs to do additional purchases. In conclusion, on the top line, I think we have seen a relatively high level of difficulty in managing all the geographies. At the same time, we have constantly seen that immediately after any lockdown, the orthopedic market is able to very rapidly recover with those pent-up demand effect. Medacta has been particularly able to profit from its geographic presence and product mix. Whenever an area was performing well, we could take advantage, and the same in terms of product lines. Just as a heads-up, we continue not to provide guidance at this stage for 2021. We are in the process of reviewing our full-year results, and we will provide additional information on the full-year presentation, which is expected by the end of March, and by which we will hope to have additional visibility, and additional, hopefully light at the end of the tunnel, thanks to the vaccination campaign, which is ongoing as we speak. This was our short update, in terms of top line, and I would be more than happy to answer any question you might have. Thank you, ladies and gentlemen. We will now begin the question and answer session. If you have a question for our speaker, please dial zero and one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question is answered before it is your turn to speak, you can dial zero and two to cancel your question. If you are using speaker equipment today, please lift the handset before making your selection. If you participate in the audio webcast, you can send in questions via the Q&A function of the webcast. Please pressing the question mark button. We've received the first question via the telephone line. The first question is from Alex Gibson of Morgan Stanley. The line is now open. Please go ahead. Hi, thanks. Good afternoon. I have three questions. My first one is just on your surgeon numbers. Could you give us the number of how many surgeons you have at the beginning of 2021 versus 2020? If you don't want to give exact numbers, maybe you can give a growth rate. My second question is just on growth. Consensus currently expects about 19% constant currency growth in 2021. Your exit rate looks to be closer to 3%-5%. I know you have some easier comparisons in the first half, but it feels like that 19% might be challenging. Do you think that's too optimistic from what you're seeing today? What would need to happen for you to reach those levels? My last one is on investments, and your margins. You are still investing in sales, as you highlighted, and you had a reasonable amount of government subsidies, I think, in 2020, which won't repeat. Do you know what the margin impact would be for those two investments or those two impacts rolling forward to 2021? What level of revenue do you need to get back to reach the 29%-30% EBITDA margins you were delivering in 2019? It's a handful, but hopefully you can help. Thank you, Alex. In terms of number of surgeons, of course, this is somehow an important number, but the quality of each surgeon and the volume that each surgeon is bringing is always an additional very important information. We counted over 400 new additional surgeons in 2021, and this is a very important number for us to reach. That's very important. This gives us confidence for 2021, although the confidence should be somehow counterbalanced by the uncertainty that we still have given the circumstances and the little visibility. The short answer around the question of, is 19% growth rate on the consensus side challenging? Of course, it is challenging. Every type of above-market growth is always challenging, and we've been leaving this challenge for the last 15 years. We believe that if the situation normalize, that type of growth is within our reach. Of course, the big if I mentioned remains very, very strong in front of us. For example, I believe none of us and none of the analysts did really predict a second wave at the end of 2020, and we had to face it. It was smaller than the first one, but we have seen an immediate negative impact. Somehow this will help us accelerate in 2021, again, with the pent-up demand. For me, what is the most important is the activity on the ground, the generation of new surgeons, because we know that as soon as the situation normalize, this will translate into top-line growth. Last point you asked was about investments and margins, which is somehow, again, very much linked to the first question and second question. We know we counted a very important number of new surgeons. Those surgeons have been served with new instruments, new implants, so we know they are ready to start and some have started, but we simply don't see in the top line their contribution yet because there are the minuses of their colleagues. In terms of margins, before talking about 2020, 2021, I would say that Medacta in 2020 has been extremely diligent. It's true we had a certain amount of government subsidies, which is around EUR 2 million. It's not, of course, going to be available in 2021. I feel that our profitability has been well-protected already in 2020, and we should be able, if the situation normalized, to go back to normal in 2021 as well. Okay, great. If I could just push on that top one, the 400 new surgeons, what sort of growth rate is that on your existing base on a net level? On the margins, I know a lot of it, you control your costs a lot, and it's all dictated by the top line, really. Do you have a level of revenue that you think you need to reach to get back to that 29%, 30% EBITDA margin, or is it a bit more complex than that? Thanks. Yeah. On the first question, I would prefer, frankly, not to answer because, as I said before, the number of surgeons per se could be extremely misleading, because the quality of the surgeon is more important, the volume of each surgeon. One big surgeon can make up for 10 small surgeons. The number is important to show that, first of all, the activity has been successful and has been significant in terms of volume of new surgeons. In terms of sales and margins, I think we can manage to protect a good level of profitability at almost any level of top-line growth. The point is that we are prepared, and we are preparing the company for a midterm sustainable growth of 10%+, which remains our midterm guidance that we had prior to