Financial Data and Key Metrics Changes - Sales reached CHF 1.8 billion, an increase of 17.9%, with organic growth of 5% despite a significant foreign exchange headwind reducing top line by CHF 44 million or 2.8 percentage points [37][38] - Adjusted EBITDA stood at CHF 398 million, up 3% in local currencies, with a margin of 21.6%, slightly above previous expectations [38][42] - Operating free cash flow declined by around 45% to CHF 185 million, primarily due to increased net working capital [38][49] Business Line Data and Key Metrics Changes - Hearing instruments business showed organic growth slightly above 5%, driven by the successful launch of Lumity and price increases [20][30] - Audiological Care's top line grew by 17.3%, significantly influenced by M&A activities, with new consumer marketing efforts bringing in new customers [21][22] - Consumer Hearing business generated CHF 133 million, with expectations for stronger sales during the Christmas season despite initial supply chain issues [23][60] Market Data and Key Metrics Changes - EMEA markets showed resilience, particularly in Germany and the Nordics, while the UK faced headwinds due to reimbursement changes [27][28] - The U.S. private market volumes declined in the first half, with low single-digit decreases, influenced by macroeconomic conditions [28][29] - APAC markets showed some positives, particularly in Australia, while China remained volatile due to lockdowns [29] Company Strategy and Development Direction - The company is focused on expanding consumer access and market reach, with significant M&A activities and product innovations [7][12] - Continued investment in strategic priorities, including new product development and digital marketing, is emphasized despite market headwinds [12][13] - The acquisition of HYSOUND is expected to enhance the company's presence in the Chinese market [8][16] Management's Comments on Operating Environment and Future Outlook - Management noted a dynamic but muted market environment, with expectations for a slower second half due to inflationary pressures and a potential loss of a large private label contract [9][58] - Confidence remains in the hearing care market's attractiveness, with mid-term targets of 6% to 9% growth in top line and 7% to 11% in bottom line [63][64] - Management anticipates a gradual easing of supply chain constraints and transportation costs, which could positively impact profitability [60] Other Important Information - The adjusted gross margin declined to 69.6%, down 350 basis points year-on-year, primarily due to M&A impacts and elevated costs [40] - The company returned cash to shareholders through dividends of CHF 268 million and share buybacks worth CHF 304 million [39] - The net debt position increased to CHF 1.5 billion, resulting in a net debt-to-EBITDA ratio of 1.5 times, at the upper end of the target range [39][54] Q&A Session Summary Question: Market slowdown expectations - Management indicated that the market slowdown is more pronounced in Q2 compared to Q1, with expectations for continued softness [76] Question: Large contract renewal issues - The large customer contract represents less than 5% of group sales, with ongoing discussions about renewal terms [77] Question: Outlook for next year - Management refrained from providing specific guidance for next year, citing the need to assess market conditions further [83] Question: Lumity launch impact - The launch of Lumity has shown good initial sales and repurchase rates, with expectations for continued market share gains [87] Question: Consumer Hearing business performance - Management expressed optimism for a significant sales increase during the Christmas season, despite the challenges faced earlier in the year [109]
Sonova(SONVY) - 2023 Q2 - Earnings Call Transcript