Sonova Holding AG

here in the room, and Stefan, welcome to the full year results, also to the interested people on the audio call. I hope you can hear us well. I have Birgit Koenigs with me, our CFO, to guide you through the full year results, as well as the outlook. We plan to spend about half an hour on there, and then we have good time for Q&A, and Thomas told me already there's already incoming questions, so I take from there some people that have already read the material. Just a standard disclaimer, the presentation contains forward-looking statements which offer no guarantee with regard to future performance. Now diving into the matter here with regard to our strategy, business results, and financial results. I think if we look at the last fiscal year, it was not an easy one with regard to how to navigate the market environment I'm sure some in the room will remember when we stood here a year ago, our outlook for the year was more positive than what has unfolded in the marketplace. I think that's true with others in the market. I think the big underlying reason, I think we have on the one hand side underestimated where the inflation will go, and we have also underestimated to a degree what inflation does to our marketplaces. Because historically, when you look at other recessions, not high inflationary environment, our market was more immune. So in that regard, unfortunately, you've seen us going through the year, changing our playbook to a degree, which we will share because we had to adjust. Also adjusting our guidance for the year, unfortunately, in August. But relative to the market conditions we have, we look at the year as We made good strategic progress on what's important for us in the long run, particularly on the M&A front. We also look on the sales performance being solid, driven by predominantly acquisition, some organic lift relative to the macroeconomical environment, and the often discussed non-renewal of a large contract with a U.S. customer. Q4 was better than Q3 in market development, but also in our own sales, which allowed us to end where we ended. When you look on the profitability, clearly muted picture, partially because of a significant known headwind from the acquisition of Sennheiser predominantly, which came in at a low profitability. We said that when we acquired the company. And that created some headwind from a margin level perspective, but then also the macroeconomics, as well as if you look on the Swiss franc side, clearly a significant impact from the FX between our cost structure and our revenue structure with all the moving parts, dollar, euro to Swiss franc. But we can also see in the numbers that we have responded and reacted, particularly starting in Q2 when it was clear to us that the picture is different than we thought. on the cost side as well as on the pricing side, and we'll comment more on that. Strong focus on the M&A side in the year before with the Alpaca and Sennheiser acquisition, making good progress towards integrating them into our businesses, creating a new business unit and consumer hearing business, but also the ability to create now a meaningful footprint in audiological key in China through the Heisen acquisition. Significant advances on the innovation side. We launched our new platform, Lumity, in line with our normal cadence of two years. And I'll comment where we stand on the journey on that one, but also within the Sennheiser brand, but with Sonova technology launching the first area entry hearing solution in January. Now, looking at the outlook, I think if you look at the number, mentally deduct still the impact we have this year from The non-renewal, you're seeing the number pretty much in line with our midterm targets. We also look at the market and appreciate that the first calendar quarter was a good step up versus the quarter before, but we see still lots of volatility in the market. So look at it as the balanced perspective, hopefully appropriately balanced, not with the same challenge we had last year being ultimately too optimistic. But we really believe this market is not a full step back to the regular growth rates we are used to, but a gradual recovery of the market towards a more normal. Highest level results, 14.6% in local currency growth. You see the significant impact here from the Swiss franc on the top line, 3.5%. And then on the EBITDA, 6.1% in local currency growth. if you mentally deduct the dilution coming from, or the low profitability coming from Sennheiser, and if you take into account the inflationary headwinds we have, it is organically a good margin performance. EPS significantly better than the bottom line growth, partially based on the share buyback, but also some moving items on the tech side, Birgit will comment on. Now, sales outlook, 3% to 7%. I said already, deducting the headwind out of the non-renewal in line with the midterm targets we set ourselves. And then you see on the profitability side, a good step up from the margin perspective around 50 basis points because of the activities and initiatives we have, but also the volume falls through. Strategy unchanged, despite it being a more muted year, Clearly, believing in our strategy has worked well for us. And if we go to the organic minus losing one customer, I think we're also making progress in many of the dimensions. Clearly, a year of expansion of our consumer access. I want to highlight a couple of things on the strategy side, starting off with leading innovation. We launched the Phonak Audeo Lumity in August 22. We continue to see a good customer response The penetration rates and what we measure in penetration, how many customers move, B2B customers moved from the Paradise over to the new product, the Lumity, is in line with what we've seen in platforms before. That's always an important metric for us. And keep in mind, the Lumity comes at a higher price than the Paradise, so they're willing to pay more. But now in April, we launched two more, call it form factors or brands, with the Lumity technology. We launched within Unitron, the RIC device, called Vivante on Lumity technology. So that's normally a good step up in Unitron territory. And then we have launched the Phonak Slim Lumity, which has similar content, but a very different form factor, which we think is appealing to part of the consumers, just because it looks different, and it looks different behind the ear. So good news coming into the year in April. two product launches, certainly not the same order of magnitude as the first Lumity, but always, from our experience, a good second step lift to the organic growth. Another point on lead innovation, you see on the right-hand side what we launched in January in a, call it soft launch motors. We're going to go in this quarter into full production and then need to drive the demand side stronger, but we launched at the CES what we call speech-enhanced hearable under the Sennheiser brand, which really gives people an opportunity to have a device who only want to have it for two to three hours in a noisy environment who are not yet ready for a hearing aid. A little bit more color around expanding consumer access in the audiological care network. Continue to make progress on a high level of acquisitions and greenfield openings. The high sound acquisition giving us that entry into China in a more meaningful scale with 200 POS. But in addition to that, we acquired over the year 140 more POS in the target markets we have defined. And we continue to do green fields in the audiological care side. So our network has grown to 3,900 POS throughout the year. One new news which we haven't shared before. I wanted to share it today because it's relevant with regard to how we improve our footprint for multiple reasons. We have embarked on opening an operations facility for the Americas in Mexico. We're making good progress there. We expect that to start to have the first output in the second half of this year. So that's how far we are. It will serve ultimately hearing instruments and the cochlear implants business. Key benefits. especially for the custom-made products, which today often come from Vietnam to the U.S. This cuts at least two days out of the supply chain, and delivery fast is more and more important for our consumers. It clearly is a place in the world where the costs are pretty low, and you get highly skilled labor. Many medical device companies moved to Mexico and have built a brain pool there and the capability pool which we can tap into. And then in light of the uncertainties with regard to supply chains over the last couple of years, with our strong footprint in Asia, which we have established some 10, 15 years ago, I think we're well advised to balance more between the regions and the geographies. Significant return starting in a year up front. Some investments, Birgit will cover that in her section. ESG highlights, don't want to go through all here, but first, if you look at rankings and indexes, we're ranking very high, highly regarded with regard to the ESG footprint and the activities we do. We drive all three different pillars every year. Big highlight in environmental was the commitment to science-based targets about a year ago, and now embarking on the journey on scope three, we already had meaningful measures on the scope one and two. Social, a lot of focus on employee engagement because it is increasingly difficult to bring people to the industry and hold on to them. Engagement is really important, but at the same time, diversity and inclusion, you can see here, we're above 50% with regard to people leaders being female in the organization, and then more progress on getting more governance parts into place, which we think are important sustainable risks for our suppliers from an assessment perspective, but also the well-expected human rights policy. With that, let me move to the business and financial results. I commented on sales in EBITDA already. If you look at the EBITDA margin, 190 basis points down versus prior year, but if you unpick the onion, you will see, and I think Birgit does it later, On the organic side, if you take the dilution out, we had a positive margin expansion despite the macro environment and the lower growth than what we had in the years before. Gearing instruments, call it flat in local currency, 0.2%. If you're correct for the non-renewal, you're in a territory 4.1% in local currency 0.2%. as a growth rate, not what we have seen before, muted market, but I think a decent number here for the year. The Lumity helped as well as the price increases. Consumer hearing business, new to us, new to you to some degree. 