Sonova Stock

Ladies and gentlemen, welcome to the Sonova AG Full Year Results 2025-2026 Conference Call and Live Webcast. I am Valentina, the Chorus Call operator. [Operator Instructions]

The conference is being recorded. [Operator Instructions]

The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Thomas Bernhardsgrutter, Senior Director, Investor Relations. Please go ahead.

Thank you, Valentina, and welcome, everyone, to the presentation of our full year results, 2025, '26. The slides of the call are available on our website. With me in the room are Eric Bernard, CEO; and Elodie Carr, CFO of Sonova. During the call, Eric will provide you with a business update and taking you through the performance and highlights for the Sonova Group across our businesses. He will then hand over to Elodie, who will take you through the financials in more detail and present the outlook for the financial year '26, '27.

We will then move to Q&A, where those of you dialing in over the phone have the opportunity to ask questions.

Now before we begin, let me mention one very important thing. Growth rates cited in today's presentation refer to changes in local currencies unless otherwise noted.

Before we dive into the presentation, please take note of the disclaimer. In short, this presentation contains forward-looking statements and serves marketing purposes. It constitutes neither an offer to sell nor a solicitation to buy any securities. And one additional reminder. Following the announced intention to divest the Consumer Hearing business, the business is classified as discontinued operations and the relevant comparative figures for the 2024, '25 financial year have been restated accordingly. Therefore, figures and growth rates in this presentation refer to continuing operations and exclude the Consumer Hearing business unless otherwise stated. In addition, the Hearing Instruments business will be referred to as the Wholesale business and the Audiological care business as the Retail business.

And with this, I pass the word over to Eric.

Thank you, Thomas. Warm welcome also from my side. And let's start the business review with the key highlights for the year. So 2025, '26 was a very successful year for Sonova. We delivered strong results, outperformed the hearing care market and fully met our guidance.

In our Hearing Instruments segment, growth accelerated in the second half, and this was driven by a very strong development in wholesale, translating into the highest year-on-year market share gain since the introduction of our Marvel platform 6 years ago. Having posted strong high single-digit growth in the first half, we accelerated to double digits in the second half, driven by our successful product launches. We also delivered robust growth in our retail business, driven by consistent execution and successful growth initiatives. We ended the year on a high note with fourth quarter momentum building sequentially, a strong signal for the start of the new financial year.

The Cochlear Implants segment continued to face headwinds in the second half, driven by the introduction of VBP in China, softer upgrade sales and heightened competitive pressure following our largest competitor's product launch. Strong growth drove operating leverage and profitability, so the normalized EBITDA margin rose 240 basis points, delivering a 17.3% year-on-year EBITDA increase. And to sum it all up, we delivered strong results, and we are confident to deliver continued above-market sales growth and increased profitability in '26, '27.

Before I talk about our performance in more detail, let me briefly recap our renewed strategy that we presented in March. At the center of this strategy is a simple focused ambition to grow Sonova to CHF 6 billion in revenue by FY 2031. And we are going to deliver this through 3 pillars. One, innovate for adoption. We will expand into new segments by launching more lifestyle aligned designs, strengthening connected solutions and further integrating AI and digital capabilities, bringing together R&D for hearing aids and cochlear implants, deepens synergies across the portfolio. Hence, we are developing solutions tailored to patient market needs and growth potential.

Two, succeed locally with multichannel, multi-brand play. We will grow by winning country by country, the right brands in the right channel at the right price. And to achieve this, we are aligning wholesale and retail more closely using customer insights to guide R&D, sharing marketing assets and scaling our lead generation engine. And we will continue targeted retail expansion to reach an optimal scale in selected strategic markets.

And finally, three, excel in operations for growth. By elevating service into a core competitive advantage, we will drive loyalty, deepen partnerships and grow market share. In parallel, we will improve efficiency and generate meaningful savings through footprint optimization, greater automation, simplified processes and disciplined value engineering. With the strategy and leadership in place, we are now focused on execution.

Moving on to the performance in more detail. Let's take a closer look at the Hearing Instruments segment. Total segment sales rose 7.5% to CHF 3.4 billion with growth accelerating to 7.9% in the second half against a strong comparison base. Normalized EBITDA rose 17.3% to CHF 794 million, delivering a 23.7% margin, up 280 basis points in local currencies. And Elodie, our CFO, will share more on the margin drivers later.

Let's move now on to the individual businesses and starting with wholesale. The business delivered a substantial sales increase of 9.5% with positive contributions from both higher volumes and improved ASP, resulting in revenues of CHF 1.9 billion for the year.

In the second half, we delivered double-digit growth of 10.9%, accelerating against a very strong comparison base of 10% growth in the same period of '24, '25. And this underscores the successful Infinio Ultra launch and the very positive market reception to Virto R. And we have a strong product pipeline, short, mid and long term, which I will come to on the next slide.

Sonova is the innovation and technology leader in this industry and over the past 2 years, we have delivered strong solutions with clear consumer benefits. We launched Sphere in 2024, the world's first hearing aid powered by a purpose-built AI chip for speech separation from noise that allows the hearing aid to instantly detect, extract and enhance speech from any direction. And with the launch of Ultra in October 2025, this feature can now be used all day.

With Virto R, Phonak introduced its first rechargeable in-ear device, combining Infinio's speech performance with a compact custom-made design and universal connectivity. It no longer requires [indiscernible] from consumers in terms of performance, size or connectivity.

And we innovated beyond hearing aids with the EasyGuard wax management system that protects the receiver with an acoustically transparent membrane, simplifying cleaning and reducing service visits.

Our innovation engine isn't standing still with the next wave of breakthroughs already underway, bringing real-time AI into smaller form factors expanding beyond [indiscernible] to provide more aesthetically appealing lifestyle aligned solutions and broadening AI functionality beyond speech and noise. During the financial year '26, '27, we plan to introduce a new hearing aid platform that builds on and expands our AI leadership while adding new connectivity solutions. This next step in innovation will further enhance the user experience and reinforce the strength of our portfolio. And I'm very excited about the opportunities these launches present and confidence they will further strengthen our innovation leadership and supports our long-term growth ambitions.

Now moving on to our retail. Revenues for the business reached CHF 1.5 billion, representing a growth of 5.1%. Bolt-on acquisitions contributed 1.3 percentage points. We further expanded our store network, mainly in Germany, Austria and Canada. Growth in the second half was 4.4% against 8.1% in the prior year period with sequential acceleration in Q4, a positive indicator for the start of the new fiscal year.

Structural cost initiatives started in '24, '25, continued to deliver meaningful operating leverage contributing to Sonova's accelerating growth. As a next step, we are deploying AI tools across our stores as a powerful enabler of productivity and to elevate the consumer journey, driving stronger consumer engagement.

And now switching to the Cochlear Implants segment. Sales reached CHF 252 million, down 11%, or 3.8% lower if we exclude China. System sales were affected by the introduction of VBP in China and a major competitor's product launch in the second half. Consequently, system sales declined by 10%, with performance actually flat outside of China. Upgrade sales declined 13%. This development was expected and reflects the product cycle as many recipients have already adopted the current processor technology. And so normalized EBITDA amounted to CHF 17.2 million, with a margin of 6.8%, impacted by the lower sales and only partly offset by strict cost control and by the benefits of the weaker U.S. dollar.

But we expect performance to improve in the second half of '26, '27, following the planned launch of a new sound processor. It will further leverage Phonak's technology to elevate hearing performance, which is particularly relevant for Cochlear Implants [indiscernible].

I'll conclude with some highlights from our sustainability activities, where Sonova has continued to make significant strides. And what you can see on this slide is that our efforts in sustainability don't go unnoticed. Sonova continues to be recognized by leading ESG rating agencies and included an important sustainability indices during '25, '26. You can see a selection on the slide, and I would encourage you to have a look at our full sustainability report, which was published alongside the annual reports.

And with that, let me hand over to our CFO, Elodie Carr, who will provide more details on the financials and the outlook.

Thank you, Eric, and a warm welcome also from my side to everyone on the call. So, let us take a closer look at the financials, and we start with sales development. Eric mentioned the positive growth dynamics for the group as well as by business. I will, therefore, focus on regional performance. Here, all key regions positively contributed to the sales development for...

Ladies, and gentlemen, please hold the line. The conference will continue shortly. [Technical Difficulty]

Ladies and gentlemen, we can now proceed with the conference. Please go ahead.

I'm sorry about the disconnection. We'll restart on Slide 15, which I think is when we got disconnected. Elodie, over to you.

Yes. Thank you, Thomas. So I'll come back to operating expenses, Slide 15. So as mentioned, normalized operating expenses rose modestly by 1.1% despite strong sales growth, and that resulted in substantial operating leverage.

R&D expenses rose 3.8% as we continue to invest in advancing our product portfolio. The success of our recent product launches clearly demonstrates that we are delivering meaningful and impactful innovation. Sales and marketing expenses were up 1.5% and include continued investments in lead generation in retail, driving robust organic growth for the business. Lastly, general and administrative expenses were essentially flat through strict cost management and reflecting the benefits from last year's structural cost initiatives.

So to sum it all up on Slide 16, let's look at EBITA component from left to right. Normalized EBITA rose by 17.3%, almost 3x faster than top line, resulting in a margin improvement of 240 basis points in local currencies. This highlights the strong operating leverage that was driven by disciplined cost management.

Normalization totaled around CHF 90 million, driven by nonrecurring items related to legal matters, legacy products and software assets. Specifically, CHF 28 million in legal costs were related to a patent settlement resolving pending litigation in all jurisdictions as was communicated in the first half. In addition, reassessment of product liability provisions for our legacy products in the Cochlear Implants segment amounted to about CHF 24 million.

Finally, at the start of the strategic review we recently undertook, certain software assets were identified as unlikely to deliver the anticipated benefits, and this led to an impairment charge of around CHF 35 million. Important to note is that these items are nonoperational, largely noncash and do not represent core operating performance. The headwind from exchange rate developments reduced normalized EBITDA by CHF 140 million, and the margin in Swiss francs 1.5 percentage points.

Let me now quickly summarize the key P&L figures. Sonova has delivered above-market sales growth across all regions with profitability rising in local currency across every metric, signaling broad-based momentum and disciplined execution. This resulted in a healthy EPS growth of 16%. In line with our total shareholder return framework, the Board proposed a 7% dividend increase to CHF 4.70 per share, implying a payout ratio of about 45%.

Moving on to CHB. As you know, on March 23rd, Sonova announced their plans to divest its Consumer Hearing business. Consumer Hearing is now classified as discontinued operations. And the figures discussed today refer to continuing operations unless otherwise stated. But I would like to highlight our financial results, including Consumer Hearing on a pro forma basis as this is the basis on which we provided our guidance.

Including Consumer Hearing, sales grew 5.5% and normalized EBITDA rose 14.5%, well within the guidance we provided and that we've reconfirmed at the end of March. The divestment adds about 230 basis points to the normalized EBITA margin when compared to the pro forma margin, including Consumer Hearing. Please note that the pro forma EBITA loss for the Consumer Hearing in '25, '26, includes onetime items related to inventory reassessments and tariff and is not fully reflective of the operational performance.

Moving on to cash flow. Operating free cash flow was solid with development driven largely by FX translation and the phasing of tax payments. We continue to deliver strong cash conversion consistently above 90%, supported by stable working capital management. Cash spent on acquisitions was CHF 46 million, related to retail bolt-ons in a number of key markets. CapEx spend was lower than [indiscernible] this year and continues to be disciplined. Cash outflow from financing activities includes a dividend payment, stable repayments of lease liabilities and a new financing arrangement.

Now let's look at our balance sheet, which remains very disciplined. DSO were stable, while inventory days improved versus last year. DPO was steady versus September, but lower year-over-year, reflecting timing of payments to suppliers. Return on capital employed remained strong at 19% and highlights our excellent operational performance and disciplined capital allocation. The change versus prior year is driven by the onetime normalization and the impact of FX on our reported [indiscernible] response. Leverage, as measured by net debt to EBITDA, reached 1.1x, down from 1.2x at the end of '24, '25 financial year.

And with this, let me move on to the outlook. Let's look at our outlook for '26, '27, starting with our assumptions for the year. We are entering the year from a position of strength, building on a strong momentum in sales and earnings. We anticipate slightly higher market growth of 2% to 4% for this year, gradually moving towards the midterm assumptions of 25%.

In wholesale, we expect to continue outpacing the market, supported by a strong product pipeline and a new platform that reinforces Sonova's leadership in AI-enabled hearing performance. Retail is set for robust organic growth, bolstered by a strong M&A pipeline and accelerated pace of new store openings to lift momentum. Cochlear Implants are expected to face headwinds in the first half with a meaningful pickup in the second half following the planned launch of the new sound processor.

In summary, we expect consolidated sales to rise 5% to 8% and core EBIT to grow 7% to 10% at constant exchange rates. We also included some additional information for modeling purposes. Based on FX as of early May '26, we expect Swiss francs sales growth to be reduced by 1 to 2 percentage points and core EBIT growth in Swiss francs to be reduced by 2 to 3 percentage points. Non-core items are expected to total around CHF 35 million to CHF 40 million.

And finally, I'd like to point you to the appendix where you will find further details as well as historical figures related to our move to core EBIT as the new guidance metric. You will also find a link to our website where you can find even more historical figures for the past 2 years.

And with this, I pass the word to the operator to start the question-and-answer session.

[Operator Instructions] The first question comes from Andjela Bozinovic from BNP Paribas.

Maybe the first one is on the guidance. Can you give us more details on what is embedded, both top end and bottom end for sales guidance in terms of competitive product launches, market share gains and M&A contribution? Any details that you can share on the phasing of the growth, especially in the Hearing Instruments given you're expected to launch new products?

And the second question is on Virto R and the ITE category in general. If you could give us more details on the product performance and contribution to group growth? And if you could share how has your market share gain evolved since demand in production of [indiscernible]?

Thank you, Andjela. So maybe I will start with the last question, Virto R, ITE. So we were not playing in this category of rechargeable ITE. We came up with Virto. It's an incredible success, and we have reached a cruising entity of about CHF 120 million per annum of revenue from 0 as we were not playing in that space. And you have seen the impact it had on the market share in the year as a result. But it's been successful across the board. I could share that placing these products in the Japanese market, for instance, got us to grow at a very high double-digit rate in Japan.

So far, we haven't seen much of an impact from new competitors product against Virto. Of course, it's early. But so far, no impact. And I would say that as you can see, the acceleration of growth in wholesale, in particular, in the second half with a very, very good velocity towards [indiscernible] March impact here show that so far, we are not impacted. And I could comment that the beginning of the year was very positive. I'm talking about the new year.

Now on your first question is what's behind the guidance, what's driving the growth, et cetera. So Elodie, I will let you comment on M&A. But if you look at the year we have entered, I would say that we benefit for the first part of the year of the effect of the success of Virto, which we didn't have last year.

We have seen our share in a very large key accounts in the U.S., growing throughout the year. During the first half, it was certainly not where we wanted to be after we reentered its large accounts. Towards the end of the year, it was clearly much better. So which means we came out of the past year with a very good velocity in this large accounts. So we will benefit from that in the new year. We cannot ignore the fact that there are new entrants in the VA, where we have reached an extremely high market share level, 54% or so. So we could expect somewhat this peak to decrease.

But then in the second half of the year and on time for the November window, we will come out with the new platform in HI, which we expect to be a success, continuing on what we have achieved with Sphere and Sphere Ultra. So this is giving you a sense for why we are confident about the guidance that we have shared on the top line. And then Elodie, if you could comment on M&A?

Yes, absolutely. On the retail M&A, we are looking as a contribution of about 1% to 2%, obviously, depending on the timing of some of these acquisitions. And that contribution is also expected to be well in line with the midterm targets that we have discussed back in March.

The next question comes from Veronika Dubajova from Citi.

