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Straumann Holding AG
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Ladies and gentlemen, welcome to the Straumann Group First Quarter 2021 Results Conference Call and Live Webcast. I'm Andre, the Chorus Call operator. 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, everyone. And I very much hope that you, your families and your colleagues are well. Thank you for joining this conference call of Straumann first quarter results for 2021. We are continuing to take action to keep our people safe and support the fight against COVID-19 in the communities we serve. And in this period, we are grateful to see that the vaccination programs are picking up speed in some regions. And as some of our employees have already been vaccinated. We are supporting the vaccination programs from a company perspective because we truly believe this is the only way out of the situation. During this conference, we will be referring to the presentation slides that were published on our website this morning. As customary, you can see our disclaimer on Slide 2. This morning's presentation and discussion will include some forward-looking statements. The conference will follow the usual format. As shown on the agenda on Slide 3, I will give you an overview of where we stand. Then our CFO, Peter Hackel, will share details about our business performance across all regions. After that, I'll provide you with an update on the strategic initiatives as well as our outlook for the future. As always, we will be available to take your questions at the end of the presentation. Therefore, let's start with our highlights and move directly to Slide #5. The Straumann Group achieved very strong first quarter sales results in 2021 compared to the first quarter of 2020. Revenue reached CHF 470 million, which shows an accelerated growth rate. We achieved impressive organic growth of 34% compared to previous year, which was, however, already impacted by the pandemic. The negative currency impact was 6 percentage points, and the acquisition effect amounted to 2% attributed to DrSmile. One of the highlights was our orthodontics business, it grew strongly across all geographies. This reflects our efforts to strengthen our value proposition. We will provide more details about exciting successes in the orthodontics business later on. We continue to invest in the future and our innovation pipeline is full. The global rollout of our immediacy solutions such as BLX and TLX is continuing, and we are looking forward to bringing exciting new products to the market also during the rest of the year. Example of upcoming launches include the two-piece ceramic implant, the Neodent Z, scheduled for the second quarter and the new Neodent EasyPack, which is offering for GPs, all components for an implant placement in one single package. In line with our focus on investing in our company to support future growth, we announced an investment worth up to CHF 170 million in building a new Straumann Group campus in China. China is a major contributor to growth now, and we strongly believe it will continue to drive significant growth in the future. Taking into account the strong start, we have decided to raise our guidance, and I will explain this in more detail later. I'm incredibly thankful to the entire Straumann Group team for their dedication and contribution, which definitely helps us strongly to achieve this record results together. Slide 6 shows the regional organic revenue growth rate for the first quarter of 2021 and 2020. It also shows the average organic growth rate for the past 2 years, as I believe it's important to put the Q1 2021 results into perspective. In the first quarter of last year, you can see that all regions were down to single-digit growth. While APAC was already heavily impacted by the pandemic. In the first quarter of this year, all regions performed very strongly. They have each returned to double-digit growth. We saw strong demand in North America as well as in Europe, Middle East and Africa, where we have expanded our presence since the first quarter of last year. In Asia Pacific, we returned to exceptional growth after the strong decline in Q1 last year. And in Latin America, we bounced back strongly despite a still quite challenging environment. We are very happy to report the strong performance, which represents a record quarter for the Straumann Group. Moving on to Slide 7. I would like to share some insights into these developments. Looking at the market, we saw a switch from the pandemic headwind that we had last year to a tailwind during the first quarter. According to Moody's, households around the world have accumulated USD 5.4 billion in additional savings between the start of the pandemic and the end of Q1 2021. Meanwhile, The Conference Board Global Consumer Confidence Index reached its highest level in the first quarter of 2021, as shown on the left side of the slide. This suggests then that consumers have disposable income and are confident spending. Based on numerous conversations that we have had with key customers in different geographies, it seems that these conclusions are also applying to specialty dental treatments. Dental practices are open around the world and patient confidence is strong. Activity in dental practice is going back to pre-pandemic level. Therefore, we believe this is due to increased consumer focus on specialty dental treatments and spending on oral health being prioritized because of ongoing pandemic related restrictions. This is reflected in our local organizations assessment, which are shown on the right side of the chart. Therefore, together with this trend, the success of our strategy implementation, our strong product portfolio and past investments has accelerated our growth during the first quarter of 2021. With this, I hand over to Peter, and he will provide additional details.
Thank you, Guillaume, and good morning, everyone. On Slide 9, you can see the quarterly revenue results over a period of 2 years. The revenue dip in the first and second quarter of last year clearly shows that the comparison with 2020 does not accurately reflect the overall midterm growth trend. However, the first quarter of this year shows that we are back on our former growth trajectory, following a recovery phase during the second half of 2020. With this in mind, we expect to see an even bigger difference between the second quarter of '21 versus 2020, which was the time when dental practices were closed in most regions and our business reported a revenue decline of 39% in Swiss francs. Moving on to Slide 10. You can see the typical sales breakdown. There is no doubt that this was an exceptionally strong quarter and the record result in the history of the group. As Guillaume explained, we believe our strong performance has brought us back to our previous double-digit growth trajectory. In the first quarter of '21, our top line increased by 32% on a reported basis, to reach CHF 470 million. On the left side of the slide, you can see that our first quarter revenue in 2020 would have been almost CHF 14 million lower at this year's currency rate, largely due to the depreciations in the U.S. dollar, the Brazilian real and the Turkish lira. The effect of acquisition was related to DrSmile, which we have been consolidating since September '20. Asia Pacific continues to be our fastest growing region. Here, it is important to remember that China suffered a particularly heavy impact last year, and the region reported an organic revenue decline of 22% in the first quarter '20. EMEA was the largest contributor to growth. Together, these 2 regions generated more than 2/3 of the group's organic growth, as you can see on the right. On Slide 11, you can see that Europe, the Middle East and Africa, as well as North America grew strongly. When looking at these numbers, it is important to consider the comparison to first quarter '20, when both markets were down to single-digit growth due to the impact of the pandemic, which began in the second half of March last year. In Q1 '21, the group's largest region, EMEA, contributed CHF 46 million of the group's revenue growth and posted an increase in organic revenue of 27%. In Swiss francs, revenue amounted to CHF 214 million, including a negative currency effect of 1 percentage point. There was strong growth in