Sonova Holding Ag · SIX:SOON
Sonova — Investor Presentation (January 2017)
68 slides from Sonova's investor presentation, January 2017
Slide 1: Investor Presentation
Investor Presentation January 2017
Slide 2: Disclaimer
Disclaimer This presentation contains forward-looking statements, which offer no guarantee with regard to future performance. These statements are made on the basis of management’s views and assumptions regarding future events and business performance at the time the statements are made. They are su
Slide 3: Contents
Contents 1 Sonova Group Page 4 2 Hearing care market Page 13 3 Corporate strategy Page 20 4 New products Page 25 5 Go-to-market Page 32 6 eSolutions Page 37 7 Financial information Page 41 8 Outlook Page 61 January 2017 Page 3
Slide 4: 1. Sonova Group
sonova HEAR THE WORLD 1. Sonova Group
Slide 5: Sonova Group vision
Sonova Group At Sonova, we envision … A WORLD WHERE EVERYONE ENJOYS THE DELIGHT OF HEARING AND THEREFORE LIVES A LIFE WITHOUT LIMITATIONS … “Hear the world” January 2017 Page 5
Slide 6: Summary
Summary Clear and focused strategy – Customer driven innovation – Strong cash conversion Significant market share gain potential – High R&D spend – fast product introduction – Differentiated multi-brand strategy – Optimized multi-channel approach Strong and expanding global sales & – Phonak, Unitron
Slide 7: Broadest and most advanced offering
Sonova Group Broadest and most advanced offering – Hearing instruments, cochlear implants … HI Hearing Instruments Behind-The-Ear hearing instruments (BTE) Wireless systems CI Cochlear Implants Cochlear implants Custom In-The-Ear hearing instruments (ITE) Hearing protection Wireless comm
Slide 8: Unique vertically integrated business model
Sonova Group Unique vertically integrated business model – Focused on customer value CUSTOMERS PRODUCTS SUPPLY CHAIN DISTRIBUTION CHANNELS Seniors HI Phonak Manufacturing HI Distributors Workers AudioNova HI Unitron Customization SPEECH Adults INTELLIGIBILITY HI Wholesale NATURAL SOUND Teens HI Hans
Slide 9: Strong global presence
Sonova Group Strong global presence – Well established network and infrastructure AMERICAS EUROPE APAC 9% 39% 52% Note: Regional sales split including pro-forma 12-month impact of AudioNova – PH, UT, HA, AB: over 50 wholesale group companies – more than 100 independent distributors – AudioNova: over
Slide 10: Sonova Group – Performance history
Sonova Group Sonova Group – Performance history SALES EBITA in CHF million in CHF million 1H 2H 1H 2H 2'400 600 2'000 500 1'600 400 1'200 300 800 200 400 100 0 0 11/12 12/13 13/14 14/15 15/16 16/17 11/12 12/13 13/14 14/15 15/16 16/17 FY 2011/12 FY 2012/13 FY 2013/14 FY 2014/15 FY 2015/16 CAGR 5-y 1H
Slide 11: Hearing Instruments – Performance history
Sonova Group Hearing Instruments – Performance history SALES EBITA in CHF million in CHF million 1H 2H 1H 2H 2'400 600 2'000 500 1'600 400 1'200 300 800 200 400 100 0 0 11/12 12/13 13/14 14/15 15/16 16/17 11/12 12/13 13/14 14/15 15/16 16/17 FY 2011/12 FY 2012/13 FY 2013/14 FY 2014/15 FY 2015/16 CAGR
Slide 12: Cochlear Implants – Performance history
Sonova Group Cochlear Implants – Performance history SALES EBITA in CHF million in CHF million 1H 2H 1H 2H 250 60 200 40 150 20 100 0 50 -20 0 -40 11/12 12/13 13/14 14/15 15/16 16/17 11/12 12/13 13/14 14/15 15/16 16/17 FY 2011/12 FY 2012/13 FY 2013/14 FY 2014/15 FY 2015/16 CAGR 5-y 1H 2016/17 Sales
Slide 13: 2. Hearing care market
sonova HEAR THE WORLD 2. Hearing care market
Slide 14: Hearing care market – Attractive size and growth potential
