Sonova Holding AG

Ladies and gentlemen, welcome to the Sonova half-year results 2025-2026 conference call and live webcast. I am Matilde, the course call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and 1 on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Thomas Bernhaskröter, Senior Director, Investor Relations. Please go ahead, sir.

Yes, welcome everyone to our half-year 2025-26 results presentation. The slides for this call are available on our website. With me in the room are Eric Bernhardt, CEO, and Elodie Carr, CFO of Sunova. During the call, Eric will take you through the performance across our four businesses and give you a quick recap of all the new innovations we recently presented at the Juha Congress in Germany. He will then hand over to Elodie, who will take you through the financials in more detail and present the outlook for the current financial year. We will then move to Q&A, where those of you who have dialed in over the phone have an opportunity to ask questions. Before we dive into the presentation, please take note of the disclaimer. In short, this presentation contains forward-looking statements and serves for marketing purposes. It constitutes neither an offer to sell nor a solicitation to buy any securities. And with this, I pass the word on to Eric Bernal.

Thank you very much, Thomas, and a warm welcome also from my side. And let's start the business review with the key highlights of The first half, a strong performance in our two larger businesses, Shearing Instruments and Audiological Care resulted in a combined sales growth of 7% in local currencies in the first half. And this is around twice the estimated market growth and resulted in significant market share gains. Growth in the SI business was driven by the success of the Phonak Infineo and Infineo Sphere platforms that we launched in August 2024. The SC business benefited from continued investments in targeted lead generation, resulting in above market growth. On the other hand, our two smaller businesses, Consumer Hearing and Cochlear Implants, both faced headwinds. The consumer hearing business struggled with weak markets and the lack of significant product launches. In the cochlear implants business, robust growth in system sales outside of China was offset by disruptions stemming from the introduction of volume-based procurement in China, so-called VDP, and lower upgrade sales. In terms of profitability, we have made significant progress. The strong growth resulted in substantial operating leverage and margin expansion in local currencies. Unfortunately, the strength of the Swiss franc continues to be a major headwind. Looking ahead, we are excited about our latest recent launches and we are confident that they will contribute to a continued positive momentum in the second half. and I'll talk more about the new products a bit later. In summary, we remain confident for the remainder of the year and maintain our outlook for the full year 2025-26. Before we move to the group highlights, I'd like to address the changes to the organizational structure we announced in conjunction with our half-year results. As outlined in the release, We will retire the current business unit structure for hearing instruments and audiological care, shifting to a four-region model to strengthen customer proximity and regional responsiveness. It's all about customer centricity. And the heads of the four regions will report directly to me. Cochlear implants and consumer hearing will remain distinct entities. Now, looking at the highlights for the group, sales reached 1.8 billion Swiss francs at 4.9% in local currencies. Normalized EBITDA reached a solid 316 million, up 16% in local currencies, which translates into a strong margin expansion of 180 basis points, again, in local currencies. And we confirm our outlook for the 25-26 financial year, targeting 5-9% growth in sales and 14-18% growth in normalized EBITDA, both measured at constant exchange rate. Last but not least, we further built on our innovation and AI leadership with the recent launch of Ultra and entered the growing segments of IT rechargeable hearings with Vietor, which so far is receiving a very strong market response. And I'll provide more details on this later. Let's take a closer look at the hearing instruments segment now. Total segment sales were up 5.7% in local currencies to 1.7 billion. This was largely driven by organic growth, while acquisitions contributed around 40 basis points. The key driver was the impressive growth of 7% in combined sales in our HI and AC business. Based on market statistics and recent competitor results, we estimate that this represents around twice the market growth. This strong development clearly demonstrates that our innovative portfolio helps to drive growth not just in our HI business, but also supports the momentum in AC or retail. On the other hand, growth in the segments was dampened somewhat by lower sales in the consumer hearing business. Normalized EBITDA rose by 16.9% in local currencies to 305 million, and this corresponds to a margin of 18.1%, representing a strong margin increase of 190 basis points in local currency. You will hear more details about the drivers for margin development later from Elodie, our group CFO. Let's move on to the individual businesses, starting with steering instruments. Building on the momentum from the second half of last year, sales increased 7.9% in local currencies, to 880 million, with positive contributions from both Voluum and ASP. Growth was driven by the ongoing success of the Phonak Infineo and Infineo Sphere platforms. And our innovation leadership can clearly be seen in the V8 channel, where Infineo Sphere sales alone are about 35% higher than the hearing head sales of our largest competitors across the entire portfolio. Although this rechargeable IT had only a limited initial impact, as it was launched towards the end of the first half, it contributed to growth in the period's final weeks, reflected a very positive market reception. Growth was further supported by expanding commercial relationships with large US customers. I am truly convinced that Vietor, together with the recently launched Infinio Ultra and Infinio Ultra Sphere, will