countries, including France, Germany and Italy. Furthermore, the group established a new subsidiary in Jordan. Alongside the implant franchise, the orthodontics business also grew strongly in EMEA. This was supported by the dynamic growth of DrSmile and the launch of the ClearQuartz material for ClearCorrect aligner. North America added CHF 29 million and grew 27% organically in the first quarter of '21, while revenue increased to CHF 138 million, despite a currency headwind of 8 percentage points. Canada and the U.S. both delivered double-digit growth driven by strong demand for premium and challenger implant as well as digital solutions. The main product categories were Straumann BLX, Neodent GM, the TRIOS intraoral scanner and other digital solutions. The ClearCorrect business grew and accelerated as we were able to attract more dentists to become ClearCorrect solution providers. Let's move on to Slide 12. In Asia Pacific, we saw fast growth in line with the trend in 2019 before the pandemic impacted the region in the first quarter of 2020. The region posted organic growth of 74% to reach CHF 92 million with a negative currency impact of 2 percentage points compared to CHF 54 million in the first quarter of 2020. Key markets, including Australia, China and Japan bounced back to show very strong growth. BLX is gaining solid momentum in Australia, while the launch is in full swing in Japan and the additional South Asian countries. From the digital solutions portfolio, the intraoral scanner showed fast growth, driven by the 3Shape scanner, mainly in Japan, and Carestream in China. The orthodontics business is gaining momentum in Australia and Japan and is being supported by pilots running in Hong Kong, Singapore, Taiwan and Thailand. In Latin America, Neodent drove revenue, while the premium segment also returned to growth. Starting from a low base, our orthodontics business is also growing very strongly. Overall, we saw strong organic growth of 24% in the first quarter of '21. Dental practices were open and undertaking treatment, also the region is still heavily impacted by the pandemic. However, the depreciation of the Brazilian real and the Argentinian peso cut growth in Swiss francs by 27 percentage points. Argentina and Chile were the strongest growth contributors, while the group achieved double-digit growth in the region's largest market, Brazil. Moving on to Slide 13. The group's largest franchise, implants, contributed double-digit growth in the premium and non-premium segments, while premium implants remain the largest part of our business. The apically tapered BLT implant and the fully tapered implant line BLX remains the key contributors. The group's challenger implant brands, Neodent, Anthogyr and Medentika grew strongly and helped to gain share in countries, including Brazil, China, France and the U.S. The digital solutions business is maintaining its growth momentum and was driven by CADCAM, the biggest part of the digital solutions portfolio. This was followed by the second largest contributor, the intraoral scanner portfolio. Sales of biomaterials were strong, particularly due to the development of bone substitutes like allograft and xenograft. Last, but not least, the orthodontics business posted very strong growth in all regions. Both of our orthodontics go-to-market approaches delivered strong growth. This includes the direct-to-clinicians model with ClearCorrect and the direct-to-consumer doctor-led approach with DrSmile. Guillaume will talk more about business development for ClearCorrect and DrSmile later. Also, our clear aligner sales performance was very strong. The winter storm in Texas during March has a negative impact on working days in our ClearCorrect factories. As many of you probably know, this storm caused significant interruptions and our team works very hard to keep production running. It was fantastic to see the team spirit that our employees showed during these challenging days. It is an outstanding example of our high-performance culture in action. Looking across all businesses, we are impressed by the manufacturing staff who demonstrated the capability to move to high-volume production within short periods of time, showing true agility. Overall, we are constantly looking at additional investments into expanding our manufacturing capacity to ensure we are able to meet demand. And with that, I hand back to Guillaume.
Thank you, Peter. In the next few slides, I would like to talk about recent achievements and our strategic progress. One of our focus areas in the first quarter was to keep a very close connection among the members of the Straumann Group team as well as a close connection between the team and our customers. We believe this was an important driver of business performance and has enabled our strong start into the year. As we are following the recommendation for physical distancing, our team is keeping driving efficiency initiatives by engaging in collaboration and creating a sense of belonging through online formats. We all know the pandemic has accelerated the digital transformation. With an agile mindset, which is rooted in the Straumann Group player-learner culture, we are embracing this change by further driving our efforts to provide frictionless customer-centric solutions. We are constantly seeking ways to improve the customer experience. To achieve this, we are making major investments in developing our Straumann service platform as well as virtual events and digital showrooms. A good example is our extensive online information and education platform, which is driving customer acquisition and has supported launches of products like TLX and Zygoma during lockdowns. We placed a heavy focus on online education, remote selling and pilot project for hybrid sales models. This included visits where these were possible, in line with the local pandemic restrictions and vaccination programs. We have also developed new even formats with our key customers to share our views about industry trends and to open up discussions in a more intimate setting. I have actually personally engaged with many customers in all geographies over the last few months. And it is exciting to see how optimistic, forward-thinking and digitally minded our customers around the world are. Technology enables people to stay connected, support each other and gain back confidence. But we also know that online meetings will never completely replace personal interactions. In North America and in Asia, we already see physical meetings being planned and taking place, while travel activity is really starting to come back. Moving on to Slide 16. I would like to start to beginning by talking about our implant business. We believe that we are gaining market share in the overall implant market, and are also continuing increasing access to implant treatments by addressing the value segment worldwide. In the premium segment, BLT is the short and mid-term growth driver. We aim to repeat our success with BLT and reach about 40% share of the premium fully tapered implant market in the next 4 to 5 years by driving immediacy treatments. The BLT rollout is going well. It has now been launched in 67 countries, including Japan and Mexico in the first quarter of 2021. The new major launches will be Russia in the second half of this year and in China during the first half of next year. We are also looking forward to be placing our first clinical study on BLX soon. It's focusing on the quality and reliability of the implant in a patient's mouth. The prelaunch of TLX has been very well received and is actually in line with our expectations. The addition of TLX differentiates our immediacy offerings from any other solutions on the market. It is going to open up opportunities for immediacy treatment for loyal tissue-level customers. This implant design also offers the opportunity to convert competitive bone level accounts with the advantages of the tissue-level concept. One of the key benefit of TLX, it is potential to make full large restorations simpler and more predictable. In January this year, we started the limited market release. And so far, Italy is the strongest sales contributor. We are further ramping up production and are on track for the full launch in the second half of this year according to the original time line. The Straumann zygomatic implant completes our premium immediacy portfolio