I hope you can hear me okay. I have two questions, please, as well. The first one is sort of a bigger picture question on the market. Obviously, you continue to expect this return to the 3% to 5% that underpins your guidance as we move through this year and into next year. Just would love to get your thoughts exactly on what you're seeing in the market. Are there any signs that you can discern of this modest continuous acceleration? Or is that something that we haven't seen yet that you're expecting? And maybe if you can just comment in particular on momentum in the U.S. looking at April and May and what you're seeing now that there is a bit more continued concern around inflation, that would be very helpful.

And then my second question is for Elodie. Just on the phasing of growth, I'm thinking especially on the EBIT front in terms of H1 and H2. Would you expect to be within the 7% to 10% range in both of the half year? And if you can give us any qualitative guidance on that, that would be super helpful.

All right. Thank you, Veronika. So market growth, well, you have all seen a number of competitors sharing pretty good numbers for the last quarter, first quarter calendar year 2026. And you've seen that we have outperformed these numbers in wholesale.

What I would say is that what's encouraging is that the beginning of this calendar year, for the last quarter for us of the last fiscal year, the market, we believe, was trending towards 4% in particular in the last couple of months. So you know that a few months ago, we're looking at [ 2% to 3%. ] It's looking better if I look at the last period. As I've mentioned in answering the previous set of questions, April was very positive. And so rather an improvement and therefore, we know we shared that for this fiscal year, we think the market will be growing at 2% to 4%. We believe that over time, it will normalize towards the 3% to 5%. If you look at the very recent months, we're getting closer to 4%.

About the U.S. market, what we see in our own numbers over the last 4 to 5 months was very positive. Of course, we have a bit of a bias here because we have very strong positions in the VA lifting our sales. But as I mentioned, we're also getting share in another very important account in the U.S., but we remain positive about the U.S. market.

And I'll pickup the -- so in terms of your questions for the phasing of growth in terms of the EBITA, and I think your question was related to H1 versus H2. So we do expect in H1 to be within the 7% to 10% range in terms of core EBIT growth in the first half. So we don't expect to be outside of this range. We will be in the range in the first half.

Then Elodie, would you expect the second half to be a bit stronger than the first half given the CI dynamics? Or is that not the right way to think about it?

So we will have, as I mentioned, I mean, on the CI side, we do expect that H1 will continue to face headwinds on the top line and for CI. And we expect to get a lift on growth in the second half as we introduce the new processor. So obviously, on the CI side, that will drive a bit of a stronger phasing on the second half.

For the rest of the business, we do expect also a solid first half. And don't forget also that we just closed an extremely strong second half in the period we just finished. So the comp will be higher for the second half. So all in all, I would say, it will be within the range for both half.

Maybe just to add on to what Elodie said, Veronika about the new processor, we are extremely excited about what's coming, but I need to mention that the timing of the launch is subject to regulatory approvals. We're not concerned, but we're subject to these approvals. Otherwise, very excited about it.

The next question comes from Marco Pires-Cox from Barclays.

It's Marco Pires-Cox from Barclays, asking a question on Hassan Al-Wakeel's behalf. I have two, if I may. So firstly, clearly, some very strong market share gains. I was wondering if you could talk about the composition of these share gains, particularly between Ultra and Virto R. I guess I'm curious to understand whether there's a structural shift towards ITE as a driving force here, and whether you're seeing customers for Virto R switching from [indiscernible] to ITE?

And then secondly, maybe a couple of the moving parts in the guidance range, particularly around the cost inflation side of things. And what are your assumptions around key cost buckets in the guide?

Marco, thank you for the questions. Market shares, I think what I will highlight is that we gained share in the U.S., in Germany, in France, in U.K. private, in Japan. So it's been a broad-based situation for a better word. We grow certainly thanks to the success of Sphere Ultra. If you travel back in time, we were the first player to introduce a solution with a dedicated proprietary chip. When the product was launched back in '24, we faced some challenges in delivering the product. This is behind us. And so the combination of an improved service and a very well-performing solution as late to this year.

Virto R, we've seen how it's moved the needle in the VA. The data is available to all of you. Was there cannibalization of more traditional designs? Not really, but great momentum. Product like Virto R brings a solution that offers a very exciting design. It looks cool, it's sexy. It's different. And since the sound quality is outstanding, all of this contributed to the success. We were also bridging a gap that we had because we had no rechargeable solution. And when we bridge that gap, we came up with the smallest, with the better sound quality, the best connectivity, all of these played for us. I cannot say that it cannibalized any more classic designs. Elodie?

Yes, I think the question was around the assumptions behind the guidance on the margin side and what are some of the cost assumptions, if I understood your question. So we do expect to gain some operating leverage from the sales growth and that drives obviously some of our assumptions on the guidance on the margin side. We do expect operating leverage, both on the gross margin as well as to the OpEx side, so supposed to drive some benefits. It is fair to say that at this point, we have no operational disruptions on our supply chains. We've been able to mitigate this very strongly. We have obviously taken all this into consideration when we have formed our guidance. But in so far, it has no material impact to our EBIT guidance.

The next question comes from Aisyah Noor from Morgan Stanley.

My question is regarding your APAC strategy to capture more market share in the Asia market. Since you announced this plan in March, are you able to share with us any KPIs that you've set or are currently monitoring to benchmark your progress, and what measures you have put in place to ensure this is not dilutive to profitability?

And then my second question is just a technical one on the noncore items, CHF 40 million on the full year EBIT for the year. What cost do these relate to? And how much of this is restructuring versus other items?

I will take the first question. Thank you for asking me about APAC. You could give me a chance to explain and expand again and re-explain what's on our mind about Asia Pacific. What we do in Asia Pacific is a 2-step process. Step 1 is very basic, very simple [ neuro science ]. It's about giving this region the right attention that maybe was missing.

Step 2, and this will take more time, will be about bringing solutions, meeting the needs, the specific needs of the patient market. And talking about Asia in general doesn't mean much because you start in China, you go to Japan, you go to India, you go to Southeast Asia, and each of these markets has a different need.

Step 1, putting the right leadership on the ground, done. Reallocating resources directly there, on the way. You've seen that we are entering into an agreement with the Singapore government and are in a so-called EDB. So it's being serious about Asia and thinking Asian for Asia.

KPIs. I won't share with you the details, but what I can tell you is, and that's real and concrete, is that in Japan for the last 5 to 6 months, I will not be too specific, you are looking at the growth rates of 30% to 45% by just bringing the right product in the right channels with the right focus, and this is very profitable, very profitable with absolutely no dilution, and it is related to Step 1.

Step 2, it's about bringing more simple solutions through potentially different channels so that access is improved, pricing has improved without diluting our profitability, and this is where we're going to be inventive over the next 18 to 36 months. That's how I would describe what we do in Asia. But we see already in our numbers, going back to your KPI question, very good growth in Japan and very recently also very good growth in India where, again, we are not like in Japan in terms of market share, where we typically are in any other markets in the world. So let's keep this in mind to make it simple, 2-step process, reaching our "natural" market share. And then Point 2, contributing to the expansion of the market, and that will be a different story. We will talk about that in the next 6 months, 12 months, 18 months, 24 months.

On your second question related to noncore items and what the expectations are there for the year, fiscal year '26, '27, and what is included. So as I mentioned, we expect noncore items to amount to around CHF 35 million to CHF 40 million in the upcoming year. What is included is mainly 2 points. One is restructuring costs. And here, it's mainly our investment program to drive operational efficiencies, which is part of our renewed strategy that we communicated in March to excel in operations and driving 90 million of savings in the next 4 years. So that's a big part. And it also includes transaction and integration costs for acquisitions. So these are the 2 main buckets of what we expect in noncore items at this point in time.

Next question comes from Oliver Metzger from ODDO BHF.

Yes. The first one is on your [ highest ] M&A pipeline in retail. So regarding the external growth opportunities, we see at Amplifon some slow activity. One could also think that demand is doing much lower after the [indiscernible]. So do you see right now less competitive dynamics because 2 of the major players in that field are, let's say, are busy in the moment?

The second one is about the ASP lift and the ITE category. So Virto R [ brought ] support for your ASP development. So first, which level of rechargeable ITE would you regard as the new normal or as the aspiration? And so how long might it take to reach this level, which would also imply some midterm ASP support in the best case?

Yes. Oliver, I'm not sure I fully understood the second question, but I will answer the first one. M&A in retail. Well, you've said this. I would just say that the playing field in doing M&A retail is certainly more favorable with the latest developments from the 2 companies that you mentioned. So one has to be opportunistic when appropriate. Yes, we are extremely careful about the management of the ROCE of the company. So don't expect to see us buying anything at any price. We will be very, very cautious. But again, in a playing field that has become certainly more favorable for us at this point in time.

Oliver, I have to say, I'm not sure I fully understood your second question. If you don't mind elaborating a bit?

Sure, sure. But first a follow-up on your answer. So when you say, okay, you're on one hand, extremely careful for management of ROCE. But on the other hand, do you see that acquisition [indiscernible] have come down due to the recent activities? And regarding my second question is about you reported some positive price developments on ASP lift and you have Virto R in the ITE category, which comes at a higher price. So this is definitely one of ASP drivers. So going forward, what do you see as the addressable market for [indiscernible] for ITEs and how long does it take to go there?

Okay. All right. So yes, I mean, generally speaking, there is less pressure on the [indiscernible] in retail than they were maybe a few years ago to make a long story short. About -- I think what you see with Virto R is the following. When you bring an exciting solution to patients and professionals that meets fundamental needs about the quality of the cell that on top of that, looks cool, price is much less of an issue. I think that eventually, this category will go naturally to rechargeable in general. How long would it take to get there? I don't know. I don't have a crystal ball. Sorry, I cannot give you a specific answer. But what we saw clearly with Virto R is that it [ comments ] a very good price across the board.

The next question comes from Susannah Ludwig from Berstein.

I have two, please. First, on EasyGuard. I was wondering if you confirm if that has now entered both Costco and the VA, and whether you think that there will be any difference in interest in these higher volume channels than, say, with independents?

And then second, I had a follow-up on your return to Costco. Are you able to comment on how much of a contribution to growth that was in H2? And then whether you feel with recent momentum, you now have a fair share in the channel or if there's further room to go?

Okay. So I will start with Costco. Obviously, I will not be completely explicit about the data points there. But let's say that you had 3 moments in time. Sonova was no longer in Costco. Sonova came back in Costco, and then the share was stable at a level that was not what we would have expected. And the share was lifted in the second half and in particular, the last quarter of this past fiscal year. And so we will benefit, assuming we maintain that share, we might increase it. We will benefit from these additional revenues from these very large accounts. So more for us in '26, '27 in Costco than they were in '25, '26.

We were not at the right [ pooling ] attitude. We got at what I would call our fair share towards the end of the past fiscal year.

About EasyGuard, I'm not completely sure about what's behind your question. But let's say that this solution is getting widely accepted and celebrated. And so it's a success. I have to say, I remember that when we spoke about that, as you heard back in November as well as when we spoke about Virto R, we were faced with a bit of skepticism for these 2 innovations. They have proven to be very, very successful. EasyGuard solved the basic constant problem, taking a lot of time in practices, right, was management. And what I would say is that the more intensity you have in the point of sales, think of the VA, think of Costco, think of very busy practices, the more this solution is relevant to the customer.

Just to give you an idea, somebody is pushing a [ cheat sheet ] to me, what we will have, what I'm doing here. We now have estimated that this solution reduces service time by 38%, very significant. It's just a [indiscernible].

That's helpful. I guess just what I was wondering when that EasyGuard solution went into Costco and went into VA or just to confirm that it's in both of those sort of high volume, high service intensity channels?

Susannah, I will not share those details here.

Next question comes from Daniel Jelovcan from Zürcher Kantonalbank.

So two from my side. The first, in the U.S., you had this impressive 9.1% local currency growth. And I guess you have a relatively limited M&A there. Is that a fair assumption because you pointed more towards Italy, France, Germany?

And in the U.S. according to my educated guess, Costco must have contributed probably 200 bps in the U.S. Is that a fair assumption? That's the first question.

And the second question is the new platform, which you mentioned in March. You mentioned it will have, because of the AI learning, less power consumption. This might be a stupid question, but I guess, with that the device doesn't get small because you cannot just put in a smaller chip in this time frame. Is that a fair assumption? That are the two questions.

Daniel, thank you for those questions. About the new platform, we will not disclose what's that all about for obvious reasons. But let's say that we keep training our AI in particular in energy management. You saw that the year after [indiscernible], we launched Ultra and you could get access to all the benefits of the AI of [indiscernible] performance for a full band, not just for a few hours. And as we optimize energy management, you can compress the size of a number of components. And I will leave it at this. I would just say that the one downside that we heard about Sphere was the size of the device, although the product has been very successful in front of this. Just imagine if part of the equation was to make it smaller, that would be beautiful.

About the U.S. growth drivers. Yes, M&A was extremely limited in terms of contribution. I think it's around 0.2%. So the very, very good numbers that you've seen in the U.S. are coming from VA, share and price. You saw our share jumping from, I think, 47 to 54 in particularly after the launch of Virto R.

So one, these very large other accounts in the U.S. as I've mentioned that we are not -- we haven't seen in '25, '26 across the year, the type of share that we reached towards the end of the year, which means that it's [indiscernible] for growth for '26, '27.

And when I look at the U.S., I believe that we, Sonova, have more room to grow in the more traditional independent segments. And it's a [indiscernible] of attention for us. We have more room for growth in being more agile, more systematic in executing a multi-brand play. And finally, there's room for growth in retail in the U.S. in performing better in general with the assets that we have and then M&A will come on top of that. So that's why, and I reconnect, it's one of the questions I was asked before. We remain very positive about the U.S. market in general.

Okay. That's great. And just a third small one, if I can sneak it in. Can you disclose the APAC growth excluding CI, which you mentioned had a big impact on growth, that would be nice.

It was a high single-digit growth. And to give you a bit more color, as you've seen that if you include CI, the growth was around 1%. This is all coming from China CI. If you exclude this very good performance in Australia. As I've mentioned before, responding to other questions, very, very good growth in Japan. And now we start to see momentum picking up in India as well.

Maybe Elodie, you want to complete this?

Yes, Daniel, as I mentioned a little bit earlier, so if you exclude Cochlear Implants from APAC and focus on our Hearing Instruments segment, sales grew by more than 80%.

Okay. So I'm sorry, I didn't hear that, sorry. Congrats.

In the beginning of the year, this year is very good in Asia.

The next question comes from David Adlington from JPMorgan.

Maybe just on the top line guidance of 5% to 8%. Maybe you could just flesh out to get towards the top end of that range, what needs to -- what are the biggest drivers? Is that better markets? Is it better impact from new launches? Or is it more M&A?

And then second, I just wondered whether you're anticipating any net tailwind or headwind from the GN Amplifon transaction when the deal completes.

All right. Okay. Top line. So how to get to 8%. Well, obviously, if the market is accelerating, that would be a [indiscernible] for all of us, all the players. So that's one data point. And then we've explained that we have still some support from what we achieved in the past fiscal year. I mentioned that it's towards the end of the year that we were accelerating in a number of other channels, key accounts or geographies so we benefit from that. And obviously, the second half of the year will be very rich in innovation, a new platform in HI. There will be a little bit later exciting news about new designs. And then the new processor in CI, again, subject to regulatory approval, which should help us regain momentum in Cochlear Implants in the second half of the year.

Any comments about M&A, Elodie?

Well, as I said, I mean, we expect M&A to contribute between 1% to 2% in this picture. And so depending on timing and how quickly some of these acquisitions could close, obviously, that would have an impact as well.

Can I just follow up on that? Is that 1 to 2 percentage points for retail or the group?

For the group, for Sonova.

All right. And your second question was about the announced acquisition of GN Hearing by Amplifon, it's very early days. As we speak, it's business as usual. Our exposure to this channel is rather limited. It will take time, assuming that the acquisition is completed. It's been to take some time to land an end-state position in terms of sourcing for the newly created group. So we don't expect a significant impact in the coming year. I would say also that this type of acquisition or merger could create opportunities, and I will not elaborate further.