Market Hearing care market – Attractive size and growth potential – Strong fundamentals HEARING INSTRUMENTS HI - Market Size ~ CHF 5 billion - Market CAGR ~ + 3-5% Governments & Independents - HI Size (units) ~ 13 million Hospitals CI HI Buying Groups COCHLEAR IMPLANTS CI Large Retail - Market Size
Slide 15: Around 15% of adults have some degree of hearing impairment
Market Around 15% of adults have some degree of hearing impairment Worldwide prevalence Hearing problems Market Penetration of hearing problems¹ by age group² Profound >75 70% 70% 15% 50% <64 50% 65-74 Moderate 10% Mild With hearing system Without hearing system Source: WHO¹, Marketrak 9 (USA)², ind
Slide 16: Expanding into larger hearing care market
Market position Expanding into larger hearing care market – Leverage strong HI position HEARING INSTRUMENTS HI - Market Size ~ CHF 5 billion - Market CAGR ~ + 3-5% - HI Size (units) ~ 13 million COCHLEAR IMPLANTS CI - Market Size ~ CHF 1.1 billion - Market CAGR ~ + 5-10% Note: Unit split - CI Size (
Slide 17: Market trends – Implantable solutions and aging population
Market trends Trend 1 – Increased adoption of implantable solutions – Aging population increasing SEVERE IMPLANTABLE IMPLANTABLE SOLUTIONS SOLUTIONS HEARING LOSS PED MARKET ADULT MARKET MODERATE 1 IMPLANTABLE SOLUTIONS: over-proportional growth and adoption rate 2 PEDIATRIC: newborn screening – expa
Slide 18: Market trends – Bi-furcation of professional service channels
Market trends Trend 2 – Accelerated bi-furcation of professional service channels B2C INDEPENDENTS B2C SERVICE LEVEL PRICING LARGE RETAIL B2B B2B INDEPENDENTS LARGE RET 2005 2010 2015 Conclusion – Vertical integration to access value-added potential and consumer January 2017 Page 18
Slide 19: Market trends – eHealth and eHearingcare
Market trends Trend 3 – eHealth and eHearingcare – Expanding digital value proposition Self Diagnostic Monitoring Virtual Care Self Adjust i.e. Diabetes App Remote Patient Data Online Care Services Hand Prosthesis App Conclusion – Develop eHearingcare solution offering based on eTechnologies January
Slide 20: 3. Corporate strategy
sonova HEAR THE WORLD 3. Corporate strategy
Slide 21: Strategic focus
Strategic focus Focus on hearing care – Continuous innovation to grow sales, earnings & cash flow 1 NEW PRODUCTS HEARING CARE INNOVATION 2 GO-TO-MARKET 3 eSOLUTIONS Lead digital (r)evolution and eBusiness transformation in hearing care January 2017 Page 21
Slide 22: New product strategy
New product strategy Implement consistent platform approach for HI & CI solution development Drive strong new product pipelines – Gross R&D 7-8% of sales January 2017 Page 22
Slide 23: Go-to-market strategy
Go-to-market strategy Grow market position along 4 main vectors – Drive vertical integration 1 1 Develop consumer base – e-Marketing / direct marketing – Demand generation processes 2 2 Integrate service channels – Retail network expansion – Integration & productivity 3 Expand accessible markets 3 –
Slide 24: eSolution strategy
eSolution strategy Develop complete solution and service offering based on eTechnologies AWARENESS COUNSELING FITTING TRIAL USE CONSUMER eScreening eCoach eAdjust eAftercare PROFESSIONAL eBooking eGoals eAssistance eMonitor MANUFACTURER eHealthCare Platforms eHealthCare Platforms Expand technology p
Slide 25: 4. New products
sonova HEAR THE WORLD 4. New products
Slide 26: New product strategy
New product strategy Leverage platform approach to offer complete range of products Product pipelines: Consistently meeting product development targets January 2017 Page 26
Slide 27: Leadership in innovation and customer experience