and has now been fully launched. It is also an important addition to the solutions that we offer for edentulous patients. In general, demand for immediacy solutions and interest in this topic are still very high among clinicians around the world. This was confirmed during our virtual immediacy symposium, which just took place on Tuesday and Wednesday of this week and attracted 6,250 participants from 126 countries. Our challenger brand Neodent has become a true global player since Straumann first invested in this brand in 2012. The reliable, yet affordable solutions are now available to doctors and patients in 80 countries. The largest market by volume are Brazil and the U.S., followed by Spain, Italy and Russia. Due to the strong demand for this brand, we are also continuing to invest in increasing production activity in the recently established building. Let's move on to Slide 17 and talk about the -- our orthodontics business. As you know, the global market for clear aligners is one of the most attractive areas in dentistry. And we expect growth in orthodontics and implant dentistry to outpace the general dental market. We are making further progress in strengthening our value proposition in this field. ClearQuartz, the new material for ClearCorrect aligners is a huge step forward in terms of comfort for patients. It has proven long-lasting tooth moving forces in addition to a high and flat streamline that improves the aligners retention. We first brought ClearCorrect to the market in August 2020. As mentioned previously, it was launched in Europe in the first quarter of 2021, and it has been very well received. We have also released a new software capability during this quarter. In February, we launched Collaborator, a new feature with ClearCorrect digital customer portal. It supports collaboration on clear aligner patient cases by enabling doctor to share individual cases with staff, other clinicians and treatment planning services. In this way, they are able to exchange expertise and seek advice in a very easy manner. Following the excellent feedback that we received from customers about the recently introduced ClearPilot 1.0 software, we started the global launch of the ClearPilot 2.0 software update in April. It introduces additional features that improve visualization for treatment planning and enhanced communication with patients. The update also includes a view that is optimized for mobile devices such as tablet computers, which are widely used in many practices. Let's move on to Slide 18. DrSmile, our direct-to-consumer brand for doctor-led clear aligner treatment in Europe, has built up a broad network of partner practices in Austria, Germany and Spain. The brand celebrated opening its 200th partner practice in the first quarter of 2021. DrSmile also expanded its geographic footprint to France and Italy. In the first quarter, we took initial steps to expand also to Poland and Sweden. Slide 19 provides more detail about our historic investment in our first ever campus in China. We signed an investment agreement with the Shanghai Xin Zhuang Industrial Park to build a manufacturing, education and innovation center. This will involve an investment of up to CHF 170 million by 2029. The first phase of the investment is planned to be completed in the fall of 2023. And the site is expected to generate potentially more than 1,000 new job opportunities by 2029. The site will provide educational programs as well as products from our implant and orthodontics portfolio for China. In this way, it will cater to rapidly growing demand for dental solutions from Chinese dentists and patients. It is estimated that China currently has over 700 million patients who need dental and oral care, but yet only 5% visited dental clinics. Building the Straumann Group China campus will enable us to increase responsiveness and will support future product launches. We also aim to tap into the many exciting opportunities for collaboration with local partners at this site to support innovation. This brings me to Slide 21, where I will share some thoughts about the outlook for the future. Since the beginning of the pandemic, predicting the market has been very challenging. However, we can say that we consistently perform above the market. Now dental practices were opened during the first quarter of 2021 and all treatments remain possible in most places. The group observed consumer demand focusing on specialty dental treatments and experienced a temporary tailwind from the pandemic as consumers prioritize spending on oral health. With mass vaccination underway and other spending options becoming available again, we expect this tailwind to soften in the second half of the year. However, we are convinced that our strong business fundamentals remain in place. Based on this strong quarter, the group's continuous investment in future growth opportunities, a strong innovation pipeline and the talented Straumann Group team that demonstrated its passion, resilience and ability to outperform the market every day. We raised our full year 2021 outlook. We now project organic revenue growth in the mid- to high 20s percentage range. We also expect an improvement in profitability compared to 2020 in terms of EBIT margin, despite currency headwinds, significant investment and the fact that travel activities and physical meetings are starting to take place again. Now I'm going to open the question-and-answer session. Chorus Call, can we have the first question please?
The first question comes from the line of Chris Gretler from Crédit Suisse.
I was just kind of wondering whether you could speak about the visibility you currently have. I mean, you mentioned that kind of you expect tailwinds to soften in the second half. But could you maybe kind of indicate what you're hearing from your sales people with respect to kind of how dentists are doing? And maybe also, if you have kind of an indication about the April trends so far, probably more on a sequential basis than on a year-over-year basis. And then the second question is with respect to the spending pattern looks like the business is developing substantially ahead of your own plans at the beginning of the year. Could you maybe kind of elaborate how you basically catch up on the cost side and the capital investment side in order to support that growth? I guess it's quite a bit stretched on some of ends of your business with that strong growth. And then the last question would be on the DSO business, whether you could elaborate on your progress on that part of the house. That would be great.
Thank you, Chris. Then yes, when it comes to what we have heard from centric or even more, I would say, from directly from customers because as expressed, personally, I've a lot of customer interactions, thanks actually to this now digital channel where we can organize very fast many different customer talk, with a small group of customers. They are all reporting that when it comes to dental specialties, they are really busy. And that health consumers have time to come to the practice and have really having income available to do those implant treatments, clear aligner treatment without that much other alternative options to spend, be it on the travel, be it on the -- on rest rooms in many places in the world. At least it was the case in Europe. It was the case in North America before the vaccination program became strong. Then they are very confident, at least until the first -- until, I would say, mid- to end of Q3, we see their agenda being quite booked until July to August. And after, it will be more difficult to say. Then one of the key questions will be, how much this tailwind will last? How much this is giving us this additional lift into our growth rate? I think nobody is able to say, but we clearly see that this will last at least until the middle of the third quarter. When it comes to DSO, I will leave the question on the cost for Peter. We are making significant progress. We had another big win in North America, actually, this week on the DSO side, implant and digital-related product portfolio wins. And we have strengthened our team. As you know, Rahma Samow arrived now in our organization since March 1. And we are continuing to accelerate investments to be one of the major player in this area. Then so far, so good. We are very pleased with our progress on the DSO side. Peter?
