Sonova Holding AG (SOON) Earnings Call Transcript & Summary

[Audio Gap] in person. However, we are delighted that we have over 170 people signed up to join the live webcast today. A lot has happened in the last year here at Sonova. We've launched innovative solutions in our hearing instruments and cochlear implants business, advanced our omnichannel strategy in audiological care and entered the consumer hearing space with the planned acquisition of the Sennheiser Consumer division. We will talk about all of this in today's presentation. In addition, we will cover the strategic progress of the Sonova Group, the midterm prospects as well as our commitments and achievements in the space of ESG. I'm convinced that we'll have an exciting afternoon ahead of us. Before we start, let me quickly run you through the disclaimer of today's presentations. In short, today's presentations are for marketing purposes only, and they do not constitute an offer to sell or a solicitation to buy any securities. And another housekeeping item, we will have a live Q&A session following the presentations today. [Operator Instructions]. And with this, it's my great pleasure to introduce to you Arnd Kaldowski, CEO of Sonova, who will take you through the agenda of the day. Arnd, the stage is yours.

Thomas, thank you very much for the quick introduction and getting us started here as well as the summary of the logistics, particularly on the Q&A side. Please allow me also to extend a warm welcome to all of you, and thanks for joining in such a large number of interested people. Despite it being virtual, we'll do our best to make it worthwhile your time. I want to run first through the lineup of the presenters who are joining me today on the stage here. I'm going to kick off with the market and strategy update. And then Tom Lang will be on stage. He is the VP of Portfolio and Product Management for the Hearing Instruments business, and he will cover the progress with Paradise over the first year after its initial launch. And now the new exciting features we're bringing out in the Paradise too. Then Vicky Carr-Brendel will join us, who is leading our cochlear implants business, and we'll give you a brief update on where we stand with regard to the CI business during and coming out of the COVID pandemic, but also an exciting update on the product side with regard to the Naida Marvel, which we launched around the beginning of the calendar year. Christophe Fond will join us, who is leading our Audiological Care business. He was with us last year. And I think he will give a strong update on the progress we're making in this important business for us. And then Martin Grieder will be on stage. You may remember him as the Head of the HI Marketing, but since 2 weeks is officially in the new role of leading our consumer hearing business. As Thomas has pointed out, we entered this market inorganically with the acquisition of the Sennheiser Consumer division. In reality, and I think he will guide us deeper, we did work already over the last years on our entry into this market. So we started organic and then followed up with an inorganic move. And at the end, I have the pleasure to have with me on stage Ludger Althoff, who is leading our global operations. In order to dive deeper on something we haven't shared yet, at least not in this forum, our priorities, our commitments, but also our journey on the ESG side. A quick look on the timing here. We've set aside the first 1.5 hours for the first 3 blocks of topic we want to cover. Then a quick break, which I hope is appreciated, then we'll take the next 2 topics, and then we have about half an hour for Q&A, and we want to be done around 4:30 with the event. So let me dive into the strategy and market update. I want to cover 3 topics here. A, especially in the COVID time I assume it is quite relevant to know how this market going. So I'll go deeper there. The second one, how are we progressing on our strategic priorities. And then thirdly, I want to go into the outlook. We call them the midterm targets for the group, which we envisioned to be valid for the next couple of years. Now if you look at the title of the section entering a new phase from a position of strength, I think you've seen us over the last few years working hard on 2 things: a, getting to a place where we grow consistently above market organically and then secondarily, improve our operations, and I don't just mean the manufacturing side, all of the processes we have in order to drive efficiency, gain investment capacity and split some of that going to the bottom line, some of that going into the growth investments. Now to some degree, we have concluded that phase. That doesn't mean there's not more potential from a process and a productivity perspective. But I think we're now in a good position where we are, I think, fairly saying we're running well, and we have the opportunity to accelerate growth organically and inorganically. A quick recap on why we think it is a good idea to either invest into us or to stay invested. Clearly, an attractive market in which we operate, very resilient against crisis, economically and now proven over the last 18 months, even against the pandemic, but then also a significant runway to improve the value we add for the consumer by driving innovation, better hearing is the basic functionality of what we provide, but moving upwards in the value we provide to consumers to something we call the healthy living companion. So more consumer value, but also more medical value. The second one, we are in a leading market position in the segments we serve, also an advanced vertically integrated business model, which we do use in order to share technology and market access between the different groups with quite some benefit to the individual P&Ls and the broadest and most advanced product offering. Ultimately, all that results into a strong financial position with attractive margins, which you've seen us lift quite significantly, but where we see further upside. But at the same time, we have the capacity to invest into growth organically and inorganically where this is appropriate. Let me get to my first point, the market update. First caveat, I'm going to talk about unit volume because the data does come from the information all manufacturers share in the individual countries in a compliant format. Let me quickly explain the graph here, and I'll take the upper left on the U.S. commercial market. You see the time period from April 2019 until August this year. The dashed line is 2019, beginning 2020. and then the blue solid line is 2020 until now. If you look at the numbers we have on all the graphs, the first number on the left side, shows the growth or the decline last year from April to March, which is our fiscal year, but I would also say the first year of COVID. The second, the blue box represents the 2-year CAGR, meaning how much did we grow versus 2 years ago on an annual basis as a market and really shows the vitality of the respective market. In the sum across the different markets, I think we're doing reasonably well in the recovery. Some markets are higher than you would expect as a normal underlying growth rate over the last 5 months. as you can see from the U.S. example, other ones are lower. But in the sum, I think we're seeing good progress on a global level. Now let's dive deeper. The U.S. last year, depressed pretty constantly. But now since March, really on a higher level, very constant, and you can see a 9% 2-year CAGR. So clearly above the historic run rate. So from our point of view, a little bit of a pent-up demand on a pretty stable consumer purchase interest. If you go to the right, you see VA, very different, significantly down last year. Now getting to the 2019 level, also pretty stable, but you can clearly see the different opening scenario of the VA, Keep in mind, they're more medicalized. In some places, they're co-located in hospitals. And then Germany has quite a different picture to the U.S. Last year, almost flat year-over-year, one of the best markets, but being