contribute to continued momentum in the second half. Let's have a look a bit more in details at these latest innovations. So what you see here, it's an overview of our latest innovations launched in the past months and presented during the UHA Congress in Germany. In August, Phonak introduced Vieto-R Infineo, the company's first rechargeable in-the-ear device. By combining Infineo's speech performance with a compact custom-made design, And universal connectivity, it no longer requires trade-offs from consumers in terms of performance, size, or connectivity. It blends the look and feel of a traditional hearing aid with the styling of a modern consumer earbud, and it has received a very strong initial market response. And this device positions Sonova to capitalize on rising demand in this 400 million Swiss franc market segment where we previously had no presence. A detail, more than 20% of our sales are in black. So people choose the black color. It means that this product is tackling the stigma. People are proud to show it. And that's the shift from what we've seen before. And then just over a year after the launch of Infineo and Infineo Sphere, we introduced Infineo Ultra, expanding our innovation and AI leadership. And in a benchmark study, Infineo Ultra outperformed competitors in the most challenging listening environment, speech in loud noise. And this is even without taking advantage of the unique speech clarity functionality of Sphere, which uses the power of our proprietary DeepSonic chip that mimics the human brain to extract and enhance voices instantly from all directions. Here, thanks to the continuous training of the Deep Neural Network, we improve efficiency by 30%, which means that with Infineo Ultra Sphere, now this powerful feature can be used all day and not just three hours. Vietto R, Infineo Ultra and Infineo Ultra Sphere all run the AI-trained AutoSense OS 7.0 operating system for better automatic adaptation to different listening environments. and offer a simplified one-step pairing process with phones and other Bluetooth devices. Our innovation extends beyond devices. We also introduced the patented EasyGuard Wax Management System, which helps protect the receiver with a sound-transmitting membrane, simplifying cleaning and reducing service visits by up to 38%. That may not sound as exciting as talking about AI, but this solution removes a very significant pinpoint from both the FCP and the user. So as you can see, we continue to innovate with a high cadence, and we expect these launches to be a key contributor to growth in the second half. Moving on to our audiological care business, sales reached 707 million, up 5.8% in local currencies, clearly outpacing the estimated market growth. And this was largely driven by organic growth. The contribution from acquisitions, including the full year effect of prior year acquisitions, was around 1% and somewhat lower than in past periods. The strongest contributions came from Bolton acquisitions in Germany, France, Canada, and Australia. Our recent product launches, as mentioned before, were a major driver of healthy growth. And in addition, the business benefited from consistent and targeted lead generation. You may remember that when we published our full year results, We also discussed structural cost initiatives, including the streamlining of global and local headquarter functions and the optimization of our store network. The savings from these initiatives clearly materialized, delivering strong operating leverage and providing flexibility to reinvest in growth. Then a brief word on our consumer sharing business. Sales were held back by continued weak consumer demand across key geographies and the lack of major product launches in the first half. As a reminder, last year, we introduced the momentum through wireless for earbuds, which were a significant growth contributor. In summary, sales declined by about 12% in local currencies to $97 million. To address the growth challenge, we are sharpening our focus, concentrating on categories where we have a natural right to play, which includes audiophile and premium headphones and soundbars. One good example of this is the October launch of the HDB630, our first wireless audiophile headphones. great reviews, you can find them online. They deliver high-resolution digital audio with or without cable and 60-hour battery life on a single charge. This means that consumers no longer have to compromise between high-fidelity sound and wireless convenience. While it's early days, consumer and expert reviews really have been positive. I strongly recommend you look online and you'll see it's really great. Sennheiser remains the market leader in audiophile headphones with an approximate 22% share and this category accounts for around a quarter of our consumer hearing sales. So promising beginnings for the HDB630. Moving on to the cochlear implant segment. Sales totaled 132 million. down 5% in local currencies. The development was hampered by tariffs and uncertainties around the introduction of volume-based procurement, so-called VBP, in China. However, excluding China, sales were up 3% in local currencies. We had solid momentum in system sales in developed markets, supported by very strong commercial execution and improved D2C lead generation through our HI and AC businesses. As a result, system sales were up 7% in local currencies excluding China, but declined by 6% overall due to the previously mentioned headwinds in China. Upgrade sales, modestly down by 1.5% in local currencies. Expected, as we have previously flagged, that during this financial year, we expect continued pressure ahead of the next processor launch, as many recipients have already adopted the Marvel technology, which was introduced in 2021. Normalized IPTA reached 11 million, representing a margin of 8.2%, and this was fairly stable versus low. prior year period supported by strict cost control and benefits from the weaker US dollar helping to offset the negative operating leverage in the second. And with that, let me head over to our CFO Elodie Carr who will provide more details on the financials and the outlook and I will of course come back for the Q&A. Thank you very much. Elodie.