Yes. On the spending pattern, Chris, thank you for that question. I would see 3 different areas that are worthwhile to discuss. On the one hand, spending in the ordinary cost of business, Point 1. Point 2, investment in growth opportunities, and the third point is the CapEx investments. Let me start probably with the last one. In the full year conference, we were talking CapEx as well. And there, I said, I could imagine that CapEx level in '21 is around CHF 120 million. Given the current volume development that we have seen, especially in the recent last weeks, that also means we need to further invest in expanding our capacity in all the different locations, be it in Curitiba for Neodent, in Andover and Villeret for the Straumann implant manufacturing, but also on the ortho side, to keep up with the ortho volume development. So my expectation for CapEx full year will be above the CHF 120 million and more in the range of CHF 140 million probably, which is in principle a good time because we are investing in further expanding our capacity by investing in further machines. If we look at the spending of the ordinary course of the business, then I have seen an increase in activities in March. As Guillaume has already also said, we see a certain increase in travel, especially in the Asia Pacific regions. We also see -- and hopefully, with the progress of the vaccination programs, I would also expect in the other regions to see an increase in spending over the coming months. So the spending pattern might be very different in the first half year compared to the second half year this year. And that we have a significantly higher spending pattern in the second half year. So far, March was already higher than the first 2 months, but definitely not yet at the pre-pandemic level, I would say, just the spending in the ordinary course of business for travel, for training events or congresses for physical marketing, promotion events and things like that. And then the last topic is the opportunity to invest in further growth projects. Given the current situation with very good revenue development, obviously, that is also increasing our capabilities to fund investment projects, such as on the R&D side, for example, such as projects to increase the digitalization, be it on the marketing side, on the e-commerce side, but also on internal financial or supply chain processes, for example, further geographic expansion with the establishment of the Jordan subsidiary in the first quarter is such an example or also further building up the DrSmile brand. So all these 3 factors together will lead also potentially to a very different EBIT margin in the first half, which is not sustainable. And in the second half, it will be most probably a lower EBIT margin because we can increase our spending level as well as we can realize the investments into the growth projects.
The next question comes from the line of Patrick Wood from Bank of America.
Perfect. I have just 2 quick ones, please. The first 1 is on the ortho business, so ClearCorrect overall. Can you give us a sense -- and apologies if I missed it, but roughly how big the business is now and growth profile? I know you guys have talked over the next 5, 7 years, how big you think that business could be? But I'm just curious, where are we now? And do you kind of reiterate that view that it could be roughly the same size as the implant business 5 to 7 years from now? So that's the first question. And then on the second question, I'm just curious on the value side of the market. Obviously, you guys are doing well and taking a lot of share. I had heard that there have been some of your competitors in Europe have been dropped by a bunch of distributors and equally pulled out of the market in parts.I'm just curious, is that thought process right? Have you seen some of your competitors retrenching from the value market and enabling you guys to take more share?
Thank you, Patrick. Yes. Then on the ortho side, yes, I think we have been, as expressed, very pleased with with the progress. We are -- without giving the Clear numbers because we don't disclose our result by franchise, but it's a 3 digit million business already by the end of 2020, if we are adding our ortho activities, that are ClearCorrect, that are DrSmile and what we call Bay Materials, which has been our acquisition end of the fourth quarter 2019. And yes, we do believe that in 7 years from now, our ortho business could still be as big as our implant business. This is at least the sense of our investment that we are doing and looking at the market potential and our current growth, we do believe that this is realistic. When it comes to the value segment, and yes, we have seen some competitor retrenching from Europe. A good example has been -- that has not been this quarter. It has been last year. That was Implant Direct that decided to stop activity in Europe, and that has been now only dedicated their activity in North America, which is a very significant change. And we believe that for small organizations, Europe will become a challenging market because of the new regulatory that are coming in place, which is called -- once again, you may have heard about MDR, and MDR will be the new medical directive regulation that will be then implemented in Europe, which is requesting, well, heavy clinical evidence before launching a product on the market, but also requesting that those clinical evidence are demonstrated for the product that are already sold. Meaning that if you don't have those evidence, you have to significantly invest to create them or as some have already decided to withdraw their offering from the marketplace. That's where we are really good news on our side because we have already been -- we have always been clinical-evidence oriented. And for the whole Straumann Group product portfolio. Our Anthogyr portfolio, Medentika are also supporting already a large part of the MDR, and we are working very significantly also to have new and complying with this new medical directive in due time. Then for us, we see that as an opportunity moving forward because barrier to entry in the European market will be much stronger than it has been in the past.
The next question comes from the line of Tom Jones from Berenberg.
I have two really. One was just on the revenue guidance, which, to be frank, I'm kind of struggling to understand. I mean you did a 34% growth in Q1. If you look at the comp in Q2, you could realistically do anywhere between 60% and 80% organic growth in Q2. So that kind of implies that to get even if I use the top end of your full year guidance range, you're expecting just single-digit growth in the second half of the year, which, given particularly Q3, Q4, relatively easy comps, I don't really understand. I mean, is this just sort of typical Straumann conservatism? Or is there actually genuine underlying reason why you think you're going to see such a significant deceleration in the second half of the year? And then the second question, which kind of feeds into cost is really just on headcount and hiring. A year ago, you took the decision to lay off nearly 10% of the workforce. To what extent are you now having to rehire those people? And what impact is that also having on overall costs? Because clearly, rehiring people is more expensive than simply keeping them on.
Yes. Thank you, Tom. 2 good questions. First one, well, I think when we look at our guidance, we see that it's taking into consideration the strong first quarter and the tailwind we had. The low comparative period in Q2 that we have, as you said. Now Q3, Q4 has not so much per se easy comparative period. If you remember, our Q3, this is where we had the biggest pent-up demand, last year. And I think we had quite some significant growth coming from the post-acute phase of the pandemic. And Q4 was actually 8% on top of a very strong quarter in end of 2019, if you recall well, where we had close to 19% growth, '19 over '20 then -- over '18. If you look really at that, our performance in the second half of '19, it was very strong. And thus, our '20 with 8% over the 2 quarters, was quite a significant growth as well. How much of the pent-up demand we had there that we will not have this year. How much of this could be supported by the continuation of some tailwind or not, it's still very difficult to predict. Then, well I agreed with you, and to be honest, there are some upside potential. But this being said, it's very, very difficult to evaluate as we speak. The second thing when it comes to head count. If you remember well, we were 7,800 okay, when we ended 2018. And we decided to have a cut of 10% of our workforce because we were really geared to very strong double-digit growth. If you look at how much we are now, we are 7,700, okay? However, 300 -- more than 300 of those are coming from DrSmile acquisition. And as you can see, then if you remove the DrSmile effect, then we are out of the 700 and -- 7,700, we are 7,400 versus our 7,300 when we ended then 2020. Then we have just increased headcount by 100 versus the situation we had after the lay off that we have done. Then I think we have gained a very significant lean approach when it comes to our organization and our operational processes. We are reinvesting in positions that are different than the one that we separated with, which is for us, that was one of the important goal of what we have done at that time, is reallocating resources in the fast-growing environment with different expertise that we were missing by the end of '19. And finally, the only people that we have rehired has been on the production side but that were people, especially in Brazil, that we are more in-furlough, in kind of Brazilian furlough, even if this word is not really existing in Brazil. That allow us to get back the same people we had, then not an additional cost and not loss of expertise. And end-to-end, we think that it has been a pretty efficient move for us during 2020.