284 million in revenue came from the Sennheiser product lines. First full year of consolidation, we're making good progress with regard to the organizational integration. We're also making good progress with regard to our expectations on the profitability, which we achieved for the first year. We're not intending to share the number all the time, but we're tracking it internally, and we make sure that we're on the path we have set for ourselves here. Market share growth, market share gains, meaningfully because we had many successful product launches. The two biggest ones were the two wireless earbuds. And then the Momentum 4, which is a Bluetooth headband headphone, which both are playing in the biggest category Sennheiser is active in. Audiological gear, significant growth, 15.7%. Organic, 4.5%. Same store. And then M&A contributing 11.2%. And then last but not least, our cochlear implants business. I need to unpack that more. 2.8% from the outside, a low number. But if you dissect into the instrument side and the upgrade side, there's a story to be told. I'll get to that in a couple of minutes here. From a growth perspective, the composition, 2-3 organic, mentally adjusting for the lost contract, you had 4.5. You see the 12-3, and you see a significant FX impact here. Looking at the performance by region and focusing on the full year results here, if you go top to bottom, Europe, Middle East, and Africa had a good number. On the market side, we've seen countries like the Netherlands, Austria, and Nordics being positive, felt like not impacted by the macroeconomics. Unfortunately, the larger ones, Germany, France, and the UK, were in a more muted environment. The UK particularly, given all of the microeconomic challenges in the country, France to a degree because they had a huge lift in the year before coming out of the new reimbursement and a little bit of a step down. If you go to the US, yes, we had alpaca coming in, but on the one hand side, we had that headwind from the customer contract. On the other side, we did see the US market going further down. than Europe. That was always the source of discussion. We've seen now recovery in Q4 to what's better territory. But in general, if you look at our Q2 and Q3, it was really significantly more muted than Europe's. Asia-Pac, a very positive number here, 40% growth. There is the high sound acquisition in there for three months. Sennheiser also has a meaningful footprint in China. but also many countries who in the year before still had lockdowns just on the recovery phase. Highest level on the P&L. I gave you all the numbers on the full year, so it's probably more interesting to unpack the first half, second half dynamic on this chart. On the top line, the first half year, almost 18%, second half was 11.6%. To see again the impact of the contract, but also slowdown in the marketplace. On the other hand, if you look at the performance on gross profit and profitability, you can see that the actions we took somewhere in Q2 started to have an impact. Price increases on the one hand side, the Lumity launch helped. Some easing of the cost pressures, not all freight still higher, but not as high as it was six months ago. Also on the component cost side and then dedicated focus on driving certain cost initiatives. So if you look at the second half year, getting to call it only 60 basis points decline profitability. Keep in mind dilution was significantly higher. So in reality, second half year, despite the lower volume, we were able to drive some good profitability improvement year over year. We'll spend a few minutes on the unpacking by business. For the ones who are not that often here, we share the revenue performance of the different businesses below the segment level, but not the profitability. Here in instrument segment, overall, you can see the 15.7 and the 2.3 organic. Growth-wise, very different stories last year. Archaeological care, 15.7, 4.5 organic. I would put in the territory at above market, good inorganic contribution, but also strong on the organic side. The consumer hearing business, as I said, meaningful growth year over year. We don't report this as organic because it's the first year in the company, but Sennheiser actually grew 16.6% based on the product launches as well as one quarter in the year before where we had lower supplies. But the predominant part of the 16.6% was growing share. And then on the hearing instrument side with the dynamic between slower market and and losing a big contract only in that 0.2% here. That's not for background. I voiced them all over on the HI, on the hearing instruments dynamic. I think positives, but also meaningfully negatives, ultimately leading us to that 4.1% if you exclude the contract, but only 0.2 if you look at the true number. Consumer hearing business, I think, Two more comments to be made. We have opted for a creating it as an independent business unit. So it has a full leadership team that is comprised of Sonova people and Sennheiser people. It also includes some Sonova engineering capabilities because of that early entry devices we develop. We've gone through all of this alignment of organization. They have one joint roadmap. They also have a roadmap on how they want to drive top line and bottom line. So in that regard, I think we're in a good position a year in of it functioning as one part and as one part in our organization. As you can tell from also the launch of the first product under the Sennheiser brand with Sonova ingredients. Audiological care, I don't think a lot more to voice over on the M&A side. I think two points I want to pick out on top of the M&A. We continue to make good progress on what we call the digital lead generation hub. The ones who were at the capital markets, Christoph was laying that out more. I think increasingly you need to engage with some of the consumers digital and then move them through a call center process into your own retail store. Ideally, you set while they're on the call already the appointment and it should be in two days, not in five, otherwise they may go somewhere else. We started that in Germany. We now have established it into serving five of our countries and it does help us drive additional growth. but also utilization in the store because we can target the leads where we have open availability in the calendar. The second one, we launched what we call the silent cloud, our first step towards a more medical services, call it technology enabled. It's an application on one side, which you can download iPad or phone or computer, which guides you through how you navigate Tinnitus as an individual and how you can help yourself. It's deeply embedded into the sales process. There is a significant number of people who come to the audiologist to struggle on genitals and the hearing aid is part of the solution. So we're getting our feet wet with regard to how do we do more than just the hearing aid and how do we do this on a technology-enabled way. Last page for me to cover here, cochlear implant segment. I said 2.8 in local currency from a growth perspective. But if you unpack it, you need to look in this business on the system sales, which is the implants and the first processor. And then five years after the first or the implantation, people in most countries have the right to get another processor. And that has a very different timing dynamic. Right. So the instrument or the system sales, the implants, that's really kind of you building your install base. I'm allowed to use that term. Right. Five point one percent. But. Unfortunately, for half a year, we had an injunction in Germany. We shared that out of a legal discussion. That injunction got lifted, but in the first half year, we defected at very little German revenue. If you're correct for that, you are in the high single digits from a system sales perspective, which is probably not a bad number in this market in the last year. Upgrade sales minus one, but we launched the Marvel processor two years ago. And what people do, they're saving and waiting until the new processor comes and they all jump on it. So having the same level in year two is actually a good performance, but you still have a little bit of a dilution relative to your growth rate. So overall, I think fair results here. I feel good about the system sales minus the injunction. On the EBITDA perspective, we improved by 150 basis point the margin despite the lower revenue growth. Unfortunately, also here we see a significant impact out of the exchange rates. So we're, quote, unquote, only at 12.5% margin. We still have the ambition to get meaningfully higher than that, but not so much in organic performance, but more, again, an exchange rate topic. With that, I want to invite Birgit up.