New products Leadership in innovation and customer experience… BTE Custom RIC Power Pediatric Premium Bolero™ V90 Virto™ V90 Audéo™ B/B-R 90 Naída™ V90 Sky™ V90 Advanced Bolero™ V70 Virto™ V70 Audéo™ B/B-R 70 Naída™ V70 Sky™ V70 Standard Bolero™ V50 Virto™ V50 Audéo™ B/B-R 50 Naída™ V50 Sky™ V50 Ess
Slide 28: Phonak Belong – Next generation product platform
New products Phonak Belong™ – Next generation product platform 1 Ease of use – Breakthrough Lithium-ion battery technology – 24 hours* of hearing with one simple charge – Quickest charging, longest lasting rechargeable HI – 3 hours of charging time – Fast charging option – 30 minutes for 6 hours of
Slide 29: Phonak Belong platform – expanding technology leadership
New products Phonak Belong platform – expanding technology leadership in … TECHNOLOGIES Audiology VALUES PRODUCTS CHANNELS STRATEGY Automation Performance Services Independents NEW PRODUCTS Small designs SPEECH Esthetics Hearing aids Large retail & comfort INTELLIGIBILITY GO-TO- MARKET Wireless NATU
Slide 30: Advanced Bionics – Performance Leadership
New products Advanced Bionics – Performance Leadership Electrode Magnetic Implant Magnetic headpiece headpiece Electrode Sound processor Sound processor Implant Implants Electrodes Sound Processors HiRes 90K™ Advantage HiFocus™ Mid-Scala Naída CI Q90 HiRes 90K™ HiFocus™ 1j Naída CI Q70 HiRes™ Ultra
Slide 31: Advanced Bionics – Building momentum with new products
New products Advanced Bionics – Building momentum with new products… Naída™ Link bimodal hearing solution – Key performance benefits: – Shared signal processing, automation and controls – Ear-to-ear audio streaming – Bimodal streaming with wireless accessories – Easy to program: Single CI with – Ada
Slide 32: 5. Go-to-market
sonova HEAR THE WORLD 5. Go-to-market
Slide 33: Independent market – Strong position
Go-to-market Independent market – Strong position – Including AudioNova INDEPENDENT MARKET EU UK FR AU/NZ US AT/HUN BR CA BE 2000 2005 2010 2015 2020 LARGE RETAIL MARKET Large retail market – Growing relationships January 2017 Page 33
Slide 34: AudioNova – Sonova retail business
Go-to-market AudioNova – Sonova retail business – 3,300 stores – 6,000 employees – A leading global retail platform of 3,300 stores – Over 6,000 employees in AMERICAS EUROPE ASIA-PACIFIC Sonova retail in 20 countries – One of the leading store networks in Europe with 128 490 733 124 over 2,500 store
Slide 35: AudioNova – Example GEERS shops in Germany
Go-to-market AudioNova – Example GEERS shops in Germany Key initiatives: – Spirit of ambition and customer orientation – Aggressive network growth approach based on greenfield openings – Up to 30 POS/a – Sophisticated geo-targeting process – Marketing approach built around Multi- Channel Customer Ma
Slide 36: AudioNova – Boots Hearingcare shop-in-shop in the UK
Go-to-market AudioNova – Example Boots Hearingcare shop-in-shop in the UK Key initiatives: – Capitalize on Boots footfall of 8 million customers/week – Access to 18 million Boots Advantage Card customers – Expansion into Boots Pharmacy format (from 391 shops since FY 12/13 to close to 500 March 2016
Slide 37: 6. eSolutions
sonova HEAR THE WORLD 6. eSolutions
Slide 38: eScreening – Results from on-line version
eSolutions eScreening – Results from on-line version – Now over 52,000 eHearing Checks completed online and in store since launch April 2015 – Attracting a younger customer demographic (average age 52 on-line compared to 66 in-store) – Conversion level to appointment comparable to other on-line mark
Slide 39: eBooking System
eSolutions eBooking System – Ease of use help to successfully generate store appointments – On completion of e-Hearing Check customers can choose to book directly into their nearest store with real time availability. – On booking a confirmation email is automatically generated with link to the ePTQ