COVID. We stated several times that the overall market conditions so far did not change, and we remain very much in line with that statement. Because of that, if we are investing and building structures, and then for any reason or for COVID reason, we have, again, backlog, that's the only reason why our profitability could suffer. It will never suffer as much as it did suffer in 2020, and we still did not publish our 2020 profitability. I'm not worried about short-term profitability. It should remain in a decent level no matter what the top-line revenue will end up in terms of number. I think we have a very good grip on the ratio between revenues and cost. Okay, great. That's very helpful. Thanks. Thank you, Alex. Thank you. The next question is from David Adlington of JP Morgan. Your line is now open. Please go ahead. Hey, guys. Thanks for the questions. Again, I've got a few from my side. Maybe firstly, in terms of the distributor stocking that you pulled out, just wondered if you could quantify how much you think that was and whether you expect to see some restocking at some point. Secondly, just on Germany, it sounds like you still managed to post some growth. I know they performed pretty well as a country through the first wave. I'm just wondering if you see any bigger impacts. I know the second wave is substantially worse in Germany, whether you're seeing any impact from elective surgeries towards the end of last year and into this year. Finally, just in terms of those 400 new surgeons year- on- year, I just wonder if you could give us any color around the geography of where you managed to recruit those. Thank you. Yeah. In terms of stocking distributor, as I said during the presentation, it is a small segment of our market. It is around 3% of our revenues. We did add a significant number of countries as we published during the year. We do expect a good growth if the situation normalizes and even probably if it doesn't. They did restart restocking at a lower level than previous year already. Particularly in countries like Israel, like South Africa, where the COVID impact has been strong, we have seen a significant wait because they were preparing themselves for good growth. They are very good distributors, and that's why they could rely on their own stock and avoid restocking. Both because of sooner or later, the stock finishes, so they have restarted already to buy, and because the number of distributor has been increased significantly and will continue to increase in 2021, we expect this trend to change very rapidly. Germany, you noted that they did manage the first wave pretty well. They did announce on the news significant changes in their policies on the second wave. But we still don't see a significant negative impact on volumes in Germany at the end of the year, nor in the first weeks of 2021. It looks like that the DACH region, Germany, Switzerland, and Austria, they remained very active in the healthcare segment, and probably this is linked to the availability of intensive care within the market, within the country, which protect the elective surgeries from being shut down. The last question was again around the number of surgeons and geographies, if I remember well. We did see a significant increase in Japan. In the U.S., both in joint and in spine, the good performance of the U.S. basically able to fully recover the lockdown areas. As you know, as we speak, there are still important regions, the big cities, the West Coast, Los Angeles, the East Coast in certain regions, Pennsylvania, which is in partial lockdown. We do have significant number of surgeons that are working at a reduced pace, at 50%, at 70%, which means that good performance of the U.S. is absolutely linked to new customers, both in joint and spine. In Europe as well, particularly in the countries that we're growing fast, like Germany, Italy, Belgium, France, we still managed to grow our customer base during the first wave, and in the second half of the year, we could measure the success of the H1 activities as well. Don't forget, we always have a little bit of delay, so the effect that we see now in terms of new accounts is mainly linked to the activities of H1 and eventually quarter three. You remember during the first H1 call, I was waiting to see the results of these new tactics, and they are being proven to be effective. That's great. Maybe can I just have one follow-up. I know historically, your surgeon training, particularly on the hip side, has been pretty hands-on, and I'm guessing that's been less possible with the pandemic and the travel restrictions. Do you expect that to be more back to normal? Or do you think what you've learned through the pandemic is going to be sort of sustained in terms of how you train your surgeons? Of course, this is one of the tactical changes we had to put in place, and particularly on the hip side, but as well for the new procedures in the spine MIS, and in general, whenever hands-on training is absolutely required. For example, in Japan, we used to do cadaver labs outside of Japan, and we managed to organize different surgeon-to-surgeon activities in the country. In general, we redesigned the physical meeting being much smaller, more one-on-one, instead of big labs using mobile trucks. I'm pretty pleased by the fact that we managed to continue to do hands-on training in a completely different format. This is one of the biggest results, in my opinion, we have achieved because it was one of the most challenging aspects. To continue to be able to do those hands-on. In 2020, we moved from big labs to truck-based labs across the U.S., for example, and much more local labs, regional labs, rather than major labs with 30, 40 surgeons per lab. That's what we did. Great. Thank you. Thank you. Thank you. The next question is from Chris Rella of Credit Suisse. Please go ahead. Your line is now open. Thank you, operator. Hi, Francesco. Hope you're doing well. Hi, Chris. Hi. I've just a few questions left. Actually, one on NextAR. Could you maybe discuss how that has been received in the U.S.? I think you published that you had the first surgery done in December. Maybe could you give a bit of an indication how the overall interest in that specific solution was? That would be my first question. I don't know. Two