Thank you, Art. So welcome here in... Stefa today and for the people on the call also welcome. So I'm going to take you through a few slides and I'm not going to pass along on the financial highlights because I haven't already touched upon most of it. So let me dive immediately into the cross-margin development which you see here and you see the 180 basis points decline on an operational basis and The ethics is a theme throughout the presentation. So here you see there is another 60 basis points headwind from the currency here. And let me just explain the 180 bips. So you see that the main effect is the dilutive effect from the acquisition of Sennheiser. And then we also saw a weaker market performance in high ASP markets. that had an impact on our ASP, on our average ASP, but we offset that by price increases in all of our businesses. And then we had the effect of the freight and the component cost, but that we offset through continuous improvement initiatives and also structural improvements. So that is what you see on the left-hand side. You see that organically we improved by 40%. basis points. And what is important to note because we discussed that during the first half results is that we see the sequential improvement of 230 basis points from the first half to the second half of the year. Then if we look at the operating expenses and you look at the operational part, you see the growth of nearly 15% and if you look at it organically you see the 2.3% there and that matches exactly the organic sales growth of 2.3% and that really reflects our disciplined cost management and this is despite inflation and also the shift in the business mix with audiological care growing so we have that headwind and then also lower sales versus originally expected due to the market environment and so that's where you can see the impacts of the continuous improvement and then you see that the growth is primarily driven by our acquisitions so the AC network expansion and again the Xenizer consumer division because that was 80% actually of the operational part of OPEX Then if we look at this slide, you see R&D is increasing by 6% and as a ratio to sales, 6.5%. So this demonstrates that we maintain a very high level of R&D spend so that we can invest in innovation. And then when you look at the next slide, this is the highest spend bucket in terms of also of increase, the 19% increase Here you see that 75% is related to acquisitions. And then if you go to G&A, all of it is related to acquisitions, the growth, so the 6%, because if you look at it on an organic basis, we were even declining G&A as a percent to sales and also in absolute value. Then the adjustments, so 31 million, I'll come back to that on a later slide. So then How does this come together? You see here the EBITDA components, so 6.1% growth. And operationally, this is a minus 190 basis points in EBITDA margin. And you can see the effects here underneath. So organically, and that is what Arndt already said, we grew 30 basis points in margin, and that is reflecting all the cost discipline that we had. And then you see next to that the 20 million contribution from M&A, which had the dilutive effect of 220 basis points. Then you see the adjustments. That's another 100 basis points. And I'll come to that here. You see 38.8 million. In the previous slide, you saw 31 million, but that was the operating expense part of the adjustments. And this is the full... full spent and then you see again here a very adverse impact on the ethics and this is 80 basis points getting us to a margin of 21.4%. So then the next slide, the key financials and I already touched upon most of it so let me just quickly highlight the acquisition related amortization so the 54.9 million that is primarily related to again the acquisitions And then on the tax line, you see that we had an underlying tax rate of 9.7%. This is much lower than we originally expected. And last year, I mean the previous year, that was 14.5%. And this is because of a delay of the implementation of the global minimum tax rate. And actually for this fiscal year, so 2023-2024, we do expect a 15% tax rate again. Okay, then here the adjustments. So you see that this is divided in three buckets, as we always have. So first of all, the restructuring, and here Anto already mentioned one of them, which is the... It's investment in infrastructure. So in Mexico, the operations facility, that is one of them, but there's other structural improvements. Then transaction and integration, as you can see, Zeneiser, Alpaca, High Sound, and then legal costs, and that is the ongoing sort of patent litigation with Medell. And then tax, I already talked about that, that has an impact on the EPS here. And then the cash flow development, What you can see here, so actually the operating free cash flow before changes in networking capital is impacted by higher tax cash out and also decrease in long-term provisions. And then when we go to the networking capital part, there you see a $30 million which is due to the consumer hearing buildup of the networking capital. We talked about that already in the first half. And you see that here as well, so 30 million. And then if I move to the other bigger ones, this is so the capex investments, so we go back to normalized levels. So after COVID, we still had some catch-up to do. So that nearly 50 million is related to, you can split that into tangibles and intangibles, tangibles again, so the Mexico facility primarily, and then intangible investments into the AC network and also the digital ecosystem. So to give one example, the CRM implementation in our audiological care business. And then the payments for these liabilities are also related to the audiological care network expansion. Then if we go to the balance sheet, so DSO stable, as you can see here. So we keep on having a strong receivable collection. And then DIO went down because of a reduction in the safety stock. That is a 15% reduction. And then net debt going to $1.5 billion. This is primarily related to acquisitions, dividends, and also the share buyback. And then you see that we are at a 1.5 times leverage ratio, so net debt. to EBITDA. Then again, our capital allocation strategy here in terms of the four in order of priority. So first, the accretive acquisition, so value driving acquisitions. So here we did for the fiscal year 2022-2023, you see the $260 million, which is higher than what we originally guided for the $7,200 million. Here you see high sound and bolt-ons. Then the attractive dividends. So here you see the 5% growth year over year. So here we demonstrate that we can consecutively grow dividends in a meaningful way. And then the healthy balance sheet shows Here you see that we target a healthy balance sheet or a moderate leverage ratio between 1 and 1.5 times, and we are currently at 1.5 times, so the upper end of that guidance. And then the share buyback here, so we announced the program back in April 22, and we bought back around $420 million worth of shares and then given the balanced approach that we take and we say a moderate leverage ratio is what we aim for so there is no share buyback currently foreseen in the fiscal year 2023-2024. We believe that is a balanced approach given the rise of the interest rates and also the still volatile environment that also Arndt was describing. So let me then now go to the outlook for 2023-2024. So as you can see, the sales growth from 3% to 7%, and EBITDA growth from 6% to 10%. So let me unpack that. If you look at the market first, so that is the left-hand side of this slide. So we continue to see and really strongly believe that the fundamentals remain intact. low penetration, and obviously innovation driving growth. And then we do see still some uncertainties in the microeconomic environment. So for instance, the month of April, when we look at just the market data for four key geographies, we do see that it's weaker versus the previous quarter, that's where we saw the uptake. So there keeps on being volatility. But then we do still believe that the consumer sentiment will gradually evolve. We saw a big uptake in consumer sentiment in the past quarter, and we believe that will improve throughout the year. And then we do see potential support from pent-up demand when customers start renewing, the ones that delayed their renewal. So volatility and uncertainty is what we do still see, although we believe it will be positive throughout the year. Then on the Sonova side, that's the right-hand side, so we have a high comparison base in the first half, and that will be easing in the second half. This is an important point, but as you already know, so in the first half of the year, fiscal year, past fiscal year, so 22, 23, we did still have the large U.S. account and in this fiscal year, the first half, we don't, so that has an impact of around 4% on revenue and you can then easily do the math. Then we believe cost pressures ease and we will see that throughout the year we already saw cost pressures coming down and then we also have continuous improvement and we will see more of that actually in this fiscal year. And then we also would like to note restructuring and integration costs for an amount of around 20 to 25 million also for the fiscal year 23-24. So that means that the first half will be significantly lower versus the second half, and that goes without saying with the elements that I just described. So then on the ethics, and that continues to remain a headwind, so we just did the math on the May rates, but of course that can still change because we see that currencies constantly change, but if we do the math on the May rates, we see that the top line is potentially impacted by 4% to 5% and then the EBITDA by 8% to 9%. So that is what we currently see, but as said, that can easily change. So then let me go to the last slide, which gives you a snapshot of the upcoming events. So then as of tomorrow, we will go on Roadshow. And then on June 12th, we will have our AGMs, which you are all very welcome. And then on October 18th to 20th, there is the EU Congress in Germany, and that will replace actually our Investor Day, and we can meet also investors and customers and consumers over there. And then on November 21, that's when we then also meet next for the results, and that is for our half-year result publication. So with that, let me end this presentation and start the Q&A. So operator, if you can open the line for questions, please.