stuck there with just 1% CAGR and quite some bumps on the road. And I think when we look at the way the German government is handling the pandemic and how they're limiting the movement of the population, you can see they haven't really gotten out from a consumer confidence perspective. So certainly, more to come. Helpful last year, but this year holding us a little bit back. Let me move to 2 more important markets: the U.K. as well as France. The U.K. and here, we only have quarterly data last year quite compressed in the private market, very nice pickup in the last quarter with 11% 2-year CAGR. U.K. NHS, again, very similar to the VA picture, I think, for the same reasons. And then the big outlier with the French market, not so much driven by COVID by the reimbursement change, you can see enormous growth last year in unit volume and even more so in the last quarter. Keep in mind, this is unit volume on value, this would be lower because the main volume comes on the lower price range. So overall, as I said at the beginning, if you put them all together, probably slightly lower than you would expect from a 2-year CAGR. But clearly, at the place we expected the market to be and I think good signs that recovery is coming in many places has happened and is stabilizing. Moving on to strategy. Allow me to start with the market trends first. And that's a very high-level picture, but we wanted to depict the most important elements you should keep in mind when you think about our marketplace. On the one hand, we and our competition is driving continuous innovation. On the other hand, the consumer expectations are evolving. They're evolving because they know what we can do. They're also evolving because they see other similar devices bringing new features, functionality, connectivity forward, and they're hoping for the same in a hearing aid. Now from a technological perspective, we moved into connectivity, which then enabled starting the application side. Keep in mind, we're still the only player in the market who has MFA, Made For All phone. So we have a significant advantage on the Phonak product range and on the Unitron product range. And now even on the AB product range with regard to the MFA. But then there's a very fundamental still technological mega trend going on in our industry, the continued miniaturization of components and sensors. And here, we just follow Moore's Law. The microelectronics technology offers us more opportunity to make our devices faster, smarter, better. Keep in mind, you need small batteries and long life cycle for those batteries, until you need to recharge. So lots of runway, enabling more and more digitization and big data over time. Now getting to the consumer benefits, I think the first statement. It continues to be the #1 priority for everybody with a hearing loss that the device enables even better hearing. You may be surprised, but at the end, nobody is at the place where they want to be. despite all the good progress we made. So this is a high priority for us. But then to the connectivity and the applications, people are trying and testing how can they anytime anywhere interact with the manufacturer or with a hearing care professional. Today, that's pretty important in the presales phase. You'll hear Christophe talk later about the lead generation side. It's less so used in the post sales phase with regard to remote fitting and other elements. We believe it will come over time. We believe that for the predominant part of our customers, the hearing care professional is the gold standard, but we have to enable that consumer journey and offer choice. And then the last one, particularly in the time of the baby boomers coming to our category. The healthy living companion becomes more important as a concept because they're looking for more functionality to help them in their fitness tracking down to more medically relevant things you can detect at the ear level and bring ultimately through the application forward. So a couple of big mega trends on which we're sitting, which make us confident that we will continue to be able to leverage innovation to drive value and penetration. From a strategy, no big change. And you may be surprised, although we said that in the last time we had a chance to talk to you. But even with COVID and even we're scratching our head very strongly, we didn't see that we need to change direction. On the right-hand side, you see our 4 focus areas from an organic growth perspective, leading innovation, expanding our audiological care, engaging more and deeper with our customers on the B2B side, HI and CI and moving in -- and moving more into the high-growth developing markets because they offer the long-term large growth potential here. Now one big enabler for us has been and will be the continuous process improvement and the structural optimizations. I'm sure you took note that our profitability went up significantly as a margin of revenue and clearly in line with what we have shared that we're going to start an engine of continuous improvement, which will run longer, but that we have a significant number of structural optimization opportunities. A significant part of the latter we've worked through. There's still some outstanding. We will not spend a lot of time here during today because you see the results, therefore, which trust you understand we will continue to march down this path. And then the last part, leveraging M&A to drive growth strategically. Let me tell you, I mostly believe that you should only go deeper into M&A if you're running your core business well. Hence the argument with a new face to some degree because we used the last couple of years, predominantly to get better from an agility, from an efficiency and from the consistent delivery of our results towards our customers. So we now have the right we have the means. And as you see from the Sennheiser acquisition as well as our indication we gave at the full year results that we want to do more on the M&A side, bolt-on wise and AC, clearly going to start using more of that potential. So I want to dive deeper into the growth initiatives, and you've seen some of them coming your way in the discussion so far. I want to give you a broader overview. Most of them will be covered in more detail in the colleagues' presentations. We started the discussion some 3 years ago on believing we can generate more investment capacity, where would you target it? Use that? Where are the best spots where you can put that in order to drive improved value for the customer and with it, drive more sustainable growth above market. And we came up with those 5 vectors here. Advanced, it's clearly innovation and leadership in the field we're active in, hearing performance hearing aid. The second one on the innovation side was the topic of expand. How do we engage deeper with consumer hearing, how do we elevate the medical value of the solutions we provide. Number 3 was about broaden, broaden consumer access. A big topic in the audiological care to some degree in the HI and the CI side. Number 4, how do we deliver better to our customers. And then we get to sales and marketing excellence. We get to value-added services. And then number 5, accelerate. How do we capitalize on the emerging high-growth markets. So those topics are in place since 3 years, at least within us as a consolidated [ view ]. So how do you drive them? And what's behind those high-level terms? The simple way we use to drive them is, we broke them down into individual initiatives, where we had the leadership skills. We gave that leader a team and gave them the means to go invest and build. In other cases where it may be new capabilities like digital marketing and lead generation factory, we actually recruited from the outside and then had a new team starting and building more and more. If you go down the advanced innovation leadership, significant R&D investments, expanding the capabilities in the company to those new technologies. Also one element here on to expand with the sensor technology. The other topic on expand was always the