Medacta : 2023 Management Report

MANAGEMENT REPORT

Medacta's Annual ReportManagement2023

Report l Medacta's Annual Report 2023

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INDEX

1.	MANAGEMENT COMMENTARY*	14
2.	MEDACTA AT A GLANCE	24
3.	A UNIQUE HISTORY: FOUNDED BY A PATIENT	24
4.	GROWTH CAPEX MODEL	26
5.	PEOPLE AND CULTURE	28
6.	VALUE CREATION STRATEGY	30
8.	BUSINESS LINES	40

6	Medacta's Annual Report 2023 l Management Report

2023 KEY FIGURES

FINANCIAL FIGURES

REVENUES

EUR 510.8M

16.9% growth at reported currency (19.5% cc1)

64.0% growth in constant currency from 2019

310.6	302.5	363.1	437.1	510.8
2019	2020	2021	2022	2023

ADJUSTED EBITDA2

EUR 134.2M

26.3% Adjusted EBITDA margin3

(27.9% Adjusted EBITDA margin in cc 2022)

	30.3%	30.5%	29.8%	30.1%
29.5%
	29.1%	29.5%		27.9%
			27.6%
				26.3%
91.5	88.1	107.1	120.4	134.2
2019	2020	2021	2022	2023

Adjusted EBITDA

Adjusted EBITDA margin

Adjusted EBITDA in cc 2019

Adjusted EBITDA in cc 2022

DISTRIBUTION DECLARED PER SHARE4

CHF 0.55

		0.54	0.54	0.55
2019	2020	2021	2022	2023

1. Is calculated as the difference between the current and historical period results translated using the previous period exchange rates.

1. Is calculated as EBITDA, adjusted for non-recurring items: extraordinary legal and MDR expenses.
2. Adjusted EBITDA margin, is calculated as adjusted EBITDA as a percentage of Revenue for the period.

1. Is calculated by dividing the total distribution declared equal to CHF 11.0M by the number of outstanding ordinary shares issued.

BUSINESS FIGURES
EMPLOYEES	COUNTRY PRESENCE
1'730	56
193 new jobs added in 2023	3 countries added in 2023

1'101	1'183	1'341	1'537	1'730
2019	2020	2021	2022	2023

30.1%	47.5%
EMEA
USA

2.0%	20.4%
LATAM
APAC

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2023 HIGHLIGHTS*

• Medacta's 2023 revenue amounts to Euro 510.8 million, equal to 19.5% growth at constant currency, or 16.9% growth at reported currency from 2022;
• Adjusted EBITDA grew to Euro 134.2 million (from Euro 120.4 million in 2022), corresponding to 26.3% margin (27.9% in constant currency);
• Profit for the year was equal to Euro 47.4 million, 9.3% on revenue;
• Adjusted Free Cash Flow at Euro 6.7 million;
• The Board of Directors is proposing a distribution of CHF 0.55 per share (CHF 0.54 in 2022);
• Outlook FY 2024: We are targeting revenue growth at constant currency in the range of 13% to 15%, and Adjusted EBITDA Margin at constant currency improving around 50 bps from 2023 reported, subject to any unforeseen events.

REPORTED PERFORMANCE MEASURES
(Million Euro)	31.12.2023	31.12.2022
Revenues	510.8	437.1
Gross Profit	347.8	305.3
Profit for the year	47.4	46.2
Distribution proposal to the AGM (in million CHF)	11.0	10.8
Alternative Performance Measures:
EBITDA	132.9	113.0
Adjusted EBITDA*	134.2	120.4
Adjusted EBITDA margin*	26.3%	27.6%
Free Cash Flow	(5.5)	8.4
Adjusted Free Cash Flow**	6.7	21.6
(Million Euro)
Total Assets	695.9	584.5
Total Equity	330.0	274.7
Equity Ratio	47.4%	47.0%
Number of employees	1'730	1'537

• Adjusted in 2023 for extraordinary legal expenses (Euro 0.5 million) and MDR transition costs (Euro 0.8 million). The reconciliation is provided in the "Alternative Performance Measures" section of this Report.
• Adjusted in 2023 for extraordinary legal expenses (Euro 0.5 million), for the settlement of legal claims (Euro 1.8 million), MDR transition costs (Euro 0.8 million), non- recurring investments for Corporate land acquisition and plant expansion (Euro 6.3 million) and international advances and deposits for future logistic expansion (Euro 2.7 million). Please see the "Alternative Performance Measures" section of this Report for the reconciliation of the "Adjusted Free Cash Flow".