Okay. And if I had to look at the outlook for the rest of the year and given the strong growth you obviously expect. I mean if I use -- if I put DrSmile to one side for a minute and use the 7,800 going down to 7,300 and up to 7,400 now. Relative to those figures, where do you expect to end 2021, sort of broadly at the same level? Or do you think you'll creep back up towards the 7,700 7,800 level that you were pre-pandemic, ex-DrSmile?
Well, this will be -- I don't think that we will be at the 7,800 without DrSmile. I don't think we'll be there, in light of what we have in our pipeline right now. This being said, you have heard Peter, we are looking at also a significant growth plan, and we may decide to have some significant investment in some area where we would want to have additional expertise. And where potentially some additional FTEs will be added. Then it's not in our plan right now. But depending on our investment, it may go there.
The next question comes from the line of David Adlington from JPMorgan.
A bit further question on the financials and the leverage. So firstly, just in terms of the gross margin, just wondering how we should be thinking about the operating leverage or the leverage within the gross margin, given the fixed cost on the production side? And then secondly, given that top line growth and your ability to actually hire people and invest, you've obviously pointed towards a very strong first half margin. I mean, it's difficult to see how it could be below 30%. But maybe you could just give us some help in terms of framing where the margins could come in within the first half? And then secondly, operationally, in terms of DrSmile, are you seeing any notable differences as you roll out DrSmile into new markets, any sort of different feedback than you expected from dentists? And when you -- when you partner with a dentist, what sort of typical uplift do they see in sales as you bring the DrSmile product through to them?
You want to?
So let me start, David, and thank you for the questions on the gross margin side. I mean, you're right, with the higher sales volume, we can also increase a certain leverage, the economies case in our manufacturing plant. At the same time, you are well aware that we have diversified our portfolio over the last couple of years and that we can eventually generate lower gross margins in the new business areas compared to the traditional premium implant business, be it on the digital side, be it on the ortho side or also on the non-premium side. And I already mentioned that the negative economies of scale. And on top of that, we have a certain negative impact, obviously, also on the gross margin in '21. So if I compare and take into account all these factors, then I would, in '21, I would not expect a significantly different gross margin compared to the 2019 level. Taking the headwind from the FX impact and the tailwind from the productivity increase and also the headwind from the portfolio maybe.
When it comes to DrSmile, David, I think that -- yes, there are differences into the different European markets. First is there is not the same level of competition, which drive, for example, the customer acquisition cost or the end-user acquisition cost at a very different level. But you don't have also the same end consumer behavior. Some will be showing up at appointments, some not, depending on where you are doing this, in which country with different culture, then I would say the unit economics are the same when it comes to what we are looking at, but the different performance per unique economics are different from one to the other. Then that's the kind of things we need to adapt to with these different consumer behaviors that we are seeing in those different countries. When it comes -- but the common theme, I would say, is the attractiveness of the value proposition, which is still seen as very positive in all the different geographies. When it comes to the value that a DrSmile clinician is having, they are definitely seeing that as a great marketing investment. They are getting in touch with a new patient flow that they would not have been connected with otherwise. They are seeing the capability to get those patient loyal and especially also try to get the family around them. Then they see that as a very interesting marketing tool actually for growing their business moving forward. And this is one of the most important expectations that clinicians are having in this today's digital age, where they are not all knowing how to deal with social media advertising or digital marketing to support the growth of their practice, and they see that DrSmile value proposition as a way to outsource that, if you will.
That's great. And maybe just coming back on the margin point, how -- are you able to give us any sort of further color around how we should be thinking about the drop-through in margins, particularly in the first half?
You are talking now about the operating margin, I assume.
Yes, yes, exactly, yes.
If we take 2020 as a proxy, then you see the margin that we generated in the second half of 2020. However, given the increased level of activity that I expect in the coming months now, not necessarily in the first quarter, but in the second quarter, at least in some regions of the world, and taking into account that we also want to invest in further growth projects, the question there is a little bit how fast we can realize these investments. I would not expect the same level in the first half '21 as in the second half 2020. I would expect a lower level compared to the second half 2020 on the operating margin for the first half.
Next question comes from the line of Michael Jungling from Morgan Stanley.
I have 3 questions. Firstly, on ClearCorrect, can you disclose case growth and customer base growth for the first quarter? Secondly, on the -- on your digital workflow solutions, can you comment on whether semiconductor shortage is going to be impacting your business for capital equipment sometime this year? And then thirdly, on the internal connection that you launched with BLT or BLX, I forget, but I think it was a new platform that you were hoping to get a patent on to improve the attachment rate. Can you comment on where you stand on the patent? Has it been granted? And if so, when does the entire portfolio shift to this -- to your own proprietary internal connection?
When it comes to ClearCorrect, we are not giving the detail about our case growth or customer growth but what we can say is that we have seen the biggest increase in case growth and end-user growth, let's say, clinician growth that we ever had. Then this is reflecting, we believe, both sides of the -- of the growth factors that we have for this first quarter. The first one is the value proposition is significantly increasing, thanks to all the investment we are doing. This is allowing us to not only increase the number of new customer acquisition in all geographies, actually, in North America, but also Europe, mainly and also gaining some share of wallet into some of the clinicians that are sharing their case in between ClearCorrect and other clear aligner manufacturers. And again, this value proposition has been significantly increased by the launch of ClearQuartz that just happened in Europe this quarter, by our ClearPilot software, which is very, very strongly progressing, and we see this trend continuing in the week, month to come. And same when it comes to the number of cases growth, which has been fueled by this, but also by the tailwind we were expecting and explaining before, which is a very significant part of -- especially, for example, DrSmile approach where we see consumer being really wanting to do a clear aligner treatment during those kind of locked down period or pandemic period where they can stay at home. The question on the patent, I think, Michael, you are referring to the BLX side, and this is the new connection that we launched when we launched BLX. We have not yet the patent granted. This is a long process. It's still on. We don't have any specific obstacle to this as we speak. It can come any time with somebody wanting to claim against it. But so far, there is no claim against it. And it follows its path for getting granted that we hope should come, I would say, by 2022, but with this kind of patent approval, it's always a very blurry date depending on many of the processes that the agency is having. And the last one was equipment. Could you -- Michael, could you help me with the second question?
It was a question around your digital workflow. I suspect that there's quite a bit of componentry in there for semiconductors. The shortage that we're experiencing around the world, is that impacting your business? And if so, what are the expectations for the rest of the year?
Yes, sorry, yes. Yes, we see this. Actually, we see raw material shortage in different components. So far, it has not impacted anything on our side. We are getting the intraoral scanners that we have sold from a logistics standpoint from our partners. We have started to sell the first Medit intraoral scanner actually, which is also a good sign to demonstrate that we are able to cover all the different price points of the market. And Vivo is also being produced without being impacted by those shortage so far.