consumer hearing business, which Martin will go deeper on. So that's the product side. On the broaden consumer access pretty self-explanatory and Christophe will go deeper, omnichannel, lead-generation factories and expanding the network. And then -- we shared that 2 years ago, continue to invest on feet on the street where we can get to more customers in the B2B environment. Deliver. We will not share a lot about this year during today, but let me, on a high level, share at the end, I think we have an enormous number of sales and marketing people because we have a large number of customers to cover, and we're helping them. So getting better in how we do this while we're adding new capability, especially on the digital market. But at the same time, also building more muscle so that we can support our customers no matter if they're independent or if they are large retailers with the right resources on the ground while they're driving for the growth side. as well as the productivity side. And then the last one, accelerating high-growth markets. Christophe will give an example and continue the discussion on how we go about the China market. Now you think about the size of those growth investments. I will not share an absolute number, but I want to ensure you that why we're working in this and why the initiatives become more relevant, and we are beyond the start-up phase of the initiatives, we obviously need to provide more investment so that we can reap the benefits at the end. And even in the last year, while our revenue was down 6%, we increased our growth investment in these initiatives by more than 40% year-over-year. Rest assured, this year, we're doing another step-up with regard to those investments because we see the potential. So one I want to cover here, because there's not that much covered later on, is the innovation side and what we're doing there and where the money is going. Our innovation framework around the device, you've seen before, starting at the top here with a hearing performance in line with what I said before, then there are still unmet needs on comfort and fit, we're reasonably new to connectivity and applications, so a wide field of more opportunity and then the additional functionalities in particular with the sensor technologies. Now Tom will guide us through, but you will see that in Paradise on 1.0 and 2.0, we worked on all of those 4 dimensions, which I think is in line with what we said, hearing performance needs to be continued to improve, while other things are coming to add more value. Now that ultimately translates into, you need to invest more because we can't step back on the continued expansion of the processing power. So we want to have the best hearing device. We need to continue to invest into algorithms and increasingly into people on the payroll for artificial intelligence and all of that for the hearing performance. And then you're adding this new functionality, sensor technologies for the healthy living benefits, more investments into collaborations with medical institutions around comorbidities. The most important ones in our field are balance, dementia and depression. And then the application side, no matter if it's more a consumer-centric application and linking to existing ecosystems or building more applications, which are relevant for the person who is using the hearing aid as a hearing aid. And you've seen that in how we were investing over the last 2 years. Both years were double-digit increases in our R&D spend. Keep in mind [ while ] we were significantly improving our profitability. I want to come to the last part of my first presentation here, and that's how do we think about the midterm outlook and targets of us as a group. No change on the chart. This is exactly what we shared in May 18. By the way, everything I'm going to say about targets is, a, without Sennheiser. We haven't closed yet. Therefore, we're a little early to giving you clear indications. Martin will give a little bit of a direction there. So everything I'm going to say still is the existing business as a secondary [ always LC correct ], it's really hard to predict the currency. So we said 24% to 28% on the top line side, 34% to 42% on the bottom line, given the good work we've done on productivity, good fall-through here. And having said what I said on market and also feeling good about where we stand with regard to our competitive position, first couple of months in, we feel good about this guidance for the year. There are no more updates on that. If you want to call it the confirmation of the guidance. So how do we think about the go forward? I think it's prudent to first go backwards. -- because our midterm targets were in place since 2016. So you would ask how did you do? Simple chart, sales and EBITDA. The last one, '21, '22, we're depicting here at the midpoint of the guidance. So the top line was at 5% to 7%. This includes in the way we think about our midterm targets organic and bolt-ons, not major acquisitions. So you can see 6.6%. I'd call it at the upper range -- at the upper end of the range. If you look in detail on the chart, you see that the last 3 years were above the 8%. That's the pickup of momentum I talked about. If you look on the EBITDA side, you can see clearly outperformed what we put out as a midterm target here with 14% as a CAGR. And I would say it's a little bit of a headwind. Now it's an LC. And you also see an acceleration at the back end and you see a 25.4% if you take midpoint of the guidance, Allow me to point out this is an EBITA, not an EBITDA. So we've done pretty well against what we put out. Now in addition, don't want to go through all of the bullet points here, you can read them. But clearly, good growth opportunities in all 3 businesses. So innovation, commercial execution, you see expanding the presence from a feet on the street perspective, emerging new opportunities of technology and form factors for hearing instruments, audiological care don't want to recap them or Christophe will go there. One additional one he will talk about is the increasing broadening of the product offering for in the store. Some of that is new product. He'll mention the Sennheiser, other ones are on medicalized services. And then cochlear implants taking advantage out of the synergies on the R&D as we do with the Naida Marvel but also driving the same playbook on the commercial execution is on the B2B side. So clearly, a strong starting point, good momentum out of the work of the last years, increasing investments into those growth drivers. So it shouldn't be a big surprise that we are putting our midterm targets higher from the top line side, spelling out a 6% to 9% here in LC, which gets you in the midpoint into the high single digits, and then on the EBITDA side, our expectation that, despite us having achieved a significant high level for the industry and for ourselves, still the potential to continue to expand the margin by around 40 basis points per year. While we do everything we have to do on the organic and the inorganic side to drive the growth opportunity. So in the sum entering a new phase from a position of strength, an attractive market with remaining intact fundamentals, making good progress in the COVID-19. It's a little spotty. But I would say in the sum, higher ones are picking up the slack of the currently lower ones, and I think we will get through. It's a little hard to predict in which month everybody will be at normal growth rates. In my eye is a well-proven strategy. I think we continue to see traction with our customers, but also the financials would tell and the ability to step up our growth investments in line with the strategy we laid out. A strong midterm sales prospect driven by further market share gains in bolt-on M&A. And in addition, a further solid margin expansion potential on top of the strong progress we have achieved. With that, I want to move us to the next exciting topic. And Tom Lang is going to join us here to share about the exciting news on Paradise from the last year. but also this year. Tom? All yours.