I think we will start with a few questions here in the room before we move on to the people on the phone. So just raise your hand.

Thank you very much. Maybe two questions from my side. The first one on Lumity. If we look at what your friendly competitor from Denmark was reporting with the Oticom, that one is performing pretty well. My understanding was always you and demand have the closest focus on highest quality. How do you see this performance of your competitor and what does that mean vice versa for the Lumity? And then maybe on the market environment, you just mentioned April, which was softer again after a very strong March. What do you, on average, expect for the rest of the year in terms of market growth? Normal year, 4% to 6%, more or less? Yeah, how do you see it, Anton?

Yeah, so with regard to performance relative to individual competitors, it is... Certainly interesting to observe the individual players. I think clearly demand, I would say, has a good development in the last couple of quarters. I'm not sure that's only product. I think there's other things they do well. If we look at the acceptance of the Lumity in the RIC form factor, we like our performance. There's other products we have in the product line to name one, if you look in the ear, we're currently disadvantaged with regard to not having Bluetooth and rechargeability in the same device. So I would not be that worried about the Lumity for a while, I can tell. I think there are some softer spots in our portfolio which we work on. But it's also not relative to one player, it's relative to market where we Take a look at our performance. On the market assumptions we have, I think we're in general more muted in our outlook than what I've seen from some competitors. I think there's one other competitor who is similarly muted than we are in the outlook. I would call it 2% to 4% in the units. It's kind of the mental basis for our guidance here. And that's in line with what we said yesterday We've seen some improvement in the first calendar quarter. We have seen probably that's a little bit our advantage. We have also seen the April numbers before we commented. Keep in mind they also have different phasing because they had the January to March in their fiscal year, which was a strong quarter. But I think for our fiscal year, two to four is the underlying assumption behind our guidance here.

Thank you. This is Chris of Credit Suisse. Maybe one question with respect to your ASP development and whether you could break that out relative to your mix component. That would be good to get a bit of better sense about the underlying unit growth in the second half. And I think you mentioned that Q4 was much better than Q2. Q3, whether you also could give a bit more of a clearer indication, let's say, on that relative momentum. And then the other question I had was on the profitability and the consumer business. Is that also somewhat ahead of your plans, or is that basically also according to plan? Thank you.

Chris, thanks for the questions. ASP2 unit, we have driven a strategy where we said we need to recover some of the inflation on price. Other people may have been driving somewhat differently or at least not as clearly as we. From a lift perspective, you've seen in the second half year, we have good contribution on the ASP side, we do have positive growth in units if you're correct for the lost contract. But clearly, part of our growth comes out of an ASP increase, which we've seen. Q3 to Q4, don't want to give you our numbers, but they're not very dissimilar to what we've seen in the marketplace. I think the market was down in the order of magnitude, those 12 tracked countries by 2.5% to 3% in Q3. Q4 was more on the range of call it four to five across the different geographies. America and Canada are stronger. So there was clearly a better year over year, but similar step up quarter over quarter. And then the last question on the profitability on the Sennheiser. We've been a little bit better than what we have planned for the Sennheiser product lines in the business we took over. Not significantly, so not significantly, giving a huge lift towards what we said is the mid-term target in the mid-double digit. I think we're starting fine relative to the market being muted. I think that's a good performance for balancing what we do on the cost side versus what we have to do on the growth side.