Slide 40: eAdjust – DS 1.0
eSolutions eAdjust – DS 1.0 – Follow-up fit with consumer – Service offered by HCP Key features: – Distance support solution compatible with all directly connected products – System including support App, target fitting software, backend services – Business model provides for: – Billing services – E
Slide 41: 7. Financial information
sonova HEAR THE WORLD 7. Financial information
Slide 42: Business summary 1H 2016/17
Half-Year 2016/17 Business summary 1H 2016/17 – Sonova Group: steady progress in HI – solid growth in CI – Sales of CHF 1,069.9 million up 6.7% as reported in CHF and up by 5.5% in LC – EBITA of CHF 205.9 million – margin of 19.2% (normalized for AudioNova one-time costs) – Hearing instruments: Slow
Slide 43: Major developments and initiatives in 1H 2016/17
Half-Year 2016/17 Major developments and initiatives in 1H 2016/17 – EU: Good growth despite headwind in DE – accelerating with new products – EU: AudioNova acquisition closed – creating one of Europe’s largest retailers Go-to-market – US: Stable VA market share in recent months – slight growth YoY
Slide 44: Key Financials – as reported and normalized, in CHF
Half-Year 2016/17 Sonova Group – Key Financials – As reported and normalized – variances in CHF 1H 2015/16 1H 2016/17 One-time 1H 2016/17 in CHF million Δ % in CHF Δ % in CHF as reported as reported costs* normalized Sales 1,003.2 1,069.9 +6.7% 1,069.9 +6.7% Gross profit 661.3 723.8 +9.5% 723.8 +9.5
Slide 45: Key Financials – as reported and normalized, in LC
Half-Year 2016/17 Sonova Group – Key Financials – As reported and normalized – variances in LC 1H 2015/16 1H 2016/17 One-time 1H 2016/17 in CHF million Δ % in LC Δ % in LC as reported as reported costs* normalized Sales 1,003.2 1,069.9 +5.5% 1,069.9 +5.5% Gross profit 661.3 723.8 +8.2% 723.8 +8.2% -
Slide 46: Sales and components – YoY
Half-Year 2016/17 Sonova Group – Sales and components – YoY PY NORM OPERATIONAL FX in CHF million 1,080 +6.6% 1,069.9 1,065 1,058.5 11.4 1,050 ANI 29.2 1,035 1,020 15.6 1,003.2 1,005 20.6 -10.0 993.2 990 15 0 1H 15/16 Divestments 1H 15/16 Organic M&A 1H 16/17 FX 1H 16/17 Reported Norm. LC impact Rep
Slide 47: EBITA and components – YoY
Half-Year 2016/17 Sonova Group – EBITA and components – YoY OPERATIONAL CY NORM FX in CHF million +2.7% 202 201.0 200 198 5.7 195.8 195.8 196 -10.1 -0.5 194 4.9 192 190.9 190 0 1H 15/16 Organic M&A 1H 16/17 One-time 1H 16/17 FX 1H 16/17 Reported LC excl. One- costs LC impact Reported time costs Marg
Slide 48: Sales by regions and key markets
Half-Year 2016/17 Sonova Group – Sales by regions and key markets 1H 2015/16 1H 2016/17 in CHF million Sales in % Sales in % Δ % in LC EMEA 418.4 42% 470.0 44% +12.2% USA 375.5 37% 383.0 36% -0.1% Americas (excl. USA) 100.0 10% 102.7 10% +3.1% Asia / Pacific 109.3 11% 114.2 10% +1.6% Total SONOVA 1,
Slide 49: Hearing instruments – Business summary 1H 2016/17
Half-Year 2016/17 Hearing instruments – Business summary 1H 2016/17 – Slower start to the year – strong acceleration after new platform launch – Sales of CHF 977.5 million up by 5.4% in LC – driven by organic growth and acquisitions – Strong performance in EMEA, some 1Q headwinds in other regions –
Slide 50: Hearing instruments – Sales and components
Half-Year 2016/17 Hearing instruments – Sales and components – YoY PY NORM OPERATIONAL FX in CHF million 990 6.5% 977.5 975 967.1 10.4 960 ANI 29.2 945 930 15.2 917.8 915 10.0 907.8 15.0 900 0 1H 15/16 Divestments 1H 15/16 Organic M&A 1H 16/17 FX 1H 16/17 Reported Norm. LC impact Reported Growth -1.