When I joined this company and this industry 20 years ago, I was amazed by the amount of technology that is inside our tiny products. I was surprised to see and to learn how this technology can truly change people's lives. And I was touched and still am today to see how grateful people are if they can live a life without limitations, thanks to our solutions. For almost 75 years, Sonova has been operating at the forefront of technology and we have provided countless needs-driven and purposeful innovations to those that rely on our health. Our technology comes live in our products. And in my presentation, I'm going to show you how we are building on the success of the Paradise platform and how we are advancing our leadership thanks to the Paradise 2.0 portfolio that we are releasing now only 12 months after the launch of Paradise. As you probably know, we are launching new platforms typically every 2 years. But we have learned and improved our life cycle management so that we are now able to provide meaningful innovations also 1 year after platform launch. A quick reminder on what Paradise is under the umbrella message of rediscover the wonders of sound, we have launched a broad portfolio of innovative solutions in summer 2020. And Paradise hearing aids have unrivaled sound quality. And this was possible due to our proprietary PRISM chip who has twice memory compared to its predecessor. We have added the motion sensor to our hearing aids and this motion sensor can establish whether the hearing aid user is moving. And with this additional information, we can provide better hearing in such situations. Adaptive Phonak Digital or APD 2.0 was scientifically proven to reduce listening effort, especially in noisy environments. And AutoSense OS 4.0 is the brain of our hearing aid and this functionality was developed using state-of-the-art machine learning methodologies. AutoSense OS is constantly analyzing the environment in which the hearing aid user is in and is orchestrating all the hearing performance options and digital civil processing functionalities in order to provide the best listening and hearing experience at any moment in time. The second innovation pillar of Paradise is personalized digital solutions. We have not only improved the functionality of the myPhonak app by adding, as an example, the possibility for the hearing care professional to remotely test the hearing of the consumer through the app and through the hearing instrument. We have also added 2 additional apps, the myPhonak Junior app and the myRoger microphone app and I will talk more about apps later in my presentation. The third and last but definitely not least, innovation pillar of Paradise is universal connectivity. As you know, modern hearing aid can directly connect to smartphones. However, there is a significant difference on how this connectivity is implemented by the various manufacturers. As a matter of fact, we are the only manufacturer still that can provide universal direct connectivity to iOS, Android and even to any Bluetooth-enabled device. And this is possible because we chose to use the globally available standard classic Bluetooth protocol, and we did not use a proprietary protocol from Apple or Android, which would have limited the compatibility basically to a handful of phones. We are also the only manufacturer who offers true hands-free phone. Paradise hearing aids literally turn into wireless Bluetooth headsets and you can have a phone conversation without even touching your phone. Also unique is the possibility to have simultaneously 2 Bluetooth connections active. This means that as a user, you can, for example, watch a movie on your tablet. And if now a phone call comes in on your smartphone, the hearing aid will automatically and seamlessly switch over to the smart where you can have the phone conversation. And if the phone conversation is over, they will switch back to the tablet. The only thing that the user has to do is pick up the phone by double tapping on the hearing aid. We have sold an amazing 1.7 million hearing aids with this technology. I think this is a clear proof of the appreciation and the acceptance of these solutions in the market. We are also constantly running clinical studies to prove to fund the evidence for our claims and the effectiveness of our solutions. And we have already shared some of those results a year ago here a small summary of some new results that you have not seen so far. We have now the evidence that the dynamic noise canceler can reduce listing effort. We know that with motion sensor hearing, people find it easier to understand while they are working. We know that the majority of users prefer the speech enhancer on for speech intelligibility. We know that people prefer motion sensor hearing for speech understanding, environmental awareness as well as sound quality. And we know that the majority of people prefer tap control over more traditional methods to control the hearing aid. On top of the scientific evidence, which, by the way, is all published on our website, we also get amazing customer and consumer feedback. 90% of users -- of consumers would recommend paradise to their family and friends. 92% of hearing care professionals would recommend paradise to their peers. 93% of hearing care professionals agree that Paradise provides balance between audibility and comfort, and we will talk more about that balance in a moment. With Paradise, we have truly set the benchmark in our industry. But as I like to say, innovation never stops. And there's always things we can do better in our solutions and products. So we have run some additional research in order to find out what are the key selection criteria for hearing care professionals whenever they choose a specific brand or a specific product for a consumer. So the top 3 criteria are: number one, speech understanding; number two, sound quality; and number three, reliability. Now for an industry veteran like me, these results are not that surprising. Ultimately, what people want is to have meaningful conversations with their loved ones, their family and friends. And for that, they need to be able understand speech, especially in more difficult listening environments. So with this knowledge in mind, we started developing and started working on our solutions, and I'm very happy to announce that we have now solutions that we can launch now that cover all these 3 dimensions. Phonak Audéo Life is the world's first waterproof rechargeable hearing aid Whenever you talk to consumers about the concerns and their hassles with their hearing aids, you often get the following questions back. Why do I have to think about my hearing aids when I go and have a shower? Why do I have to take them off if I go for a swim? Why do we have to be concerned if it's raining or if I sweat a lot? We have already implemented significant improvements in terms of reliability in the past years, but we wanted to go a clear step beyond that. And with this product, the latest addition to the Paradise platform, we clearly cover old concerns of users in the context of water and humidity. Phonak Audéo Life offers all the superior performance functionalities of the Paradise platform like Made For All connectivity, rechargeability to Bluetooth connections and so forth. But how is it possible to develop such a product without it making it looked bulky. And I think this is an area where technology leadership comes into play. Our engineers have totally redesigned this hearing aid. We have added silicon ceilings to all possible entry points for humidity and water. We have moved the microphone openings. We have now introduced a coding for all the components we have redesigned the receiver connection, and we have changed the charging technology from a galvanic or contact charging to wireless charging. I think this is a great example for needs-driven innovation. But what about the other 2 pillars? What about sound quality and speech understanding? How could we possibly improve those 2 dimensions in Paradise? Well, let's have a look. [Presentation]

