• Core Revenue Growth: 11.7%, reaching CHF224.8 million for 2024.
• EBITDA Margin: 19% for the core business.
• Gross Margin: 82.8% for the core business.
• Net Income: CHF11.4 million, with a net margin of 5.2%.
• Free Cash Flow: Margin of 6%, with cash flow increasing by CHF20 million.
• Cash on Balance Sheet: Almost CHF140 million at the end of the year.
• Regional Performance: EMEA was the key growth contributor; US showed strong growth; APAC affected by price cuts; Latin America underperformed.
• Acquisition: 51% stake in NeoOrtho, a Brazilian value player.
• Future Outlook: Organic growth of 13% to 15% in core sales and core EBITDA margin in the high teens range.

• Warning! GuruFocus has detected 4 Warning Signs with XSWX:MED.

Release Date: March 18, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Medartis Holding AG (XSWX:MED) reported a core revenue growth of 11.7%, reaching CHF224.8 million in sales for 2024.
• The company achieved a well-managed EBITDA margin of 19%, indicating strong profitability.
• The acquisition of 51% of NeoOrtho, a Brazilian value player, is expected to enhance Medartis' presence in the Latin American market.
• The company is focusing on innovation and digitalization, with plans to introduce patient-specific solutions and digital planning.
• Medartis is expanding its product portfolio with the launch of new systems like Hand 2 and the preparation for Keri TOUCH launch in the US, which is expected to drive future growth.

Negative Points

• Sales growth of 11.7% was slightly below expectations, indicating potential challenges in meeting market forecasts.
• The Latin American market, particularly Brazil, faced significant challenges due to changes in insurance companies, impacting premium segment sales.
• Price cuts in Australia have affected the APAC region's performance, with further impacts expected in the first half of 2025.
• The US market faced difficulties due to a lack of leadership for a year, although a new US President has been appointed to address this.
• The transition to exclusive distribution in the US is ongoing, with potential risks associated with changing 50% of distributors.

Q & A Highlights

Q: Could you provide more color on the sales guidance of 13% to 15%? What factors contribute to reaching the upper end of this range? A: The guidance is based on several factors, including the ongoing distributor changes in the US, which are currently 50% complete. The acceleration in the US market, particularly in upper extremities, and the expansion of KeriMedical in Europe are key contributors. The CEO, Matthias Schupp, emphasized a cautious approach, preferring to underpromise and overdeliver, with a clearer picture expected by the half-year results in August. (Matthias Schupp, CEO)

Q: How do you plan to accelerate growth in the US, and does this include a focus on upper extremities and distributor changes? A: Yes, the focus is on upper extremities and changing distributors to exclusive ones for Medartis products. The company is also targeting specific regions in the US, such as Northern Florida, Orlando, and Tampa, where they were previously not present. The CEO highlighted the importance of personal contact and improving customer service to leverage Medartis's strong reputation for quality and innovation. (Matthias Schupp, CEO)

Q: Can you explain the impact of price cuts in Australia and the outlook for this market? A: Price cuts in Australia started three years ago with a cumulative reduction of over 20%. Additional reclassifications led to further cuts of up to 30% last year. The expectation is that these cuts will stabilize by July this year, allowing volume growth to translate into value growth. The government aimed to align public and private market pricing, and no further cuts are anticipated. (Dirk Kirsten, CFO)

Q: How do you convince US distributors to go exclusive with Medartis? A: Distributors are attracted by the comprehensive portfolio Medartis offers, particularly in hand and wrist and upper extremities. The anticipation of KeriMedical's entry into the market also makes exclusivity appealing. The CEO noted that smaller, dedicated distributors are more interested in focusing on Medartis's offerings. (Matthias Schupp, CEO)

Q: What is the expected impact of the NeoOrtho acquisition on Medartis's financials? A: The acquisition is expected to be accretive at the EBITDA level. NeoOrtho operates with gross margins around 60%, and Medartis plans to improve efficiency and expand into other Latin American markets. The acquisition will initially involve a 51% stake, with plans to acquire the remaining shares by 2028-29. (Dirk Kirsten, CFO)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.