• Alternative Performance Measures: This section and other sections of this Annual Report, contain certain financial measures of historical performance that are not defined or specified by IFRS, such as "constant currency", "EBITDA", "Adjusted EBITDA" or "CORE EBITDA", "Adjusted and Normalized EBITDA", "Free Cash Flow", "Adjusted Free Cash Flow", "Adjusted and Normalized Free Cash Flow", "Net Debt" and "Leverage". Reconciliation of these measures as well as "CORE" financial measures is provided in the "Alternative Performance Measures" (APM) section of this Annual Report. These Alternative Performance Measures (APM) should be regarded as complementary information to, and not as a substitute for the IFRS performance measures. For definitions of APM, together with reconciliations to the most directly reconcilable IFRS line items, please refer section headed "Alternative Performance Measures" of this Annual report.

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SHARE INFORMATION

The registered shares of Medacta Group SA are traded on the International Reporting Standard of SIX Swiss Exchange and are part of the Swiss Performance Index.

NUMBER OF SHARES

Share capital (in CHF)	2'000'000
Number of registered shares outstanding as of December 31, 2023	19'927'500
Nominal value per registered share (in CHF)	0.10
Number of treasury shares as of December 31, 2023	72'500

2023 DATA PER SHARE
(Swiss Francs)	31.12.2023
2023 High (in CHF)	131.40
2023 Low (in CHF)	95.40
Closing price (in CHF)	125.60
Market capitalization (in CHF billion)	2.5

2023 RELATIVE SHARE PRICE DEVELOPMENT

Index base 100 calculation

Source: Refinitiv

											CHF
											125
											122
											121.94
											120
											117
											115
											112
											110
											107
											106.09
											105
											102
											100
											97
											95
											92.33
											90
											87
											85
											82
											80
											77
											75
											72
Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec

Medacta Group SA		SPI TR		SXI BIOMED TR

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LETTER TO SHAREHOLDERS

Dear Shareholders,

2023 marked an extraordinary year for Medacta, culminating in a remarkable growth of 19.5% in constant currency, exceeding the milestone of EUR 500 million. This achievement reflects our unwavering dedication to responsible and sustainable innovation, particularly through our advancements in minimally invasive techniques and personalized solutions. These innovations along with medical education are fundamental assets to our strategy and have significantly contributed to our market share expansion. Our success in navigating the year was further supported by our proactive adaptation of our supply chain, ensuring resilience and continuity in our operations. This performance once again proves the effectiveness of our strategy in achieving remarkable gains in market share and bolsters confidence in our ability to execute our long-term value creation strategy.

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OUR ACHIEVEMENTS

We remain dedicated to improving patient outcomes through innovative minimal invasive techniques and personalized solutions, maintaining at the same time a strong focus on healthcare sustainability. In October 2023, Medacta announced the launch of GMK SpheriKA, marking a pioneering development as the world's first knee implant optimized for Kinematic Alignment (KA). GMK SpheriKA further reinforces Medacta's commitment to providing surgeons with personalized solutions for each of their patients. By working together with a remarkable team of globally renowned orthopedic surgeons, we have introduced a product that builds upon our clinically proven GMK Sphere and incorporates the fundamentals of Kinematic Alignment to ensure that each patient receives an implant that can accommodate their unique pre arthritic anatomy.

Within our MySolutions Personalized Ecosystem, the NextAR Augmented Reality Surgical Platform continues to be validated by research demonstrating the accuracy of our technology. A 2023 study titled "Glenoid Component Placement in Reverse Shoulder Arthroplasty Assisted with Augmented Reality Through a Head-mounted Display Leads to Low Deviation Between Planned and Post-operative Parameters" published in the Journal of Shoulder and Elbow Surgery, affirms the high accuracy of the NextAR Shoulder system. This system offers precise intraoperative guidance for the placement of the glenoid component. Furthermore, a study "Evaluating a Cutting- edge Augmented Reality Supported Navigation System for Spinal Instrumentation" underscores the efficiency, accuracy, and adaptability of the NextAR Spine system.

