Carl Zeiss Meditec AG
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Carl Zeiss Meditec AG
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Good morning, ladies and gentlemen, and welcome to the Carl Zeiss Meditec Analyst Conference Call regarding the Q1 2022-'23 results.
[Operator Instructions] Let me now hand over to Sebastian Frericks, Head of Investor Relations.
Yes. Good morning, everybody, and thanks for joining our call today, and welcome to Q1. I'm Sebastian, the Head of Finance and Investor Relations. And with me today, as usual, our President and CEO, Dr. Markus Weber; and our CFO, Justus Wehmer. And I'll hand over to this gentlemen now to present you the prepared remarks. After that, we look forward to taking your questions.
Markus, please go ahead.
Yes. Thank you so much, Sebastian. And also a very warm welcome from my side. This is Markus Weber speaking. Welcome to the 3 months, '22, '23 analyst conference of Carl Zeiss Meditec AG. And as usual, I would like to give you a brief look on our agenda.
I will start off first with an overview of the results. Then I will hand over to Justus. He will give you more details on the financials. In the focused topic sections, I will give you then an overview of our order backlog, which is still very high and then talk about the recent development of the IOL market. Also there, there are some good developments ongoing. So finally, I will give you an update of our outlook for the current fiscal year. And then as usual, there will be a Q&A afterwards.
So then let's get started. As we have communicated in December, we clearly anticipated a weak start into the new fiscal year, especially regarding profitability. So the sudden shift of COVID policy in December in China after 2 months of tough lockdowns, and this was really very severe for us to observe, the reversal in reimbursement policies in premium IOLs in South Korea, as well as the continuing supply chain difficulties created an extremely challenging and dynamic environment for our business.
Internally, we are facing still a high-cost inflation in payroll materials, while we're continuing to expand our strategic investments, especially in innovations, but also in new product launches and regulatory. So despite all these challenges, I'm actually very pleased to report a very reasonable start, good start in line with our expectations.
In the first quarter, we have reached a revenue level of EUR 470 million a year-over-year growth of 15%, quite positive. Constant currency revenue reached EUR 460 million, a year-over-year growth of 12%. So growth was achieved, and this is also quite positive in both SBUs and in all regions and in particular, in Americas. The device business demonstrated a very robust performance outpaced the consumables business this time, but also, as I already mentioned, because of China and because of the activities in South Korea.
The supplier situation remains tense, especially component shortages, freight cost increase, extra procurement costs are still in place. The team has taken various measures to reduce our negative effect as much as possible. Actually, we are quite proud of the team, which is managing the shortages in the supply chain.
So actually, as a result of the supply chain and also because of our still good order entry, we have a large order backlog. And I think I will talk about this later on. But again, this is a combination of the strong order intake, but also the challenges of supply chain.
So EBIT margin dropped to 12.8% versus 8.1% in prior year due to this weaker product mix, high production costs and higher OpEx here, especially because of our strategic investments in R&D. Our net income reached over EUR 50 million, benefiting from positive FX effects on our hedging contracts corresponding to earnings per share of EUR 0.57 versus prior year EUR 0.42.
So with this, I would like to hand over to Justus. And Justus, take it from here.
Thank you, Markus, and also good morning, and welcome from my side. I'm now going to give you a more detailed overview of our financials, starting as usual with the performance of the SBU ophthalmology.
Revenue came in for OPT with EUR 358 million. Compared to prior year, the reported increase was 15% and at constant currency, 13%. Growth was mainly driven by our devices business. Also consumable sales managed to grow under a difficult environment, as Markus just outlined, with shortfall of procedures in China and decline of premium IOLs in South Korea during the reported period.
As a consequence, SBO OPT EBIT margin declined 6.5 percentage points compared to last year to 10.1%. As Markus mentioned, we clearly see various factors which affected the EBIT margin: Weaker product mix due to slowdown in refractive procedures and premium IOLs; as well as inflationary payroll and procurement costs. On the other hand, we continue to invest heavily into strategic R&D projects such as our digital health care data platform, surgical ophthalmology in general, also regulatory affairs and other ongoing innovations. And also, however, increasing sales and marketing activities such as physical trade shows and travels.