Slide 51: Hearing instruments – Key Financials
Half-Year 2016/17 Hearing instruments – Key Financials – As reported and normalized – variances in LC One-off 1H 2016/17 in CHF million 1H 2015/16 1H 2016/17 Δ % in LC Δ % in LC as reported as reported costs* normalized Sales 917.8 977.5 +5.4% 977.5 +5.4% EBITA 198.4 196.8 -2.8% +10.1 206.9 +2.3% -
Slide 52: Hearing instruments – Sales by product groups
Half-Year 2016/17 Hearing instruments – Sales by product groups in CHF million 1H 2015/16 % Group sales 1H 2016/17 % Group sales Δ % in LC HI Premium 246.8 25% 263.9 25% +6.4% HI Advanced 199.0 20% 203.1 19% +1.5% HI Standard 293.1 29% 313.0 29% +5.1% Wireless communication 43.9 4% 49.4 4% +11.2% Mi
Slide 53: Cochlear implants – Business summary 1H 16/17
Half-Year 2016/17 Cochlear implants – Business summary 1H 2016/17 – Double digit system sales growth – strong momentum from new products – Sales of 92.4 million – growth of 7.0% in LC – Naída CI Q-series – good market response – System sales growth – driven by Europe and North America – Temporarily
Slide 54: Cochlear implants – Key Financials
Half-Year 2016/17 Cochlear implants – Key Financials – As reported – variances in LC in CHF million 1H 2015/16 1H 2016/17 Δ % in LC as reported as reported Sales 85.4 92.4 +7.0% EBITA -2.6 -1.0 NM - EBITA margin -3.0% -1.1% Solid growth driven by system sales – EBITA approaching break-even January 2
Slide 55: Sonova Group – Operating expenses
Half-Year 2016/17 Sonova Group – Operating expenses in CHF million 1H 2015/16 1H 2016/17 Δ % in CHF Δ % in LC Comments Research & Development -65.4 -68.0 +4.0% +3.6% Investment in next generation - in % of sales 6.5% 6.4% platform Sales & Marketing -313.4 -352.2 +12.4% +11.4% Thereof: - in % of sale
Slide 56: Sonova Group – R&D spending
Half-Year 2016/17 Sonova Group – R&D spending in CHF million 1H 2015/16 1H 2016/17 Δ % in CHF Δ % in LC R&D costs charged to the P&L 65.4 68.0 +4.0% +3.6% - in % of sales 6.5% 6.4% Capitalized development costs 11.6 14.8 +27.5% +27.5% - in % of sales 1.2% 1.4% Amortization of development costs -3.7
Slide 57: Reported results and income taxes
Half-Year 2016/17 Sonova Group – Reported results and income taxes in CHF million 1H 2015/16 1H 2016/17 Δ % in CHF EBITA 195.8 195.8 0.0% Acquisition - related amortization -13.5 -15.3 +13.3% Operating profit (EBIT) 182.3 180.5 -0.9% in % of sales 18.2% 16.9% Financial result -1.0 -4.8 >100% Income
Slide 58: Sonova Group – Cash flow
Half-Year 2016/17 Sonova Group – Cash flow in CHF million 1H 2015/16 1H 2016/17 Δ % in CHF Cash flow before changes in NWC (incl. taxes paid) 197.4 208.0 +5.4% Changes in net working capital -11.3 -16.9 +48.9% Operating cash flow 186.1 191.2 +2.8% in % of sales 18.5% 17.9% Cash flow from investing a
Slide 59: Sonova Group – Balance sheet
