Medartis : Highlights 2023 Annual Report

2023 Annual Report Highlights

Key Financial Figures 2023

Net sales	Internal growth1	Underlying2 EBITDA	Net result	Investments
212.0 CHF m	17.4%	33.6 CHF m	37.8 CHF m
0.6 CHF m
Driven by strong performance in	Sales in 3 out of 4 regions	EBITDA margin increased from	Basic earnings per share	Investment in machinery,
EMEA, LATAM and the US	soared in the 20% range	12.8% to 15.9%	reached 0.05	consignment sets and M&A

in CHF million,	FY 2023	FY 2022	Underlying YoY change
rounded	Reported	One-off costs2	Underlying	Reported	One-off costs2	Underlying	in CHF	at CER
Total net sales	212.0	182.8	16.0%	20.5%
Internal net sales1	201.2	177.8	17.4%
Gross profit	167.6	(0.5)	168.1	149.5	(0.2)	149.6	12.3%	17.7%
EBITDA	31.9	(1.8)	33.6	16.2	(7.2)	23.4	43.4%	54.6%
EBIT	9.1	(1.8)	10.9	(1.9)	(7.2)	5.3	103.8%	237.8%
Net profit / loss	0.6	(5.8)
Headcount (31 Dec)	829	866	(4.3%)
Margins in % of sales	Change in %-points (PP)
Gross profit	79.0%	79.3%	81.8%	81.9%	(2.6 PP)	(1.9 PP)
EBITDA	15.0%	15.9%	8.9%	12.8%	3.0 PP	3.6 PP
EBIT	4.3%	5.1%	(1.1%)	2.9%	2.2 PP	3.3 PP
Net profit / loss	0.3%	1.1%	(3.2%)	0.8%	0.3 PP

1"Internal growth" denotes the increase in sales at constant exchange rates (CER), excluding the impact of mergers, acquisitions, and divestments. The NSI's contract manufacturing business is classified as non-strategic and is therefore excluded from this calculation. Internal growth serves as a crucial performance indicator for management.

2 The one-off costs in 2023 are related to the costs of remediating the IT attack in May. The figures for 2022 exclude the one-off costs for the NSI acquisition and the discontinued China business in order to facilitate an assessment of the underlying operational performance.

Unit

Total liabilities and equity Total shareholder's equity Total liabilities

• in CHF million

• in CHF million

• in CHF million

  Equity ratio Operating Cash flow Capital expenditures Free Cash flow

• in %

• in CHF million

• in CHF million

• in CHF million

  Share price at year-end Outstanding shares

  Market Capitalisation 31 Dec. Earnings per share

• in CHF shares in CHF million in CHF

2023 2022

349.5 327.9

255.0 237.8

94.6 90.1

72.9% 73.0%

20.0 (3.9)

(18.8) (15.2)

(17.9) (56.8)

84.0 82.0

12,359,185

1,038.2

0.05

11,856,569

972.2

(0.49)

2019*

in % 20

Operating margins (underlying)

2020*

2021

2022

2023

15

10

5

0

2019

2020

2021

2022

2023

*restated

EBITDA margin

EBIT margin

Dr. Christoph Brönnimann Chief Executive Officer

Marco Gadola

Chairman of the Board of Directors

Chairman and CEO Letter

Dear stakeholders,

We look back on a successful 2023. Medartis has delivered a solid financial performance in line with its financial targets and achieved important improvements in many areas. Total Net Sales increased by 20.5% which is at the upper end of our guidance and approx. four times higher than the market average. In three out of four regions sales grew by just around 20%. Only in the Asia Pacific region did sales increase by less than 10%, as the authorities in Australia, our largest regional market, have imposed price cuts of 12 % (affecting H1) and a further 5% (affecting H2). In our largest region, EMEA, revenue surpassed the CHF 100 million mark with further market share gains. The strong performance of our sales teams, the launch of new products and the strong demand for Keri Medical products, which we sell in the DACH countries and the UK, were the main contributors to this success. We currently hold 47% of Keri Medical's share capital, and our plan is to launch the Keri Medical portfolio in Australia during Q4 2024. In addition to the strong topline development, profitability also improved significantly. The underlying profit (EBITDA) surged by 43.4% to CHF 33.6 million, corresponding to margin of 15.9% compared with 12.8% in 2022.