Let's look at MCS. MCS again delivered a solid performance with revenue of EUR 112 million versus EUR 99 million in previous year's Q1. This represents a revenue increase of around 13% or constant currency 10%, which is actually a good growth given the supply chain difficulties. Our order book continued staying at a strong level.
Supply chain constraints were more pronounced at MCS. Recently, let lead time of some core devices already extended to more than 6 months and we had to further increase our safety stocks for some critical components. EBIT margin, though, is still at a healthy level of 21.5% despite those increased procurement costs, material and payroll costs. Gross margin remained relatively stable. However, increased OpEx, especially in sales and marketing and research and development weighed on the EBIT margin.
Let's look at the revenue growth in the regions. All regions contributed to the growth and for a change, with the strongest momentum from Americas this time. Americas achieved sales of EUR 140 million, an increase of 22% at constant currency, 11% among which the U.S. grew by 16%, and this growth can be majorly attributed to our device business. Latin Americas, and here, especially Argentina and Mexico grew significantly by around 50%.
In EMEA, we noted revenues of EUR 122 million, an increase as reported of 7% and at constant currency 9%. Core markets remained generally stable, whereas Southern Europe countries demonstrated stronger trends with countries like Italy, Switzerland and Turkey reaching up to double-digit growth rates.
In Asia Pacific, we yielded revenues of EUR 208 million, around 15% as reported, and that's exactly the same like, at constant currency. And this is because sales in Asia Pacific are mainly calculated on euro base. China, including Hong Kong, performed well with 15% growth, although the consumer business, as already mentioned, was somewhat depressed. But also India with plus 42% and Southeast Asia with amazing 80% growth, performed excellently. Whereas Japan and South Korea started weaker.
So let's have a look at the P&L lines on the next slide. We noticed a lower gross margin with 54.7% compared to previous year. It's dropped by 2.1 percentage points, and that is clearly due to the stronger device business portion and the relative slowdown of consumable sales, in particular, in China. OpEx are notably higher, mainly impacted by strategic investments. R&D is significantly increased due to continuous investment in the strategic development projects, as I mentioned already before. Sales and marketing expenses are higher. And as I also already said, mainly because of advertising and trade shows amidst some of our product launches.
It's worth mentioning that due to heavy inflation, all costs are rising, material, labor, et cetera. We've already adjusted prices in some categories with good pricing power at the beginning of the fiscal year, though its financial impact will be visible in a half year only due to a high number of our order backlog.
EBIT of EUR 60 million was below previous year's level of EUR 74 million, as already shown and explained by Markus. And EBIT margin then resulted in 12.8% versus 18.1% a year ago.
Our adjusted EBIT margin was 13.4% below prior year's level of 18.6%. It's rather small effects related to purchase price allocation, related amortizations on intangible assets in connection with the acquisitions in both periods.
And finally, a short look at the cash flow statement. Operating cash flow at EUR 18 million previous year, minus EUR 15 million. Slightly improved due to tight working capital management, where accounts receivables reduced to a large degree, while further ramp-up in safety stocks in light of the 10 supply chains. Cash flow from investing activities mainly include payments for property, plant and equipment especially for the expansion of our IOL and refractive production and some intangible assets.
Cash flow from financing activities are mainly influenced by changes in receivables and payables on our treasury accounts and the net liquidity continues to be at a healthy high level of over EUR 870 million.
Yes. I thank you for your attention, and hand it back to Markus.
Yes. Thank you so much, Justus. And now let's go directly to the focused topics. And as already mentioned before, I would like to start with supply chain. So supply chain pressure is [fast] so a sticking point, also as a result of our high order entry. And this -- we have a high order backlog on a very high level.
Looking back to the last year, actually, we have seen over the year a book-to-bill ratio always over 1. So overall, this is then also causing this backlog level. The chart on this slide gives you a rough idea of what categories are most affected. What you see here is the breakdown of what categories, the growth of the order backlog comes from. Absolute growth was quite massive, as already mentioned by Justus and by myself, amounting to more than EUR 200 million compared to the end of 2021, with a total backlog now of above EUR 600 million in December '22 and actually more to come.
A significant portion of these backlogs come from surgical microscope. So the product is running pretty well in the market, both on the microsurgery side as well as on the surgical ophthalmology side, but also diagnostic and reflective laser equipment is heavily affected. Our consumable business is not impacted in a meaningful way. But at this point, our supply chains largely continue to work without major disruptions. So we have to build additional safety stocks, debating times for our customers but remains still long, sometimes up to close to a year.