Half-Year 2016/17 Sonova Group – Balance sheet In CHF million 31 Mar 2016 30 Sep 2016 Δ % in CHF Net working capital 185.5 230.1 +24.1% Days sales outstanding (DSO) 64 60 Days inventory outstanding (DIO) 132 144 Capital employed 1,608.0 2,565.5 +59.5% Net cash 298.3 -672.9 NM Equity 1,906.3 1,892.6
Slide 60: Total shareholder return – Cash deployment strategy
Half-Year 2016/17 Total shareholder return – Cash deployment strategy 1. Acquisitions 2. Dividend Bolt-on Maintain payout CHF 50- 70 ratio of around 40% million p.a. Total shareholder return strategy 4. Share buyback 3. Solid cash position Return of excess cash to Return to a solid shareho
Slide 61: 8. Outlook
sonova HEAR THE WORLD 8. Outlook
Slide 62: Factors impacting 1H performance and 2H outlook
Outlook FY 2016/17 Factors impacting 1H performance and considerations for outlook into 2H Factor 1H 2016/17 2H 2016/17 AudioNova acquisition: Included for 1 month Included for 6 months Integration Integration, NL business model transformation AudioNova acquisition: Modest market share loss in Stabi
Slide 63: FY 2016/17 guidance and mid-term target
Outlook FY 2016/17 FY 2016/17 guidance and mid-term target FY 2016/17 FY 2016/17 Mid-term Guidance1) Guidance2) Target May 2016 Nov 2016 Sales growth in LC +4%-6% +14%-16% +5%-7% p.a. Sales thereof effect of RET strategy on WHS ca. -1% ca. -1% thereof M&A ca. +1% ca. +11% ca. +1% p.a. EBITA EBITA gr
Slide 64: FX impact on sales and margins
Outlook FY 2016/17 FX impact on sales and margins USD/CHF EUR/CHF Rate Sales EBITA USD/CHF +/- 5% +/- CHF 42 million +/- CHF 13 million EUR/CHF +/- 5% +/- CHF 45 million +/- CHF 17 million Note: Sensitivities based on pro-forma numbers, which include AudioNova for 12 months USD and EUR account for r
Slide 65: FX rates – Main currencies
Outlook FY 2016/17 FX rates – Main currencies accounted for around 90% of Group sales Other USD GBP, CAD, BRL, AUD and JPY Note: Split based on pro-forma numbers, which include AudioNova for 12 months EUR Avg 1H 2015/16 Avg 1H 2016/17 Effect Avg FY 2015/16 Spot 10-Nov-16 USD 0.95 0.97 0.97 0.99 EU
Slide 66: AudioNova acquisition – Pro-forma 12-month impact
Mid-term outlook AudioNova acquisition – Pro-forma 12-month impact CHF million CHF million Sales: 2’500 2’500 8% 9% 2’000 9% 2’000 11% 38% 27% 52% 1’500 1’500 43% 1’000 1’000 64% 54% 500 500 46% 39% 0 0 SOON w/o Sonova AudioNova SOON plus SOON w/o Sonova AudioNova SOON plus AudioNova AudioNova CI HI
Slide 67: Retail to outgrow group average
Mid-term outlook Retail to outgrow group average – Continued bolt-on acquisition activity WHS BUSINESS MODEL TRANSFORM VERTICAL BUSINESS MODEL Mid-term CAGR: 4,000 5-7% (M&A: ~1%) Mid-term HI RET CI 3,000 6-10% Sales (CHFm) 6-8% 2,000 (M&A: ~2-3%) 1,000 3-5% 0 11/12 12/13 13/14 14/15 15/16 16/17E 17
Slide 68: Thank you
Thank you
Sonova Holding — Investor Presentation (January 2017) on 6ix