Sonova Holding AG · SIX:SOON
Sonova — FY2016/17 Earnings Presentation
45 slides from Sonova's earnings presentation, May 16, 2017
Slide 1: Full-Year 2016/17 Results
Full-Year 2016/17 Results Stäfa, May 16, 2017 Lukas Braunschweiler | CEO, Hartwig Grevener | CFO, Thomas Bernhardsgrütter | IR
Slide 2: Disclaimer
Disclaimer This presentation contains forward-looking statements, which offer no guarantee with regard to future performance. These statements are made on the basis of management’s views and assumptions regarding future events and business performance at the time the statements are made. They are su
Slide 3: Agenda
Agenda 1. Sonova Group 2. Hearing instruments segment 3. Cochlear implants segment 4. Financial review 5. Outlook 6. Questions & Answers 7. Upcoming Events May 16, 2017 Page 3
Slide 4: 1. Sonova Group
sonova 1. Sonova Group
Slide 5: Sonova Group: Unique vertically integrated business model
Sonova Group Unique vertically integrated business model – Focused on customer value CUSTOMERS PRODUCTS SUPPLY CHAIN DISTRIBUTION CHANNELS Seniors HI Phonak Manufacturing HI Distributors Workers AudioNova HI Unitron Customization SPEECH Adults INTELLIGIBILITY HI Wholesale NATURAL SOUND Teens HI Hans
Slide 6: Business strategies – Focus on hearing care
Sonova Group Business strategies – Focus on hearing care HI Segment CI Segment HI Business RET Business CI Business Expand market reach Secure market access Build medical position Drive solution Offer best-in-class Strive for performance innovation leadership professional services leadership Continu
Slide 7: Summary FY 2016/17
Sonova Group Summary FY 2016/17 – Substantial acceleration and strong fiscal year – Sonova Group: Strong progress in HI – solid growth in CI – Sales of CHF 2,395.7 million up 15.6% as reported in CHF and up by 15.3% in LC – EBITA of CHF 481.4 million – margin of 20.1% (normalized for AudioNova one-t
Slide 8: Major developments and initiatives in FY 2016/17
Sonova Group Major developments and initiatives in FY 2016/17 – EU: Strong growth despite headwind in DE – accelerating with new products – EU: AudioNova integration on track – creating one of Europe’s largest retailers Go-to-market – US: Increase in VA market share to 45% – US: Introduction of next
Slide 9: Key Financials – As reported and normalized – Variances in CHF
Sonova Group Key Financials – As reported and normalized – Variances in CHF FY 2015/16 FY 2016/17 One-time FY 2016/17 in CHF million Δ % in CHF Δ % in CHF as reported as reported costs* normalized Sales 2'071.9 2'395.7 15.6% 2'395.7 15.6% Gross profit 1'375.5 1'651.8 20.1% 1'651.8 20.1% - Gross prof
Slide 10: Key Financials – As reported and normalized – Variances in LC
Sonova Group Key Financials – As reported and normalized – Variances in LC FY 2015/16 FY 2016/17 One-time FY 2016/17 in CHF million Δ % in LC Δ % in LC as reported as reported costs* normalized Sales 2'071.9 2'395.7 15.3% 2'395.7 15.3% Gross profit 1'375.5 1'651.8 20.1% 1'651.8 20.1% - Gross profit
Slide 11: Key Financials – Normalized – Variances in LC
Sonova Group Key Financials – Normalized – Variances in LC in CHF million 1H 2016/17 Δ % in LC 2H 2016/17 Δ % in LC FY 2016/17 Δ % in LC Sales 1'069.9 5.5% 1'325.8 24.5% 2'395.7 15.3% Gross profit 723.8 8.2% 928.0 31.1% 1'651.8 20.1% - Gross profit margin 67.6% +160bps 70.0% +350bps 68.9% +270bps OP