The next question comes from Falko Friedrichs from Deutsche Bank.

My first question is on your retail business. Do you expect that organically speaking, growth could be or should be above your targeted end market growth for this fiscal year? And then secondly, on the Cochlear Implants business, and sorry if I missed it, but it is probably fair to assume growth for the business again this fiscal year. But is it fair to assume that this growth should still be below the full year guidance range?

All right. So we're not guiding specifically on the retail business. So I would not tell you exactly what the numbers will be. What I would say is that we have good momentum. The exit velocity from the past fiscal year was very good. We saw acceleration in the last quarter. So we are optimistic going forward. You see the numbers for this, they were somewhat above the market growth. That's all I will say. And the second question was, sorry?

The second question was related to Cochlear Implants growth.

Yes. So as we mentioned it before, first half, we expect the numbers not to look that great. But when the second half comps, again, subject to regulatory approval, we come up with a new processor. We believe that it's a very relevant innovation that we bring, powered by Phonak. And so that should lead to an exciting acceleration for our CI business once the processor is in the market.

Okay. And without putting a specific number behind it, is it then fair to assume that the CI business can at least grow positively this fiscal year?

Yes.

The next question comes from Rula, Martinien from Jefferies.

Congrats on the [indiscernible], by the way. I would have two questions, please. So the first one is a more long-term question, and it refers to your reiterated ambition of being a CHF 6 billion from company that by fiscal year 2031, which obviously implies a substantial contribution from larger deals. Any incremental comments you'd be key on sharing on that when it comes to the time line and type of deals you could think of?

And the second question would be a question actually related to the retail business in China. I would appreciate if you could remind us how much does it contribute to the retail sales. And I was quite impressed by the way, by the double-digit retail growth you've posted there. Any indications on what have been the driving forces behind that?

Yes. So I will start with the second question you asked, retail business in China. So you might remember that we acquired this asset a while back. It's never a walk in the park to do retail acquisitions in China. So it took some time to, I would say, warm up. What we see happening and indeed, [indiscernible] very good double-digit growth in the second half of the past fiscal year. It's a lead generation engine that is becoming better and better, it's execution store by store, it's playing our brands, it's working on pricing. So I think it's just, I would say, operational excellence in motion. It's a rather small contributor to the overall retail revenues for the group. It's less than -- we're talking about less than 2%. So it's not significant.

About the ambition of CHF 6 billion by 2031, you can translate that into 30 million lives, but we would improve. Yes, it includes more acquisitions. The only comment I would make at this point is that we are looking at selected geographies, identified pipeline of retail acquisitions, and that's all I will say for that.

The next question comes from Urs Kunz from Research Partners.

Just one question left from my side. During the strategy update day, you kind of say elaborating on the sales cost mismatch of the Swiss franc. And then you also said that you want to bring down the cost of the Swiss franc from around 15% to below 10% midterm. Is it correct? Midterm means in the next 5 years? And are we seeing any positive impact already this year? Or is that all for next years to come?

Yes. Urs, I'll be happy to take this one. So as you very rightly pointed out, we did discuss in March the fact that we have a structural imbalance in our Swiss franc position because we have about 1% of our revenues in Swiss francs, but about 15% of our costs in Swiss francs and it is our mission to bring this to below 10% in the midterm. And we're looking at doing that in 2 different paths. One is that we're looking at the procurement and the activities of what we purchased in Swiss francs and looking to obviously purchase this in the future in different currencies that are more adapted to where we have our revenues.

And then on the other side, as we grow the company, and we expect we expand to a regional set up both in terms of the U.S. but also, as Eric talked about in APAC. We also do expect to grow our activity further in those regions close to the customers and close to our activities. And therefore, as we go closer in these regions, which will then lower the share in comparison of our Swiss francs activities. So we are basically working on both initiatives and making progress in both areas. As we also recently discussed our initiatives in Singapore with the [indiscernible].

That means is there any progress this year already expected or towards this 10% goal?

As I said, this is a midterm objective. And we do expect some gradual progress over the midterm.

Next question comes from Niels Granholm-Leth from DNB Carnegie.

First question, I'm sure you're seeing that [indiscernible] in the U.S. are looking to expand their hearing aid retailing. Would you regard yourself as conflicted as to expanding into this channel given your engagement with Costco?

And my second question would be just a household question as to your discontinued operations. So in the theoretical situation that you were to own your consumer business for the entire fiscal '27? What would be the ballpark of the negative contribution from discontinued operations?

Shall we start with the second question, the CHB full year, what will be the impact?

So if I understood well, you're asking what would be the impact of CHB for full year, if it was in our financial portfolio, right? So we do not specifically disclose that information. This is a -- you have the results that we have published for the prior year. But going forward, we would make progress towards a breakeven, but not getting fully there yet in this current fiscal year.

Yes. About this large retailer in the U.S., obviously, I will not comment in detail. I will just say that on the 23rd of March, we explained that country by country. We want to deploy a multichannel, multi-brand strategy, in other words, bringing the right product at the right price in the right channel. That's all I will say.

Could I just then follow up on that matter. When it comes to your use of the Sennheiser brand. Are there any circumstances that would lead to the termination of your rights to use the Sennheiser brand?

No. So without going into too many details, the license agreement we have to be able to sell in these very large accounts in the U.S. Sennheiser brand. It's a separate licensing agreement. So it's disconnected from anything else. So we don't have any issue there.

And the last question for today comes from Richard Felton from Goldman Sachs.

I'll just keep it to one question, please. And it's a follow-up on the discussion on the APAC opportunity. Could you just remind us where you currently see your market share in some of those key APAC markets, and how that compares to your global average.

Okay. All right. So let's say that if we are at -- I'll just make it simple, if we are at 10 as an index market share in Europe or in the U.S., we are with the exception of Australia and in Asia around depending on the market, 3 to 6. So if I go back to the Step 1 about Asia Pacific, it tells you that we have a chance to potentially double at least the size of our business in Asia. It's not going to happen overnight. But again, I would highlight that by just bringing one product with the right energy, the right focus in the market like Japan, we have generated over the last few months, high double-digit growth.

So thank you very much for everybody joining the call. If you have any additional questions, feel free to reach out to me. I will be available for the rest of the day. And thanks for joining, and I wish you a very good day. Thank you.

Thank you very much for all your questions. Have a great day.

Thank you.

Ladies and gentlemen, the conference is now over. Thank you for sending Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

Good day, and welcome, everyone, to today's strategy update presentation. Thank you for joining us via our live video webcast. I'm Thomas Bernhardsgrutter, Head of Investor Relations at Sonova. Today marks an important milestone as we present our refreshed strategy that lays out the building blocks for Sonova's next phase of growth. You'll hear from our leadership team on how we plan to strengthen our market leadership and chart a course towards CHF 6 billion in revenue. The presentation will last about 1 hour, followed by a 45-minute Q&A session. [Operator Instructions] There will be a short break after the presentation to allow you to dial in.

Please note that today's event is focused on our strategy and long-term vision and is not a financial results update. We will publish our full year results and detailed outlook for the coming financial year and our results presentation in May. We kindly ask that questions focus on the refresh strategy presented today. We will not address current trading performance or other financial details beyond what is covered in this session. In addition, please note that going forward, the Hearing Instruments business will be referred to as the Wholesale business and the Audiological Care business as the Retail business. These terms will be used consistently throughout the presentation. Before we begin, let me point out that this presentation contains forward-looking statements that involve risks and uncertainties. I encourage you to review the disclaimer in full.

Moving on to today's agenda. Our CEO, Eric Bernard, will open with an overview of our industry position and the market context and then lead the strategy update. He will be joined by Anders Rosengren, Group Vice President, Research and Development; and Roberto di Fiore, Chief Operations Officer, who will elaborate on initiatives in their respective areas of responsibility. Elodie Carr, Chief Financial Officer, will then cover the financial aspects of our strategy, including our midterm targets and capital allocation. Eric will close with a summary before we open the floor for questions.

And with that, I hand over to Eric. Eric, the stage is yours.

Thank you, Thomas, and good morning, afternoon and good evening. It is a pleasure to speak with you today. Over the past months, have had the opportunity to take a deep look at Sonova. Our portfolio, our people, our innovation engine and the markets we serve. And what I have seen is clear, Sonova is a strong leader with even stronger potential. Today, we are here to share with you how we will unlock this potential with a sharper strategic focus and the renewed ambition to scale our leadership and let me start with what I observed in my first month.

When you walk into a new house, you see what's great and what's not. And what I saw at Sonova is powerful, a purpose that naturally aligns business objectives with a vision that inspires people to come and work for us at Sonova. And as a result, we can attract top talents. Strong market leadership positions in the U.S. and Europe that are not accidental. They are earned, a technology engine that continues to set the benchmark in AI-driven audiology on top of a strong pipeline and a financial foundation that gives us flexibility to invest where we can make an impact.

At the same time, the upsides are equally clear. We can innovate beyond traditional form factors like RIC Receiver-In-Canal. We can accelerate profitably in Asia, a clear opportunity for Sonova. We can operate truly as one integrated hearing care company retail and wholesale together, meaning more value can be created, including for our wholesale partners. We can better leverage synergies between hearing aids and cochlear implants, and we can raise the bar in operations from manufacturing to customer service, knowing that this industry is a device and service industry. All of this creates a simple conclusion. Sonova is strong and with sharper focus, it can be even stronger.

Now let's look at some recent highlights. Our latest launches show what happens when technology leadership meets disciplined execution. Products like Infinio Sphere, Virto-R, Ultra and EasyGuard have each reinforced our leadership position in our core business. And as a result, we have outperformed the market over the past 12 months. Virto-R, for instance, is a strong proof point. When we put world-class audiology into a design people want to wear, we reduce stigma and expand penetration. And the proof is in the data. The black model pictured here has reached 30% of total sales in most markets. This device looks and feels like a very cool ear buds. And in total, this product has now reached an annualized sales level of CHF 130 million. And in the veteran affairs channel in the United States, certainly, a good proxy for the general strength of any supplier. Virto-R has brought our share to a 5-year high. And in the specific category of the custom rechargeable products, the share of Virto has exceeded 60%. This momentum gives us confidence as we enter our next strategic chapter.

Let's now briefly talk about the market. We all know, there has been a lot of discussions in the market recently. But when we step back and look at fundamentals, the picture is remarkably consistent. Demand for hearing care will continue to grow, driven by aging populations, longer treatment horizons, stable prevalence and penetration opportunities. And this is why we say confidently the structural growth of our industry is intact for the decade ahead. And Sonova is very well positioned to capture it.

Let's now have a closer look at some numbers. When we look at the fundamentals, the picture is pretty clear. Across regions, the 65-plus population is set to grow steadily through 2035 by over 300 million people creating a significantly larger addressable base over time. And adoption is still far away from what it should be. Even in developed markets, like France, for example, with a very well-established reimbursement system, strong awareness and the ability to pay penetration after all is only slightly north of 50%. And in emerging markets, as you can see on the slide, the penetration upside is very, very obvious.

So when we talk about Sonova's opportunity, it's simple. The world is aging, adoption will grow, and we are uniquely positioned to close that gap market by market with solutions that address these needs. And with that context, let's now move to our strategy. As part of sharpening our strategy, we have made 1 clear portfolio decision to divest the consumer hearing business and focus on hearing care. And the rationale is straightforward. When we acquired the Sennheiser Consumer division back in 2022, the objective was to explore hearing solutions -- sorry, was to explore hearables and early entry consumer hearing solutions and to bring the relevant technologies and insights into Sonova.

That mission is now complete. And those learnings have been fully integrated into our core businesses where they can create stronger value. And that brings us to the business itself. Consumer hearing sells its products and the license Sennheiser brand with its strong heritage and global recognition. But consumer audio follows its own market logic and dynamics, making it better suited to fit for purpose owner. So for Sonova, focusing fully on hearing care lets us better leverage R&D synergies between hearing aids and cochlear implants, accelerate our innovation road map and allocate capital where it has the greatest strategic impact. So we are now starting extracted process to identify the best owner to take this business forward.

With this decision made, let's turn to Sonova's renewed strategy. At the center of this strategy is a simple focused ambition to grow Sonova to CHF 6 billion in revenue by FY 2031. And we are going to deliver this through 3 pillars. One, we innovate to drive adoption. And in just a moment, Anders, our Head of R&D, will walk you through how our technology and our design choices translates directly into stronger adoption. Two, we win country-by-country with a multi-brand, multichannel approach. I'll come back to this shortly and give you a bit more color on how we succeed market by market. And three, we excel in operations to support growth. Here, Roberto, our Chief Operations Officer, will show how we improve efficiency and productivity while also turning service into a true differentiator.

Let's have a quick look at each priority now, starting with innovating for adoption. Innovation has always been part of who we are. And now we are making it drive broader adoption. How? By pushing design and form factors towards more lifestyle aligned solutions. Strengthening our connected platforms and bringing AI and digital deeper into the entire customer experience. To strengthen our innovation road map, our Cochlear Implants business will benefit from more leveraged synergies with our hearing aids R&D. And finally, we are going to innovate specifically for Asia.

The second pillar is about succeeding locally, country by country, deploying a multi-brand, multi-channel playbook. This is about delivering the right brand in the right channel at the right price. In practice, that means addressing each market with a portfolio of clearly differentiated brands. It also means thinking vertically integrated, unlocking more synergies between wholesale and retail with faster customer and consumer feedback into R&D, sharing marketing assets to all channels and a smarter use of our lead generation engine.

And finally, it means expanding retail in a targeted way, focusing on strategic markets where we need to build scale, and I will come back to this later. All of this helps us win country by country with sharper market activation, broader reach and minimal channel conflict. Which brings me to our third pillar, excel in operations for growth. Hearing care is both a device and a service market and that gives us a unique opportunity to do 2 things at the same time. One, boost productivity. Roberto will come back on footprint optimization. More automation, streamlined processes and strong value engineering. And two, build service into a real differentiator. When we deliver on time and on quality, this supports our wholesale partners, drive loyalty and ultimately improves our share.

Now to deliver on this strategy, we have the leadership in place. Over the past months, we have built a very international leadership team with deep industry expertise, balance with fresh perspectives, a team that is now fully ready to execute on our plans. And the only piece of the puzzle missing is the Chief Digital Officer, a very important addition to the team and the role that will be filled very, very soon. A few words about the new regional structure, which will become effective on April 1. We are moving to a 4-region model, as you can see on the screen, and each of the regional heads leads an integrated wholesale retail business. With this setup in place, the 4 region heads can provide constant customer feedback to the central strategic functions supporting them. This enables us to better put the customer at the center of everything we do and in return, allows us to better meet the diverse regional or even country needs.

Now that we have covered the team and structure, let's return to our first pillar, innovation and Anders, over to you.

Hello, everyone. My name is Anders Rosengren, and I'm leading R&D at Sonova. It's really a true pleasure to speak to you today about what we are doing differently in innovation as the industry leader. Our focus is, I mean, really simple. It's about innovation for adoption. It's about deliver solutions people want to wear every day because they perform reliable, deliver outstanding experience, feel right and are effortless to use.

So how do we make this possible? And this is really a combination of leading our audiological research, engineering at scale and establishing thorough clinical evidence. So starting with the research and science side of this. In the last year alone, we delivered more than 30 scientific conference presentations. We delivered 26 research study publications. And we hold over 1,800 active patents and design rights. This scale of research and science that feeds directly into our engineering organization. This is how we secure continued leadership, and this is how we enable to deliver world-leading products.

So talking about products and moving on to our recent launches and talking about how we are leading the industry across functionality, design and usability. So starting with functionality, our [ Sphere ] platform that introduced direct speed extraction powered by our proprietary deep neural network chip. This is real-time AI engineered specifically for hearing. And talking about design. Here, I, of course, think about our Virto-R and how that demonstrates how high-performance or geology can be delivered in the smallest, most discrete personalized form factor and how we are using right fit AI-driven creation for our custom form factors.