Great. And maybe a quick follow-up on the ClearCorrect. Why is it that you've given us the data in the past on case growth and also on customer or customer acquisition growth, when your biggest competitor does. What are you scared of? Why are you no longer disclosing that?
Just because, well, we are not doing that for any of our business. We are not disclosing also for implant, how many new customers we are gaining. We are not disclosing the number of implant volume in detail. And just to have on the first place something which is consistent with the rest of our business. We are not disclosing, for example, the number of intraoral scanners we are selling, while others can do. It depends on how they want to give the information. We are not afraid of anything. It's just making sure that we are consistent with the rest of our activities. And secondly, also, the difference we have here is that we would have a blurry picture also in between the clinician direct-to-consumer activities and pure B2B approach, which are very different dynamics, very different activities, and that are also very different numbers, then it would not make sense to explain an average number where we have also quite different dynamics. Then being -- disclosing those numbers would have to get some additional explanation of the different go to market. And we believe that it's good to comment that in the way we are doing that, at least for the time being.
The next question comes from the line of Daniel Jelovcan from Mirabaud.
Just on BLT and BLX, I mean you mentioned in general that both were key growth drivers for the group. But specifically, then when you look at North America and EMEA, you only mentioned BLX. And so I guess, BLT is not really a driver in the other regions like Asia Pacific, for instance. So is that just maybe, I don't know why? Maybe that's the first question.
Yes thanks for the question. Actually, it's just because we did not -- we did not want them to be so specific region by region. But what we can disclose is that BLT has been a strong growth driver everywhere from all regions. This is our workhorse from not only current users, but also future uses because as we often said, even fully-tapered implant users like BLX are often user using apically tapered implant like BLT. Then we see the growth of BLX has also in many practices, a Trojan horse to win the BLT, the apically-tapered implant as well. And actually, this is what we are seeing. And if we look at our absolute number, the growth for premium implant is even more coming from BLT than BLX because of the market penetration. Now when it comes to growth rate, obviously, BLX is faster than BLT but BLT is having more than 40%. We were at the end of '19, 41% market share on the apically premium segment, and we believe we are still gaining share in all geographies, Europe, North America, APAC included.
Okay. And the second last -- last question. Is in North America and in EMEA, you had exactly the same organic growth of this 27%. But in your Slide 7, you gave this interesting number of the degree of restrictions to public life. And there, you see that Europe is the worst and North America is the best. I mean, it's not a surprise when you look at Texas or Florida, how open everything is. So does that mean that your argument with the tailwind of restrictions -- sorry, it's a bit complicated. But that Europe was benefiting a lot from the focus of patients to oral health because they cannot travel or restaurant visits, like you explained, whilst in North America, they can, but maybe your dynamic in North America is strong, let's say, excluding this pandemic, this restriction to public life, because of Neodent and BLX or whatever? Or is it, yes...
Yes, I fully understand the sense of your questions, and it's an interesting one. And honestly, nobody has the analytic data in order to have let's say, a fact-based answer. But I will share with you at least my perception and my assumptions. I think, while the people in the U.S. can -- and in some states, actually, it's not everywhere. But now because of the vaccination program, I think the capability for people to move to go to restaurants and for having less restrictions than in Europe, the spending capability restrictions are in my eye is the same. In U.S., people like to do a lot of entertainment. They like to go to Disney. They like to see NBA games. They like to see NFL games, and they are spending a lot of money there. And this is still not possible in the U.S. They are -- you cannot go to see NBA games, NFL games, you cannot go to all those large parks as they used to be. Then I also believe that restrictions in spending or constraints in spending or alternative options for spending are as limited in North America that it is on North America as of today. People are still not living the same life. And that's why we see that this tailwind has been the same in both regions.
The next question comes from the line of Maja Pataki from Kepler.
2 questions from my side. Last year, we were all trying to figure out how much pent-up demand there is in the channels? And if there is pent-up demand at all. Do you think now the tailwind that we're seeing from the savings is actually a pull forward of potential customers that would have come through in the next 2, 3 years. And therefore, this is something that is very strong for you this year, but then we might see a bit of a slowdown in the average growth in the years forward? Or do you think this is just really attracting customers that would have never considered doing implant treatments or even clear aligners. Be interesting to get your view on that. The second question is just pure financial. Peter, can you disclose to us what would happen with the group tax rate, if, in fact, in the U.S., we see an increase to 28% corporate tax.
Well, I think it's a very good question also. Thank you. And it's a little bit explaining also the way we see our year-end guidance, which is optimistic, but also taking into consideration that we might consider some pull-forward demand because I don't think it's going to be some patients that are coming in a practice that have -- that would have not done implant otherwise. We don't think so. Then on clear aligner, that might be the case and more maybe on clear aligners than on implant. But implant being still an answer not only for aesthetic reasons, but especially for functional reasons, I think, yes, you may have some pull-forward demand here that we would see the effect in the third and fourth quarter. But it's still very difficult to say from an analytical standpoint.
Understood. Sorry, just a follow-up on that side. So you -- do you believe -- because we've also seen the strong Align numbers yesterday, and I guess there is these dynamics in the market. So you do believe there is a fair chance that right now, clear aligners could have attracted a customer base that would not have considered a treatment otherwise?
Potentially, yes.
Then turning to your second question, Maja, on the group tax rate and the impact of the current situation in the U.S. Looking at the underlying tax rate, I would expect there an impact of something between 50 basis points to 1 percentage point.
The next question comes from the line of Oliver Metzger from Commerzbank.
So the first one is about the dynamic in the quarter. So you had obviously a quite strong quarter. So for Q2, basically, the expectations were already high. But could you share with us your view of the dynamics between what do you think is the underlying growth or what relates more to pent-up demand, with the effect the savings Maja has just highlighted as well as also we had a certain comparable low base. So do you see, from an underlying perspective that potentially the market now moves into a pace where growth might be potentially even higher than before the crisis. So that's basically the first part. The second one is a quick one. I have recognized that the whole discussion on ceramic implant has become Thailand. So could you share with us your view about this tough segment also on the future prospect? Is the hype already done? Or do you see some soon development?