In the reporting period, we again experienced a tense global supply chain, even though we almost don't directly source from China. But the ripple effects still heavily impacted availability of some components. On top of that, the respiratory infection base last winter in Germany and Europe also caused staff shortages and productions, where we are all still trying to remedy and to suffer.
Going now to IOLs in the interim. Also in this slide, I want to share some most recent trends of the IOL market with you, but also worthwhile to mention according to our own estimates. So it's quite encouraging to see that the '22 global IOL market already narrowly exceeded its pre-COVID level. Particularly premium IOLs, including the Toric and presbyopia-correcting IOLs have achieved significant growth. The Toric IOLs by unit was more than 40% higher than that of 2019 and presbyopia-correcting IOLs, the unit was even more than 60% higher, which is really awesome results here.
So overall, we have been able to further gain market share throughout the period. And as you know, we have a very comprehensive IOL portfolio and advanced technology in premium IOLs and have been investing heavily into further expanding our product categories. We believe more probably of premium IOLs will benefit our business in the long run. Also quite important to say our heavy investments in digital is also supporting this.
So we also have some good news to share today with you. Just a couple of days ago, the FDA has cleared our monofocal hydrophobic IOL CT LUCIA. So making our first intraocular lens available to surgeons now in the U.S. is a super major milestone for ZEISS that we have been waiting for quite some time. And actually, we are quite happy with the team and also looking now very forward how this will continue, why it was -- still be a long road until we have a full portfolio of IOLs now.
This is a super critical first step, and I really want to congratulate everybody who was actually participating here and has worked intensively, as you can imagine, over the last weeks and months and years to make that happen.
Yes. So then, let me lastly comment now on our outlook for the current fiscal year. And with this, yes, our outlook to fiscal year '22, '23 remains positive. We aim to outperform our markets. And hopefully, Justus, I myself were convincing you in this regard.
As you all know too well, we are starting the year with a long list of risk factors for our business. Tension in the global supply chain remains substantial. The impact of inflation is hitting our operating expenses and procurement costs. There is a fear of recession still ongoing and a sting from inflation to the customer.
Also our consumable business in Q1 was under pressure due to -- mainly to high volatility in the Chinese market. Our outlook for the rest of the year is still quite positive. The vast majority of the population in China has by now likely been affected and recovered. We have seen the turning point in December and January and currently see positive effects coming in, in February.
For the current fiscal year, we can expect rising personnel and material costs and high investments in sales and marketing as well as already mentioned in R&D against the background of the introduction of new products and innovations. The EBIT margin is expected to decline slightly from the previous year to around [19]% to 21%, but still in the guidance. In order to achieve these targets, stabilization of the global supply chain and a significant recovery of the consumer business in China in the further course of the business year is definitely required to make that happen.
Midterm, we continue to have significant investment needs as we want to further broaden our global presence and want to continue to drive our innovation strategy with a high level of R&D investment, but as a result of higher costs, but more also a high level of recurring business, we are very confident that we can achieve midterm EBIT margin sustainable above 20%, as already reported in the last reports and discussions we had with you.
With that, we have come to the end of our prepared remarks on the financials. As usual, I would like now to pass back to the moderator to take your questions. Thank you so much.
[Operator Instructions]
And first up is Oliver Reinberg from Kepler Cheuvreux.
Oliver here from Kepler Cheuvreux. Three questions, if I may. The first one, generally on the trends in China. So can you just share with us what kind of decline you have seen in a refractive in China in Q4? And any kind of data points that you can share in terms of the kind of performance during Chinese New Year here?
and then the second question is on stocking in China. So obviously, you have increased inventories in the second half. So can you just provide any kind of color how this kind of inventory levels at your warehouses have changed in the first quarter? And if you see any kind of color in terms of the stocking level that may be at end clients, I assume that they also may have an interest to build safety stocks.
And then the third question, please, on OpEx, Obviously that has increased, I think, by 24% in the first quarter year-on-year. I assume that the comps obviously will get easier as we progress through the year. But is there any kind of color how should we think about the kind of increase in OpEx level on a full year basis? Is the 15% increase enough or could it be more?