And talking about usability. Our amazing EasyGuard solution simplifies everyday handling with a seal dome that significantly improves wax protection and reduces services needs. With EasyGuard, we can reduce service time with up to 38%. And this is, of course, extremely valuable, both for our users and our audiologists. So is this where we are? No, of course, this is just a starting point. And I'm extremely proud looking forward to our next wave of innovation, where we will focus on real-time AI in a more compact form factor. Where we will focus on more aesthetic lifestyle aligned solutions and AI functions beyond speech noise.

All of this is the design to drive even better performance. To grow adoption and increase lifetime value. So why do we know that this matters? Because research-driven, innovation-led development. This is how we keep on shaping our industry. With solutions grounded in clinical evidence and built for excellent performance made for everyday life. This is how we are shaping our industry.

So moving on to the next slide. Let me take you through a very simple, but also very powerful idea. How better hearing supports quality of life. And the pyramid or the stairs on this slide that shows the progression. It begins with audibility, making sounds accessible. Then comes speech [ intelability ] understands words clearly. Then ease of listening, reducing the effort it takes to follow conversations. And above that, we see cognitive and physical well-being and at the very top, social participation and overall quality of life.

So when we think about this from an R&D perspective, our philosophy is fairly simple, actually. It's the design technology that creates measurable gains at every single level of this pyramid. And even more importantly, we validate these effects with rigorous science. And our evidence is truly strong. In our latest pioneering studies, where we use Infinio Sphere, we see outstanding speech intelligibility and we do that even in fast dynamic conversations. And this is exactly the situations where people struggle the most. So this is where we really need to deliver value. We also show significantly reduced listening effort demonstrated not only through subjective ratings, but also by objective measurements of the blood flow in the brain.

I mean this is truly cutting-edge research. It shows physiologically that our technology, our products, reduced neuro load in the brain of a user. This is pioneering research, and we were super proud to see this published earlier this year. We can also show improved ability to memorize words during dynamic conversations. And this is a clear sign that our products lower the cognitive load and frees up mental capacity for our users. This is true value. We also show exceptional sound quality and very high spontaneous acceptance at first fit. This means that people walk away immediately feeling comfortable with a sound experience.

And most importantly, we also see a positive impact on social participation with Sphere. Our users report less fatigue, higher engagement, more willingness to take part in conversations and social activities. This is why we do our stuff. This is the core of our business. So why do we know this matters? Because these benefits, they accumulate. When listening becomes easier, people engage more socially. When they feel less fatigue, and when they experience a higher quality of life, these outcomes compound. And this is not something we just believe. This is something we can prove with hard science data. This is the value our innovation delivers, and it's the direct results of Sonova's long-standing commitment to scientific engagement and pioneering research.

So with this, moving on to our AI leadership in hearing care. So our experience is that leadership in AI, this is not defined by one capability or one breakthrough. This is a system advantage that we built over years. We own and we integrate the full technology stack from our proprietary deep neural network silicon through a rich data pipeline, our real-world training data sets developed over years through our deep audiological expertise, our clinical validation and a full integration of algorithms, AI, DSP and system architecture. This full stack control allow us to optimize every layer for real-world performance. And this is something competitors cannot easily match.

So let me break this down a little bit more for you. I mean, we are a leader in this field because we have the full stack control. We have our own chip. We have our own software. We have our own AI and this means optimization at every layer. It means faster iterations and enables us to drive better power performance trade-offs and something we deliver directly into the ear of our users. It's also built on our purpose-built training and data pipeline and our pioneering science. This is years of audiological research, real-world training data and clinical validation that ensures our models are tuned to hearing outcomes, not generic audio, and that's hard to copy.

We also come from a leadership through our software first platform. We expand beyond speech and noise into personalization, context aware adoption and automation. And this keeps improving with every cycle. The result is continuous performance gains released after release. So why do we know this actually matters? Because this creates a compounding system advantage, our continuously learning data pipeline, our training environment keeps improving our models and create real-world performance gains, which in turn, of course, improves user outcomes. This cycle consistently reinforces our leadership.

So to round off the segment. It's time to talk about how we are driving the next phase of adoption. How our innovation is building on a continued focus of connecting audiology and lifestyle as well as innovation based on feedback and data from users and retail network audiologists. Our Virto-R product has shown is really clear. When outstanding performance meets great design, demand rises and friction drops. And we will build on this momentum by expanding design beyond our Receiver-In-Canal portfolio into a much broader lifestyle and healthy aging solutions. At the same time, we see value shifting to software slowly.

With our Infinio Sphere Ultra product, we deliver over-the-air updates. We deliver continuous performance improvements and deeper engagement throughout the user journey. This is extending life and value of the installed base. And finally, we are pulling together and building a cohesive digital ecosystem. We have devices, apps, fitting tools and support working together, really connecting to create a connected seamless experience for users and audiologists.

So why do we know that this matters? Because if solutions look and feel great and if they are meaningfully connected in a digital ecosystem, more people will start and will stay with hearing care. This is how we are driving adoption, and this is how we are continuing to improve people's lives, and this is why we are a leader in the industry.

Thank you very much. And with that, I'm handing back to Eric.

Anders, thank you very much. And let me now move to the Asia opportunity, an opportunity we will address in 2 steps. Today, our market share in Asia is well below our levels in Europe and the U.S. So the first step is simply to reach what I would call our normal share level. And how do we do that? By having the necessary focus that maybe was missing before by placing the right people on the ground by marketing our existing portfolio of products to the more affluent segments of Asia. And by adding solutions like Virto-R in markets such as Japan, to give you a concrete example, where we have recently seen high double-digit growth as a result. So step 1 is simply about having an appropriate focus on the region.

Before I get to the next step, let me outline some key parameters of the Asian equation. Large and aging populations, low adoption, low awareness, sometimes challenging access and obviously a rapidly growing middle class. Which brings me to step 2, develop made for Asia solutions, products and cost-efficient care models tailored to local needs, affordability levels and just different consumer behaviors when shopping. This will be developing over the next 3 years.

And in that context, I can share that we have just reached a general understanding with the Singapore Economic Development Board, EDB, to establish regional innovation center in Singapore. And this center will, amongst other initiatives, develop innovative quality hearing care solutions tailored to Asian needs. Sonova will lead on this initiative with very strong support from the EDB. Altogether, this creates a clear and profitable mid-term growth pathway for Sonova in Asia.

And with that, let's turn to how we win locally in each market. To put it simply, hearing care is local. Country by country, the mix of channels, reimbursement models and customer expectations looks very different. And even within the country, each channel values different things and has different needs. That's the starting point for how we want to compete. If you look at the pyramid on this slide, this illustrates our wholesale playbook in one simple picture. To meet the specific needs of each channel we use a portfolio of clearly differentiated brands. And in doing so, we meet those needs precisely while minimizing channel conflict.

With the multi-brand playbook logic defined, let's now look at how we unlock the wholesale retail synergies. A major advantage of our integrated wholesale retail model is the synergies it enables. And with the new leadership structure, the 4 regions, the new CMO and CDO roles and unified R&D function, all reporting directly to me. We now have the setup needed to fully capture those synergies. And let me give you 3 very concrete illustrations of what I mean.

Let's start with synergies for innovation. Because we operate an integrated wholesale retail model, we get direct visibility into consumer needs and fitting behavior through our store network. Those insights flow straight back into R&D, giving us faster feedback loops, more targeted feature development and tighter coordination between platform innovation and real-world use. This is a clear advantage. What we learn in retail directly feeds our technology road map.

Second, creating synergies for market activation. Our integrated model will allow us to run coordinated launch campaigns and deploy global marketing assets consistently in our stores and with our wholesale partners. This gives us optimized brand and product presence across channels. And this is exactly what we did when we launched Virto-R.

And third, synergies for consumer reach. We have a unique tool. Our lead generation factory. And until now, it mainly sent leads to our own stores. Going forward, we will also use it to support our wholesale partners in areas where we don't own stores. That widens our reach and drives market share without adding physical locations. We are piloting this successfully in Italy and more markets will follow.

And this brings me to how we want to scale retail in selected strategic markets. In any given country, why does scale matter in retail? Pretty simple. When at the right scale, everything improves. Overall cost per store goes down, local brand visibility goes up, cost per lead decrease, and we can attract the best talent. There is a clear correlation between optimal scale and profitability in retail. And our business in Germany is a good illustration of that. I could also have mentioned Belgium. So what we will do next is simple, we will replicate this playbook of reaching optimal scale in selected strategic markets.

And with that, I hand over to Roberto, our Chief Operations Officer, to take us through the operations chapter.

Thanks a lot, Eric, and my real pleasure to be here today. I am Roberto di Fiore, and I joined Sonova in November last year. So yes, I am still relatively new to the company but really not new to the hearing care world, as I have been in operation in this industry since 2017. So I had the chance to experience what excellence looks like in operation in our industry. And in this regard, let me share something about Sonova.

Sonova has a strong basis on which we can build on, and we have a number of opportunities that we can capitalize from. I will be back to design potential later but allow me to start highlighting something that is often underestimated. Hearing care is product-driven, no doubt about this. But at the same time, it's fundamental service industry. Customer experience is absolutely crucial, but not always given the strategic attention it deserves. And let me reflect on it with something indeed personnel.

My dad was hearing impaired. And when he had this device out for repair to wait weeks to have it back was really painful for him and us whole. So I know firsthand that building the best-in-class customer experience in service and quality is vital and can make a competitive difference when it comes to customer loyalty. Therefore, our ambition in operation is bold and very clear to be the best in cost, on quality and on time [ machine ] for our customers and users. And this ambition will be built on 3 core pillars.

Firstly, on quality, enhanced customer experience. We will focus on enhancing customer proximity where matters in particular, when it comes to custom manufacturing and service. This can be a true differentiator to be chosen over our competitors. At the same time, by fully digitizing sales and post-sales customer interaction through a unified ecosystem, we will make service significantly easier for customers and partners. They do want seamless, simple, predictable experience when it is after sales, repairs, customization and support. And by doing this, we create strong stickiness to be chosen again at the moment of the repurchase. Quality is a prerequisite, consistent on time is a must. Being close to our customer elevates service quality to be capitalized by consistently delivering on time.

To secure this advantage, we are strengthening the resilience of our value system, enhancing interoperability across our sites and reducing geopolitical exposure by reinforcing our regional vertical presence. On quality, on time, while driving cost leadership and efficiency to the next level. We are accelerating our journey towards best-in-class efficiency in operation by specializing selected site through centers of excellence by expanding automation across manufacturing and beyond manufacturing and by advancing value engineering. Executing across these dimensions, we unlock significant productivity and reduce structural cost. This is the north star of our journey by being consistently on time, on quality, on cost, we can truly differentiate.

But let me share also how to make our road map executed [ distributively ]. We have 4 strategic levers to improve productivity. Surely it's about footprint optimization Sonova has a strong foundation built through past investment. The next step is to maximize value by giving each site a clear mandate per each value stream. Some sites, focus on proximity adds on cost and outstanding efficiency and select sites on specialized capabilities. We have a clear road map to reshape our footprint, simplify intra and inter site flows to increase agility and reduce logistics cost.

But let me share also the second lever. While optimizing our footprint, we identified significant untapped potential in our processes. We see clear opportunities to simplify and excel through end-to-end process streamlining through modernized forecast to planning with agentic AI through strengthening local for local to ensure cost-effective product availability while reducing working capital. While these actions increase speed and agility two things, customers immediately feel their bigger impact is cost reduction. By removing complexity, we free up resources that can be redirected towards strategic initiative. And for us, push automation is really strategic.

We know that our industry moves fast with a high pace of innovation. This means full end-to-end automation is neither practical nor optimal but targeted automation will be a major accelerator. And here, we will focus on 3 clear opportunities. Reliability, automation must support our teams by making quality more consistent and less dependent on manual steps. Handling and sorting, this activity offer attractive returns when automated. And order entry and after sales, I have touched upon some minutes before. This is a big opportunity by digitizing and automating these processes, we significantly improve customer experience and transparency while reducing industrial and internal workload. This is not automation for its own sake. It is automation that simultaneously improve experience, quality, speed and cost.

Last but not least, we will enhance engineering to increase value. Value engineering is where material cost and product competitiveness come into play. Our plan focuses on 3 priority actions: aligning our maker by strategy with the reshaped footprint, strengthening redesigned to cost across the existing portfolio and building multiple sourcing options, including regional suppliers to reduce risk and dependency. Value engineering has a significant untapped potential at Sonova, and we are committed to fully unlocking it.

And what does all these mean financially? Bringing these 4 levers together, we are targeting CHF 90 million in annual cost savings versus current baseline at the end of year 4 with net savings already in year 2 while supported over the first 3 years by CHF 50 million of additional transformation investment. Are this target ambitions? Yes, they are, but they are achievable with the roadmap we have in place. We have a strong starting point, clear priorities, significant opportunities and even more importantly, the right outstanding skill set. I know the operation will play a decisive role in delivering on Sonova's new strategy and we will make it happen.

I look forward to your questions in the Q&A session. And with that, it's my pleasure to hand over to our group CFO. Thank you very much, and to you, Elodie.

Thank you, Roberto, and hello, everyone. So let's dive into the financials, and I'd like to start with an update on our current trading. First, we have seen continued momentum in the wholesale Hearing Instruments business with a strong growth in the second half, well above the market. This momentum was driven by successful product launches, as you've heard previously in this presentation. In our retail business, Audiological Care, we have continued organic growth albeit versus a higher comparison base and with limited contribution from M&A. Consumer Hearing has returned to growth in the second half and following the decision to divest will be treated as discontinued operations in FY '25, '26 result. In Cochlear Implants, we have seen a challenging environment. with headwinds from the [ VBP ] implementation in China and upgrade sales in the CI segment declining due to product life cycle maturity and increased competitive pressure. Maintaining our 2025, '26 guidance, and we expect to come in at the lower end of the guidance range, as was previously mentioned.

So let's now turn to the midterm, and I would like to give you an overview of our midterm targets. Excluding Consumer Hearing, we are targeting a sales growth of 5% to 10% CAGR and core EBIT growth of 7% to 12% CAGR, both of which are in constant currency. This is assuming a gradual market recovery over the course of 2026, moving towards a 3% to 5% in the midterm. The growth drivers are the ones you have heard throughout today's presentation. First, market share gains, supported by our accelerated innovation road map, the expansion of our portfolio and geographical expansion and then scaling our retail network through bolt-on M&As and greenfield openings.

From a margin perspective, you have heard from Alberto the operation excellence program, which should bring around 1.5 percentage points of gross margin improvement by 2030. At the same time, we will make investments to enable market share growth and margin improvement with increased investment in R&D to fund also the modernization of the IT infrastructure and our digitization initiatives. Last but not least, we are introducing core EBIT as our key profitability metric, replacing normalized EBITDA. Core EBIT includes amortization, which gives a more comprehensive view of the economics of acquisitions, which are an important part of our growth strategy. And it will exclude restructuring and other nonoperational items, providing a clear view of underlying performance during transformation.

So how do these elements translate into our longer-term growth ambitions? I have shared our midterm targets. And I now would like to explain the building blocks and how it reconciles with the CHF 6 billion sales ambition Eric talked about. Starting from our fiscal year '25, '26 revenue base, the path is built through several sources of growth. First, underlying market growth, which we expect to gradually move towards 3% to 5% annual growth. Second, market share gain. We expect this to contribute approximately 1 to 3 percentage points of additional growth. Third, bolt-on M&A and greenfield expansion, which we also expect to add 1 to 2 percentage points annually. Together, these elements define the range of our midterm targets and to reach the upper end of our ambition CHF 6 billion, we see additional upside from larger strategic acquisitions as well as from the full execution of our strategic initiatives.

Let me now walk you through the building blocks behind our core EBIT expansion. We start with sales growth, which we expect to be in the range of 5% to 10%. From there, we will benefit from operating leverage driven by growth and innovation, contributing approximately 1 to 2 percentage points. And next, we see additional contribution from operations, footprint and supply chain optimization, adding around 2 to 3 percentage points. At the same time, we will make investments to support the growth path of the business and the strategic initiatives.