Thank you, Oliver. And when it comes to the underlying factor of the growth, that's -- yes, what we believe is important is the agenda of dentists are filling up and meaning that this focus on oral health is also a priority that we see having some lasting effects. And this is not so much new where we were seeing that aesthetic was becoming more and more important for health consumer and for everyone, starting from the baby boomers onwards, but also now to the new generation and this new selfie generation. Then this is part of our business fundamentals. And we still believe that this is just reinforcing our business fundamentals for the future in the field in which we're acting. That's why we are very confident. While there might be some pull forward on the implant case as an example, that oral care and dental specialty, in particular, will still benefit from healthy growth in the future. When it comes to ceramic implant, ceramic implant, yes, well, we are not speaking too much about it, maybe in those financial information conference, but this is still a very important topic for us. We are going to launch our first challenger brand ceramic implant called Neodent Z, which is the first ceramic implant in its category to have a narrow diameter implant of 375, then the limited market release will be done in the second half of this year with the objective of gaining significant share against the other value brands in the marketplace. We are still investing on a premium side also to continue developing our ceramic implant line, PURE in order to also be able to unlock more market potential for ceramic implant with narrow diameter implant. Then I still believe that ceramic implant will be a major topic for the future because it will be a significant way to differentiate value proposition.
The next question comes from the line of Veronika Dubajova from Goldman Sachs.
I will keep it to 2, please. First one slightly controversially, but I'm just going to push you, but I'm really confused if you do deliver the type of growth that you have guided for, why margins should not only be above 2020, but back at the levels that we had observed in 2019? I appreciate there are things like currency, but you've also done quite a lot with your cost base over the past 12 to 15 months. And so I'm just trying to understand kind of what are the headwinds that would prevent you assuming you do get to, let's say, 30% sales growth. What are the headwinds that prevent you from returning back to the type of margins that you were earning back in 2019. If you can talk to that, Peter, that would be super helpful. And then my second question is kind of a very quick one on DrSmile. Can you comment on the organic growth rates that you're seeing in that business right now? Even approximately be really helpful to sort of understand how meaningful that is in the context of driving the growth rate for the EMEA business?
Peter?
So I'll take the question on the margin first, Veronika. It depends a little bit, how do you compare the margin versus 2019. I mean, we know EBIT core margin was 27.1%. We know we have a negative FX impact of somewhere around 2 percentage points, maybe 250 basis points, that order of magnitude. So that would bring down the '19 margin on an FX-adjusted basis to 25% or 24.5% to 25%, that order of magnitude. I think it's very, very realistic that we achieve that margin. So we would be at the '19 level again on an FX-adjusted basis. If we would make up the FX headwind until the year-end, and we are talking now about the full year margin, not the half year margin or whatever, full year margin. If we are able to make up the FX headwind that needs to be seen. And that depends on the development of the spending in the ordinary course of the business. As well as how fast we ramp up the spending into the selected growth opportunities that we have identified. I think that depends from that. So there are also certain things that we cannot really influence somehow as we don't know when all the restrictions are lifted and when the respective activities are going up. I would not exclude that we could get back to the '19 level. I would not exclude that. But at that point in time, I would also not commit to that, that we will achieve that. For sure, we will be at the '19 level on an FX-adjusted basis.
Yes. I think on -- Veronika. Yes, I think we can -- on DrSmile side, there is a significant growth coming from them that -- to try to help you here and give you some perspective, the way I can help you to get an idea of the growth rate they are delivering. We expect DrSmile to reach 3-digit million for the total year 2021, which gives you a very kind of idea, good idea of what those guys are delivering as a growth rate right now.
And that, Veronica, you see the M&A or the acquisition impact. You see that in the first quarter, and that gives you a certain indication for the '20 sales level of DrSmile.
Yes. No, that's very helpful. And any appetite to take that platform to markets such as the U.S.? Or for now, is this really sort of a more European-focused solution for you?
So it's a more European-focused solution for us when it comes to the pure DTC-model clinician led as they are doing. Now they are -- we will use this platform technology for alternative business model that we can do, but not exactly the same way because the U.S. being very competitive, customer acquisition costs are also very challenging in order to generate some profitability here, and we see that with some of those players in the pure DTC marketplace in the U.S. But yes, we are looking at how to have a play in the North American market with an adapted business model. That will be for 2022.
The next question comes from the line of Kit Lee from Jefferies.
My first question is just on ClearCorrect. I think you just gave some color around the growth rate for DrSmile. I'm just wondering if you can also talk about ClearCorrect and what the growth rate has been? And what do you expect the growth rate to be for the full year of 2021? And then my second question is just around the utilization rates on clear aligner and also on implants among your customers. I'm just wondering if you have seen an uptick in utilization rates, just given that we've probably seen more adoption of digital workflow. You probably have more patients coming through the door. So I'm just wondering what the utilization rate has been for these 2 procedures?
Thank you, Kit. Yes. On the ClearCorrect side, we -- once again, we are not giving a precise number here. But what we can say is it's a very strong 2-digit growth rate, but on the high end, then that's where we see that we have a very healthy B2B and B2C go-to-market performances. And that's where we were seeing already at the moment of the acquisition of DrSmile, that to be a strong player in the ortho business and fulfill our vision of having a business which is as big as the implant one, we need to play on both go-to-market side. And that's, at the moment, at least paying off from our strategic decision standpoint. When it comes to the uptick in utilization, well, we -- of course, based on 2020, because of the patient flow being really healthy, we see an increased usage for both implant and clear aligner side from a consumer standpoint. But our growth because of our aggressive sales approach are also linked to new customer acquisition. And for us, it's a very important point because the new customer acquisition is also the fuel for tomorrow's growth and a sustainable double-digit growth. Then it's always well balanced between existing customer uptick and new customer acquisition. When it comes to the digital workflow, yes, we have seen through the pandemic, an acceleration of the digital workflow penetration and acceptance among clinicians. We still see this in the number of intraoral scanner being sold, on the quotations being requested, and we believe it's going to be still a strong trend moving forward for the months and years to come.
And can I just follow-up on the utilization rate. If you compare that to the pre-COVID levels, how would that look like in Q1? And what are you currently seeing in your own customer base?
Well, when it comes to clear aligner, then we see it's clearly an increase. Implant side, it's a little bit more difficult to say because when you buy an implant, it's not automatically that you have a case because you are buying a stock of implant for the case to come. Then I tell you that there has been an increase on the order frequency or the order size. Now how much then the usage has been, we assume that it has been stronger, but it's more difficult to quantify for a real usage standpoint.
The next question comes from the line of Julien Dormois from Exane.
I just have one, and it might be a quick one because you might not be willing to answer. But I'm just trying to look beyond the current recovery. And obviously, you guys are still firing on all cylinders across your portfolio. So would you think you will be able to share some midterm targets at a later point in 2021 or in 2022? And more specifically, would you feel confident in guiding for a continuation of double-digit growth between, for instance, between 2022 and 2025, for instance?