Active Vent is the world's first intelligent hearing aid receiver, and when we say receiver in our industry, we actually mean loud speaker. So-called open fittings have become very popular in the recent years, and this is because they are super comfortable for the hearing aid user. The downside is that these users that were fit with an open vent cannot benefit from the full performance of the hearing aids. So as hearing care professional, you always have to decide where you put your focus on more on listing comfort or more on speech intelligibility. It was always a compromise. Thanks to Active Vent, people can now benefit from the best of both worlds, the comfort of an open fit as well as the hearing performance of a closed fit. Conceptually, this idea of opening and closing the event is not new. We have been discussing this for many, many years, but only recently has the technology and the miniaturization become mature enough in order to make this technology a solution viable for hearing aids. You see on the slide here how the microelectronics work. On the right side, you see how these valves within the receiver is opening and closing and this is all happening automatically steered by AutoSense OS. There is no need for the end user to do anything manually. There are 3 core use cases where this technology provides significant benefit. First of all, if the user enters a loud environment like a restaurant, for example, there you want to close your year because you want to block the noise from the outside. Second use case if the user is listening to music streamed from mobile device. Then again, you want to close your ear because you want to avoid that the base or the low frequencies is leaving the year before you can hear it. And the third use case is if you have a phone conversation, again, you want to close the ear because you want to avoid noise coming in from the outside. We have run clinical studies to prove again, the effectiveness of this solution. We have seen that the own voice is not -- the own voice perception is not degraded, while hearing performance is optimized. We have clearly seen superior sound quality for streaming media. And most importantly, we see a 10 percentage point improvement in speech understanding in noise. We also always like to say hearing is believing, and this is why I brought a little demonstration for you today. What you're going to hear in a moment is a recording made through a paradise hearing aid with active event. The user of this hearing aid is in a loud environment like a restaurant. And here she is listening to music that is streamed from a mobile device. Initially, in the recording, the vent is closed, which is the optimum setting for this environment, and you will be able to enjoy the music. After roughly 15 seconds, we open the vent. And you will hear how now noise is conflicting with the music. And then after another 15 seconds, we closed the vent again, which is again the optimum situation. Let's give it a try. [Presentation]

All right. I'm sure you were able to hear a clear difference between the open and the closed vent. And I hope you understand now why we are so excited about this new solution. We are also striving to expand our offering and reach more consumers. And I'm happy to announce that with the new Phonak CROS P we have a solution for people with unilateral hearing loss. So this is a product that is designed for people that are death on one ear and have either normal hearing or an aidable hearing loss on the other year. Now you could argue, well, can the better ear not simply compensate for the? That's unfortunately not the case. So people with unit natural hearing loss struggle with understanding in noise, they struggle with localization. And often, they cannot hear or understand if people talk to them on the deaf ear. Thanks to CROS P, all these consumers can now benefit from superior Paradise platform and clinical studies have shown that they get improved speech understanding in noise environments as well as they are able to follow conversation wherever that conversation of the speaker is coming from. CROS P is available in 2 form factors, a rechargeable model as well as a model with disposable zinc air batteries. Let's have a look at our app portfolio. As I mentioned in the beginning, we have expanded our app portfolio by 2 additional apps, one of them being the myRoger microphone app. This app is for users of our latest Roger microphone, the Roger on. And with the app, they can control the settings they can, for example, override the automatic microphone selection whenever this is needed and they can do it in a discrete way without having to touch the Roger microphone as such, because the Roger microphone may be lying on the table or maybe on a lanyard around the neck of a presenter. The myPhonak Junior app is for both, the loving parents that want to have the convenience and the flexibility of remote sessions with their child's hearing care professionals as well as for the child that is now able to control their hearing aid under some controlled boundary conditions, of course. So this app is truly designed for the needs and the requirements of the pediatric market. With Paradise 2.0, we are significantly improving the usability and functionality within the myPhonak app. We are adding 3 important features that were clearly asked for by the market. Specifically, these are the myPhonak memory. We are adding sensitivity options for tap control, and we have significantly simplified the access to remote support. So let me summarize. We are building on the success of Paradise, and we are launching a package of purposeful needs-driven innovation now with Paradise 2.0. This package consists of the world's first water proof rechargeable hearing aid Audeo Life, which addresses the concerns of people with humidity, sweat, taking showers and so forth. We are launching the world's first intelligent hearing aid receiver Active Vent. With this receiver, people have access to the best of both worlds, the comfort of an open fit as well as the hearing performance of a close fit. With Cross P, people with unilateral hearing loss can benefit from the superior Paradise technology, and we are constantly working to improve our app portfolio, and we are adding significant innovations in our latest myPhonak app. With that, I would like to thank you your kind attention. That is what is new in terms of hearing instruments. And with that, I would like to hand over to Victoria Carr-Brendel, our GVP of Advanced Bionics.

Well, it's really exciting to see the type of innovation that's going on in the hearing instruments side because we get it over on the cochlear implant side very quickly thereafter. So I'm Vicky Carr-Brendel, and I am the GVP, President of Advanced Bionics, the cochlear implant side of the business. And I've had the privilege, and I am so proud to be the President, and I've done so for the last 2.5 years. So today, I'm going to talk about a quick business update and then really focus on our Marvel CI launch. That has been so welcomed in the overall market and has really, I think, differentiated Advanced Bionics again. So this slide is really giving you a market update. The market is up on the top and specific to Advanced Bionics down at the bottom. And really, what I want to talk about here is that we're seeing the market recover from the pandemic basically to mid-single digits and really seeing that in Europe, North America and for that matter, China, maybe not so much in the U.K. but basically seeing those numbers kind of return to what it was in the calendar year of 2019. We're also seeing ourselves have recovery associated with our competition. And what I mean by that is that when we measure our competition, market share gain, we're seeing ourselves recover in that respect as well. But really focusing on our continuous improvement that Arnd talked about has helped us improve our gross margin significantly. Now specific to Advanced Bionics, we know that the Marvel launch has been transformative. And we see that many of our customers have returned to their ordering pattern that they had prior to the pandemic and the field action. So we're really grateful for that. And as I mentioned, our continuous improvement has improved our margins as well as our focus on commercial excellence, and that's been really excellent to see because it's focusing on both the customer and on the consumer journey, and those initiatives have been very powerful. So let's talk a little bit about the Marvel CI launch. So first of all, as with our Paradise product portfolio that Tom showed you, our Marvel CI has the first of many things as well and one of which is a purpose-built cochlear implant system for -- specifically for pediatrics. And we get to leverage what's happening over on the Phonak side, which you know they're specifically so great on kiddos. We got to do the same thing over on the cochlear implant side. And so Sky CI Marvel is the first purpose-built cochlear implant system for pediatrics. But it's not only that. It's really amazing. When I talk to patients who are putting our technology on for the first time, this Marvel CI product, they talk about immediately sensing the difference in their hearing performance and the quality of the hearing experience. And so that's been so excellent to see. And that, of course, is porting over the technology that we had on the Marvel hearing instrument side and putting it into the cochlear implant side. They also noticed right away how easy it is to wear this device it's smaller, it's lighter, and it has an ergonomic curve to it, as you can see from the pictures that enabled the patient to have it, sort of, hug the year. And