The US business is the management's top priority in 2024 and beyond

The US is the market in which Medartis has the greatest growth potential with market shares still significantly lower compared to what we have achieved in EMEA, Latin America, and APAC. To live up to our plans to gain significant share in the by far most important market in our industry is the number one priority of our leadership team and the board.

Total sales growth of 34.1% shows that we are accelerating and heading towards our medium-term target of USD 80 million, which we aim to achieve in 2025. The acceleration is the result of the strengthening and expansion of our sales force and significant investments in surgeon training and education (T&E). We have made good progress in the hand and wrist segment, while the results in our lower extremities business have fallen short of expectations. We have realised that building the sales channel and training the salesforce requires more effort and time than originally anticipated.

With the integration of the former NSI business, we have laid the foundation to scale up our US business. We can now count on a dedicated US design team focussed on developing products in line with market preferences and on local manufacturing capabilities co-located at our US headquarters in Warsaw, Indiana.

In 2024, our focus will be on further building and strengthening our sales team, maximising the potential of our differentiating product portfolio, leveraging the benefits of our strategic partnerships with Keri Medical and Field Orthopaedics and intensifying surgeon training to successfully position the NSI technologies in the US lower extremities market.

Customer focus is the key to fostering innovation Surgeon-centricity and patient-focus are deeply rooted in Medartis' DNA, enabling us to continuously challenge the status quo and conventional treatment approaches. Polyaxially angular stable hand plates, the innovative olecranon double plating fixation, the new ultra-skinny radial head plate, the world's first scaphoid plate and the tendon-sparing Y-shape of the FPL wrist plate are examples of innovative products that hold significant meaning for both surgeons and patients.

The IBRA Institute in Basel is an important step to live up to our commitment to excellence in T&E

Even the most ground-breaking innovations are useless if we are not able to convey the underlying concepts to surgeons or if the users lack confidence in applying them. Recognising this, we place significant emphasis on providing practical training and continuing education modules on a global scale. One great example of our commitment to this is the foundation of the IBRA Institute in Basel last year. The certified centre serves as an important resource for medical professionals, fellows and residents alike, offering opportunities to deepen their practical skills throughhands-on experiences with human specimens. This addresses a need that is prevalent in many countries and it allows to bring together a team of surgeons, design engineers and manufacturing specialists under one roof.

We are confident that we will continue to gain market share in 2024 and make significant progress in the US and our other core markets. Challenges will persist in Australia as we will face another 5% price reduction in July due to government intervention. At a group level we are aiming for internal growth in the mid-teens. By balancing further operational efficiency improvements with strategic investments, we expect to further improve EBITDA margin (at CER) by one percentage point in 2024.

New Sustainability Report encompassing all 3 scopes of carbon emissions

As we present this Annual Report, we would like to draw attention to our new Sustainability Report. This report marks a significant expansion compared to the previous year, now incorporating Scope 3 emissions inventories for the year 2023. Notably, the disclosure aligns with the internationally recognised GRI standard, elevating the report's comprehensiveness and adherence to global sustainability guidelines. Furthermore, it addresses local market requirements, including details on due diligence and transparency obligations concerning minerals and metals from conflict areas and child labour. We remain committed to fostering ongoing progress and accountability in this crucial respect.

Thanks to our customers and employees

We would like to take the opportunity to thank all our customers for their trust and confidence in our company. A special thank you goes to our design surgeons, research and training partners, and IBRA fellows - they have been instrumental in supporting Medartis in our effort to stay the most innovative and customer focused company in our industry.

In May 2023, we faced an unforeseen important challenge - a hostile IT attack brought our operations to a standstill for an entire week. The reaction of all our more than 800 colleagues worldwide has been exemplary. Thanks to their exceptional efforts in overcoming the challenges posed by this cyber attack we were able to restore operations to full speed already during June and returning quickly on growth path.