follow-ups. Yes. Thank you, Chris. NextAR has been very well received. There is a lot of demand we are managing. We have been, of course, forced to manage those requests because, for example, as we know, in Europe has not been cleared yet. We have already secured several centers even within Europe, with a purchase agreement, although the product is not even cleared yet. There is a very good level of interest. In Australia, we started to expand our customer base, and in the U.S., there is a strong interest as well, and as we know, the target for this system is not only the hospital and their activities, and this was the HSS press release, but as well the Ambulatory Surgery Center where this particular design will perfectly fit in terms of space, in terms of cost, in terms of capital requirement. There is a rollout program that has started in H1 2021. We will do it in the usual Medacta way. We start by training the key reference centers. HSS is going to be one of them, a very important one, of course. Then second half, we'll see a full launch of the platform, and we're just talking about total knee arthroplasty. As you know, we are preparing the system for the additional application in terms of shoulders and in terms of spine. Those we expect to be cleared within H1 2021. The system is going to become more rich and even more appealing to hospital surgeons and surgical centers. Okay. The spine and shoulder, the approval is expected in the U.S. in first half, I guess. First, you never know with the regulatory, but in general. We expect it within H1, for sure. Okay. Yes, that sounds good. The second question is, I think on your slides, you mentioned that you added 80 new employees, which is great news. How many of those are actually sales force or sales and marketing related? Maybe if you also, on the sales force expansion, could elaborate on the relative expansion by region and product lines. Yes. First of all, those are, of course, only the direct employees. When we talk about sales force expansion, especially in the U.S., it is just half, if you want, of our efforts, because we have all the indirect or agents and distributors in the U.S. market. A big portion of this number, around half, is sales-related happening in the countries. We have seen a big increase, for example, in the Asia Pacific market, which is very important, especially Japan and Australia. This is quite logical to expect as they were less impacted by COVID. They basically followed almost their original budget in terms of hiring. The rest is split between Europe and U.S. In the U.S., we did have a significant expansion of sales distributors, both in spine, and we prefer to go through indirect representation expansion on the joint side as well, given the situation. We managed to add a good number of additional distributors, significant distributors in the U.S. market as well. Okay, great. The last question is just on, maybe on a quarterly basis, the performance. I know you won't get close, but basically from earlier comments, I think you indicated somewhere like low teens growth in Q3, maybe into October. Basically, looking at the second half report, basically you come to the conclusion that it was basically somewhere around a flattish in November, December and for Q4 in the low single digits. Is this about the pattern in terms of exit, the growth momentum you're having right now? On the impact of kind of the latest l ockdown and so on. Yeah. Let's say, I would take your guess estimate as a relatively accurate estimate as a group. Of course, this comes from different regions, different countries. The momentum is very different. If you go back to the growth rate of the different region, you see how APAC was accelerating significantly while Europe was decelerating and U.S. was almost flat. I have data, of course, within each state, each region. It's not a momentum that is generated in an homogeneous way. It's just a consequence of the up and down and stop and go, I would say, that we see constantly in our region. We have seen in July, August, September, when most of the market, with the exception of Australia and Victoria, were not affected. That's the growth momentum that we would expect as soon as the situation would normalize. That is why going back to Alex's question about the 19% to 2021, of course, it is very challenging, but if the condition normalize, it's attainable. Those are the numbers we have in front of us. We have put a lot of efforts into the generation of new customers, and we'll do our best, given the situation, to transform them into revenues. Great. I appreciate your comments. Thanks. Thank you, Chris. Thank you. At the moment, there are no further questions. As a reminder, to ask a question, you have to press zero and one. We've received another question. It is from Daniel Ostrom of Mirabaud. Please go ahead. Your line is now open. Yeah. Hello as well from my side. Sorry for sneaking in in the end. Just one question. Why was the hip business stronger than the knee business in the second half? No big difference, in the past, the knee business was significantly better than your hip business. Why was that trend slightly changing in the second half? That's my first question. The second question, the augmented reality launch in general, which will be key this year, next year. How difficult is it currently to make such launches in a COVID environment where you don't have, I guess, many physical meetings to explain the surgery? I would be curious about that. Thanks. First of all, on the hip side, I think you have to consider that because the hip business was the most affected one in H1, that's where you should expect the biggest jump or the biggest recovery as well in H2. Second aspect was probably related to the fact that APAC, Australia, and Japan have been impacted a little bit less. In those markets, historically, our hip business was stronger than our knee business, which is exactly the opposite in the U.S. I think our dynamics, which are linked to both the geographic mix or mainly to the geographic mix and its contribution to the overall results. In terms of product launching, of course, COVID is making it much more difficult. For example, to have a first surgery in the U.S. almost five months after 510 approval is suboptimal. It