it's really given them the ability to wear this product for much longer times than previous products. Remember, our cochlear implant patients are wearing these products from 18 to 20 hours a day. So it's really important that it's comfortable. But the Made For All phone technology has really been a game changer as well. Historically, patients -- our recipients have to wear accessory devices around their neck in order for them to have virtual connectivity with Bluetooth connectivity. And what we see here is that we have integrated that. So Made For All phones, and we can connect with virtually any Bluetooth-enabled device, and patients are really adoring that feature. Specifically, we have 4 different ways that we talk about the Marvel CI technology. So there's the hardware, and I mentioned the processor itself, but we also have a whole slew of accessories that enable our patients to hear in different hearing environments, not to mention an ultra-thin head piece, which fits comfortably under helmets, for example, for kiddos who are wearing bikes -- or sorry, riding bikes. The AutoSense technology is what I think is having those patients, those recipients feel that they're having a different hearing experience. And Tom talked about what AutoSense does, but it basically takes a noise out of the environment and allows patients to hear what they really want to hear. I mentioned connectivity that Made For All ability virtually any Bluetooth-enabled device as well as our ability to integrate to our best-in-class Roger Direct. And therefore, they don't have to have accessories pinned on to them or placed on to them. So having it integrated has been also a game changer. And then for the ability for our recipients to be able to change their hearing experience in a discrete fashion with our remote AB app. So taken all together, this platform is really a no-compromise platform. But let's hear what a patient had to say about this. [Presentation]

Yes, AutoSense, again, has been a real game changer. Well, with all of this technology, what we've been able to do is refocus our attention on growth, and what we see with our customers is folks who have ordered our Marvel CI platform are reordering it at a rate of 95%. That's really exciting for us. And not only that, I feel like we're finally leveraging what is the potential of Sonova, and that is to say, 30% of our supported recipients are being referred to us by our Sonova partners, whether it's audiological care or wholesale, that's in Germany, 30%. And something I'm particularly proud of is the focus that we've had even before our corrective field action on focusing on reliability. And what we've seen is an improvement of our reliability numbers, in other words, a decrease in the number of complaints that we have on all of our external products, our external processors, cables, head pieces, batteries, et cetera. So a 30% reduction over the last 2 years has been so exciting to see. And lastly, on the innovation part, talking specifically about AutoSense, we have 3 out of 4 patients preferring this new AutoSense. Now let's remember, that's in comparison to Naida Q, our previous generation, which they really appreciated the improvement they got there. So this is almost a step-function opportunity for them to see even better hearing performance, just like Arnd was saying, that's what Sonova stands for. So we've seen significant progress in a multitude of our areas, which I think is enabling us to focus back on growth. So our key takeaways, it's been a great year. We've really started it well, and the Marvel launch has really helped us drive to the growth that we're seeing. We also have been honored and we appreciate that we're solely but surely making progress with those customers who lost trust in us because of the corrective field action. And I'm happy to report that we've had some great progress in that area as well. But a strategy isn't a strategy if you change it every day. And so our strategy remains very constant and very consistent with the overall Sonova strategy and that is we'll utilize our continuous improvement, we'll focus on great execution commercially, and you will see growth. So with that, I thank you very much for the opportunity to present on behalf of the Cochlear implant folks, and I would like to introduce you to Christophe Fond, who is our GVP of Audiological Care. Christophe?

Thank you, Vicky, very inspiring. Also introduction. So I'm Christophe Fond, I'm in charge of Sonova Audiological Care already for some years now, for almost 5 in this responsibility and very glad to be with you today. Hopefully, next year, we'll be in person, but we'll see. What is Audiological Care. It's a direct access to the end consumer for the group. If you look at the numbers, we have 3,200 point of sales into the world, and we have 7,000 employees, mainly HCP so Audiologists in contact with the end consumer. If you think about those 2 numbers, they have been pretty stable in surface compared to last year number. In reality, we went through an optimization of the network, but also an optimization of the in-store capacity to get closer to the consumer demand. And by the way, to increase significantly the top line and the bottom line out of this optimization. In addition, during that journey, we are implementing omnichannel in all our markets in the world. So we have a global strategy introduced by Arnd earlier today, but I will come back in more detail of the omnichannel, but omnichannel is what we do, and that will be the profile of our organization already now and more in the future. And last but not least, in addition of all that, we go for a strong expansion of our network. So we are building our internal capacity to accelerate significantly the expansion of the group. Also, I will cover that with you today. If we look at the strategic priority and the growth driver, we are starting from continuous improvement. And this is what a good retailer will do is what a good organization is doing. And it's where we are financing, by the way, the full growth initiative of the pipeline from our continuous improvement. 3,200 stores, 7,000 employees. It's a large network. And from there, by optimization, you can really go to the next level. And the next level is the expansion, the right to do M&A or the right to do GreenFields, that's exactly what we get from this continuous improvement. And that's great because we are building now acceleration in openings GreenField and M&A, and you will see a couple of numbers I will share with you. In addition to that, and I introduce that with the omnichannel, we have to move to consumer journey innovation. And that is a big learning already, it was part of the strategy 2 years ago. It's also an acceleration of our strategy. And we learned that from the COVID. And there is many different examples. The restaurant industry moved almost overnight to purely one-to-one to end consumer into the restaurant type of relation to an omnichannel proposition. So we have seen that in different parallel industry also. And it's for us a clear reason to accelerate and to get closer to the evolution of the consumer behavior. And on top, and that's the beauty to be part of the Sonova Group and organization also including the new development with the -- to come acquisition of Sennheiser is to introduce into our network, new product and new services. All that, it's our strategy. It's also, by the way, in that order, the agenda we are going -- I'm going to share with you today. When we go back now to continuous improvement, this is just an example of what can be continuous improvement, but it's very easy to understand. Our performance of business is mainly coming from a triangle in between marketing, regeneration in between in-store network optimization, and, by the way, proximities to the end consumer and in-store excellence means the productivity of the system at the end of the day. You cannot succeed if you are good only in 1 part of the 3 pillars. You have to cover the 3 and to put the 3 together as a system, you have also to have the enablers of the system, and then you get traction. And then you get to the acceleration and then you move to higher top line, higher productivity, but also immediately our higher level of EBITDA at the end of the day, of the system. And this is what we are focusing, and focusing on daily basis. In addition, and here, we are moving to the next level, it's the M&A and the development of the business. So it's 2 pillar. Is the M&A on one hand and the GreenField. What we want with this strategy is network expansion. We strongly believe that despite digitization of the organization and so on at the end of the day, in our industry, the consumer will need, at certain moment of the journey, to go back to stores. And we have every day proof of these ideas of concept of what we believe. So what we want to do first is to