Julien, thank you for your questions. Yes, I think we always said, this is our goal. We want to do double-digit growth in the years to come. And where we always said even during the pandemic, that our philosophy is to keep investing for getting back as fast as possible to this double-digit growth and try to maintain it. Then what we do currently and what we are looking at is everything is done to have this double-digit growth maintained over the years to come. You might remember that we have seen our Chairman giving our North Star for the 7 to 8 or 9 years from now to be a CHF 5 billion company. Then obviously, it could be coming by inorganic growth, but also a very strong organic growth as well, meaning that double-digit growth for the years to come is still our objective.
Next question comes from the line of Falko Friedrichs from Deutsche Bank.
I have 2 quick questions, please. Firstly, on vaccination rates, how much of your sales force in the EU and the U.S. is vaccinated at this point? And how many of those can actually physically visit your customers for the dentist again versus only being able to sell virtually, essentially? That would be interesting. And then secondly, on the market share for the BLX implant. You spoke about your goals here the 40%. But is it fair to say that you are currently at around 10%? Would that be a fair estimate?
Thank you, Falko, for the question. Yes, good question as well. We say when it comes to vaccination of our teams, first, this is an information that we are not allowed to disclose on an individual level. Then the people are not expected or obliged to share this personal medical condition with us. We are then -- we can give a kind of idea. But again, this is an important point to highlight that we are not forcing people really to tell us their medical condition. That what we say is that, obviously, the medical -- the vaccination program has been very strong in North America, especially because we have been -- well, considered as a healthcare company and the healthcare workers were having also a priority there. Then all our management in North America is vaccinated. And a large part of our sales team there as well. When it comes to Europe, it's a bit different because vaccination program are lagging behind. Then we know that some of them are vaccinated, some not. And however, we are obviously advising and preaching for vaccination for everyone, not only because we believe it will facilitate the exchange with clinicians, and that all professionals as a whole. But also because this is a very strong contribution from our organization to make sure that this is the only way to put an end of the pandemic. Now this being said, is it helping us to visit more customers? Yes, it is. But we also believe and we know from customers that they are also expecting to keep some of those digital interaction then we believe that the hybrid sales model is the model of the future, and this is a lot what we are working on. When it comes to our market share to BLX, I think it's a very interesting and critical question. Our goal is to be to 40%. Based on our expectations, we believe that at the end of the year, we have strong confidence that we're already going to be in between mid-to-high teens, if you add the volume of BLX and TLX, when it comes to market share of the fully tapered segment, which would be already an excellent achievement, as we see a very good acceptance of our fully-tapered products on the marketplace, a great momentum, and we would be almost -- we will be at least totally in line with our total goal of 40% in 4 years after launch.
The next question comes from the line of Lisa Clive from Bernstein.
Just one question perhaps asking for a bit more granularity around the distinction between whether this is sort of pull forward of future demand or whether it's new patients. Has your sales force from their dentist contacts sort of noticed any change in the profile of patients in the last several months? Are they younger? Particularly in the U.S., is there more self-pay or fully self-pay versus those with some sort of insurance? And then #2, when you first entered the clear aligner market, you said very clearly you weren't competing directly with Invisalign. You were going for the much sort of more simple straightforward cases that could be handled by GP dentists. Is this still the case? And sort of how should we think about your total addressable market?
Yes, when it comes to the implant questions, we don't see a fundamental change in the patient profile. This has not been reported by any of the clinicians we are working with. More that there is much less discussion into the treatment proposal, the cost of the treatment, then patient acceptance is getting much easier during this period, but no change in customer profile. When it comes to our addressable market on clear aligners, that's a very good question as well. Yes, we are still focusing on GP as we speak because of the capability of our software, but we are working hard in the future in order to be able to address the orthodontics segment in the future. Then our plan is to expand our addressable market and being able to treat more complex and advanced cases, we have a much better software interface during the beginning of 2022. And it's part of our significant investment when it comes to software development.
Okay. And then just a follow-up question on that, as you would be targeting the sort of orthodontics segment, which is a largely new segment of dentists for you, would that require additional investments in sales force to have a sort of specialized team for that?
No, we don't think so. However, increasing our foot on the ground will be anyway part of the strategy of expansion of our clear aligner business. But not for going to a specific target group. We actually don't see that this way.
The last question for today comes from the line of Kevin Caliendo from UBS.
I wanted to expand a little bit on the last question. You have ClearPilot 2 coming out, you have a new software program that you're investing a lot of money on in the clear aligner market. And you also mentioned that you're exploring ways to potentially enter the DTC market in the U.S. in 2022. Is this all sort of a combined strategy? Or are there different pieces to that? It doesn't -- like it sounds like the DTC opportunity, I don't know if you figured out a way to sort of solve the customer acquisition cost profile. But we just -- it sounds like 2022 might be a second sort of inflection point for your clear aligner business, and I'd love to get some more details around that.
Yes. I think it's also a good question. Another inflection point, I don't know, but at least another phase, again, in our clear aligner growth, yes, definitely. We have -- when we acquired ClearCorrect, we said we are here to transform this family-own U.S.-only company into a global international brand with being able to be seen as one of the leader of its category. Then obviously, it goes through a lot of investment and development expertise, in term of product portfolio in terms of go to market, in terms of manufacturing capabilities, then that's a continuous development plan that we're having where we are investing significant of our cash flow into the manufacturing capabilities and development capabilities, software side, and that's what we are doing right now. Then I believe that we will have a very strong direct-to-consumer growth, still moving forward. We hope that we will have an inflection in our B2B part of this business with being able to address the orthodontic specialist segment but it's going to be an ongoing significant growth strategy for this still, I would say, a young franchise within the Straumann Group organization.
Let me ask just a quick follow-up. I know we're at the top of the time here. But on the DTC market in the U.S. You called out, you've seen the models they struggle with profitability. So how would you enter that market? Would it be through M&A? Would it be sort of your own offering where you partner with DSOs, how have you thought through solving sort of this customer acquisition cost for the DTC market in the United States?
Yes, we have honestly different ideas to this, but I will not be able to share that with you right now. It's too early. And we are obviously, as many, I guess, looking at trying to go around that significant cost factor. Then when we will have something that we'll be able to launch and see some of the first results, we'll be happy to explain more about this, but it's too early to disclose anything at this time, sorry. With that, we conclude our conference. We look forward to e-meeting you at one of our upcoming financial conferences or during our virtual roadshow meetings, which are outlined on Slide 23. Then thank you once again for joining us, and have a great day.