Carl Zeiss Meditec AG Q2 2023 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Oliver Reinberg - Kepler Cheuvreux - Analyst : Yes, thanks so much for taking my questions, three, if I may. The first one would be on China. Can you just give us more color on the operating trends you currently see? First, on refractive, you indicated that there was a pickup in demand towards the end of the quarter. Is that already stocking for the summer period? And also, with the opening of China, it hasn't seen any kind of improvement in terms of demand for the hardware business. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 09, 2023 / 7:30AM, AFXG.DE - Q2 2023 Carl Zeiss Meditec AG Earnings Call Secondly, on volume-based procurement, can you just provide us any kind of color on timing or procedures that are related to the introduction of [VBP] for intraocular lenses? And also, have you seen any impact on local demand for IOLs from China already? And third question would be on OpEx. I mean, we have still seen a significant increase, a 26% increase in OpEx in the second quarter, and even 32% for sales and marketing. Can you just be a bit more specific what we should expect for the second half? I guess comps may get easier, but not sure how much of cost inflation has already fully impacted your P&L, and you already talked about that the sales and marketing ratio may further went up. So any kind of color where you expect OpEx growth to be in the second half? Thanks very much.

Question: Oliver Reinberg - Kepler Cheuvreux - Analyst : Okay. Thanks so much. Can I just follow up? So on the EBITDA, do you have any kind of color on the timing, when is this going to initiate? And do you see any impact on IOL demand in China already?

Question: Oliver Reinberg - Kepler Cheuvreux - Analyst : Perfect. Thanks very much indeed. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 09, 2023 / 7:30AM, AFXG.DE - Q2 2023 Carl Zeiss Meditec AG Earnings Call

Question: Sven Kuerten - DZ Bank - Analyst : Thank you. First question is also on China. We are hearing from some companies from the medtech sector that local competition and product coupling [in China] is increasing. So how do you see the risks that Chinese companies are going to copy your [treatment sets] for refractive lasers? Or do you have some technical barriers like a specific -- text-specific coding, which makes sure that your lasers just work with Carl Zeiss Meditec treatment packs, the first one. The second one is on microsurgeries, and the questions is how do you see [accounts spending environment] from microsurgery products in hospitals developing in most Western countries where cost pressure is increasing, especially due to wage inflation currently? Thank you.

Question: Sven Kuerten - DZ Bank - Analyst : No, no. The question was rather -- we have a lot of wage inflation going on in the hospital sector. There's a lot of cost pressure on hospitals. The question is, does this impact the spending for your microsurgery products in any way account-based?

Question: Sven Kuerten - DZ Bank - Analyst : Okay. Thank you.

Question: Sezgi Bice Ozener - HSBC - Analyst : No worries. That's okay. Sezgi Ozener, HSBC here. Thanks for taking my questions. One on the order destocking, please. You had quantified a few quarters ago. How much more do you think we have? And a second on VBP, please. You've already mentioned that you went through to national VBPs over the few years. Can you maybe give us some color on whether that led to the elimination of distributors in the middle segment and what kind of margin impact that had? And do you think that can be replicated on a national level? And one more thing related to that, given your current market share in China, how much more upside could you do with and without a joint venture in terms of capacity if you were to win this tender?

Question: Sezgi Bice Ozener - HSBC - Analyst : Sure. Sorry for the acoustics moments ago. The other question was on destocking. You had given us a number a few quarters ago. How does that number look now? And actually, my first question was -- you understood pretty correctly. Thanks for the answer. Just wanted to check if national tenders override the previous regional VBP deals.

Question: Sezgi Bice Ozener - HSBC - Analyst : Okay. Thanks very much. Very helpful.

Question: Falko Friedrichs - Deutsche Bank - Analyst : Thank you. Good morning. I have two questions on China first. The first one, going back to VBP, how likely do you think that the refractive laser business could also be included at some point? And is there any sort of indication for that at this point in time? Then my second question on China is, can you provide a bit more color on procedure growth at the beginning of Q3, so in April essentially? Then my third question is on your EBIT margin going into Q3 now, I'm aware you can't say too much about it, but is it a fair assumption that you should be at least back within your guidance range in the third quarter on the EBIT margin? Thank you.