Sorry, Daniela, John, Steve. The first one with the big commercial customer in the US. Anything heard of them coming back? I mean, I guess KS is dead as far as I heard from them. But in brand, you are also not... At least I don't see it on the website. Are you there or is it possible to be in there? I mean, can you imagine that you as the number one, you're not present in the biggest commercial channel in the U.S.

So, what's... So, yes. There is no KS, which was kind of a little bit of the surprise of the last year. I think that's based on their decision on how they want to drive their brand portfolio at the end. And probably also differences in price points in the branded versus the non-branded. I think, no, we're not. in the channel today to answer your specific question. And yes, I think over time we will have that discussion, but it also needs to be seen on their end in their, what is their strategy? How many suppliers do they want? When do they make changes? Clearly we have good technology and good product. I think the other one that was a conscious choice of us, we had a Phonak product in the channel for the non-RIC side. And we've chosen to take that out. It was a small revenue, but the price points in the channel wouldn't sit well with what we command as prices from independents with a phone art brand, right? And so you can see there's a discussion to be had at the right point of time. And I don't want to go too deep into the commercial discussions we have there. But yes, there will be discussions. on the customer to choose if they like the value proposition between brand, price, and technology.

And the second question. Actually, the retail was quite good, I think, in organic terms, considering the fact that you're quite strong in Germany, and Germany was quite soft. So can you give us a bit more flavor on the U.S. own retail and Germany's own retail? Yeah. Okay, thanks. Thanks.

I think we've seen good performance over the last years building within GEOS in Germany. I think it started off with us being for two or three years now more active on branding that GEOS brands more with Boston Line Marketing. People will know here in the room that Mr. Gottschalk is kind of the figurehead for us with GEOS, which fits the target audience really well. And that was a conscious choice to make to improve our unaided brand awareness, but also improve kind of the recognition of gears in the market, which a couple of years ago was not at the same place from price performance quality. So that's one part. You heard us talk about the lead generation hub, which we started in Germany, given that it's our largest market. That has a nice contribution to the growth we're seeing because we just bring more new people to the category. I think the team's executing well. We have seen above-market performance in Germany consistently over the last years. In the US, I think the market is more difficult, as I said. That's true also on the audiological care side. We see good, continued same-store growth in what came from our side with ConnectHearing. You may remember that four years ago we restructured that network and made it far smaller to have a good footprint with stores close to each other that continues to work well with good same-store growth. I think in the integration of Alpaca and other chains we have acquired, I would say, Half of them are doing fine, no change in performance on the integrated entity. In one larger part of that world, we have alignment to do from culture and mindset, which has led to some attrition. But in the sum, we're pretty happy with the performance in the US, but not running at full cylinders yet. Because if you go from 160 stores and you go to 450, you have to integrate the brands, you have to integrate the lead generation mechanisms and the marketing, there'll be some hiccups in the first year, right? But a good start from what we would have expected relative to the integration efforts, but certainly more to come.

I would suggest we switch it up a little bit, maybe go to a few questions from the phone.

Operator, can you... The first question from the phone comes from Maya Pataki from Kepler Chevrolet. Please go ahead.

Yes, hi. Thank you very much for taking my questions. I'll keep it to three. Arne, can you help me please consolidate your comments that you had positive unit growth in the second half of the year? Is that on the wholesale side only or for the total group? That's my first question. The second question, just very quickly on Costco, you are contemplating how you will play that... play that channel and your guidance for this year is adjusted to reflect the exit of Costco. Shall we read that you will provide an updated guidance if and when you were to enter Costco this year or is it more that you don't think it's going to happen this year? And then just very quickly on the greenfield operations that you had this year, Can you remind us how long it takes for a store that is opened to contribute to top-line growth? Thank you.

Thank you. On the unit volume side, my comment was, unfortunately, it's a complex modeling here between the large contract and then still wanting to see, are we winning share? Yes, no, and how are we doing? So I was excluding the large contract. and then looked at unit volume for the second half year, excluding that contract, and said, look, there was some positive unit volume growth, but a bigger part of our growth outside of that was in the pricing side. This was meant to be for the wholesale business. The audiological care adds more, and if it is just for the fact that we have significant inorganic growth, but then also organic growth. On the large contract, we have not considered staying somewhat more on the plannable side of life, any contribution from there into our guidance. If it would be a significant contribution and would be firm and we know when the shipment dates are, we would certainly inform the either when we have the half-year results and we know, or if it has such an impact that we would need to take the guidance up. So rest assured, we will inform you at the right point, but not necessarily in line with commercial negotiations if that doesn't change the impact of the guidance. But it's not included in the guidance. On the store side, I assume your question was on Greenfield opening.

Yes.

On Greenfield, it depends a little bit on the geography, but... You can get to the Greenfield store, which is opened, adding what we call local contribution margin. So the cost is lower than your revenue. Call it in year two. In the first year, you're kind of having more cost than average than what you get in revenue. But in year two, early year two, you can get to a positive contribution margin. The challenge is always that you start without a database. That's the difference to an acquired store, which comes with an existing customer base, which makes up 50% of the revenues. But year two should be the place where you start to be accretive. I think year three to four, you should be at a normal run rate of a local contribution margin.

Okay, great. May I just quickly follow up? Because you've been talking about the price increases that you've been putting through in wholesale. And to my understanding, there was always a talk that it could be, you know, we shouldn't take the full price increases on the wholesale portfolio, but maybe 50%, which could be in the mid single digit range. But if I follow your logic for the adjustment of Costco and everything, it seems that the pricing impact in the second half of the year or the ASP impact in the second half of the year would have been less than 3%. What were the negative impacts on ASP mix that were counterbalancing your price increases?

I think the biggest one is the big two ones are A, when we referenced those numbers that was to the independent market because larger customers have one-year or two-year terms. Secondarily, we had a meaningful mixed shift between geographies because the U.S. was traveling lower than Europe as a market, and Europe is at a lower price point. So that's the two elements why you see less fall through than the numbers we have quoted. I think when we quoted, we shared that. probably half of the market will be impacted immediately because the other half is in larger and longer term contracts. But I think you should not forget the mix shift, which we've seen from the U.S. towards Europe as a higher share, as you could also see in the growth rates.

Okay, perfect. Thank you very much.

You're welcome.

The next question comes from Julian Woodward from Bank of America. Please go ahead.

Thank you very much for taking my questions. I have a couple, please. The first one is that you're sort of the first player who really talk about potential for pent-up demand this year. I think we've seen after COVID that the expected pent-up demand didn't really materialize. So what gives you the confidence that it will be the case this time, let's say if inflation remains high, and can you try to quantify it? The next one is on pricing. So have you just started to hear some pushbacks from clients when it comes to price increases? It seems that you were a bit more aggressive than peers. And just does the guidance include any further price increases for 2024?