Yes. So thank you, Oliver, for your great questions. And I think about the numbers you set will take these answers. I can only tell you in terms of R&D and the OpEx costs, especially here.
So the main increase what we see here now year-over-year is actually the R&D costs. And as already mentioned before, in the OpEx. So we have -- especially for sure, it's labor costs coming up, but also new acquisitions. So we had a lot of acquisitions ongoing. And also new hires, especially in digital, which are resulting in roughly now year-over-year or like-for-like for Q1 last year, then more than 3% absolute points in R&D.
So that means we are now really on a very high level on the quota, and we want to stay in this quota because we see really great opportunities, especially when it comes to digital and the workflow solutions here, to make the investments.
So maybe to answer the question concerning OpEx, Justus will take care of now the numbers here.
Yes, sure. Thank you, Oliver. Trends in China was your first question. I think as we have already actually in December communicated, of course, Q1 was soft. And after the typically strong Q4, where in Q4, and let's take the stocking effects aside Q4, is always the strongest quarter because it's typically coincides with the high season peak of the summer vacation in China, where people tend to get their eyes lasered.
And therefore, the reduction in consumption is anyway always significant between Q4 and Q1. And now we have two over layering effects that make this kind of -- how do you say this? This reduction trend even larger because we had the filling of the warehouses in China in Q4 on the one hand side, overlaying on the anyway strong business. And on the other side, in Q1, on the typically lower consumption, we had now the lockdowns.
And when the lockdowns were released, we basically had a population which was infected and sick at home. So that is why you may say that we had kind of, on the typical pattern two accelerators in both directions. So -- and this basically explains also somehow the more accelerated margin differences versus the previous year.
Now you were asking on the current observations, and I can of course, not yet disclose any detailed numbers. But at least, it looks as if the consumption in China for treatment packs is on a good path. I'm cautiously optimistic considering the most recent numbers that I've seen. And we clearly have seen a peak in consumption during the Chinese New Year vacation period.
So from that perspective, we are thinking that we return to see a normalization of consumption end markets. And I think if I remember correctly, you also were interested in the stocking development in China. I think that is still a little bit early to tell.
We would expect that there will be some reduction of stocks, especially happening now with the consumption of the treatment packs. But I'd say it's still too early to tell to give you a clear indication on where we are at the end of this quarter. My gut feeling tells me that we will see some consumption, but the remainder of the year, Q3 and Q4 will be more meaningful.
On OpEx, maybe just a word in addition to what Markus said, yes, clearly, we have the inflationary trends which have indeed been a driver for some of the development in our OpEx. My impression is we will see a bit of easing during Q3 and Q4. Q2 will potentially still see stronger OpEx upward trends. Yes, that's currently my expectation. Thanks.
And the next question comes from Graham Doyle from UBS.
Just one. I don't know if I misheard you, but you spoke about India in particular, being very strong. It sounds like you said 80% growth. If that's the case, could you talk a little bit more about that, and maybe what that means for Q2?
And then just a sort of broader question on -- I know it's difficult because of where we are with China, but just when we think of phasing for this year, it does feel like you're going to have a tailwind or at least less of a headwind in China as we go through the next few quarters.
And presumably, price becomes a bit more of a tailwind in Q2 as you move through the backlog. So is it reasonable to assume that Q1 should be the slowest growing quarter on the top line. Now I'll leave it there.
Yes. I'll take it on. So first, to clarify, it was actually Southeast Asia with this 80% growth that I was talking about. India came in still with 40%. Now again, let's go 1 year back. In India a year ago, you had, I think, the deepest misery of corona crisis. Therefore, we always have to take these kind of growth rates with a look at the bigger picture and perspective.
However, undeniably, we obviously want a stronger grow in these regions and have expanded quite a bit our sales activities. And you see some of that reflected certainly in the growth rates, both for India and Southeast Asia.
Tailwind, I think you were mentioning for China in terms of pricing. First of all, as far as it is referring to our consumables business, yes, I would agree that, of course, higher consumption of consumables will overall help us in terms of price and then margins.
But let's all remember that the backlog as such is not anymore for us controllable in terms of the margins that we will realize at least. Of course, the sales price is locked in. And therefore, I'm a little bit more cautious on the margin realization, the net margin realization on that backlog once we can convert it into revenue.