Those studies prove that Personalised Medicine can be accurately achieved with NextAR Platform, a solution requiring a fraction of the investments and cost per case compared to other technologies in the market.

In November 2023, we announced the commencement of a new facility expansion in Rancate, supplementing the ongoing construction in Castel San Pietro. This expansion is aimed at supporting future growth and increasing in-house production to satisfy the growing demand for Medacta products. Over the next three years, the Rancate site will be expanded by approximately 9'500 square meters, while the Castel San Pietro facility will see its production area increase by about 5'300 square meters, becoming operational in the first half of 2024. This development is expected to create numerous new jobs, effectively doubling Medacta's production capacity across these two technological hubs, supporting Medacta's future needs.

Management made strategic investments in strengthening our supply chain, enhancing our logistics and distribution framework to guarantee more efficient worldwide product delivery. In March 2023, we inaugurated a new distribution center in Memphis, Tennessee, named Medacta Americas Operations, dedicated to serving the US market.

Throughout 2023, Medacta bolstered its operational and sales teams across various regions and business segments, adding 193 new roles to accommodate our expansion and ongoing market penetration.

Management Report l Medacta's Annual Report 2023

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OUTSTANDING GROWTH IN ALL REGIONS AND BUSINESS LINES*

In 2023 Medacta's revenue saw a remarkable increase of 19.5%inconstantcurrencyand16.9%inreportedcurrency from the previous year, reaching EUR 510.8 million. This significant growth was uniformly driven by positive performance across all business sectors and regions, attributed largely to the acquisition of new customers worldwide. In addition to our commercial development efforts, in 2023 we experienced some tailwind thanks to the recovery of the accumulated backlog primarily in the USA and Australia, contributing to our momentum.

Currency development had a negative impact with a headwind of 2.6%, predominantly due to the Euro strengthening against major currencies such as the US Dollar, the Japanese Yen, and the Australian Dollar. This was only slightly mitigated by the Euro's depreciation against the Swiss Franc. Since 2019, Medacta has achieved a 64.0% revenue increase in constant currency, highlighting substantial growth that surpasses a mere rebound from pre-Covid levels.

In terms of trend by business line, revenue from our Hip products rose to EUR 229.8 million, marking a 15.5% increase on a constant currency basis. This positive momentum was driven by the success of our Anterior Minimally Invasive Surgery (AMIS) approach and our Hip revision solutions. Since 2019, revenue from Hip achieved a compound annual growth rate (CAGR) of 8.8%. Revenue from our Knee offerings reached EUR

198.3 million, an increase of 23.2% on a constant currency basis; the growth was generated thanks to a solid and complete product offering based on our personalized Kinematic Alignment platform (MyKA).

Since 2019, revenue from Knee offering achieved a compound annual growth rate (CAGR) of 15.4%. Our Extremities business line reported an increase in revenue of 33.8% on a constant currency basis to EUR 36.3 million; the growth was primarily attributable to Shoulder through the Medacta Shoulder System and technologies

(MyShoulder and NextAR Shoulder). The Sportsmed business, which is in an early start-up phase, continued to develop its growth plan. Since 2019, revenue from Extremities offering achieved a compound annual growth rate (CAGR) of 38.9%. Revenue from our Spine offering grew by 15.2% on a constant currency basis to EUR 46.4 million, mainly driven by the good acceleration seen on NextAR Spine utilization, recently supported by a clinical study which highlights its efficiency in spine

surgery. Since 2019, revenue from Spine achieved a compound annual growth rate (CAGR) of 16.4%. All the business lines benefitted from significant marketing activities and salesforce expansion.

In 2023, we strategically reorganized our key geographic areas, introducing the EMEA and LATAM regions reclassifying countries from the former Rest of the World (RoW) region**.

Overall, group performance was very positive in every market thanks to a confirmed strong growth in EMEA, North America, and APAC. In every region the growth was sustained by organically expanding our sales force and customer base together with some new product introduction.