Thank you. Thanks for the question. On a pent-up demand, it's a certain logic we deploy. I think in COVID, what we did see, and that's validated by our own retail, that it was the new consumers who didn't join the category, but everybody who had a hearing aid was coming back because they felt comfortable despite the COVID concerns because they knew our audiologists and they knew our store, they knew they will be taken care of from a safety perspective. Completely the opposite in the last 12 months. We see normal growth in new customers. We do spend some marketing on it, but it is in line with what we had expected to lead. But in reality, the lower revenues we see in the market come from people who simply delay their purchase after five years. And so this is just us deploying some logic saying look if somebody was waiting normally five years now they waited six the moment they feel more comfortable about the economics they will come back while if it is a new customer we know how much hard work we have to invest through the audiologist and the marketing to get them to the category so we were less optimistic you know but to be proven um We haven't modeled in a significant pent-up demand curve. We just see that as a potential. I think it's still kind of mentally embedded in what we said about the unit volume 2 to 4 and the revenue guidance we gave. On the pricing side, if you increase prices in an industry where that was not the standard for the existing product, yes, people will comment on it. And then comes the question, how many of those do you convince to accept that and go with you? I think we had also clearly the objective to counterbalance some of the headwinds. We also wanted to set a precedent in the industry that one can increase prices. I think other people have chosen a somewhat different strategy. I think everybody did some price increases, but we were probably at the higher end. I think for the go forward, we assume some price increases. not to the same degree as last year. I think last year was a clear year where inflation was going up so much there was also an easier argument to have. I think we want to hold on to ask for some more value, probably more than we have done historically, but not at the same, at the increase year over year as we've done in the last year.

Thank you very much. It was really clear. Just if I can squeeze a very quick follow-up on my last question about Costco. Could you consider maybe to introduce Sennheiser as a brand at Costco, maybe to compete with more consumer-oriented brands like Philips or Jabra?

Thank you. We can consider many things, but the way we think our brands, we have clearly medical brands and then Sennheiser we like having with us because it's a more consumer brand and if we want to play in the market of early entry devices and people come to the category without a hearing care professional then we do believe that does require different brands so it would create brand confusion relative to the architecture we wanted to drive for right so in that regard not not as likely from our end because then we end up having another medical brand. We end up having confusion on medical versus consumer devices. So not very likely from that angle. I also don't think it gives a huge benefit. While the Sennheiser brand has a brand recognition in the United States of America amongst what we call the audiophiles, it is stronger as a brand in Europe and in China. So I don't see this huge brand appeal of Sennheiser for an OTC, not for an OTC, but for a normal hearing aid in a channel like Costco.

Okay, perfect. Thank you. So I guess it leaves us with Unitron.

It's a brand we use for certain channels, yeah.

Thank you very much.

The next question comes from Hassan Al-Waqil from Barclays. Please go ahead.

Thank you for taking my questions. I have two, please. So firstly, coming back to market dynamics, could you talk about share dynamics in the second half? And particularly in fiscal Q4, given peers have posted high single-digit or double-digit growth in Q3 and to a larger extent in Q4, what do you put the share losses down to? And could this be perhaps durable given product cycle momentum elsewhere? And then secondly, following up on Lumity, could you share some of the data points that you track around the progress of the launch and how you characterize this versus Paradise? And why do you think this hasn't driven some of the share gains you may have expected? Thank you.

Share dynamics in Q4, I need to stay reasonably vague because we don't publish quarterly numbers. I think if I look at our unit volume in the Q4 relative to market, and again, I allow myself to extract the contract, I would say we were doing well relative to the general market data we have. It's also fair to say that there were one or two players who did better than we. Now, if you do the math there, and sorry for getting deep into math, You have to add a loss to our side and a win on the other side because what we lost in the large contract, somebody else picked up, right? So in that regard, it's not just the 4% impact we're talking about. You need to do something on the other side because our 4% went most likely to three vendors, right? But again, I think certain players have done well with their strategies and their products in the channel. We feel... good about our performance relative to the unit market we know as the published market and that's where I would leave it here on the Lumity side I said it earlier I think you need to unpick first a little bit the portfolio don't want to go into product by product but clearly on an ITE product we're currently struggling given that we don't have what other people have and what people are looking for that's something to be solved on the product development side There are some other areas in the portfolio which didn't do as well. I think on the RIC side, we're good with the performance. And we see on the Lumity, and that goes back to your question on the metrics we're tracking, our most important metrics is how are people adopting the product over the existing product, especially when you have meaningful price increases and the price increase or the price delta is mid-single digit there. And we're... call it very close to the same penetration curve as we had with the Marvel in the Paradise in the customers, which are our loyal customers. So it's not so much the product in our eyes, which is a concern. I think it's different parts of the portfolio. It's probably more on the competitive accounts in a market environment where prices are more sensitive, but it's not in the penetration towards the people who convert from the one product to the other.

Very helpful. Thank you.

You're welcome.

Can I go back to the questions?

First question regarding the cochlear implants. We saw this 12.5% margin, which would have been a lot better without the influence of the currencies. Is it still your assumption that you get mid-longer term into the mid-higher teens margin in this area? Then on the share buyback, if you intend to have no share buyback this year, so it's fair to assume that you won't get to this $1.5 billion in the next three years and you would maybe set that out with a longer date. And the last question, I guess I'm right to assume that in the sales guidance from 3% to 7% is the usual bolt-on contribution.

So on the cochlear implant business, if you unpack the numbers, we make progress on the profitability in local currency. Unfortunately, we don't control currency, so I think we're still making progress. and there is no reason why we shouldn't get in this business into what you're indicating, somewhere 15% to 20% EBITDA. Hopefully, currencies also help at some point of time, but if I look like for like, we have progress despite it only being a 2.8% here. On the bolt-on side, yes, bolt-ons are in at a low percentage growth level. I think we've guided that. We expect Thomas needs to help me out here in the range of, what, 40 million in revenues out of bolt-on, so you would translate that probably to a percenter coming from the bolt-on side.

It is. It's been, like, around 100.

You want to make a comment on the share buyback?