And the last question was on an outlook in terms of the pattern in the quarters and whether Q1 may have been the slowest. Again, there's a lot of uncertainty. I would think that Q2 typically for us also is a rather softer quarter. So I'm not yet here to basically make a case for a steady growth pattern from here to the end of the fiscal year.
Although there is some positive momentum in China, but again, much more important for us typically is Q3 and Q4. So therefore, I remain a little bit conservative. So I would not yet guide you that we will see enormous improvements already in Q2. But certainly, our conviction is that Q3 and Q4 will see the typical strength in both growth and margin. Thank you.
Next up is Falko Friedrichs from Deutsche Bank.
I have two questions, please. The first one on your EBIT margin. And now looking into Q2, and it sounded as if China is getting clearly better. Is it realistic to assume that the EBIT margin in Q2 could be coming close to your full year guidance range? Or is it likely going to be below still?
And then my second question is whether you can share your latest feedback on your new [ARTEVO] device, especially coming from U.S. customers.
Falko, Markus here. I think Justus uses will take the first question concerning the EBIT. Maybe I'll start first with [indiscernible].
So [indiscernible] as we already reported last year, [indiscernible] so, we have demo units running in U.S., and the utilization there is very high. But it's also important to note that the U.S. market is a mature market. And so that really means that we are entering in a mature market with a device where we are competing against installed equipment.
And this is an ongoing process, and I really want to make the point here, especially in this period to make clear that this is not a short-term activity. This is rather a long-term activity. So that means we are starting now with KOLs and getting the KOLs on board, making sure that they are actually spreading the value proposition of our [indiscernible] of [indiscernible] now with the IOL of CT LUCIA. So we have now also an additional element with the bundling so that we can start there and starting then also to gain actually momentum against the business models of competition.
And then lastly, with the new digital full cataract workflow, what we are starting now to test and where we have seen an efficiency gain of more than 20% in terms of throughput. Then this is actually the third element, what we want now to use actually to enter in the U.S. market.
As you can imagine, this is something which is on -- not on a weekly or monthly basis. It's really something what I would expect that this will take the next 3 to 5 years to get full momentum until we have our -- reached our fair market share.
But overall, the signs are quite positive. We get a lot of good feedback from the market. It's also clear that, let's say, innovation and also R&D for the next versions and features are important. And this is something the team is also working on. So overall, we are quite positive, but still a way to go.
Okay. And Falko, I'll take the question on our expectation for Q2. Frankly, I think we will still see in Q2 some headwind on the OpEx increase. We have the tariff -- tariffs in Germany and the results from that negotiations with the union that we will have to face. And I think overall, still inflationary pressures around the world are reflected in the numbers, in the OpEx.
And I think from all the numbers that I see; we can actually only expect later in the course of the year that this tails off somewhat. So my best guess right now would be that in Q2, we most likely will stay with the EBIT margin below the guidance that we have given.
And then in the second half of the year, assuming the China returns to the growth patterns that we have seen in the past, and we always have observed during the 3 years of corona, that China has quite a dynamic development after weaknesses in the market. So with that kicking in, and our increased ability of a turning the backlog into business.
And then, of course, creating additional revenue on then higher ASPs because every -- all the order entry that we are baking in now will, of course, reflect for some of our products' higher ASPs. That should actually help us to drive margin in the second half of the year into the guidance.
And where within this guidance it's going to end up, whether we will be closer into the lower end of the guidance or more mid or an upper end, frankly that is ultimately a function of the strength of China plus the supply chain's development. So -- and that is still a little bit early to make a call here.
Okay. And a quick follow-up. Is it fair to say that you still have full confidence into the entire EBIT margin range for this year, so also the upper end? Or should we rather focus on the low end for the full year?
You really push it. We stick to our guidance, yes. That's where we are. And I think the dynamics of our markets have been such in the past that there is still a way to reach the upper end. But as I say, the stakes are as explained, yes. And so inflation will play a role and easing up of brokerage costs, which last year have been quite a toll on top that we had to take. So there are a couple of variables that are still a little bit hard to predict.