In the EMEA region, revenue saw a remarkable increase of 22.6% on a constant currency basis, reaching EUR

242.4 million. This surge was attributed to significant customer acquisitions across all business lines.

In North America, revenue climbed to EUR 154.0 million, marking a 15.7% increase on a constant currency basis. A notable factor in this strong performance was the recovery of some patient backlog in the first half of the year.

The Asia Pacific region experienced a growth of 19.4% on a constant currency basis, amounting to EUR 104.2 million, primarily due to new customer acquisitions in Japan and Australia. In Australia, the recovery of accumulated backlog provided additional momentum.

Revenue in Latin America reached EUR 10.2 million, with an 11.9% growth on a constant currency basis, largely driven by increased purchases from stocking distributors.

GROSS PROFIT PERFORMANCE *

The Gross Profit was EUR 347.8 million compared to EUR 305.3 million in the previous year. The Gross Profit margin was equal to 68.1% compared to 69.8% in 2022. This change was primarily due to a negative impact from currency development, and temporary geographic mix effects caused mainly by a higher contribution of EMEA on total volumes. These negative effects were partially compensated by a positive leverage impact on depreciation and amortisation.

• Alternative Performance Measures: This section and other sections of this Annual Report, contain certain financial measures of historical performance that are not defined or specified by IFRS, such as "constant currency", "EBITDA", "Adjusted EBITDA" or "CORE EBITDA", "Adjusted and Normalized EBITDA", "Free Cash Flow", "Adjusted Free Cash Flow", "Adjusted and Normalized Free Cash Flow", "Net Debt" and "Leverage". Reconciliation of these measures as well as "CORE" financial measures is provided in the "Alternative Performance Measures" (APM) section of this Annual Report. These Alternative Performance Measures (APM) should be regarded as complementary information to, and not as a substitute for the IFRS performance measures. For definitions of APM, together with reconciliations to the most directly reconcilable IFRS line items, please refer section headed "Alternative Performance Measures" of this Annual report.
• In 2023 the Group reorganized the key geographic areas introducing EMEA and LATAM regions, reclassifying Rest of the World (RoW) region. EMEA includes revenue from the former Europe region and select countries originally included in RoW region. LATAM includes revenue from countries located in Latin America previously included in RoW region. 2022 figures have been restated accordingly.

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ADJUSTED EBITDA MARGIN *

The Adjusted EBITDA amounted to EUR 134.2 million, growing by EUR 13.7 million from EUR 120.4 million in 2022, corresponding to a margin of 27.9% in constant currency (26.3% reported) compared to 27.6% in 2022. This margin expansion was achieved through effective cost management and to the leverage of fixed costs on sales volumes. The decrease of reported EBITDA margin reflects primarily the reduction in Gross Profit, the negative currency development and inflationary pressure.

ADJUSTED EBIT MARGIN *

The Adjusted EBIT for the period raised to EUR 75.7 million, 14.8% on revenues, compared to EUR 68.9 million, corresponding to 15.8% on revenues in 2022. This change in margin is attributable to the decrease in EBITDA, which was only partially offset by the leverage impact on depreciation and amortisation, which increased but at a slower pace than revenue.

PROFIT FOR THE YEAR

The Profit for the year was EUR 47.4 million, compared to EUR 46.2 million in 2022. The profitability in 2023 was significantly affected by negative financial results, mainly driven by unrealized exchange losses. Additionally, the Group's effective tax rate rose to 19.4% from 15.6% in 2022, largely due to a one-off transaction associated with establishing a logistics company in the United States, which altered the usual Group's profit mix and thus the Group's average tax rate.

SOLID BALANCE SHEET

Medacta's balance sheet remains robust, with total assets increasing to EUR 695.9 million and an equity ratio of 47.4% at the end of the reporting period (47.0% in 2022). The Adjusted Free Cash Flow generated in 2023 amounted to EUR 6.7 million (EUR 21.6 million in 2022), after significant investments in instruments, implants and manufacturing expansions to sustain the future growth of Medacta.

STOCK PRICE GROWTH AND PROPOSAL OF DISTRIBUTION

The Medacta stock price experienced a material growth in 2023, equal to 22% compared to 4% of the SMI Swiss Performance Index.