Question: Falko Friedrichs - Deutsche Bank - Analyst : Okay. Thank you.

Question: Graham Doyle - UBS - Analyst : Morning, guys, and thanks for taking my questions. Just a couple from me. So firstly, just on the margin, not so much this year, but when we think of 2024 and over the midterm, you've obviously previously talked about a margin of at least 20% as being sustainable. Just what we think of the headwinds this year being mix and supply chain and a lack of pricing in terms of raising prices through the order book, it sounds like those things should all improve next year. So is it reasonable to think the midterm guidance is a central starting point for 2024? And then a second question just around the US business on how you're getting on in cataract and phaco. It'd be good to get a bit of an update there in terms of placements and just market momentum. Thank you.

Question: Graham Doyle - UBS - Analyst : Okay. Thank you very much, guys.

Question: Oliver Reinberg - Kepler Cheuvreux - Analyst : Yeah. Thanks so much for taking my follow-up. And so just one last one. So effectively, you're going to review your midterm guidance later this year? That's what I understood correctly. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 09, 2023 / 7:30AM, AFXG.DE - Q2 2023 Carl Zeiss Meditec AG Earnings Call

Question: Oliver Reinberg - Kepler Cheuvreux - Analyst : Okay. Perfect. Understood. And three other quick questions. Firstly, on the US, I mean, it's quite encouraging to see really 23% growth in the US, which we haven't seen in a while. Can you just provide a bit more color what kind of product groups were driving that and whether it's just order backlog conversion or also generally stronger demand? I guess, so far, this was not supported by the CT LUCIA or QUATERA. Second question is, you talked earlier in this call about your willingness to defend IP on refractive. So J&J obviously got the approval for the ELITA system. Can you just confirm, have you taken any kind of IP action on that kind of approval? And third question, thanks for the color on the order book, which you disclosed standing at EUR573 million. Can you just give us any kind of color how that compares on a year-on-year comparison? And also whether you expect most of this to be converted to sales in the second half or whether this will more likely spill over into next year? Thank you.

Question: Oliver Reinberg - Kepler Cheuvreux - Analyst : Perfect. There was just the question on the US that remains outstanding.

Question: Oliver Reinberg - Kepler Cheuvreux - Analyst : Okay. Perfect. Thanks so much for your time.

Question: Oliver Metzger - Oddo BHF - Analyst : Hi. Good morning. Thanks so much for taking my questions. Two there; first one is on your EBIT margin guidance. So the 200-basis-point is still a meaningful range despite first half is already known? Basically, it implies a higher volatility or risk for a second half. Can you comment on the most important swing factors which drive you to be upper or to be lower end of your guidance? Second question is, you mentioned already that the momentum continued also in early Q3. How should we think conceptually between the phasing between Q3 and Q4, please? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 09, 2023 / 7:30AM, AFXG.DE - Q2 2023 Carl Zeiss Meditec AG Earnings Call

Question: Oliver Metzger - Oddo BHF - Analyst : Yeah. One quick follow up. So would China be potentially -- would give you enough business really to reach the upper end? Or is it that you really need both factors to reach the upper end?

Question: Oliver Metzger - Oddo BHF - Analyst : Okay. My second question is regarding the phasing in Q3 and Q4, please.

Question: Oliver Metzger - Oddo BHF - Analyst : My second question is regarding the phasing in Q3 and Q4, please. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 09, 2023 / 7:30AM, AFXG.DE - Q2 2023 Carl Zeiss Meditec AG Earnings Call

Question: Oliver Metzger - Oddo BHF - Analyst : Sorry. My second question was about -- you mentioned that the momentum -- you said the momentum continued in early Q3. So how should we think about phasing between Q3 in Q4?

Question: Oliver Metzger - Oddo BHF - Analyst : Okay. Thank you very much.