Medacta Group SA (MEDGF) (H1 2026) Earnings Call Highlights: Double-Digit Growth, Margin ...

Negative Points

• Gross profit margin declined to 65.2% from 68.3% due to adverse FX impact, price erosion, and unfavorable geographic and product mix.

• North America growth was only around 7%, lower than other regions, due to market softness and Medacta-specific factors.

• Spine segment grew only 4.5%, impacted by a strategic refocus on enabling technology and direct sales, causing dilution.

• Net profit decreased to EUR42 million from EUR60 million, though adjusted for one-off items, it was EUR49 million vs. EUR46 million.

• Operating cash flow decreased to EUR56 million from EUR73 million, due to higher net working capital needs.

• Free cash flow was negative EUR18.6 million, reflecting increased capital expenditures and working capital investments.

• Strikes in Spain are ongoing and expected to continue, creating uncertainty in one of Medacta Group SA ( MEDGF )'s fastest-growing markets.

Q & A Highlights

Q: Can you give us a sense of what you've seen in the US joint market so far in Q3, and to what extent you think you can offset any market weakness with innovation and share gains in the second half? And can you walk through the drivers to hit the implied EBITDA margin step-up in H2? A: Francesco Siccardi (CEO) said the US market grew about 3% in H1 versus an expected 5%-5.5%. In Q3, Medacta-specific factors are easing, especially the US Spine dilution, and Hip is reaccelerating thanks to the new triple taper stem. He remains confident in a US acceleration in H2, helped by a softer comparable versus an exceptionally strong H1 2025. On EBITDA, the company generated costs in H1 for a higher growth rate that did not fully materialize, particularly in the US, but it has adjusted cost increases to actual revenue levels and expects top-line acceleration to drive operating leverage, despite external headwinds such as fuel surcharges.

Q: When you look at the midpoint of the guidance, it implies around 14% growth in H2, about 4 percentage points above H1. With an extra trading day, improving US demand, pent-up European demand from strikes, and improving Spine, is the midpoint or better still possible for the full year? A: Francesco Siccardi (CEO) said all those elements are real, plus India contributing in Q4 and the anniversary of French price cuts (around 3% on certain products) from September last year. He said achieving the midpoint is not easy but possible, though more likely slightly below the midline given four months to go. He stressed that growing 10%-12% in the current environment would be phenomenal and roughly three times the market, and that Medacta always targets very high numbers.

Q: You noted a notable softening within Medacta's existing customers in the US and the general market slowdown. How much was coming from existing customers versus new customers? A: Francesco Siccardi (CEO) said new customer pickup remained very strong, almost as strong as the record prior year, showing the offering and ability to attract customers and hire salespeople remain intact. The weakness came mainly from base attrition of existing customers doing less volume, partly because they moved business from hospitals to ambulatory surgery centers (more profitable for them), and partly from reduced Spine business as Medacta deliberately refocused on more profitable specialty Spine products and technology-driven sales rather than growing at any cost.

Q: You mentioned strikes in Europe in the first half. Do you still see that for the second half, or is it over? A: Francesco Siccardi (CEO) said it is unfortunately not over, specifically in Spain, one of Medacta's fastest-growing European markets. The Spanish public market was down almost 20% in H1 due to strikes, and further strikes have been announced though the situation is uncertain given Spain's autonomous regions. He said Medacta is doing very well despite this headwind and would have had a record year in Spain without it. No other strikes were seen outside Spain, after France in H1.

Q: Do you have the approval for the first product in India already? A: Francesco Siccardi (CEO) said Medacta received approval for its Knees a few weeks ago, the most strategic and highest-potential product in India. The company will start shipping goods that have been sitting on the shelf, with action expected already in September.

Q: On the US acceleration, after three semesters of relatively flat reported numbers, what else should we expect beyond Spine improving and Hip reaccelerating from the taper stem? Is it too far to say we would see a lower attrition rate on base surgeons in H2? A: Francesco Siccardi (CEO) pointed to good Hip reacceleration, Knee already growing well, the new Monoblock Medacta Shoulder stem addressing a segment led by Stryker/Tornier, and Spine reducing its dilution of Medacta USA's growth. He said the company analyzed customer by customer and believes base attrition should significantly reduce, while the new customer pipeline remains good. The first two months (summer months) confirm those trends, so Medacta remains cautious but confident in a good US recovery in H2.

Q: On inventory and the rebuild, how much is for India versus repairing safety stocks after the exceptional 2025 growth? A: Corrado Farsetta (CFO) said the biggest chunk of the inventory change is driven by top-line growth and serving new customers, with a portion needed to cover inventory tensions after last year's super-strong growth, and only the smallest portion (about EUR2.7 million) related to the new Indian market. Francesco Siccardi (CEO) added that the H1 2025 stock level was not physiological, as it reflected around 20% growth, well above plan, so 2026 involves rebuilding stock levels.

Q: On the Spine margin, has the dilution to group margin continued to decrease, and where is Spine profitability today relative to the rest of the business? What is needed for Spine to no longer be dilutive? A: Francesco Siccardi (CEO) said Spine's gross profit margin is actually higher than Joint, but at EBITDA level it is improving yet still below the core Hip and Knee business, mainly due to very high US commissions that previously made US Spine profitability negative. Overall Spine is already positive and contributing, but at roughly one-third of the marginality of the core Joint business. The US business model change is needed for scale to bring marginality, and Sports Medicine is the next line to turn around, which supports the midterm EBITDA expansion guidance.

Q: Can you confirm that at EBITDA level there is no meaningful difference between the US and the rest of the portfolio, and that regional mix should become more supportive in H2? A: Francesco Siccardi (CEO) confirmed that US pricing is higher than European pricing, so a geo mix change impacts gross profit, but has a much lower impact at EBITDA level because the US carries additional distribution, marketing and insurance costs. EBITDA profitability of the US market and some European markets is similar and very comparable.

Q: Do you have any idea what is actually happening in the US as to why that market is a little bit slower? A: Francesco Siccardi (CEO) cited two factors. First, the market is returning to a normal pre-COVID growth rate of about 2.5%-3%, versus the abnormal 5%-5.

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