Slide 12: Sales and components – YoY
Sonova Group Sales and components – YoY PY NORM OPERATIONAL FX +15.3% in CHF million 2,389.4 2,395.7 2,400 6.2 2,350 2,300 ANI 216.2 2,250 2,200 2,150 28.4 2,100 2,071.9 90.0 2,054.8 -17.1 2,050 2,000 50 0 FY 15/16 Divestments FY 15/16 Organic M&A FY 16/17 FX FY 16/17 Reported Norm. LC impact Report
Slide 13: Key Financials – Normalized
Sonova Group Key Financials – Normalized 1H 2016/17 2H 2016/17 FY 2016/17 Nor- Δ% Δ% Nor- Δ% Δ% Nor- Δ% Δ% in CHF million malized in CHF in LC malized in CHF in LC malized in CHF in LC Sales 1,069.9 +6.7% +5.5% 1,325.8 +24.0% +24.5% 2,395.7 +15.6% +15.3% Δ organic 20.6 +2.0% 69.4 +6.5% 90.0 +4.3% Δ
Slide 14: Sonova Group – Sales by segment
Sonova Group Sonova Group – Sales by segment 1H 2016/17 2H 2016/17 FY 2016/17 in CHF million Sales Δ % in LC Sales Δ % in LC Sales Δ % in LC HI Segment 977.5 +5.4% 1,212.8 +25.9% 2,190.3 15.9% CI Segment 92.4 +7.0% 113.0 +11.8% 205.4 +9.6% Total SONOVA 1,069.9 +5.5% 1,325.8 +24.5% 2,395.7 +15.3% – S
Slide 15: Sales by regions and key markets
Sonova Group Sales by regions and key markets 1H 2016/17 2H 2016/17 FY 2016/17 in CHF million Sales Δ % in LC Sales Δ % in LC Sales Δ % in LC EMEA 470.0 +12.2% 692.2 +53.2% 1,162.2 +33.8% USA 383.0 -0.1% 404.3 +2.0% 787.3 +1.0% Americas (excl. USA) 102.7 +3.1% 108.2 +4.5% 210.9 +3.8% Asia / Pacific
Slide 16: EBITA and components – YoY
Sonova Group EBITA and components – YoY PY NORM OPERATIONAL ONE-TIME FX in CHF million +12.1% 490 482.9 480 3.9 -18.4 470 464.5 463.0 34.8 -1.5 460 450 440 430.6 20.0 430 -6.4 424.2 420 0 FY 15/16 PY FY 15/16 Organic M&A Cap. FY 16/17 One-time FY 16/17 FX FY 16/17 Reported Norm. * Norm. gain LC excl
Slide 17: 2. Hearing Instruments Segment
2. Hearing Instruments Segment
Slide 18: Hearing Instruments Business summary FY 2016/17
Hearing Instruments Business summary FY 2016/17 – Strong top-line acceleration after new platform launch – Sales of CHF 2,190.3 million up by 15.9% in LC – driven by organic growth and acquisitions – Strong organic growth in EMEA – some headwinds in Germany after AudioNova announcement – Phonak Belo
Slide 19: Hearing Instruments Key Financials – As reported and normalized
Hearing Instruments Key Financials – As reported and normalized – variances in LC One-time FY 2016/17 in CHF million FY 2015/16 FY 2016/17 Δ % in LC Δ % in LC as reported as reported costs* normalized Sales 1'885.0 2'190.3 15.9% 2'190.3 15.9% EBITA 430.8 455.0 6.0% 18.4 473.4 10.3% - EBITA margin 22
Slide 20: Hearing Instruments Key Financials – Normalized
Hearing Instruments Key Financials – Normalized 1H 2016/17 2H 2016/17 FY 2016/17 Nor- Δ% Δ% Nor- Δ% Δ% Nor- Δ% Δ% in CHF million malized in CHF in LC malized in CHF in LC malized in CHF in LC Sales 977.5 +6.5% +5.4% 1,212.8 +25.4% +25.9% 2,190.3 +16.2% +15.9% Δ organic +15.0 +1.6% +57.4 +5.9% +72.4
Slide 21: Hearing Instruments Sales by Business
Hearing Instruments Sales by Business 1H 2016/17 2H 2016/17 FY 2016/17 in CHF million Sales Δ % in LC Sales Δ % in LC Sales Δ % in LC HI Business 629.6 +0.1% 681.6 +5.6% 1,311.2 +2.8% (third party sales) HI Business +2.0% +10.0% +6.0% (incl. sales to own retail) RET Business 347.9 +16.3% 531.2 +67.7
Slide 22: Hearing Instruments Sales by product groups