First, in operations where we will invest CHF 50 million to drive the ambitious savings plan. Second, in R&D, where we will ramp up investments to accelerate and continue to develop our products and solutions road map. Third, in our IT infrastructure and digitization initiatives to strengthen our technology and data capability as we see this as strategic. This represents a margin investment of around 1 to 3 percentage points. When we combine these elements, they create a clear pathway from revenue growth to earnings growth, supporting our core EBIT CAGR target of 7% to 12%.

Now I'd like to cover an important topic as we are a Swiss-based company reporting in Swiss francs, and we have seen significant currency movements this year. First, Switzerland remains a core strength for the company. It is a headquarters and primary center for innovation, giving us access to world-class talent pool, a strong innovation ecosystem, a stable macroeconomic environment and a predictable and competitive tax framework while also benefiting from a strong Swiss franc that provides an attractive currency for acquisitions.

At the same time, we have a structural currency mismatch in our cost base. Today, around 15% of our global cost base is denominated in Swiss francs, while less than 1% of our revenue is in Swiss franc. Given the structural strength of the Swiss franc, this is something we need to manage proactively. We have, therefore, consolidated all mitigation measures into a dedicated program to strengthen our natural hedge. Our ambition is to reduce the Swiss franc share of our global cost base from around 15% today to below 10% over time. We will do this through procurement currency optimization, better alignment of our cost base with our revenue currencies, especially as we grow and the expansion of international capability hubs. Importantly, this does not change our commitment to Switzerland. These measures will not eliminate the impact of the Swiss franc, but they will meaningfully reduce the structural exposure over time.

Let me now turn to our capital allocation framework. Our approach reflects a disciplined prioritization of capital to support growth while delivering attractive shareholder returns. First, to support organic growth and making investments. I have covered those in the previous pages. Second, with retail bolt-ons. We will continue to scale our store footprint with investments of approximately CHF 80 million to CHF 100 million per year. Third, strategic M&A. We will pursue selective larger acquisition in strategic countries alongside targeted technology acquisitions that support our innovation roadmap. Fourth, an attractive dividend policy with a payout ratio of around 40%. Fifth, maintaining a healthy balance sheet targeting a net debt-to-EBITDA ratio of 1 to 1.5x. And finally, share buybacks. Given our strong M&A pipeline, we do not foresee share buybacks in fiscal year '26, '27. This will be reviewed thereafter once the leverage target is consistently met.

So I would like to conclude with a brief reflection of our financial foundation. Over the past years, Sonova has delivered consistent and resilient financial performance with sales growth of around 9% CAGR and core EBIT margins averaging above 20%. We have maintained strong cash generation with free cash flow conversion of around 90%. Our balance sheet is disciplined with leverage consistently in the range of 1 to 1.5x net debt to EBITDA. And importantly, we have delivered attractive returns with return on capital employed between 18% and 20%. The strong financial track record provides the capacity and the flexibility to continue investing in our strategic priorities and support the next phase of growth and shareholder returns.

With that, I will now hand over to Eric for the conclusion.

Elodie, thank you very much. And let me bring it all together as we close. First, we have a clear ambition, an ambition of reaching CHF 6 billion in revenue by 2030, '31 through strong capabilities we are building across the company. Second, we have a sharper focus by concentrating on Hearing Instruments and Cochlear Implants and divesting consumer hearing. We are creating a more focused Sonova, directing our resources to where we lead and where we create the most value. And third, we have confidence in our future. With a clear strategic direction, our technology leadership, the talent across our entire company, our financial strength and the right structure in place to fully unlock the potential of our integrated wholesale retail business, we are well positioned to successfully shape the next chapter. So think of Sonova as a leader with a significant upside and a team that is ready to deliver.

And with that, I want to thank you for your time, your interest and your trust in Sonova. And we will now have a few minutes break before we continue with our Q&A. Thank you very much.

Thank you, Eric. We will now take a short break to allow those of you who would like to ask questions to dial in. [Operator Instructions]

[Break]

We are now ready for the Q&A session, which will last approximately 45 minutes. I kindly ask you to limit your questions to 2. And once again, today's event is focused on our strategy and long-term vision. We therefore ask that questions focus on the refreshed strategy presented today.

And with that, I'll hand over to the operator.

[Operator Instructions]

It's Hassan Al-Wakeel from Barclays. Two from me, please. Firstly, can you talk about how you think about the phasing of these top line targets given there is clearly a softer market backdrop that has lasted a lot longer than we expected. How have you factored this into your thinking alongside the potential for pent-up demand longer term as well as Amplifon's acquisition of GN Hearing?

And then secondly, in terms of your core implies decent margin expansion over the medium term, how much of this margin expansion is expected from structural cost actions? And how do you think about pricing and mix impacting the margin? And what about next year given this market softness is the lower end of the range is more reasonable?

Thank you very much for your question. So you can imagine, I will not speak in details about next year because this is not the right setting to talk about the guidance to come. But to go back to your first question about the phasing of the top line, we expect to see an acceleration coming from both the market recovery and also for the different initiatives that we have described that will deliver more and more effects over the next 4 years about the short term or the shorter-term perspective, we expect a recovery of the market towards the end of 2026 calendar year to be specific.

About margin expansion, maybe Elodie, you can reflect on this?

Yes, I'd be happy to. So on the margin expansion, as I covered in the bridge, we have 3 main elements. One is related to operating leverage. One is related to investments we are going to make. And I'm going to focus on the third one because I think that was the core of your questions. The third one is related to our operations excellence program and supply chain. And from this part, we do expect, as we covered during the presentation, to get a benefit of about CHF 90 million per annum run rate towards the end of our midterm. So that will require some investments as we discussed, CHF 50 million with a ramp-up of savings starting in year 2.

And Amplifon's acquisition of GN Hearing and how you intend to offset that and whether you see any opportunities from the tie-up?

Yes. So in general, we do not comment on the strategic decisions made by market participants. But I would say that we are not particularly concerned by what happened. We see opportunities as a result of this announced acquisition. We're struggling to hear you if you are trying to speak now. We cannot hear you.

Can you hear me now?

I think we can hear you better now. Go ahead.

So this is Julien Ouaddour from Bank of America. So I have a couple of questions. So my first one is on the midterm sales outlook. So clearly, just exceeds a very -- an extremely strong product cycle where wholesale has grown well above market. And I think today, you're close to a record high market share. The question is how do you foresee the threat from competitors to potentially catching up on real-time AI, for example, during the next subject plan?

And how can you be sure to accelerate the growth from such tough comps and current high market share, especially to reach the upper end of the guidance, which roughly 8% to 10%. And I want to understand if it's based on the pipeline you have in terms of products or it's more on the new market penetration you like mentioned for Asia. Also, if you can just size the age opportunity for us, that would be great.

And the next question is, I mean, looking at the CHF 6 billion sales target by 2031, using the midpoint of the top line targets, it seems that you will need roughly CHF 800 million coming from larger acquisitions on top of the bolt-on. I mean, can you just give us a little bit more like color on what are you looking at? I mean there is not a lot of large assets left in the hearing aid space from what we understand. So any idea or like any examples of where you could go to find this CHF 800 million would be super helpful.

Julien, thank you for the many questions in one go. First, you said CHF 6 billion target, we call it CHF 6 billion ambition. This is what's going to drive all employees, all teams around the world at Sonova to get their CHF 6 billion. Then let me go back to the concerns that you seem to raise about the fact we have a very strong market share based on innovations that we have launched over the past 6 months to 18 months. The pipeline is rich. And without going into too many details, you can expect us to come with a new platform before the end of this calendar year. Additional designs to the pipeline that we have and more. So we are rather confident that thanks to a very strong pipeline we will continue to acquire a share over the last 12 to 18 to 24 months.

Going into the granular details of what brings what Asia and so on and so forth, we will not share these details right now. And about the size of acquisitions, you've understood. I hope we were clear that we want to scale up in retail, where we believe in selected markets, we have not reached optimized scale, which drives clearly optimized profitability. So this is what we are talking about, which is bigger than typically bolt ons. And as you know, typically, on an annual basis, the bolt-ons bring CHF 80 million to CHF 100 million. So think about larger retail acquisitions in -- of that type.

Elodie, anything you'd like to add?

As I explained, I mean, we do are targeting 1% to 2% from bolt-on acquisitions and greenfield openings. That's in our path to our midterm targets. And beyond that, see potential upside from larger acquisitions. But you can understand, Julien, that we will not go into the details of that part.

Sure. I thank for that. I mean maybe the very quick follow-up on like on the first question is, I mean, how can you get to the upper hand of the top line guidance, like the 8% to 10%. I mean looking at the history, it seems to be -- I mean, pretty optimistic scenarios. So I just want to understand exactly how and if it can get from '27 onwards or is more at the back end, as you said in the first question from Hassan. So just trying to understand how to get to the 10%?

Understood. Market growth, 3% to 5%. We outperforming this market growth, thanks to a very strong pipeline and a number of initiatives we could mention building a competitive edge in service, for instance, bolt-on acquisitions and then these larger retail acquisitions that we spoke about. That's pretty much the model that gets us to the very upper end of the target that we have described. And clearly, an acceleration as you go towards the end of this next cycle of 4 years.

Again, Elodie, anything you'd like to add?

I think, Julien, when we prepared the bridge of how we see our revenue growth going forward, you have seen the 4 elements that Eric has just described. And we put in these 4 elements because all of them are important and all of them will contribute towards us reaching the midpoint and above of the midterm guidance. First, we talked about underlying market growth. Our assumption is 3% to 5% with gradual recovery. And then for market share, getting 1% to 2% from bolt-on and greenfield 1% to 2 and then potential for a larger acquisition. And as well, by the way, the full potential of the execution of our strategic initiatives.

Next line to be open is from Graham Doyle.

It's Graham for UBS. It's just a follow-up to Julien's question just there. So in terms of the sort of larger scale M&A, it'd be good -- I know you obviously can't talk about specific targets. But I think it's useful to get an outline of what your financial constraints or what you think your sort of rules are. So in effect, if I look at $800 million, I think about some of the deals done recently to get that revenue, that would imply like potentially a quantum of like 3 turns more leverage. So would you guys be comfortable being north of 3x net debt to EBITDA for any given period? And could you maybe talk about the kind of return metrics, the ROIC you would use to look at that?

And then just a second question, and it's just because given the world we're in now, we've got spike in rates, and it might be more difficult to do this type of M&A. Where in that 5% to 10%, do you think organic growth should likely land if that's possible even just a range.

Maybe Elodie you take the first question?

Yes. So I'll start with the M&A side. Rest assured that our M&A views will remain very disciplined. And I have talked about our very healthy balance sheet between 1, 1.5x EBITDA. We have a very strong cash generation, and this gives us some sizable firing power to do some targeted M&As. But again, we will be extremely disciplined as we look into it. And that is why part of it is that we are moving with our key profitability metric to core EBIT. So we will include in that amortization, which will give a view of the economic performance of the M&A and really be transparent about what those are. So that's going to be our approach when we look at our M&A.

Eric, there was a second part of the question, I believe.

Yes, which was about organic growth, and you could refer to Slide 29 and have it in front of me. We won't put it back on screen, but I think there, we were quite explicit but what we expect in terms of organic growth, if you assume a market growth of 3% to 5%, we intend to add 1% to 3% coming from market share gains, and you can do the math to make it simple.

Just another one, sorry, Eric, just on that leverage, is there -- in order to get some of these deals done. I just want to understand, I think shareholders want to just be comfortable. Is there a hard stop on a leverage level you will not go above just to understand that.

As I said, we will remain very disciplined. I've shared in our capital allocation strategy that our broad allocation will maintain a very healthy balance sheet, 1 to 1.5x and that will be our guiding light towards our acquisition strategy.

Next line to be open is from Andjela Bozinovic.

This is Andjela from BNP. Just 2 questions on my side. Maybe the first one is on the market. So you assume now 3% to 5% growth. Can you confirm this is in value terms? So it's lower than previously communicated 4% to 6%. Can you just give us the main drivers that impacted this lowering of the market assumptions? And confirm that 3% to 5% is also for 2026.

And the second one is maybe a follow-up on Julien's question on innovation in this space. And particularly the pace of introducing new products. You have previously commented on around like 24 months launch window. Do you see this changing with the increased innovation space, not only for you but also for the competitors? And when you said you were going to launch a new product by the end of this fiscal year, that's in RIC's platform. If you can just confirm that.

Andjela Bozinovic, thank you very much for the questions. I will start with the second question. So yes, indeed, you've seen that Sonova historically has been extremely consistent in delivering relevant innovation every 2 years. But if we look back at the very recent past here, was launched in August 2024 and less than 14, 16 months later in October, we came up with an upgrade. And we will come up with a new platform before the end of this calendar year as I have explained this. So we're going to be very consistent at our pace of innovation. And what's your question is and what about software innovation, on air upgrades and so on and so forth, this will also be part of our future equation.

Maybe, Anders, you want to add to this?

Yes. So I mean, as you said, we are continuing our release cycle and strengthening that. And if we look ahead into the road map that we have, we will see Sphere in a more compact form factor. We will see AI beyond speech in noise, and we will see more aesthetic design form factors as well. So we will continue well beyond just Receiver-In-Canal portfolio. But we will definitely maintain also the cycle then and accelerate that.

And Andjela Bozinovic, about your question about market growth, 3% to 5%, yes, value term versus 4% to 6%. Yes, we are cautious for the short term. But you've seen the demographic fundamentals that I've highlighted early in the presentation. So the category will keep growing it's going to recover, as I said, we believe, towards the end of '26 calendar year. There's been many hypothesis about the slowdown. But yes, 3% to 5%. This is where we think it's going to be heading.

Next line we are opening is from Veronika Dubajova.

I'll keep it to 2, please. The first one is I just want to understand the reiterated fiscal '26 guidance and whether that includes or excludes the divestiture of the consumer health business if you -- would you can clarify whether those growth rates are including or excluding consumer health care? And then maybe just a brief or on what the most likely outcome in your mind is when it comes to the consumer health care asset. Is this a monetization? Is this just a wind down and kind of when you'd expect to have an update on that divestment. That would be my first question.

My second question is sort of related a little bit to your addition of M&A and growth, in particular in Asia Pacific and how that guides into operating leverage. I think when we look historically, obviously, what we tend to see is prices outside of the U.S. tend to be ASP dilutive expansion both in wholesale or retail when it comes both to you and your peers and some of these [ OUS ] and outside of Europe markets has tended to be margin dilutive. So just help me reconcile that kind of -- I get the higher ambition on the revenue growth makes sense. I'm having a hard time bridging the gap from the higher growth ambition on revenues to an appropriately sized ASP and mix dilution on the margin front. So I think that's probably Eric for you and maybe for Elodie to comment on as well.

Yes. Veronika, thank you very much for these questions. Very useful because they give us a chance to react or reflect on reports that we have published recently. The first point I would make is that not being Asia focused would be sacrificing a significant potential for growth over the next 5, 10, 15 years. So it would be a massive strategic error, not to invest in Asia. Now specifically, I hope I was extremely clear it's going to be a 2-step process.

The first step is just by making sure that Sonova is more focused on Asia than it was before. Our share there is absolutely not what it should be. And this is not about operating at lower ASP. This is about operating in a more focused manner in Asia. I gave the example of the success of Virto-R in Japan recently which got us to grow double digit in this market where you can be profitable. So Asia doesn't equal lower profits, especially when you operate in the premium tiers of the market, and we were not as focused as one could be or should be in Asia.

And then over time, it will be about benefiting from these obvious demographic trends and needs emerging from Asia, potentially at lower ASP, but also with lower cost to serve. And by the time we really get that, we will have optimized a number of items that are building the cost to serve from COGS to simply service and delivery. So don't expect a drop of profitability over the next 18 months or 24 months because we will grow in Asia.

On the first question about [ CHB ] and how it's going to be part of 2026 guidance and so on and so forth? Maybe -- maybe Elodie, you can take this one. I will just make one point. It's not going to be a complex carve-out at all for us.

