Sonova(US:SONVY)2021-11-15 21:38Financial Data and Key Metrics Changes - Company reported sales of 1.6 billion Swiss francs, an increase of 48.5% year-over-year, with 46.6% attributed to organic growth [35] - EBITDA reached 406 million Swiss francs, reflecting a 129.3% increase compared to the previous year, with an EBITDA margin up 8.9 percentage points [36] - Adjusted EPS increased by 142%, reaching 4.86 Swiss francs compared to 1.97 Swiss francs in the prior year [42] Business Line Data and Key Metrics Changes - Hearing Instruments segment showed a two-year CAGR of 10.5%, with an EBITDA margin of 25.6% [22][27] - Audiological Care segment faced geographical headwinds, with a two-year CAGR of 6.3% [22] - Cochlear Implants segment achieved a 13% EBITDA margin, the highest ever for this segment, driven by strong sales from Marvel processors [21] Market Data and Key Metrics Changes - U.S. market demonstrated a strong performance with a 12.2% two-year CAGR, attributed to market share gains and pent-up demand [25][26] - EMEA markets showed slower recovery, particularly in Germany, Belgium, and the Netherlands, which were among the slowest markets [20] - Asia experienced weaker performance due to lockdowns in Japan, Australia, and New Zealand [26] Company Strategy and Development Direction - Company maintains its strategic focus on innovation and market share growth, particularly in Audiological Care and Hearing Instruments [13][17] - Plans to continue bolt-on acquisitions in Audiological Care, targeting 70 to 100 million Swiss francs in capital deployment annually [17] - Emphasis on R&D investment, with a two-year CAGR of 20.4% in R&D spending [43] Management's Comments on Operating Environment and Future Outlook - Management acknowledges ongoing challenges from COVID-19 and supply chain issues but remains optimistic about maintaining guidance for the full year [10][52] - Anticipates continued strong demand in the U.S. market, with expectations for a gradual slowdown in growth rates [55] - Management expects higher lead generation costs to persist in slower markets, with increases of 20-25% in some regions [74] Other Important Information - Company repurchased shares worth 277 million Swiss francs by September 30, contributing to a net debt position of 345 million Swiss francs [38] - Operating free cash flow increased by 37% to 337 million Swiss francs, reflecting a focus on working capital management [22] Q&A Session Summary Question: M&A strategy and potential assets - Management indicated interest in bolt-on acquisitions in Audiological Care and potentially larger assets if strategically attractive [63][65] Question: Gross margin sustainability amid supply chain pressures - Management acknowledged the need to consider inflation and microelectronics costs, suggesting potential for price adjustments in future innovation cycles [64][67] Question: EBITDA margin expectations amid processor upgrade revenue softening - Management expects to maintain double-digit EBITDA margins despite potential revenue declines in processor upgrades [71][73] Question: Lead generation cost increases - Lead generation costs have risen significantly, with some markets experiencing increases of 20-25% compared to pre-COVID levels [72][74] Question: U.S. market performance and growth segments - Management noted strong performance in the U.S. market, particularly in private-label contracts and VA, but highlighted slower growth in the VA segment [80][82] Question: Component cost impact on gross margin - Higher component costs impacted EBITDA by approximately 50 basis points in the first half, with expectations of 100-150 basis points in the second half [86][87] Question: Sennheiser Consumer Division performance - Sennheiser's business is performing well, with some increased costs due to component shortages, but no significant impact on sales [89]