The Board of Directors, after assessing the strong economic and financial results of the year, decided to reward our shareholders through a distribution. Our Board Members are proposing to the Annual General Meeting the distribution of CHF 0.55 per share, half of it to be distributed as dividend out of available earnings and half of it to be distributed out of accumulated reserves from capital contribution.

OUTLOOK

We are targeting revenue growth at constant currency in the range of 13% to 15%, and Adjusted EBITDA Margin at constant currency improving around 50 bps from 2023 reported, subject to any unforeseen events.

GROUP EXECUTIVE MANAGEMENT TEAM (GEM) EXPANSION AND APPRECIATION

The past year has showcased the resilience and strength of our company, laying a solid foundation for growth in the years ahead. In alignment with our vision for future growth, on top of the existing GEM (composed by Francesco Siccardi - CEO, Corrado Farsetta - CFO and Alessandro Siccardi - CSCO), we have decided to expand our Group Executive Management team to include Massimiliano Bernardoni (Chief Innovation Officer), Giovanni Niccolò Galli (Chief Commercial Officer) and Asif Hussain (Chief People Officer).

We extend our heartfelt thanks to our entire team for their dedication and hard work, which have been instrumental in reaching this juncture. Together, we look forward to embarking on this exciting phase of development and achieving new milestones.

Sincerely,

Dr. Alberto Siccardi	Francesco Siccardi
Chairman of the Board	Chief Executive Officer
of Directors

Management Report l Medacta's Annual Report 2023	13

1. MANAGEMENT COMMENTARY*

CORPORATE INTRODUCTION

We are an international company specialized in the design, production and distribution of innovative orthopedic products and the development of accompanying surgical techniques for joint replacement, spine surgery, and sports medicine. Established in 1999 in Switzerland, we have grown considerably from our origins as a manufacturer of hip and knee replacement products into a global business. We are currently active in targeted regions of countries that together represent the majority of global orthopedic revenue, according to Orthoworld.

Today, our primary focus is on our high-volume Hip and Knee business lines (which generated 45.0% and 38.8%, respectively, of our reported revenue in 2023), complemented by our offerings in Shoulder, Spine and Sports Medicine ("Sportsmed") business lines. Our products and surgical techniques are supported by an extensive program of surgeon education and engagement initiatives, enabling our offerings to be used to the best advantage of both the patient and surgeon. All our products and surgical procedures are designed to improve patient well-being, facilitate the work of our surgeons and increase the sustainability of the healthcare system by improving efficiency while reducing healthcare costs. Our financial results confirm the validity of our business model and prove our success: in the year ending December 31, 2023 we achieved a 64.0% constant currency revenue growth from 2019, generating revenues amounting to Euro 510.8 million and an Adjusted EBITDA Margin of 26.3%.

LATIN AMERICA** 2.0%

	Argentina
	Brasil
	Chile
	Colombia
	Ecuador
	Mexico
NORTH AMERICA 30.1%	Panama
Paraguay
Puerto Rico
Canada
United States

Branches

Distributors

• Alternative Performance Measures: This section and other sections of this Annual Report, contain certain financial measures of historical performance that are not defined or specified by IFRS, such as "constant currency", "EBITDA", "Adjusted EBITDA" or "CORE EBITDA", "Adjusted and Normalized EBITDA", "Free Cash Flow", "Adjusted Free Cash Flow", "Adjusted and Normalized Free Cash Flow", "Net Debt" and "Leverage". Reconciliation of these measures as well as "CORE" financial measures is provided in the "Alternative Performance Measures" (APM) section of this Annual Report. These Alternative Performance Measures (APM) should be regarded as complementary information to, and not as a substitute for the IFRS performance measures. For definitions of APM, together with reconciliations to the most directly reconcilable IFRS line items, please refer section headed "Alternative Performance Measures" of this Annual report.
• In 2023 the Group reorganized the key geographic areas introducing EMEA and LATAM regions, reclassifying Rest of the World (RoW) region. EMEA includes revenue from the former Europe region and select countries originally included in RoW region. LATAM includes revenue from countries located in Latin America previously included in RoW region. 2022 figures have been restated accordingly.

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