Yes, Veronika if I understood your question correctly regarding CHB. First of all, I think you would like to know if for our current trading in the fact that we maintain our guidance for 2025, 2026, if those numbers are included. And here, the answer is yes, we have done this update on a similar scope as what was previously communicated in terms of guidance. So no changes there as we wanted to be transparent also on our current trading. As I mentioned, CHB will be treated as discontinued operations in this fiscal year. And as we give you our earnings update in May when we announced our earnings for the full year. You will, of course, get a lot more details about how this impacts exactly the performance.

Can you just quantify the profitability of Consumer Hearing and what we should be moving into discontinued ops. And then I'm sorry, I just want to understand, are you expecting any proceeds for a sale? Or is this a one down?

So first, about what broadly the impact is. I just want to say that, first of all, Consumer Hearing represents about roughly about 5% of our revenue for Sonova. So this is a relatively, I would say, limited impact on the sales side. And on the profitability side, I think it was said at the time, roughly after the acquisition, that the impact of Consumer Hearing was about 200 basis points dilutive to Sonova. And I think that's an assumption that I would not go back on. So overall, I would say, about 5% of the top line for Sonova with a dilutive profitability. Proceeds not expected in the fiscal year 2025, 2026 and obviously more to come in the next fiscal year.

So the next question here will be [indiscernible].

It's Jack Reynolds-Clark from RBC. My first question was on penetration. Could you kind of talk through where you expect penetration to get through across I guess, the various severity levels within developed markets? And what do you think needs to happen to reaccelerate penetration and over what time frame? Then kind of joint to that. In the other markets, how long does that take to kind of trend towards developed markets?

And then my second question was just kind of a clarification on the wording of guidance. Do you expect EBIT to grow at least 7% every year, year-on-year for the medium term? Or is the 7% a floor for the average growth rate over that time period?

Thank you for your question. So I will let Elodie answer the question about EBIT penetration. The barriers to penetration are pretty well described. And their importance vary country by country, but you can list awareness, access, affordability, clearly stigma and a very complex and sometimes conversion consumer journey and consumer experience. So by working on these 5 dimensions, we can increase penetration.

An example of what we did recently to anchor my comments in something real, Virto-R and I remember when we launched it at [ Yuha ] back in October, I faced a bit of skepticism. But I could see that we had a fantastic design, a small device, performing extremely well, a very cool design. And again, I will repeat that this is an example of a product that moves the needle, that gets people in the category, whereas maybe before they were not considering it because the product looks cool. So this is about stigma. This is about design. When -- and so a lot of people in the more mature markets are hesitant because they don't want to look old because it's complicated. It's all of these we have to tackle. And you heard Anders talking about a different take on design, we will be looking at.

If you look at what will be, what are the faster-growing markets, the emerging markets, there, it's a full spectrum. It's access that needs to be reflected on. It's certainly affordability and probably a different way to provide access over time and I will stop here, I've said enough, I believe. Maybe Elodie, you can reflect on the EBIT question.

Yes. I think your question was about the 7% to 12% midterm guidance regarding core EBIT. And here, it's a 7% to 12% CAGR in the midterm. This is what we would like to communicate. Clearly, they will be phasing in some of it, as I explained because some of the -- one of the building block is the operational excellence program that will ramp up over the period. So that will contribute more as time goes by. For specific phasing, I will not comment in details on next year's guidance, we will communicate that when we announce our earnings in the month of May.

Next line will open is from David Adlington.

Two, please. So firstly, you talked about large-scale M&A, but also as part of that, you talked about strategic opportunities. I want just you could expand a little bit. I mean -- a second is coming back to Asia. On Slide 19, you talk about the Phase II and resource...

David, if I may, could you repeat the question? I'm sorry, it was hard for me to understand. Sorry about that.

So the large-scale M&A that you're talking about to get to that CHF 6 billion as well as large-scale M&As about other strategic opportunities. Can you expand on what you mean by other strategic opportunities? The second question, and you're talking about Phase 2 and resource deployment for 3 years, could maybe quantify the amount of investments that might be required?

Yes. You can imagine that we are not going to disclose the details of M&A opportunities that we see ahead of us. So the only thing I will repeat is what we have shared so far which is that in retail and in selected strategic markets, we want to get to the right scale that allows us to have optimal profitability as we've been able to achieve it in a number of markets. So we have a playbook. We have a model. We're going to replicate this. I will not comment any further for obvious sensitive competitive reasons about maybe resources. That was the second question.

I think part of your question, if I understood well, was related to other strategic opportunities as we described it on our building blocks towards the CHF 6 billion potential. And here, it's the realization of the full potential of our strategy all the different building blocks that you have seen throughout the presentation and realizing the full potential from that, we also see as a potential for upside towards the CHF 6 billion. So this is what I wanted to cover. In terms of investments, we have planned a number of investments, as I've explained, to support our growth initiatives. And these are investments in R&D. We have investments in our operations excellence program, we have investments towards IT transformation and digitization, and this includes also the ramp-up of our Asia presence, as Eric explained before.

I would just add that we need to keep in mind that Sonova has got a very strong cash conversion. It's a very profitable organization and that gives us firing power without challenging our leverage, just to make things very clear.

Next line to be open from [ Henrietta Rumberger ].

It's Henrietta Rumberger from AWP. I have one on the -- what you said about strengthening your natural hedge in terms of currencies. What does it exactly mean? Are you planning to produce more in other countries. So do you plan to shift something like that? Maybe you can sort of elaborate a bit more on that. And the other one is the Asian expansion which markets are you already present at? Are you tackling or targeting special markets in Asia to start with? Is it like India or China? And related to that, I remember reading in the press release that you said, first of all, you want to target the more wealthy ones, and then you want to go into mass business. Is that not rather dangerous thing to go into that business there?

Henrietta, thank you very much for your question. I will start with Asia expansion. Again, as I've explained it and you have this on one of the slides we presented, our market share in Asia is not at all at the level of where we have in other markets. I will be anecdotal here, but I think it will tell a clear story. So far, the Head of Asia Pacific for Sonova was based in Switzerland. It means that we were not focusing enough on Asia.

So step 1 is to increase the focus on Asia. To think Asian for Asia. To have people on the ground who are Asian experts, and I gave the example, and I will give it once more of what we did recently in Japan, by bringing [indiscernible] Virto-R, a custom product, which is typically the type of product that the Japanese market appreciate very much. And there, this is sold at very high ASP. It's very profitable. So there is no issue about playing in Asia for Phase 1.

About Phase 2, we could ask ourselves another question. We all know about the demography in Asia. We all know that Asia adds tens of millions of people reaching their 65th birthday every year. Do we want to leave this space wide open to others? Or do we want to be an actor? What can we learn from that? How can we bring the best of Sonova and becoming more Asian. And that's also the intent we have with this initiative, we are starting supported by the Singapore government and its arm called the Economic Development Board. So not thinking Asia for the next 5 to 10 years would be, in my view, a significant strategic mistake.

About manufacturing, first question of yours about manufacturing in Switzerland, manufacturing elsewhere. Gradually what we do in Switzerland will be building a center of excellence. In Switzerland, and I go back to what Roberto explained earlier on, this is where we are going to create, invent, redesign so that we can then export at some point when it's ready in lower-cost manufacturing. But no drama to be expected Henrietta, you have natural attrition, there is aging of our population, so don't expect anything dramatic in step 1 to be specific.

The next question will be from Susannah Ludwig.

I have 2, please. I guess, first on your innovation road map, you talked about more compact AI solutions and more personalization. Can we assume that a more compact format can come as early as your next platform launch for RIC products? And then maybe could you elaborate on sort of what types of personalization might be possible? Is there a future where devices could learn to prioritize voices of close -- the users close contact? Or sort of what other signals might be able through personal to help devices know what sounds to prioritize?

And then second, just as a follow-up to the questions on retail acquisition. I understand you do not want to give away too many details, but I was wondering if you're able to share anything about the balance between further retail in Asia versus elsewhere?

Susannah Ludwig, thank you for all these questions. So Anders, I will let you reflect on the more detailed questions about innovation, but I will just make one comment. In the VA where Sonova has a very strong share, we have been in spite of the bigger size of Sphere and we know it's about 20% bigger than the competitors' product, we have been very successful, and that's on the back of a superior audiologic performance. The AI keeps learning and then eventually needs less consumption for sound performance. So yes, you can imagine that in the next years, we will come up with a smaller device which will address the weakness of the product, which is nevertheless very, very successful. About retail acquisition, I'm sorry, Susannah, I will not tell you much more than what I have said already for obvious reasons.

Maybe you want to reflect Anders on the other parts of the question?

Yes. No, as you said, Eric, about getting to a more compact form factor has, of course, been our major next step and it's going to come here with the next platform launch. And this is something that we are building. I talked earlier about our continuously improving AI, our data pipeline, our training pipeline, how we continue to improve and that helps us create a moat here but also drive forward. That also reflects, of course, into additional capabilities. We talked about personalization, and I need to take the balance here between what we can resolve or make visible today and where we need to come back at a later stage. But this is something that we are working on, where we see AI going well beyond speech and noise as a next step.

Next question will be from Martin Parkhoi.

This is Martin Parkhoi from SEB. I just need to come back to the form factors again. because it's part of this new strategy, but are also, of course, acknowledge that it takes time to develop new products. So do you already have new form factors in place that you started way before that Eric came up with this new strategy, maybe even before we entered Sonova? Or is this something which are more to be realized in the second part of your new strategy plan?

And then also that, if you look at form factors, is it just a matter of looking at what is out there now and then make a best-in-class of that? Or can Sonova will make new form factors, which we haven't heard about before, of course. And then just to be 100% sure on the comment on the smaller version of Sphere of what the next name will be can you do it smaller and then keep the same level of performance as you have today. And then, Eric, of course, I know that you would like to talk too much about Amplifon and GN and I will not ask you how it will impact you. But how do you think it will impact the industry because we, of course, know that GN has been the [indiscernible] if I can say that, -- it's not much in German, but I cannot work for decades for GN, will it actually be positive for the pricing on the wholesale side in the market that you take away this pressure that normally is in the industry?

Martin, great. That's many questions and some very pointed. So no bringing innovative, relevant form factors. This is not just in my head. I was extremely lucky when I came on board, and I'll go back to this image I was using before. You get into a new house and you see everything that is great and everything that can be improved and that leads to many upsides for us, but also great things. And Virto-R, for instance, was an example of I come into the company and presented this product and I realized how great a success it can be and maybe it was not as much perceived that way. And there are other products in the pipeline not in 3 years but I won't tell you one exactly, but you know, soon.

The second question was about is it looking at what currently exists and improve it? Or is this about going different beyond? I trust you've understood that I've got a team surrounding me that is extremely ambitious and so you can imagine that we are reflecting on what could go really beyond what currently exists. I think I've answered the question about the smaller version, could it perform as good as the current one for Sphere? Yes, absolutely, maybe even a bit better. And then about [indiscernible], I will not comment too much. I don't think it's appropriate to do so. It's too premature. I would just say, though, that this confirms what I have described and explained, I hope convincing all of you that Sonova is very well positioned to act as an integrated wholesale retail players that we have practiced that for a while in the way we are ahead of the curve and we're going to double down on this and yet without forgetting our wholesale partners.

Last question from Daniel Jelovcan.

Daniel Jelovcan from ZKB. Two questions. R&D synergies you mentioned between implants and instruments I mean, over the last 20 years, I heard there's a lot GN and Cochlear had it actually never worked. Of course, for Sonova it's different because you own the brand, but I just wonder how that works in daily business. I mean there are still in the U.S., I guess. So that's the first question.

And the second question is about you talked well about multi brands, which is not a surprise with your background, of course. But how easy is it to establish brands in Asia? I mean, demand has the Philips brand, WSA has the Siemens brand every Chinese knows that brands. I'm not sure what brands you will bring in markets like China, if it's also Fnac in the second run, maybe with a lower version? Or do you revitalize some older brands like even in [ Argos ] brand and so on?

Thank you very much. I will start with the multi-brand question. A brand is only as good as the substance it has behind it to make it strong. It's not good enough just to put one brand on the same product you are selling and another one. And I will stop short of telling too much here, but we have clear plans ready to execute and you will see a first move before the end of this calendar year in that space. And then if I may, you quickly jumped to China. Asia goes well beyond China. And I would say that what we do in China will be specifically for China. And there, it's not maybe 1 or 2 brands you need, but maybe more, and you have to be extremely creative. But as you may remember, that's the game I have or a play. I have practiced in my past quite extensively.

About R&D synergies between the Hearing Instruments and the implants. We are in a unique position where we own both the Cochlear business, and we are the designer of the hearing aids. And for a number of reasons, we have not enjoyed the synergies that can come from this. In terms of organization, our first decision was to have Anders who was next to me today, supervising both and looking at what can be done in that space over the next few years. Maybe, Anders, you want to add a few comments to this to put more meat on the bone.

Yes. No, but we are now looking into how we can continuously accelerate, see road map building on our leadership in Hearing Instruments. And of course, I cannot go into details here, but there are significant opportunities that we see ahead of us here to really deliver more in the Cochlear Implant business.

Okay. We are closing the Q&A session. And I'll hand back to Eric now for the closing remarks.

So to all participants, thank you very much for your attention. Thank you for the questions.

I would just close by repeating that we are very ambitious. At a time where conversations were rather pessimistic, if not negative, about what we firmly believe is a category that will continue to grow. And we intend to keep leading in the premium segments, but also be more creative so that we can really serve the demographic wave that are coming our way. I hope you've seen that with my 3 colleagues, I hope you sense that we have a very cohesive team, very international, and it's the same if you go beyond and you look at the larger Executive Committee group, we are committed to perform and deliver profitably for our shareholders. Thank you very much.

Ladies and gentlemen, welcome to the Sonova Half Year Results 2025, 2026 Conference Call and Live Webcast. I am Mathilde, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Thomas Bernhardsgrutter, 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 Bernard, CEO; and Elodie Carr, CFO of Sonova.

During the call, Eric will take you through the performance across our 4 businesses, and give you a quick recap of all the new innovations we recently presented at the [ EUHA 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 solicitation to buy any securities. And with this, I pass the word on to Eric Bernard.

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 2 larger businesses, Hearing 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 HI business was driven by the success of the Phonak Infinio and Infinio [indiscernible] platforms that we launched in August 2024. The HC business benefited from continued investments in targeted lead generation, resulting in above market growth.

On the other hand, are 2 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 VBP 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. And 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 4-rigged model to strengthen customer proximity and regional responsiveness. It's all about customer centricity. And the heads of the 4 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 CHF 1.8 billion, up 4.9% in local currencies. Normalized EBITDA rate is solid CHF 360 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% to 9% growth in sales and 14% to 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 Virto R, 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 CHF 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 segment was dampened somewhat by lower sales in the Consumer Hearing business. Normalized EBITDA rose by 16.9% in local currencies to CHF 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 see more details about the drivers for margin development letter from Elodie, our Group CFO.

Let's move on to the individual businesses, starting with Hearing Instruments. Building on the momentum from the second half of last year, sales increased 7.9% in local currencies to CHF 880 million with positive contributions from both volume and ASP. Growth was driven by the ongoing success of the Phonak Infinio and Infinio Sphere platforms. And our innovation leadership can clearly be seen in the [indiscernible] channel, where Infinio Sphere sales unknown are about 35% higher then the hearing head sales of our largest competitors across the entire portfolio.

Virto R now, 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, reflecting a very positive market reception. Growth was further supported by expanding commercial relationships with large U.S. customers. I am truly convinced that Virto R together with the recently launched Infinio Ultra and Infinio Ultra Sphere will contribute to continued momentum in the second half.

So let's have a look a bit more in details at the latest innovations. So what you see here, it's another view of our latest innovations launched in the past months and presented during the [ EUHA ] Congress in Germany. In August, Phonak introduced Virto R Infinio, the company's first rechargeable in-the-ear device. By combining Infinio'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 aids 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 CHF 400 million 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 a shift from what we've seen before.