Last, but not least, we would like to thank our long-term shareholders. We appreciate the trust into our company and the always constructive feedback and input.

Our Annual General Meeting is scheduled for Wednesday, 17 April 2024 at our headquarters in Basel. Like last year, we will hold the assembly in person, underscoring the importance we place on direct exchange with you, our valued shareholders. The agenda for the meeting will be distributed in due course. For the first time, you will also have the opportunity to choose between paper or electronic copies of the documents. Another novelty at this year's AGM: you will have the opportunity to cast your vote not only for the financial report, but also for our non-financial disclosure, referred to as the sustainability report. The Medartis Board of Directors recommends endorsing these and all other items on the agenda. We hope to see many of you in person, providing an opportunity to connect.

Thank you once again for your enduring support.

Sincerely,

Marco Gadola

Chairman of the Board of DirectorsBasel, March 2024

Dr. Christoph Brönnimann Chief Executive Officer

Business Review

Medartis reported sales of CHF 212.0 million for the full year 2023, representing growth of 20.5% (CER). Internal growth of 17.4% was driven by strong performance in EMEA, LATAM and the US. The EMEA business made the largest contribution to growth with an increase of 19.8%, further expanding its strong market position in both upper and lower limb.

The company's sales grew due to the strong performance of existing products and the successful launch of new products for the upper and lower extremities. The conversion from the first generation to the Modus 2 system in the head segment (cranio-maxillofacial) additionally contributed to growth. The remarkable acceleration of Keri Medical, and in particular the strong demand for the TOUCH saddle joint prosthesis, played a significant role in the company's success in EMEA. In the important US market, the expansion of the distribution channel and the launch of the Field Orthopaedics hand nails as well as KeriFlex were the most important growth factors.

Thanks to the strong sales growth, Medartis also achieved higher profitability in 2023. EBITDA totalled CHF 31.9 million, which corresponds to a margin of 15.0%. In May, Medartis faced an IT attack. This was swiftly resolved, but the resulting one-off costs lowered the EBITDA margin by 0.9 percentage points. Excluding non-recurring effects in both periods, the underlying EBITDA marginincreased from 12.8% to 15.9%. The decline in the gross margin was attributable to a less favourable product mix, characterised by increased third-party custom manufacturing business and a higher proportion of distribution products (Keri Medical, Field Orthopaedics). However, this was more than offset by strong operating leverage and effective cost control measures. After taking financial expenses and taxes into account, net profit totalled CHF 0.6 million.

PERFORMANCE BY REGION AND PRODUCT CATEGORY

The largest region, EMEA, performed very strongly across almost all markets and business segments and achieved year-on-year growth of 19.8% at CER. This allowed the company to surpass the CHF 100 million regional sales threshold for the first time. The important DACH region (Germany, Austria, Switzerland) grew significantly and exceeded expectations despite already holding a significant market share. France and the United Kingdom in particular grew rapidly over the course of the year. The performance in the UK was driven by strong demand across all businesses and by new customers, many of whom were attracted by the Keri Medical portfolio. Medartis acquired the distribution rights for the Keri Medical products in the UK in H2 2021. In the third year since the Spanish subsidiary was

founded, the company continued the dynamic growth trajectory of the previous years and delivered again an impressive increase. Poland and the distributor markets also saw significant expansion. From a financial perspective, the traditional EMEA subsidiaries generate a robust cash flow that enables the company to strategically develop new markets, expand further in existing markets and acquire new customers.

foot and ankle applications, which has been available in selected markets since August 2023. Medartis attaches great strategic importance to the area of lower extremities and aims to increase its market share in the coming years. Three systems were launched in 2023 and more will follow in 2024, targeting the treatment of flatfoot deformities and arthritic feet. The momentum gained from these launches is expected to fuel further growth in 2024.

Keri Medical played a pivotal role in the growth of the German, Austrian, and British subsidiaries and contributed half of the growth in the upper extremities segment. In addition, the overall growth in the upper extremities segment was further bolstered by the recent launches of clavicle, ulna shortening, and forearm implants, as well as significant market growth in Medartis' core business - the wrist.