Hearing Instruments Sales by product groups 1H 2016/17 2H 2016/17 FY 2016/17 in CHF million Sales Δ % in LC Sales Δ % in LC Sales Δ % in LC HI Premium 272.8 +6.3% 331.7 +22.4% 604.5 +14.7% HI Advanced 207.8 +1.3% 256.9 +24.2% 464.7 +12.8% HI Standard 318.6 +4.9% 395.3 +26.7% 713.9 +15.8% Wireless co
Slide 23: 3. Cochlear Implants Segment
3. Cochlear Implants Segment
Slide 24: Cochlear Implants Business summary FY 2016/17
Cochlear Implants Business summary FY 2016/17 – Double digit system sales growth – strong momentum from new products – Sales of 205.4 million – growth of 9.6% in LC – Strong system sales growth – driven by double-digit increase in North America and EMEA – Temporarily lower upgrade sales – affected b
Slide 25: Cochlear Implants Key Financials – As reported
Cochlear Implants Key Financials – As reported 1H 2016/17 2H 2016/17 FY 2016/17 Δ% Δ% Δ% Δ% Δ% Δ% in CHF million Reported in CHF in LC Reported in CHF in LC Reported in CHF in LC Sales 92.4 8.2% +7.0% 113.0 11.2% +11.8% 205.4 9.8% +9.6% Δ organic 5.6 +6.6% 11.9 +11.8% 17.6 +9.4% Δ net acquisitions 0
Slide 26: Cochlear Implants Sales by product groups
Cochlear Implants Sales by product groups 1H 2016/17 2H 2016/17 FY 2016/17 in CHF million Sales Δ % in LC Sales Δ % in LC Sales Δ % in LC Cochlear implant systems 73.1 +13.7% 86.9 +11.8% 160.0 +12.8% Upgrades and accessories 19.3 -10.7% 26.1 +11.3% 45.4 +0.5% Total Cochlear implants 92.4 +7.0% 113.0
Slide 27: 4. Financial Review 2016/17
sonova 4. Financial Review 2016/17
Slide 28: Sonova Group – Financial highlights
Financial review 2016/17 Sonova Group – Financial highlights – Sales of CHF 2,395.7 million – driven by organic growth and acquisitions – Gross Profit of CHF 1,651.8 million or 68.9% of sales – Reported EBITA margin of 19.3% – Continued investment in innovation – gross R&D spending of CHF 159.4 mill
Slide 29: Sonova Group – Key Financials – As reported and normalized
Financial review 2016/17 Sonova Group – Key Financials – As reported and normalized – variances in CHF FY 2015/16 FY 2016/17 One-time FY 2016/17 in CHF million Δ % in CHF Δ % in CHF as reported as reported costs* normalized Sales 2'071.9 2'395.7 15.6% 2'395.7 15.6% Gross profit 1'375.5 1'651.8 20.1%
Slide 30: Sonova Group – Operating expenses
Financial review 2016/17 Sonova Group – Operating expenses in CHF million FY 2015/16 FY 2016/17 Δ % in CHF Δ % in LC Comments Research & Development -130.3 -137.1 +5.3% +5.0% Continued investment in next - in % of sales 6.3% 5.7% generation platform – ratio change driven by larger share of retail Sa
Slide 31: CI Segment – Capitalized development cost
Financial review 2016/17 CI Segment – Non-operating items – Capitalized development cost in CHF million 150 135 – Decision to directly skip to our new 2.4 GHz 22.4 120 113.8 -35.6 platform for the sound processor technology 100.6 105 triggers CHF 35.6 million impairment of 90 capitalized development
Slide 32: CI Segment – Product liability provision
Financial review 2016/17 CI Segment – Non-operating items – Product liability provision in CHF million 45 43.4 40 40.6 – Close to 1’000 cases out of 2’000 overall 35 Amounts used expected failures resolved (no claim or settled) Reversals 30 25 25.2 – Average historic claim rate and cost per claim 20
Slide 33: Sonova Group – Reported results and income taxes