took us more time to organize first training on cadavers with the surgeons. We managed to do it, to have clearance for having a specialist in the hospital to assist during the first cases, it took time. I was surprised to see, for example, in Australia, a very good acceleration already in the last few weeks of 2020 in the utilization rate of the system. Once the know-how is transferred into the country, within the country, it's relatively reasonable, the possibility to organize a physical meeting and training. In Europe, of course, it's not cleared, as we are waiting and we wanted to anticipate those problems, we are working on the training side ahead of the clearance in order to try to minimize those difficulties, and hoping that by May, June 2021, those will be resolved. Yes, it's an additional challenge. It's not easy, but it's going pretty well. I'm not particularly worried about its full release, especially because it was, in any case, planned with a slow introduction in H1 and a full release in H2. Okay, thanks. The last question, just for Japan. In general, your Asia-Pacific region was 12% up in the second half, and it was already up close to 19% in the second half 2019. You already have a very strong comparative base. For me, it's quite amazing how quickly you grow, and you said you won market share. What do the Japanese do better? You also said that the pandemic had less of an impact. What is so different in Japan? If I watch TV, Tokyo shut down because of the virus and so on. What are the Japanese doing better in the hospitals than the other parts of the world? I would say, first of all, they don't shut down the hospitals. They have organized very few hospitals to be the COVID centers. That's something that, frankly, has been done as well in other countries. They probably have an excess of ICU. I was shocked, if you look at the mortality rate in Japan, it's extremely low. They probably protect those patients in a different way. Using mask has been always, of course, in their culture since many, many years. We were laughing at them when we travel with them on the plane. If you look at the mortality rate in Japan, it's very, very low. I would say the most important aspect is that hospitals have never been shut down. We have seen some delayed procedure, for example, in spine, in big deformity cases or adolescent cases, which can be planned, and maybe those have been slightly postponed. In general, I think they managed pretty well. I think under a cultural point of view, they cannot force people to do things in a very strong way as they can do in China or they have been doing in many countries in Europe. On our side, I think what we continue to do in Japan and frankly in all the markets, but you see the results only in Japan and Australia this year, is that we are expanding our sales force and our products continue to be convincing. If we have good products, good solution, minimally invasive technologies and products that can deliver better results, you attract good sales people and they bring their customers, and they convince more customers. That has been the story of our growth in the last years. We hope to continue to show those results in the other regions as soon as this situation normalize. Okay. Many thanks. Thank you. Thank you. The next question is from Ruben Bonall-Gamms of Finanz und Wirtschaft. Your line is now open. Please go ahead. Hello. Thanks for having my question. 30 + products have been approved last year. More shall follow H1 this year. What do you think is the contribution for your growth this year and beyond of those new products? Specifically, what role will the augmented reality system play? Yeah. When we talk about new product release, the important impact is always one or two years after the full product release. Strategically, it is very important. For example, to have a complete revision product line on the hip side is very important because there are centers that would not consider to use your primary implant if you don't have a strong revision product line. In spine, we are entering new segments, the cervical segment, the minimal invasive segment, the big deformity segment. Reinforcing our product line in certain segment of our business is absolutely vital to increase as well, the revenue per case. That's particularly true in spine. On the shoulder, again, it's very important to have a complete product portfolio. Maybe you add some products which are not extremely impactful in terms of revenues per se. They reinforce the overall product line because surgeons and hospital want to have a supplier, a partner that is able to serve them across all the different needs they have. Different products have different contribution. Again, it's very important as well to constantly renew your products in order to gain from the feedback you receive on the clinical performance, and you come back to the market with new features to reinforce your clinical performance. That's what we have been doing, for example, on the hip side or on the knee side. Back to the NextAR. We do expect NextAR to become an important flagship product when it comes to technologies. There is a technology battle as we speak in the market, with a robotic solution coming from all our competitors. We prefer to take this side road, betting on the surgeon's preference on simplicity, lower cost, and lower capital requirements. This is definitely a requirement in most of the European markets, is an important aspect in the ASC market in the U.S., the surgical center market. In general, I think if you can do something in the same way at the lower cost per case with lower investment with the same results, you have a good asset. That's what we expect from NextAR across the different regions. The fact that it's going to become a platform covering all our needs is very important. Thanks a lot. Thank you very much. Thank you. As there are no further questions, I would like to come back to you. Thank you. If I understand well, there are no additional question. Is that correct? Yes, that's correct. I think we can probably close the call, and I would like to thank all the participants and we're going to keep in touch for the full year results presentation expected at the end of March. Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.