Okay, so the share buyback, so yes, it's up to 1.5 billion that we commented on earlier, but then in order of priority, if you look at the capital allocation framework, the healthy leverage ratio has a higher priority, and there we say it's moderate, so that means like between one and one and a half times, and given that we also have, as you know, the dividend payments upcoming currently, and we are running at a higher end. So we believe it's important to say that currently we do not plan any share buyback. As I said earlier, so given the rising interest rate and the volatile environment, this is how we set our priorities.

I think it's worthwhile to note we have done more M&A in the last year, right? So we were getting to that 1.5 and we're wolf-based the way we set it up, right? we would not feel comfortable to be below one and below and above 1.5 so that's why you see us going careful i think it depends also to a degree on what else happens on the m a side right but if you do the math this year you want to go call it to 1.2 leverage that's some work to be done in the cash flow given we pay a dividend and we do some bolt-ons But think about it rules-based. I think we really need to look at the leverage, and as long as we have that leverage in mind, that's what we shared with you. If we would make a change to our leverage assumptions, we would tell you.

If there's nobody, I have another two questions. The first is on the restructuring expenses. Actually, could you detail for what that you're going to use it, you know, this 20 to 25 million this year? And then the second question is just on this speech enhanced here, could you discuss how the market's been receiving that since you launched it in January?

So first on the structural or the restructuring, so That will be a continuation also on the Mexico operations that I alluded to in the beginning of the presentation. So that is one part. And then we have further structural optimizations also even in the audiological care network, but also just throughout the company. And this is just to address the cost base. So it's more a continuation of what we started already.

On the speech enhancement site, we launched, given that CES was in January a product and we have started selling it, it does get good responses. We have not gone on full marketing with regard to it, given that we need to ramp up the manufacturing, which we do in Vietnam. product availability expected in larger scale and then really kind of more marketing investment behind it more in this quarter. I think the initial responses are the speech enhancement is quite strong in a positive way for people because they're not used to that kind of a speech enhancement in any hearable because we have as we have in hearing aids, the beam focusing in there. And so you really hear somebody who is in a restaurant, two tables next to you, very clearly. So very positive for the ones who are looking for that performance. They do like the general performance on music and audio. So I think from the users who have it and have used it and who really looked for that kind of benefit, they say, wow, that's quite impressive for hearable. but we don't have full data based on we really put significant marketing behind it. We now see how that works with the system.

Thank you.

So we have, I think, three more questions from the line, and then I think we will conclude the call. So, operator, can you give us the final questions from the phone?

The next question comes from Veronica Dubajova from Citi. Please go ahead.

Hi, good afternoon, Arndt and Burgett and Thomas. Thank you for taking my questions. I have three, please. One, I just want to go back a little bit to the performance in the second half. I think when you gave us the guidance back in November, you had talked about roughly a flattish market. I think it turns out that coming in actually a point or two better than that. Yet, you've definitely missed consensus expectations, and I think your guidance as well from a revenue perspective. So I'm just trying to understand a little bit better what you think went wrong in that second half of the year. Is it that price realization? Is it something else? Just maybe give us a little bit of insight into that because I think we're all scratching our heads about that. So that's my first question. My second question is just looking at the guidance for fiscal 24, especially the upper end of it. It does imply some pretty significant acceleration as we move through the year. On my map, potentially up to high single digits exiting the back half of the year. Just curious if there's something in your pocket that you have that can drive that. Is this about the new Lumity extensions? Is this about Unitron? Is there something else that we're not thinking about that should make us feel that the entire range is in play? So that would be my second question. And then just a follow-up on the decision not to do a buyback. Anything we should be reading into that from an M&A perspective, or is this really just a prudent balance sheet management? Thank you, guys.

I think the last one. The last one is it is a prudent decision. balance sheet because that's, as I said, we first have the healthy balance sheet as a priority over the share buyback.

We also have to think about when we announced the 1 to 1.5, we were in a different interest environment. So to a degree, you need to at least recognize I stick to my rules while the market's changing on me. You also see people who are getting into trouble from their leverage ratios and whatever. We feel comfortable with our balance sheet. Yes, share buybacks are appreciated at times, but just keep in mind when we range that. We just want to get to the range we set in the first place after we did some more M&A. I think the second half, I would need to go back to my notes you quite pointed there. I'm not sure I look at it that way, but I can try to answer what are the areas where outside of product there may be some, call it, headwinds for us. I think you guys, we came out with the half-year results, and then the large contract was up in the air, and then there was some noise from their side on reliability. As much as we like the performance of our products we're shipping today, I think the Lumity is better than the Paradise ever was. I think noise in the market on reliability doesn't necessarily help you, right? but that's more kind of a thing in a voiceover in the market you have to work through. That is one discussion. I think the other one on the pricing side, yes, customers don't necessarily like price increases. And if you play your cards, then other people go in a different direction. This may have consequences, right? So in that regard, If you think from a confidence of customer perspective, there are some customers who were a little bit more held back in the discussion with us, which I wouldn't attach to Lumity as a product. I think the good news is our reliability proves to be pretty good for the product, and Lumity shows significantly better numbers than the product before. Make no mistake, we do share this with customers. Secondarily, if you look on the pricing side, it was interesting that at least two larger players have done price increases in between. I think that also kind of side-to-side versus six months ago is a better position to be in. We do still think it was right to do the price increases, but other people did this later than us. So that's how we make sense out of it, but definitely not in the Lumity penetration side-by-side relative to other products. On the second half here, We always like to have something in the back pocket, but if we don't share it, we don't share it. But in general, I think we do believe that if we unpeel the onion, and unfortunately we have lost a big account, and unfortunately that gives us a negative and other people a positive. If I just work through the numbers, I feel reasonably good about the second half year. We have launched the Unity on Vivante. We launched the Slim. We clearly have opportunity to drive even more positive upside with the Lumity through the right marketing exercises. There may be more additional products we launch. We bring new technology to all platforms and to all brands and all form factors. But that's kind of more, expect more in the normal on our end there. But I think Clearly, there is potential in the second half because we don't have the headwind out of the contract on both sides. We do think the market is gradually improving. I think the last comment, I think you need to factor in there, Veronica. Keep in mind the year-over-year dynamics in the jump of points. Q3 was really a weak quarter for the industries. the market went backwards, right? So while the Q1 was particularly still strong last year, the Q2 started to get a little weaker, but we really had a significant drop from Q2 to Q3. So in the first half, the second half, I think you also need to factor in jump-off point assumptions. If you put them all together, we felt comfortable about the second half of the year without a magic rabbit out of the hat.