And then just over a year after the launch of Infinio and Infinio Sphere, we introduced Infinio Ultra, expanding our innovation and AI leadership. And in a benchmark study, Infinio Ultra outperformed competitors in the most challenging listening environment, speech and loud noise. And this is even without taking advantage of the unique [indiscernible] speech clarity functionality of Sphere which uses the power of our proprietary deep sonic chip that mimics the human brand to extract and enhance voices instantly from all directions. Here, thanks to the continuous training of the deep neural network, we improved efficiency by 30%, which means that with Infinio Ultra Sphere, now this powerful feature can be used all day and not just 3 hours.

Virto R Infinio, Infinio Ultra and Infinio Ultra Sphere all run the AI trends [ AutoSense OS 7.0 ] operating system for better automatic adaptation to different listening environments and offer a simplified one-step paring 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 pen point from both the EHCP 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 CHF 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 bolt-on 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 Hearing 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 4 earbuds, which were a significant growth contributor.

In summary, sales declined by about 12% in local currencies to CHF 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 audio file and premium headphones and sound bars. One good example of this is the October launch of the HDB 630. Our first wireless audio file 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 sounds 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.

Sonova remains the market leader in audio file headphones with an approximate 22% share in this category accounts for around 1/4 of our consumer healing sales. So promising beginnings for the HDB 630.

Moving on to the Cochlear Implants. Sales totaled CHF 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 of launch as many recipients have already adopted the [ Marvell ] technology, which was introduced in 2021.

Normalized EBITDA reached CHF 11 million representing a margin of 8.2%, and this was fairly stable versus the prior year period, supported by strict cost control and benefits from the weaker U.S. dollar, helping to offset the negative operating leverage in the segment.

And with that, let me hand 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?

Thank you, Eric. And also a warm welcome from my side to everyone on the call. So let's take a closer look at the financials and starting with the sales development. Eric has already discussed the growth dynamic by business, so I'm going to focus on regional performance.

I'm pleased to report that all regions achieved solid positive growth in the first half. Sales in the EMEA region was 4.5% in local currencies. This was driven by success of new products and a limited contribution from bolt-on acquisitions in Germany and France. Growth in the hearing aid market was strong in France and the U.K. private market, while Germany and Italy experienced some weaknesses. The U.S. posted the strongest growth, up 7% in local currencies, driven by double-digit growth in our HI business, indicating substantial market share gains. Growth was further supported by expanded commercial relationships with major customers and positive growth in the VA.

The Americas region, excluding the United States rose 4.3% in local currencies with solid growth across our Hearing Instruments segment. Standout countries with Canada and Brazil. Sales in the APAC region grew 0.5% in local currencies. As mentioned by Eric, CI sales in China were held back by the VBP introduction. However, our Hearing Instruments and Audiological Care business posted double-digit growth in China, and solid gains in Australia and Japan. Excluding CI, APAC grew by 4.7% in local currencies.

As you know, Sonova generates almost all of its revenue in currencies other than the Swiss franc. With a strong appreciation of the Swiss franc against all major currencies, and in particular, the U.S. dollar, reported sales were reduced by CHF 107 million or 5.8% due to FX translation.

Now let's look at our gross profit margin development. In local currencies, the gross profit margin fell by 80 basis points. Higher volume and E&Ps in the HI and AC businesses had a positive impact on our gross profit margin. In H1, we incurred temporary costs related to regionalizing our manufacturing and logistics footprint as we further ramped up activities in our plant in Mexico, and in our distribution center in Germany. In addition, lower operating leverage in our Consumer Hearing business contributed negatively to the development. Here, the FX impact on gross margin was 40 basis points. We have a better balance between U.S. dollar revenue and costs due to regionalized production and sourcing, moderating some of the impacts of currency.

Moving on to operating expenses. Normalized operating expenses declined by 0.2% in local currency despite strong sales growth, and that resulted in significant operating leverage. R&D expenses were up 2.4% as we continue to invest in innovation to advance our product portfolio. You heard from Eric about the results of these efforts with the launches in recent months.

Sales and marketing expenses were effectively stable in local currencies. Launch investments were lower as we had our big Infinio and Sphere Infinio launches in the prior year period. On the other hand, we continue to invest in growth through ongoing new generation efforts in the Audiological Care business. G&A expenses declined by 2.7% in local currencies through disciplined cost control and also the benefit from last year's structural cost initiatives. Whilst FX reduced operating expenses in Swiss francs by 3.8%, the impact was less pronounced than our sales as key functions such as R&D and headquarters are largely located in Switzerland.

So when we bring it all together, let's look now at EBITDA components looking from left to right. In local currencies, normalized EBITDA rose by 180 basis points or 16% year-over-year, driven by operational improvements in our 2 largest businesses, Hearing Instruments and Audiological Care. Acquisitions had no material impact. Normalization totaled CHF 29 million, mainly related to legal costs from patent litigation fees and settlement.

As you may remember, we incurred significant legal costs in recent years related to a patent dispute in the Cochlear Implant business and were temporarily prevented from selling some products in Germany back in 2022. With this settlement, pending litigation in all jurisdictions worldwide is now resolved.

Moving on to FX. I talked about the translation impact on sales, gross profit and operating costs already. And in sum, adverse currency development reduced the reported EBITDA margin by 150 basis points.

Let me now quickly summarize the key P&L figures. Sonova delivered strong profitability growth in local currencies across all metrics. All regions contributed to higher sales. And all in all, normalized EBITDA grew 16% in local currencies.

Moving on to normalized EPS. We achieved a strong growth of 20% in local currencies. Including FX movement, this resulted in a stable EPS versus the prior year period.

Now a note on our cash flow. Cash flow from operating activities was 12%, primarily driven by lower cash outflows from changes in working capital with positive effects from lower receivables and inventories, partly offset by lower payables.

Moving on to operating free cash flow. The lower CapEx was more than offset by net investments in financial assets, which is related to financial equity investment. During the first 6 months of the year, Sonova spent CHF 31 million on M&A, reflecting continued bolt-on acquisitions in our Audiological Care business, mainly in Germany, in Canada and in the U.S.

In summary, this resulted in a free cash flow of CHF 38 million. The cash outflow that you see from financing mainly reflects dividend payments as well as repayments of lease liabilities and that was partly offset by new financing arrangements. In October, after the balance sheet date, Sonova repaid CHF 200 million and if you issued a new Swiss franc bond of CHF 150 million with an attractive coupon of 0.92% and the maturity of ACOs.

Now let's look at our balance sheet, which remains strong. Days of sales outstanding and days of inventory outstanding improved versus a year ago and versus March 2025. This is a good development, reflecting better receivable collection, and was achieved despite some inventory built up to mitigate impact on trade disruptions. Days payables outstanding remains largely stable.

Overall, we saw an improvement in the return on capital employed, which was to 17.5%, and this is entirely driven by the higher profitability over the past 12 months. The leverage measured net debt to EBITDA reached 1.5x, down from 1.8 a year ago, but up from 1.2 at the end of the last fiscal year.

And with this, let me move to the outlook. So let's look at our outlook for the year, and I will start with our assumptions going into the second half. First of all, while markets remain volatile, we continue to expect overall market growth of 1% to 3%, in line with what we saw in the first half and reflecting weaker demand from macroeconomic uncertainties and tariffs.

Please note that this outlook assumes no significant additional tariffs or other major disruptions beyond those already known at the time of this publication. Normalizations are expected to be in the range of CHF 30 million to CHF 35 million for the full year. And based on an October exchange rates and looking at a full year 2025, '26, adverse currency developments are expected to reduce sales growth in Swiss francs by about 6 percentage points and normalized EBITDA growth in Swiss francs by 13 to 14 percentage points.

So coming to the outlook for the year. With the launches outlined by Eric, including Virto R, Infinio Ultra and Infinio Ultra Sphere, we expect to maintain good sales momentum in our Hearing Instrument business, building on the momentum we had in the first half. Coupled with continued growth in Audiological Care, and an expected sequential improvement in Consumer Hearing and Cochlear Implants, we reiterate our outlook and continue to guide for sales growth of 5% to 9% and and normalized EBITDA growth of 14% to 18%, both at constant exchange rates.

So with this, Eric and I are happy to answer your questions. Operator, can you please open the line for the Q&A?

[Operator Instructions] The first question comes from the line of Hassan Al-Wakeel from Barclays.

A couple, please. Firstly, if I can ask on the guidance and your confidence around the acceleration in the second half, particularly on the top line amidst broader market uncertainty. Do you view the lower end of the range more likely? And what are your key assumptions for the top end?

And then secondly, on Costco, can you talk about your share here given you had expected to get to 25% pretty quickly and had recently mentioned that you didn't think you were quite there. Is that still the base case despite a trial of a potential new entrant into the channel?

Thank you, Hassan. So Eric here, I will take the second question first. As a general principle, we do not comment on -- on specific customers. But if we talk about a very large account in the U.S., we have reached a reasonable share, stable and we believe we have solid plans that we are designing together with this customer. I think what you may see is that now 5 players are invited that at the table. I won't comment any further about what will happen next. I'd say that it was great for Sonova to be back at the table, this large account in the U.S. and things are progressing nicely.

So I will take the question on the guidance, Hassan. As you will have seen in the first half, we grew 4.9% in terms of revenue growth and in Hearing Instruments and Audiological Care combined was a growth of 7%. We do expect to benefit from the recent launches of Infinio Ultra, Infinio Ultra Sphere and as well the entry into growing new market segment with Virto R and successfully introduced in the month of August. And so building on this innovation leadership, we have reiterated our guidance full year 2025, 2026, which remains at 5% to 9%.

And I could add to give more colors about the potential impact of Virto R over time is that it's a segment value that's roughly CHF 400 million, if we reach our natural share of 25% to do the math, it could be an additional CHF 100 million of revenue over time. It's starting very well. We've launched in [indiscernible] a few weeks back. The numbers are very promising as an example, but credit numbers as well, in general, in all other markets where we've launched it. I won't give the specifics. But wherever we've launched it, it's extremely well received.

That's really helpful. If I could just follow up on the North America strength 7.4% constant currency growth. How much of that was down to Costco and the VA price uplift, please?

So we won't be as granular as you've asked us to be, but they had a significant share or contribution to this growth. But in general, we've done well in the U.S. also in other large accounts. But our innovations launched a year ago were very well received. So the U.S. market has been very favorable for us, also beyond these large accounts.

The next question comes from the line of [ Angela Bozinovic ], from BNP Pariba Exane.

The first one maybe on the VA. Eric, last month at the EUHA conference, you mentioned that you have had some difficulties in the channel up until November. Can you please elaborate what the difficulties were and if it was just specific for the VA? And how confident are you that these are behind us?

And second one, just on the market share and the products. And maybe it's also a follow-up on Hassan's question earlier. But your outlook assumes a significant market share gains in H2. Can you comment if you're seeing any kind of slowdown in the market share gains in the last 2 or 3 months? And when we look at Ultra because it's just a platform upgrade, it's not a new product. Can you walk us through your assumptions on market share gains versus Sphere?

So I'll start by trying to answer the second question, which is rather complex. No, we haven't seen a slowdown in market share gains. We have kept getting here quite across the globe. If you look at the last 3 to 6 months, we gained share in the U.S., we covered that just a minute ago. In Germany, in France, we have less precise data in China, but we know that in HI as well, our development in China has been very strong. So I think there's very, very good momentum.

I'm a bit sorry to hear you describing Ultra as just a small improvement. And let me reflect on that. When Sphere was launched -- and it will, by the way, be a good segue to the question you asked about the VA. When Infinio and Sphere were launched back in August 2024. And by the way, I was not in charge of the company. So I'm reflecting on this as an observer -- the choice was made to bring to market a product that was not perfect, but it was a product ahead. Ahead because the only one with a dedicated AI chip leading to a much better sound performance, especially when you want to decent conversation in noise. And even with the product for Sphere that is 20% to 25% bigger than others, it's been selling very well.

And this is almost a proof in the pudding, if I can be a bit simple here. that the sound is significantly better. When the product was launched, there were some imperfections. One of them was related to a component called a receiver. The problem is completely solved now, completely solved and for a while. But in the VA, where intensity in the clinic is much higher than at an independent, speed is important. This degenerated some challenges. And this is what I was alluding to when we were together in Germany. All of this is behind us. And so we are very confident that with all of these being addressed.

And with Ultra being what? It's a Sphere that works all day long, not just 3 hours. That connects perfectly. It's a bit more than just a platform upgrade because it just keeps increasing the gap with all the other competitors. And what we've seen is some resistance sometimes because of the size of the device. But what we see now is that the word of mouth, when people try it, we sell more and more of this year. So Ultra is a significant improvement in many ways.

I believe I've addressed both the question of the VA and why we are confident about why we will keep gaining here over the last few weeks and few months.

And I could add to this as really, really talking about AI is certainly more exciting than talking about wax. [indiscernible] EasyGuard really addresses one of the worst pain points that both the HCP and the user have been facing historically. And this is a door opener for our sales team and this is going to help us enter new accounts, I'm sure it's a great entry point. And it really addresses a significant pain point, which, by the way, we are able to monetize.

We now have a question from the line of Veronika Dubajova from Citi. .

I will keep it to 2, please. One, I just wanted to understand sort your -- I know this question has been asked by Hassan, but I kind of want to decompose it maybe a little bit. I think if I look at the sort 8% growth that you did in the first half of the year. And in wholesale, there's about 2.5 points in there from the VA. You don't want to comment on the large customer, but let's assume for argument's sake that that's kind of 100 to 200 basis points, which is I think what your ambition was at the time of the guidance. What that leaves the wholesale business growing at, excluding that? Is an above-market number, but not a meaningfully above market number. It's sort of a 0.4% growth rate against the market growing it, too. I guess, are you satisfied with that momentum when you think about it excluding those 2 big tailwinds that you've had? And as you fast forward to the back half of the year, what do you think that number could look like given the things that you're launching with [indiscernible] and the Ultra upgrade. So that would be my first question.

The second question is a little bit of a financial one around the gross margin. Pretty meaningful compression there. Obviously, I appreciate that. ethics played a role there. But I don't know, if you have any guidance towards the back half of the year and whether there's anything you could do to improve the profitability in the short term. Or is this kind of the new normal, given the changes you have made to the manufacturing footprint more fundamentally?

So I will take the first question. So yes, we're happy because I've got numbers that I cannot share in details in front of me, but it's clear that beyond a large account in the U.S., we have gained share very nicely in France, in Germany, in Canada and in in U.S. commercial in general. So it's been a very, very solid past quarter and first half as far as gaining shares are concerned. And again, we are confident that Virto R, Ultra and no longer any issues around the receiver like the ones we experienced after the launch back in 2024 of Infinio, this is gone. So we are confident that in the HI space, we're going to keep growing very, very nicely.

Good. And I will take the question on the financials. Veronica, so you were asking on the gross profit side and generally on the margin side. regarding the second half outlook and what the expectations are there. So from this perspective, I would say, 3 different impacts. One is obviously operating leverage that really drives -- comes from the revenue growth and that should -- as you see in the first half was also a positive element there. So we expect that also to continue in the second half.

Second is the cost improvements that we have seen and are coming from the initiatives that were taken -- structural initiatives that we've taken in previous year. So obviously, these will also continue in the second half.

And then last but not least, as I explained, we talked about some temporary costs relating to some regionalization of some of our manufacturing footprint with the ramp-up in Mexico and the ramp-up of the distribution center in airport and the expectation there is that this should also drive following improvements in the second half.

The next question comes from the line of Oliver Metzger from ODDO BHF.

The first one is a little bit more general about the hearing aid market, and this has obviously also some impact on your guidance. So you assume a continuation of the 1% to 3% market growth, which is still compared to what we have seen a more muted continuation for more muted development. So history has shown, and Eric, you are for multiple years in hearing in industry. So you -- that normally, weaknesses are more of a temporary nature. And I completely understand why your guidance is had and your market assumptions are very [indiscernible]. But what do you think about -- you're talking about 6 months for the second half. When do you think that we might see also growth is hearing market back to a north of 3% towards the 4% level? That would be great to hear.