Financial review 2016/17 Sonova Group – Reported results and income taxes in CHF million FY 2015/16 FY 2016/17 Δ % in CHF EBITA 430.6 463.0 +7.5% Acquisition - related amortization -27.2 -39.3 +44.6% Operating profit (EBIT) 403.4 423.7 +5.0% in % of sales 19.5% 17.7% Financial result -6.4 -6.3 -0.5%
Slide 34: Sonova Group – Cash flow
Financial review 2016/17 Sonova Group – Cash flow in CHF million FY 2015/16 FY 2016/17 Δ % in CHF Cash flow before changes in NWC (incl. taxes paid) 449.1 517.1 +15.1% Changes in net working capital -20.6 5.3 NM Operating cash flow 428.4 522.4 +21.9% in % of sales 20.7% 21.8% Cash flow from investin
Slide 35: Sonova Group – Balance sheet
Financial review 2016/17 Sonova Group – Balance sheet in CHF million 31 Mar 2016 31 Mar 2017 Δ % in CHF Net working capital 185.5 169.7 -8.5% Days sales outstanding (DSO) 64 61 -4.6% Days inventory outstanding (DIO) 132 127 -3.7% Capital employed 1,608.0 2,535.9 +57.7% Net cash / (debt) 298.3 -404.6
Slide 36: 5. Outlook 2017/18
sonova 5. Outlook 2017/18
Slide 37: Outlook FY 2017/18: Sales and mid-term CAGR
Outlook FY 2017/18 Retail to outgrow group average – Continued bolt-on acquisition activity WHS BUSINESS MODEL TRANSFORM VERTICAL BUSINESS MODEL Mid-term CAGR*: 4,000 5-7% (M&A: ~1%) Mid-term* HI Business 3,000 6-10% RET Business Sales (CHFm) CI Business 6-8% (M&A: ~2-3%) 2,000 1,000 3-5% 0 11/12 12
Slide 38: Factors impacting performance – expectations and considerations
Outlook FY 2017/18 Factors impacting performance – expectations and considerations for outlook Growth of HI and CI market in line with long-term average and trends Continued retail channel bifurcation – independents versus chains Market Further retail consolidation in focus of major players –
Slide 39: FY 2017/18 guidance and mid-term target
Outlook FY 2017/18 FY 2017/18 guidance and mid-term target Actual* Guidance* Mid-term FY 2016/17 FY 2017/18 Target Sales growth in LC +15.3% 10%-12% +5%-7% p.a. thereof M&A +11.0% ca. +6.0% ca. +1.0% p.a. Sales FX-impact +0.3% Total sales growth in CHF +15.6% EBITA growth in LC +12.1% 10%-14% +7%-11
Slide 40: FX impact on sales and margins
Outlook FY 2017/18 FX impact on sales and margins USD/CHF EUR/CHF Rate Sales EBITA USD/CHF +/- 5% +/- CHF 43 million +/- CHF 10 million EUR/CHF +/- 5% +/- CHF 45 million +/- CHF 18 million USD and EUR account for roughly two thirds of the overall FX exposure May 16, 2017 Page 40
Slide 41: FX rates – Seven main currencies
Outlook FY 2017/18 FX rates – Seven main currencies account for around 85% of Group sales Other USD GBP, CAD, BRL, AUD and JPY Note: Split includes AudioNova for 12 months EUR Spot FY-15/16 1H-16/17 2H-16/17 FY-16/17 Effect May 2017 USD 0.97 0.97 1.00 0.99 0.99 EUR 1.07 1.09 1.07 1.08 1.09 GBP 1
Slide 42: 6. Questions & Answers
sonova 6. Questions & Answers
Slide 43: 7. Upcoming Events
sonova 7. Upcoming Events
Slide 44: Upcoming events
Upcoming events Important dates 17-26 May 2017 Roadshow Full-Year Results 2016/17 13 Jun 2017 Annual General Meeting 17 Oct 2017 6. Sonova Investor & Analyst Day 13 Nov 2017 Publication & Call Half-Year Results 2017/18 May 16, 2017 Page 44
Slide 45: Contacts
Contacts Investor Relations Media Relations Thomas Bernhardsgrütter Michael Isaac Director Investor Relations Head of Media Relations Phone +41 58 928 33 44 Phone +41 58 928 33 24 Mobile +41 79 618 28 07 Mobile +41 79 420 29 56 Email thomas.bernhardsgruetter@sonova.com Email michael.isaac@sonova.com