Maybe to add on that, Falko. Actually, the tension, also now in comparison to last year and the year before, the tension is pretty high on the system, I would say. So that really means as we all know, the geopolitical things, black swan experiences and task coming up and issues coming up all time.
And this is something the team already, let's say, has adapted on it and starts really to work on it and to actually change challenges and opportunities. But overall, what we see over -- when you're now looking to what is in front of us, actually all these things like the Russian aggression and war in Ukraine, the sanction packages and then COVID still ongoing, inflation recession. So all of these things has to be mitigated, and this is an ongoing process, I would say.
The next question comes from Sezgi Oezener from HSBC.
I would have a few, please. First of all, in your order backlog, to my attention that growth in the MCS segment was quite significant. So I was wondering if it has to do with the new INTRABEAM as well as the [indiscernible] products that you've showcased us last quarter.
And you've also mentioned that in some products, order times can lead up to 1 year. But where would you assess the average duration, average order lead time? And how does that compare to last year?
And my second question relates to the market share in the IOL segment. Thanks for sharing those specifics with us, showing which were significant growth on Toric and even more presbyopia-correcting segments. Which one is more significant for you? How would you assess your market share as well as the recent evolution of your market share in some of the segments? Or do you think your market share, gained market share and where you've lost.
Yes. So also a good morning from my side. First of all, concerning the lead times in MCS and especially in devices, so it's nothing, let's say, particularly now for MCS. It's more about what kind of product groups and product families we are dealing with.
So this means MCS, the main part here is in the -- actually, the high lead times are really coming from the operational microscopes. So that means ARTEVO, TIVATO and ARTEVO is actually an ophthalmology side, but the TIVATO and the KINEVO. So these are actually the microscopes where we have a huge demand coming in from the market, on the one hand.
On the other hand, where actually the capacity increase is in a way, lacking behind the market demand. And this is quite important also to understand. So when you are looking on pure numbers, so it means unit numbers and how many units we have shipped last year now to this year, then we are on a record level. So that means manufacturing and production is doing very well in that way, that the capacity is on a record high level, but this is still not enough for the even higher order entry coming in.
And this is causing actually the higher backlog and this is then causing also the higher lead times. This is something that the team is working on, where we go, especially also with our supply chain, because this goes on Tier 2, Tier 3, Tier 4 and we are working on that. We expect in our projections and forecasting that we can reduce this or then over the year, but still not on the normal levels.
And I mentioned before, it really depends sometimes on the availability of some specific components and modules. And that means then this is then also explaining why sometimes we go up to 52 weeks. But then always focusing on that and then trying to bring it down again as fast as possible. Hopefully, this is explaining it for MCS. Otherwise, please ask.
The second part, in terms of the IOLs and premium IOLs. Well, this is something where we are actually completing our product portfolio, as you know. In the public part, we are very nicely positioned. And on the public part, there's still a way to go. And this is something where we are following this high priority, also in building up a mid- and long-term strategy concerning that.
And according to this, that might be that we are also acquiring new things that we may also collaborate and doing joint activities here. All of these things are strategic opportunities we are actually assessing. For us, it's clear that we want to give a full solution over the entire, let's say, life of a person.
That really means that we really start in the early ages trying to think about how can we actually help you, the patient. And then over the lifetime, might be then reflective laser correction, might be then IOLs, might be even other measures like also then at the beginning of life with lenses. And then actually in collaboration, then also with other parts and other companies.
So this is actually our plan. Overall, we believe that there's huge growth opportunities and momentum for us in the IOL market, especially since we have really very good control points, not only in the IOLs, but also in the diagnostics and in the operational microscope or in the operational area -- in the arena. So this is really something where we see sort of control points and where we feel very well positioned now to move on.
I see. Then should we think about the MCS market maybe as like longer-term growth than comparing than previously thought in this outlook? I mean, does it have to do with driving minimally invasive surgeries? Is that why there's higher demand? Or is it just post-COVID catch-up still?
So -- so hopefully, I understood it right. Otherwise, please correct me. So in MCS, actually, what we see is, first of all, the KINEVO is doing really very well since the feature set is so compelling. Because it's not only the KINEVO itself, it's also the [CLARUS], which is there. So that means the endoscope connected to that. Then we have the [CONVIVO]. So we are actually offering a full workflow here, and this is something where actually the momentum kicks in, also in the connection now with navigation here. So this is, I would call it, it's not only a COVID topic. It's really because the innovation is cutting edge. And actually, it's a leading product here.