The second question is about your Cochlear Implant business. So even excluding China, it's not doing well. And it would be great to have your view, what has changed over the years. So we saw it was growing steadily over multiple years, have been there any changes in reimbursements less willingness of copayments? Or what do you see behind this structure slowdown we see now for quite a while?

All right. Thank you, Oliver. So I will start with the second question claimant. As you know, you have 2 types of revenues systems and upgrades. And if we are fully transparent, our latest innovation was brought to market in 2021. So we are slow to innovate versus our competition. In 2026, we will come to market with great innovation that will allow us to sell not only systems but also upgrades that will be very relevant.

By the way, the change that we have put in place in our organization is to have one head of any supervising both what was called HI and what is called CI. The speed at which what is developed for hearing aids gets into our implants is not satisfactory for me discovering Sonova from the inside. And this explains most of the weakness behind the numbers.

But I will repeat that if you put aside China, not out having anything new to offer to still grow at 3% is the testimony that from a commercial standpoint, the team are doing a great job, and this is something that we will keep in the future. But expect us some time in to come up with a brand-new solution that will allow us to get back into growing both systems and upgrades.

And by the way, by then, we will have absorbed the bumps and the challenges coming from the VBP deployments in China. So I'm positive about what we will see from the Cochlear Implant business units sometime later in 2026.

About the market, -- and I'm sure you've heard that from other players, we cannot neglect the impact of in Europe inflation only tariffs and the impact of the volatility of financial markets for retirees in the U.S. where it's 401K plans and so on and so forth.

So what we think is that people have waited. And that at some point, we're going to see the market bouncing back. The question is when. Is this going to be towards the end of 2026 or second half of 2026. I'm talking calendar year. This is going to be early 2027, that I honestly don't know. So we are working with the assumption that the market at least for the next 6 months will keep growing at around 3%.

And by the way, one has to be careful behind the 3% because France was a very large contributor of the global growth, and it's a bit of an outlier, growing at a much faster pace. So we are conservative as far as the market growth is concerns. And I will repeat what we've described. Leveraging our innovations, we expect to grow at a faster pace in the HI segment.

We now have a question from the line of of Urs Kunz from Research Partners.

I have 1 question again about Cochlear Implant business there. And where do you take your positive expectations of having a better H2 there? When you were hinting at a new product in 2026, I guess that's a new process. Is there more than a new process that we can expect. But even then, this would have no impact, I guess, in the current fiscal year yet?

Correct. It will have no impact in the current fiscal year. That's going to come next fiscal year. Absolutely.

And where do you take then the positive expectations of having a better H2 in the Cochlear Implant business?

I don't think I mentioned that. Maybe I wasn't clear. That's not what I suggested. What I explained is that when we come to market with a new processor, then we will see a different pattern in our growth. And that will come sometime in the next fiscal year. Sorry, if I wasn't clear.

So this -- but the problems in China, do you think that should be something that we can expect to be better in H2? Or is that also something that you have to keep in consideration?

Yes, I'm hopeful that towards the end of H2, we will see a normalization of our business in China, but there's still a bit of work to be done in that phase.

Then my second question would be on share buybacks. I see that the net debt-to-EBITDA level is at 1.5 now, which would allow at some point relatively soon to come back on that question. Is there anything to mention from your side?

So we are, in fact, at 1.5x net debt to EBITDA, as you mentioned. Our capital allocation strategy discussed in May is still relevant, and we are not considering a share buyback at this point in time.

Then next question, a question about acquisitions that we are in a really low level -- do we have to expect that there will not be a lot more in H2? Or did you already do something that you can say H2 should be a bigger impact?

In line with the capital allocation strategy, we do expect an envelope for what we call bolt-on acquisitions. So basically in the Audiological Care business -- so there was about CHF 31 million in the first half. We do expect to ramp that up in the second half to come in line with the overall envelope that we have previously talked about for the year.

Okay. Then my last question on this new organization structure that you start to implement now. I guess there's no significant restructuring costs involved is that because otherwise, I guess you couldn't stick to your normalized EBITDA guidance?

Absolutely no restructuring costs. It's about creating regions reporting to me directly with region head supervising both wholesale and retail. It's about making sure that we meet the specific needs of customers, which are very different from China to the U.S., from Europe, the U.S., et cetera. It's all about customer centricity and being very close to the market needs. And it follows something that we did not comment about, but I can share that for already a few weeks both the head of R&D, and I explained is supervising now both Hearing Instruments and Cochlear Implants and the Head of Quality reported to me.

So if I summarize this very briefly, to win in this industry, you have to keep innovating and you have to be on quality on time. And this is why both R&D and quality report to me directly. And the second step is to create 4 regions so that we are clear on what needs to be delivered for the specific needs of customers which are very different region by region and coming into Sonova, I see, for instance, real significant opportunities in Asia Pacific.

The next question comes from the line of Martin [indiscernible] from Jefferies.

I hope that you can hear me okay. So I would have 2 questions, if that's okay for you. The first one is that I just wanted to circle back on the EUHA related discussions that we had it's my impression that patients equipped with the Infinio and Sphere products can get the Ultra software upgrade for free. So I was wondering if you could comment on the commercial strategy for the Ultra versions. Will these be priced in line with the classic versions? Will these be priced higher than the classic versions and/or will clients have access to both the classic and Ultra version at different price [indiscernible]? These are kind of the questions I'm asking myself at the moment. And I'm asking that because if I understood correctly, your comments during EUHA so your newer wax management system is something that is only available on the Ultra version so far and that is something that you intend to monetize. This was the first question. So maybe I can give you some time to answer this one before asking the second one.

Okay. Thank you for the question. So yes, indeed, for existing wearers, the upgrades to Ultra is available for free. Well, assuming that the HCP is offering it for free. However, for new wearers, Ultra is priced at a higher level from us, so wholesale price. Again, have addressed that question already at EUHA, so there's nothing new there.

For the EasyGuard, first point, we can monetize it, and it's going to be available beyond Ultra over time.

Okay. That's perfect. And for the second question, it was about the momentum in Consumer Hearing and Cochlear Implants. So I would appreciate any comments that could help us do the modeling stuff for these 2 divisions as the momentum has been pretty bumpy and that comp-based differences makes it even harder to get a proper view on what could look like when it comes to the second half of this year?

I will pick up that question. Looking at Consumer Hearing, we do expect a stronger sales in the second half than what saw in the first half. I think a part is really driven by the introduction of our new products, the HDB 630. I don't know if you've seen, but it's very exciting product. It's the first wireless audio file product, and the reaction in the market has been very positive. So we do see a better growth on Consumer Hearing compared to the first half.

I think there was some on Cochlear Implants as well. So Cochlear Implants, as Eric has mentioned, I mean you have 2 sides. One side is the VBP situation in China, which he has already mentioned. And the other side is the weakness that we have seen in upgrade as systems. So while systems have been strong in all areas, except China, upgrades have been lagging behind because of the fact that the product there is starting to be quite aging and the new products will come in the year 2020 -- or in the fiscal year 2026. So that's currently the underlying business assumptions that we are taking.

Okay. That's perfect. And just a quick follow-up on the Consumer Hearing business. So I got it that you should grow the sales on a sequential basis. But what about sales growth for consumer hearing on a year-on-year basis?

As I said, our assumption is to be on a stronger sequential basis. And that should come, as I said, from the new products and stronger momentum there. And then I will not give a specific number year-over-year.

We now have a question from the line of Susanna Ludwig from Bernstein.

I have 2, please. I guess, first, I just wanted to follow up about your comments on the opportunity in APAC for Sonova. Maybe if you could just comment a little bit more on what it is that Sonova needs to do differently in that region to take advantage of the opportunity. Does this require sort of different products, different brands or a different go-to-market strategy?

And then second, just following up on the question on gross margins into H2, I guess, could you maybe quantify the sort of 80 basis point headwind this half? What percentage of that comes from the temporary cost from the ramp and the regionalization of manufacturing? And then is that expected to fully abate in the second half?

Thank you for the question about Asia Pacific. I spent more than 20 years of my life across Japan, China, Singapore, et cetera. So your question is what does it take to win bigger than currently for Sonova in Asia Pacific. Well, you've seen that we are creating a euro of Head of Asia Pacific, excluding China, knowing that China already reports to me directly. And this head of Asia Pacific ex China will be based in Asia, in Singapore. That's the first change. Managing Asia Pacific from Switzerland is probably very challenging, irrespective of the quality of the leader.

Then awareness, access, affordability, consumer journey. This is what you need to tackle if you want to grow in this category. And in Asia, it's particularly acute. You need to be able to bring products at different prices and yet keep profitability at the same level. So here, you're talking about more simple products, maybe defeatured products and not just selling in Asia, what you have designed for Europe or the U.S. Then there's a lack of qualified professionals. So you also have to think in terms of more simple solutions for dispensing. So products price points. And certainly, as you've touched on brands, presence on the ground. China, for China, I speak about China, in particular, this is what we need to get our fair share of Asia Pacific, which I believe we do not have today.

This will take time. And it's giving you some insights about one of the dimension of the strategy we will be talking about when we go into next year. but certainly very good opportunities for the group in this part of the world.

Great. Thanks for the comprehensive answer. And then I guess just on the gross margins.

Yes, I will gladly answer this one. So you were asking about the gross margin, specifically the impact of the ramp-up costs for the regionalization of some of our manufacturing footprint. So as I mentioned, we ramped up activities on the manufacturing side in Mexico and also with our distribution center in Germany. We did absorb some ramp-up costs in the first half. Those transfers are now in the completion stage. And so we do expect a sequential benefit half on half to come from cost improvements in these areas. But I will not give a specific number.

Next question comes from the line of David Adlington from JPMorgan.

Most been answered, but maybe just to put a clip a little bit further on the second half implied guidance for the top line. Obviously, that implies at the top end, sort of 13%, 14% growth in the second half. I just wondered maybe put another way, why not narrow the top of the range down a little bit just to make still a very, very wide range?

And then secondly, just on the Section 232 probe and [indiscernible] just want to get your thoughts on the tariffs and what mitigation you might be able to put in place if they do come in?

I will pick up the first question on the guidance. So we stick to our range in 5% to 9%. So I mentioned...

David, may we ask you to go on mute because there's noise in your background. Thank you very much.

Yes. So -- and as I mentioned, we achieved 4.9% in the first half with 7% in HI and AC. And we do expect some growth in the HSI based on new products. So Infinio Ultra, Sphere Ultra and Virto R, and that allows us to basically keep to our [indiscernible] in the second half.

And about the tariffs, as you know, we are currently exempt from U.S. tariffs based on the [indiscernible] protocol. If you were referring to the sector 232, if miracle is correct investigation. As a matter of principle, we don't comment on ongoing investigations. If we take time anyway. If we were really in a difficult situation, we have facilities in Mexico, in the U.S., in Canada, and we will be agile about adjusting the way and the location where we manufacture.

We now have a question from the line of [indiscernible] Zurcher Kantonalbank.

Do you hear me?

Very well.

It's actually not is Michel, it actually me, Daniel as you hear. So just a question on the ASP uplift. I'm not sure if it was already answered. But when I look at the great 7% local currency growth in the Hearing Instruments segment total. Can you talk about the unit growth there or the other way around the ASP uplift, must have been quite an impact, right? First question.

Yes. Okay. So of course, without being too granular because this becomes a competitive information. If you look at HI versus AC to wholesale versus retail, a rather good balance in the wholesale business with both growth in units and some ASP increase, more skewed towards volume than prices. And if you look at our retail business, the opposite. We had both positive impact, but more skewed towards price increases than on volume, and this is a reflection of the fact that our own retail stores are able to drive, create value growth out of the innovations that we brought to market. So a good balance if you look at the combination of growth.

Okay. Good to hear. And the second and last question, I mean, with your background at [indiscernible] at the have altered this great eyeglass with hearing aids. Is that an idea for the future as well for you? Or is it too far away? Just -- yes that's the question.

First, what's great when you see such initiatives with large organizations with market power is that they help us increase the awareness of the importance of good hearing. I would not comment about whether we're going to go there or not. I won't make any comments about it.

We now have a question from the line of Niels Granholm-Leth from DNB Carnegie.

First one on the launch of Virto R. So wouldn't you expect any cannibalization from this CIC form factor on your other form factors? And perhaps you could elaborate on the amount of sales that would come from your CIC category now. So where could this category actually go as a percentage of sales. We know that it's about 10% of the market.

And then secondly, we have had this discussion throughout this year about these 5-year reimbursement cycles and to what extent it has affected the overall hearing aid market this year. So do you prescribe to the idea of market growth being under pressure this year because of less people or fewer people renewing hearing aids in our 5-year after the shutdown since 2020?

Yes. So I'll start with the last question. We believe there's a longer repurchase cycle for the last few months. So yes, I think it did increase. So first question.

Second question is Virto R. So again, we estimate that this segment is about CHF 400 million per annum. And so it will take a fair share of that segment. At some point, we hope to -- it's a cruising at altitude of CHF 100 million, which we see as incremental. We don't see a risk of cannibalization what we see is that we're entering the new accounts and that we are reaching to new type of consumers. So we don't see a risk of cannibalization, maybe marginal. But for us, we really see it as incremental.

And I will repeat what I said in my introduction, what's very interesting is to see that black as a color is more than 20% of the sales. And that's really something new. We've never seen that otherwise. And when I'm wearing it, when I see people wearing it, the reflection you get it, it's really cool. It's really different. And I think this product is helping us not only within the industry to get into a segment where we have no right to play because we had no rechargeable solution. And by the way, we are not best-in-class for custom products and there, we have significantly improved. But we're also tackling the stigma in a new way, and that is very, very exciting.

By the way, what I mean by we were not that great in the custom segment is now with the new way we tell the product this process called right fit, which is using AI. You get really to an optimal feed and acoustic performance in the smallest possible size. It's really the smallest of all and the returns are much, much lower than what they were before. And we mentioned that at EUHA, but now we have a bit more -- we have 3, 4 more weeks on top of when we met at EUHA. And so it's a very promising category for us.

So you would expect your CIC to -- you would close the gap to the market where -- which is currently at around 10%?

We believe so. Very promising.

The last question comes from the line of Sibylle Bischofberger from [indiscernible].

As a first question, in the past on the outlook slide, you always mentioned the midterm outlook. Now it was not mentioned anymore. So is the goal still valid? This is my first question.

Right. So yes, indeed, we are not sharing the midterm targets any more why. And I'll be very candid and straightforward here. You have a new management team. You have a new chair, and we are currently working on updating our strategy and our strategic ambition. And so sometime at -- in the first half of 2026, we will be very specific about this updated upgraded midterm targets.

Elodie, anything you'd like to add to this?

Well, I'd just like to add that we have strong fundamentals in the industry. You have an aging population in the world. And in that sense, the industry is an industry that will grow because more and more people are getting older and more and more people will need some hearing aid. So in the scope of that, I will say, and now with a focus on the regions and growing in those markets that will be -- these are strong fundamentals we can talk about.

We don't expect our ambition to go down. The market growth has slowed down over the past few quarters, but demography doesn't change. The world is aging, aging very fast. And so demand for hearing solutions will increase. But again, we have now started the process to refresh in depth our strategy in our strategic ambition. And so expect us in the first half of 2026 to come back with probably a capital day to be organized to present this to all of this.

And then my second question, you several times mentioned your market share has gone up. Could you give us a hint how large is your market share now?

We share that, Thomas? I'm not sure. So...

No, we don't really share that, but I think, historically, we've always talked that we had more than a quarter. And you can imagine that it has gone up from there, but I wouldn't go beyond that. .

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Eric Bernard, CEO, for any closing remarks.

Well, thank you very much for all these questions. We will talk not too long down the road and looking forward to further calls and meetings in person over the next few weeks and months. Thank you very much. Bye-bye.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.