That's very helpful. And can I just ask a quick follow-up on Russia? My understanding is you're the only company that remains. Any sort of rethinking on that? Was the big contributor in the second half? And are you getting any pressure from any particular customers or channels to leave Russia, just given the global conflict there? Thank you.

So we don't expect a change in our strategy, to be very clear about it. We have stopped to sell non-medical product in Russia right away, which gave us quite some headwind on Sennheiser, which had a meaningful business in Russia. It also gave us a little bit of headwind in hearing instruments because of Roger and other consumer devices we have. But our choice was to say if somebody has a medical need, we think that should be supported, and if it is a consumer device, we see selling. So that was our ethical decision there. I don't foresee a change to that, honestly speaking. I know there's lots of discussion out in the world, but I think the world has made some peace with regard to, on the medical side, if it's truly a medical device, it's probably okay.

The next question comes from Susanna Ludwig from Bernstein. Please go ahead.

Hi. Thanks so much for taking my questions. I have two, please. So first on Conversation Clear Plus, I wonder if you could talk a little bit on how you think about the marketing costs and marketing for this product. It targets a more mild loss category, which is sort of harder to convince people that they need help. And I guess the early data from the OTC category, which also targets that mild loss, is a bit disappointing. So I wanted to see what you thought on the read-across there. And then second, on the cochlear implant side, you guys had mentioned a headwind from hospital staffing shortages. Can you talk about how those progress through the year and if you're still being impacted by them at all? Some other elective surgery markets have seen sort of a big benefit from pent-up demand and just wondering if you see any potential next year for benefit in cochlear implants from pent-up demand.

On the conversation clear plus, one of the reasons we launched this and we're quite confident about it, is the use case very different, and I think the perception is different. If I buy an OTC, and I'm all for people being successful bringing category to consumers in need, I think you choose to buy a hearing aid. If you go to the earbuds, you choose to buy an earbud from a form factor and from what it looks like, and you then need to convince the others around the table, that it's okay to wear your earbud also during dinner. But a very different use case also with regard to two of the main functionalities will work no matter what the speech enhancement does. You can make phone calls, you can listen to music. So it feels like a softer entrance, particular to consumers who may not be that comfortable to hearing it in the first place. Why we call it an early entry device. So I think that gives us hope and expectation that the dynamic will be different. I think on the OTC, nobody has asked, but I would say it's still early innings. I think people will need to find the right channel partner. I think direct-to-consumer with Facebook and Google Ads is going to be quite expensive. So you need to figure out what's your channel. Does the channel have enough sophistication capability that they can explain it in the first place without having to do the fitting? So I wouldn't mentally give up on the OTCs. but I find the speech-enhanced hearable more relevant and easier to sell to a consumer who may not want to have a hearing aid at that stage. On the cochlear implant side, it's interesting. When I worked over the instruments, 5% growth, I allowed myself to mentally take out the half year we couldn't sell in Germany. We're kind of in the high single digit. That's not necessarily a bad number. That's kind of the number we've seen pre-COVID in a good year. So I do think, yes, we have seen that the availability of staff, while in some parts of the world it's still limited and in some countries, but in general we don't have as much headwinds as we've seen in other places. On the pinned-up demand, that's a tricky one. I get pushback when I discuss that with my colleagues. I think on the pediatric side, people will always get a priority to be fitted. because we know in the first two years you should get the cochlear implant, so they're not going to wait two more years just because they don't have so much stuff. On the adult side, that would require that the adult is completely convinced and is waiting for you, right? So perhaps a little bit, but probably not as pronounced as somebody who has a hearing aid coming up on year six, got the reimbursement letter a year ago, right? So that seems to be, for me, more straightforward. But perhaps we will see. But not a bad instruments number in the last year in the market.

That would be great. Thanks. That's very helpful.

Thank you.

The last question for today's call comes from David Edlington from J.P. Morgan. Please go ahead.

Hey, guys. Thanks for squeezing me in. Just one that hasn't been covered off, I don't think. Just in terms of as you build out capacity at your new Mexico plant, I just wondered if you expected any dilution to your gross margins as that facility ramps up that capacity.

There will be some dilution, call it, in the first six months or so because in order to prevent that we're getting into trouble from shipments and it's not just the manufacturing, you need to get the supply chain right and you have very different nodes, you need to get over a border we're not used to. We will run carefully with build up and build down. But We have reflected that mentally in the guidance, so this is not going to be such a big number. It's just more an approach from a caution perspective. It clearly will pay by itself if you look just at the labor cost differences. Mexico is, I would say, close to Vietnam, significantly better than China, significantly better than the United States of America.

Maybe just one follow-up, because that leads us on to net working capital. I just wondered how you expect that to flow through this year and whether we should see it as a net positive or negative in terms of the cash flow.

Sorry, can you repeat the latter?

Yeah, just in terms of the inventory, obviously not just related to Mexico, but I suspect there was some inventory build last year. How do you expect that to flow through this?

Yeah, we do still see some some of the, yeah, there is still investment into CapEx also in this fiscal year, 23, 24 for it. But not to an extent that you would say, because, I mean, if you look at the 22, 23 CapEx that you see in the cash flow, that is, I mean, only part of it is, is for the Mexican operation, because there's a lot also on the audiological care network and that expansion. So it's not that substantial, let's say. But on the networking capital, maybe on inventory, like Ant alluded to, just to be on the cautious side, you could see some in the first half, but that would then go away again for the full year.

But that's relative to the factory. I don't know if your question was in general on inventory. I think on the total stock, system sonova in all of the different sites and and all different types of inventory we would expect an improvement in terms we still have safety stock with the easing of the components market now starting to move more towards them looking for buyers of the material and not allocating you i think you can start to get into more careful and into less careful environment um so in that regard i think I would expect a continued improvement of the inventory transposition overall. There's Mexico, but that's just part of the equation.

That's part of it, and that is indeed what we planned for this fiscal year. The improvement, I mean.

No, should I... I'm going to close. I was wondering what Thomas is going to do. So thanks a lot for the continued interest on our journey. I'm sorry for having to unpack so many things left, right, up, down. It was an unusual year in the macroeconomics, but also with the so often quoted non-renewal of a contract. We're looking forward for a year where this hopefully becomes a little bit more straightforward. You've seen our guidance. We're trying to balance between there is still some volatility in the market, but we do believe that we're in a good position to continue to drive market share growth on the back of the strategic initiatives we have and the acquisitions we've done. With that, thank you very much, and I'm looking forward to the next discussion.