On the other side, we see also now, and this is something which is now -- will come with our acquisition with Kogent and Katalyst that with the instruments and then also the connected instruments, that this will give us an additional boost in this business. So that we -- and we always say that, so then we are actually helping the search not only in the vision, but also with their hands.
So we are actually then taking care of the eye of the surgeon, but also of the hand of the surgeon to make sure that the high precision is then when it comes to brain surgeries or spine surgeries that the high precision is there.
On the other hand, also in ear and throat, neck topics and also dental -- this is also something where we see a positive momentum, but then also with the different jobs to be done, with a different application pool where we are working on. Here, also, we want to move into workflow solutions. So where we can offer a full solution to our customers, to our surgeons, to make sure that the outcome is maximized.
But be aware of that, that this has a different, let's say, optimization topic like, for instance, in cataract. Because cataract is a highly standardized process, and this is something where we actually we want to define and actually to lead the industry standard here.
When it comes to neuro[indiscernible] that it's more about single process steps for workplaces where we are then offering the right solutions. Hopefully, it's answering your question.
It's not very much, more like structural growth to then catch up, but thanks a lot.
It's highly strategic. I will call it.
A following question comes from Oliver Reinberg from Kepler Cheuvreux.
The first one was on your commentary regarding the kind of Katalyst franchise you're building in the U.S. So it's obviously fair enough that this is kind of a long-term undertaking.
But you mentioned that you received good feedback but also the next features are important here. So I was just wondering, is there anything in terms of features that your clients specifically are asking for which your current device is still missing? That's my first question.
Secondly, just on VisuMax capacity. I found it very encouraging that in the Q4 call, you talked about the plan to deliver capacity here. Is there any kind of data points that you can share with us in terms of how the capacity for VisuMax production has changed now by Q1, let's say, on a year-on-year or sequential basis, any kind of feeling to get a kind of idea of the momentum here?
And then the first -- third and last question, just on inflation when it comes to personnel cost inflation on a like-for-like basis, what should we expect? I mean is 5% sufficient like-for-like? And is there any kind of regional spread that we should be aware of?
So let me see that I remember all of these questions. So the first one was the cataract with Visumax capacity. The cataract, what was the first one?
On features in the U.S.
Features. Okay. Let's get started maybe with the first two questions. And then the third question, I would hand over Justus.
So yes, indeed -- so -- but this is -- I would -- only what I would say this is a normal standard innovation of what is happening when a new platform, a new product is introduced to the market. So but then you are always starting with the first features and then the next features are coming.
So for instance, additional hand pieces or additional consumables, that's something. So also when it comes, for instance, to ergonomy, so that means foot pedals and these things. So all of these things is something where we always have on the list and where we say, okay, -- let's get started with the platform first with an MVP. It's a minimum viable product.
Actually, this was much more than a minimum viable product, as you can imagine. But then the next features are coming. And this is something which is quite normal. So that means the program team is working on the first feature set and then the next is coming in a normal product road map. So maybe to answer that.
And more to come to make that also clear. So that means that also, for instance, that the team is now working on a retinal solution for the [indiscernible]. All of these things are actually on the plan.
The second part, VisuMax capacity, indeed. So actually, our plan is to increase significantly the capacity by end of the year. These are activities actually for our suppliers, but also for activities here for the system integration and assembly.
Actually, our plan is to have a capacity increase. Yes, so let's say, beyond 40% by end of the year actually to make sure that we can reduce then also the backlog here.
Yes. And on the inflation on payroll, Oliver, by and large, I think anywhere between 5% and 6% is what you can apply. And that is almost for the U.S. and for Europe, the same.
Any for Asia?
Less. I mean it's not as accentuated, yes. And I mean, then anywhere between 3% and 4% is probably from what I recall right now, yes.
At the moment, there are no further questions [Operator Instructions] There are no further questions.
Good. Then I think we are at the end of our call. A big thank you very much for your attention and participation. Looking very forward and also the next quarter. And with this, we all wish you a wonderful weekend, a good time, and talk to you soon again. Thank you so much.
Thank you.
Thanks. Bye-bye.