In 2023, Medartis introduced several solutions aimed at broadening its product portfolio and strengthening its position as a leading pure-play extremity company. Enhancing its upper extremities portfolio, the 'APTUS Distal Ulna System 2.5' offers surgeons a versatile and anatomical solution for treating a range of distal ulna fractures, from simple extraarticular to complex intraarticular head fractures. It integrates seamlessly with the company's distal radius system, the company's best-selling product.

The lower extremities business enjoyed an impressive surge of 41% in EMEA with strong contributions from the 'Ankle Trauma' and the 'CCS compression screw' products. The implant portfolio is complemented by the digital and patient-specific service of the CMX

In CMF, Medartis continued to successfully migrate existing customers from "Modus 1" to the next-generation "Modus 2" system, resulting in an increased market share. Many countries also sent customers to the new "IBRA Institute" in Basel, where participants were able to benefit from real-life training modules with pre-fractured human bone models. Positive feedback from attending surgeons confirmed both the necessity and the success of these training courses.

More than a quarter of growth contributed by new sales agents

Medartis' US business grew by 34.1% (CER) and generated full-year sales of CHF 51.9 million, including CHF 10.8 million from contract manufacturing orders for third-party customers. Excluding these external sales, internal growth saw a positive trend and surged by 20.5% (2022: 12.8%). According to independent market data, this is 3-4 times higher than the market average. More than a quarter of

10

this growth was contributed by the new independent sales agents who have joined the Medartis network over the last two years.

Revenue by region and year-on-year changes:

in CHF

million,	Internal
rounded	growth (CER)
EMEA	19.8%
US	20.5%
APAC	5.6%
LATAM	19.4%
Total Group

FY 2023	Internal growth (CER)
106.5	91.4 16.5% 19.8%	19.8%
51.9	41.0 26.4% 34.1%	20.5%
31.5	32.1 -2.0% 5.6%	5.6%
22.2	18.3 21.0% 19.4%	19.4%
212.0	182.8 16.0% 20.5%	17.4%

The 20.5% growth was recorded across all product categories, but demand was particularly strong in foot and ankle, wrist, and hand. The contributions from KeriFlex and Field Orthopaedics supported this positive trajectory. In the US, the addition of Field Orthopaedics' intramedullary nail portfolio seamlessly complemented Medartis' hand portfolio. These products, distributed alongside Medartis' own product portfolio, give surgeons the option of using different fixation technologies. The company also launched LapiPrep in Q2 2023, a technology acquired with the former NSI. LapiPrep offers hands-free, triplanar correction-angle correction for bunion (hallux valgus) treatment cases, promising repeatable treatment results. While customer feedback is promising, initial experiences underscore the significance of medical training and education as well as clinicalresearch and affairs. These elements will continue to be key focal points for the company in 2024 in order to strengthen its market position in the lower extremities segment and promote surgeon engagement. In view of current and upcoming product launches, Medartis plans to further expand its sales network, which currently boasts 247 sales agents and representatives. In 2024, the company aims to broaden its sales channels even more while enhancing its medical training capabilities. The recruitment of new talent in crucial commercial areas, including marketing, training and education, and sales, underscores the company's commitment to developing the organisation further.

Following the integration of NSI and Medartis US over the past year and a half, the company has strategically realigned key functions such as manufacturing, logistics, quality, R&D and finance under global oversight. Preparations for the transfer of Medartis products from Basel to Warsaw have concluded. Following validation tests, the inaugural production of screws began in February 2024, with plates and surgical guides set to follow later in the spring. This strategic move is aimed at leveraging the manufacturing and engineering expertise housed in the modern 6,500-square-meter (69,500-square-foot) production facility in Warsaw.

The commercial and R&D departments are now seamlessly integrated into global functional metrics, bundling capabilities and enhancing mutual support for both current and upcoming product launches. As part of early succession planning, the current US President, Rod K. Mayer, has decided to retire following the