go for optimization of the network and what we are doing basically on a daily basis. And then from this optimization, we moved to new openings. And on that, we are increasing. We took the decision to increase the balance sheet investment. So we leverage more of our balance sheet and move from EUR 50 million to EUR 100 million to bolt-on budget in CapEx on a yearly basis in order to get more acquisition. Here, it's excluding big acquisition. On the other hand, on the right hand of the presentation here is a P&L investment, so it's more the GreenField. And on that, we have 3 vectors for this GreenField. We have the normal store, the store you know in our industry. We have also the World of Hearing, which is our big format, full product and full services, and we have this urban spoke strategy. I will come back to that one. in the next pages and the shop-in-shop as an opportunity. But shop-in-shop is not a detail of our industry, look at what we do with boots in U.K. We have a shop-in-shop model, but it's massive. And with that, we have 30% of the U.K. market with shop-in-shops. So it's also something coming very nicely to our portfolio and offering. At the end of the day, what we expect from this network expansion is mid- to high single-digit growth. In addition to our classic organic growth. So this is not a small ambition. This is a big one. Moving to that in terms of where in terms of strategy, First of all, we do M&A everywhere in the world. So there is no market limitation on the existing market but also looking at new markets. In addition to that, we have strategic markets, and the strategic markets are the 7 markets you have here from Brazil to U.S., Canada, so strong presence in North America, and we have to accelerate that one. It's also on the right, Japan and China, where we are also in strong acceleration, but it's also the market we are traditionally in, which is, in this case, France and Germany. So those 7 blocks are the core strategic market doesn't mean on the other hand, we don't do M&A everywhere in the world. And for that, we changed also the process in the mindset of our MDs of our local CEOs it's to have the M&A at core of the organization and not something we can do on top. But something really we talk about it in all reporting and so on permanently. One of the model we are driving at high level of speed, it's World of Hearing. Here we go. And the World of Hearing, so if you remember for the one joining us last year and 2 years ago was a launch of the World Offering. It's an urban spoke model. And you can see from the pictures, it's a bigger place. It's a bigger place because it's closer. It's A location for -- so one having a retail knowledge A location is very much shopping mall high street level. Normally, in our industry, we are more in B location, but that's A location where we are closer to the consumer. We are opening our door at the end of the day to the consumers. It's an urban spoke model because it's every World Offering, it's for 15 stores around it, and it gives the opportunity for the consumer to have fitting access to all our stores, but when they want to move to a higher level of medical sophistication or accessories and so on, they go next door to the World Offering and they see and they have access to all of it. It was launched 2 years ago, and we went to a pilot. I will show you the numbers of pilot and stores. But what is important to have in mind, and that's on the right hand, it's a proven benefits. First of all, it goes faster. So the end consumer coming to the store being in contact with the product are getting to a faster closing process to buy the product. Secondly, it's higher value for product because the opportunity to present the product to give access and the chance for the consumer to test it, give higher value to the technology presented by Thomas before. And secondly, and -- that's very interesting one. We have to keep on pushing in that direction. We get access by also our presence and profile of store and so on to a younger group of consumers. And part of the strategy of this industry, for sure, is to get in relation long term to the -- lifelong relation to the end consumer. It's all about it. And when you go to this younger consumer means you create 3 years, 4 years or younger, you create the opportunity to have an additional 20% or 30% of sales on top of the size of the market. So it looks like capacity management, we are by doing that, increasing the size of the market at the end of the day. And for sure, to be more visible, to be closer to the end consumer. It's a development of brand awareness. And what you can see from the pictures, it's always World Offering plus the local brand, so it can be Schoonenberg for the upper right. It can be in [ Jena ] also. And on the bottom, you see the interior of a connector in Canada in Vancouver where you have also a World Offering. We have also in New Zealand and different places. If I look at the map, so the upper part on the right-hand was what we had and what was planned in terms of development 2 years ago, 10 stores, 4 countries to see how it's working and to see if it's working was a pilot. Now we are moving to this '21 '22 to '22, '23. So we are precisely in this period, and we increased the number of countries by 6 and 6 plus because I will come back to the plus later on in the presentation. So it's 6 flag you have here on the map, and we go on those stores to 100. At the end of the day, the ambition is pretty simple is to have one World Offering for 15 stores and to apply the logic of urban spoke. And we are very well engaged into the journey. We are in the middle of the journey. If you do the mathematic, we go to 200-plus World Offering at the end of the day, and that's exactly where we want to be globally. Moving from the expansion to the consumer journey and the innovation, that's a complex one. But it's -- I will go step by step. If I start from the left, it's what a normal omnichannel should propose. So personalization, lead generation, omnichannel type of services or multiple services that you can buy online or you can buy into the store. And also at the end, when you move this omnichannel logic into medical world is telehealth. So this is a proposition we are having today for our consumers. When you move to the ecosystem, it's -- at the end of the day, you understand that very well is to for the consumer to have the opportunity to start the journey into Internet and then to move to the store and potentially to finish the journey with Internet or call center services can be the other way around and that's the omnichannel logic. In order to get there, you need to have strong enablers, which are IT system, digital marketing and product. We know that the product from Sonova are having full connectivity. So that's a good starting point. We are also very well engaged into this key enabler journey because we have the IT system and we have the digital marketing. So we are able to develop and implement this ecosystem. What is the vision here is pretty simple. We -- this is a market today. So the dark blue, it's in-store. So light blue, it's the blend. So the omnichannel in store mix with digital, Internet and so on. And the red on top is the pure digital means 100% of the journey is digital. We don't expect -- and moving to the right, we don't expect this pure digital journey to be much bigger, probably some improvement, more percentage there, but not big. What we expect is a blend one, which is at the end of the omnichannel to be big and represent 70% to 80% of the transaction. And again, we are well engaged into that direction. In order to support this ecosystem, you need to have a very strong engine in lead generation. And we created last year, 2 years ago now, December '19, the lead generation factory. So it's a platform we created in Berlin, in order to have an in-house digital marketing platform for online lead generation. So that's very important. That's the internalization of any social [ blue ] type of proposition, with plus, plus on top of it because the difference in between internalized lead generation platform and externalized is you own the database, which is a fundamental. And you are able to reactivate this database to [ whole ] purchase, which is a fundamental logic of our industry because it's where you are creating value. And also, you have at the end, the possibility to send this data-base to different stores and that create productivity at store level. So the combination of these 3 factors is this what you get from the lead generation factory. And on the right hand of this presentation, you can see that we have an extensive development in Europe. We have also already very good development of the U.S. market and also very important one in China. And talking about China, because that's totally new to you, this is what we have, and we took -- so a strategic decision to move in China from the upper part of the funnel from the lead generation from the digital world, knowing that we have also, being Sonova, a very strong wholesale platform means consumer contact platform into China. So we start with the lead generation, and we create a strong contact, a strong relation with local player, but big local player. We talk about the Alibaba, jd.com. We talk about the strong digital player of the Chinese market, the WeChat and Tencent and so on. From that standpoint, we moved to the engagement via our own application. And I will show you just after a couple of numbers on this engagement, we are already pretty high in a short period of time. And then from this engagement level, we shift to the conversion. We do purely online conversion, so via jd.com, or Tmall, WeChat, but we do also the network partner development. We are working on a daily basis with 320 stores in China, which are our customers wholesale in China, and we are delivering leads to those player. In addition of that, we have our own store in China, a small base for the moment, but we are learning a lot from it. We are developing the store in a GreenField. And by the way, also World Offering will become a platform for the Chinese market. So all our knowledge and this medicalization and the additional level of service will come also the construction of the brand equity will join the Chinese market. From there, a few numbers, and I will not be too long on that one, but very interesting one. On our WeChat proposition, we have 430,000 followers. So 430,000 followers, you could say, for the Chinese market is not that big. They are 1.6 billion. But you have to compare that with the current activity of this particular industry. And those 430,000 followers are 2x more than the 5 followers of the industry into this proposition. So we are 2x bigger than the accumulated 5 next one. And this year, where we create a lot of traction because we learn from them, we understand and we learn also from the conversion going to our network, consumer network, customer network in China, and that's very interesting. The second part on the right here, it's our rating in JD.com. So it's not only a volumetric traction, but it's also moving to qualitative traction. And here, we have been ranked in the specialized store in JD in the top 20 out of 400 specialized stores in China. And that's great, and that's a very good beginning for us in China. It's just the beginning of the journey. But moving to omnichannel, believing China is a digital market. I think that's pretty clear. Starting from the upper part of the funnel, I'm sure it's the right strategy, and this is where we go. Finally, and this is the last part of my presentation. It's the adjacent product and the additional product we are implementing in our stores. So you learn that now we are moving that into our World Offering, but not only also in the 3,200 stores where we have adjacent product to launch or launched already. Sennheiser will be one of the products. You see that here with a logo because it's where we have thousands of hundreds of contact with our own end consumer at the end of the day. We are also developing, and that will be after my last slide, some medicalization services moving to more tinnitus to moving to more balanced or cognitive training. This is not totally new for us. So it's not a new segment. It's just a new segment to make it bigger. We are in cognitive training or we are [ Tencent ] already playing this game and getting a lot of traction years ago in Belgium, in Germany in mature markets. But to make that as a system is new for our organization. Two examples. So the cognitive training is what you have here on the upper left. It's 10% of the German network currently, we are moving that to the rest of the world. It means with this cognitive training, it's pretty simple to understand. We help the consumer at the end of the day to use the hearing instrument. And by helping him, we create more stickiness in between our relation to the end consumer. So we increased significantly the lifelong relation with the end consumer. When you move to the right here, it's more pilot phase but very interesting one. We are having a platform with -- in 2 markets, 2 countries with Amgen. So you know Amgen. Amgen is specialized pharma in oncology, but also in osteoporosis. And we were talking with Amgen and developed an interesting idea, very simple concept. If you have a risk of falling and if you have, at the same time, osteoporosis you increase your personnel risk by a high, high, high multiple, I will give you a couple of numbers after. But basically, there is a direct relation with audiology and balance. And balance training is very important of our proposition. There is also a very strong relation with balance and falling and falling in relation with osteoporosis because at the end of the day, if you have a balance issue and osteoporosis. This is no comorbidities. There is no relation in between the 2, but if you have the 2, and if you fall, you are in big trouble mechanically. And this getting out of the silo of the different industry, talking together about database, consumer revolution and consumer behavior, we find that very interesting and very interesting for future development. All in, this is -- this was my presentation in substance, it's super easy. One, it's -- we want to accelerate the size of the business and increase the number of stores. Secondly, we want to increase significantly our omnichannel proposition by having more system of omnichannel contact with the end consumer, but also more reason to have touch point by number of services or additional products in our offering. And at the end of the day, what we want is to have all that together at the same time by increasing significantly our presence in the world. and this is what we do with the execution of this strategy. Thank you very much. I think now we have a short break, and we have all to come back at 3:10. [Break]

Welcome back, everyone. I hope this was a good break for everyone. We were a little longer given that we were trending ahead in the sections before. I welcome you back to the second part of our Investor and Analyst Day, and want to invite Martin Grieder to share with you our new venture, our new business within the Sonova family. He will dive deeper in Sennheiser Consumer Device business, which wasn't as public as our business is, but he will also talk about where we want to take the business with regard to the speech enhanced hearables. Martin?

Thank you, Arnd. And a warm welcome to everyone, and good afternoon. I'm delighted to be here today and to talk to you about our consumer hearing business and an exciting new growth vector we are entering. Those of you who have been with us for more than 7 years, and I think there's quite a few of you will remember that at my first Investor Day's presentation, I showed the slide in my presentation, which was full of Nespresso capsules. I did that to illustrate my 20 years plus of experience with Nestlé and Espresso in the consumer goods industry. This experience, obviously now comes in handy as I go on to lead the consumer hearing business for Sonova. During the next 30 minutes, I will provide you with an update on our acquisition of the Sennheiser Consumer business. I will then give you an overview of Sennheiser's business. And finally, and probably most interestingly, I will share with you the growth opportunities we see in this area and which specific segments we want to focus on. But let me dive right in and go back to the deal rationale of the Sennheiser Consumer division acquisition. We are joining forces to enter a rapidly developing speech-enhanced hearing segment, and we are jumpstarting our internal developments we have done so far. We are also entering a very exciting new growth vector, which is growing double digit, and which is a true wireless segment. We are gaining access to new distribution channels we are not in today. We are leveraging a strong Sennheiser brand through our licensing agreement, which you will have in perpetuity, which is attached to the acquisition deal. And we will be leveraging our combined and complementary strength in the area of sound quality and otological know-how. And finally, we believe we have a number of significant synergies in the area of production, R&D and channel access. So all in all, a great match coming together to really succeed in a new exciting segment. Let's look at our 2 respective companies, and let's look at what we have in common, which is really important around things like culture, values and passion, and where we complement ourselves really well and bring different and complementary strengths to the table. We both have a strong passion for audio in our respective areas. We are both leaders in our market or in our segment. We have complementary strengths, us in audiology and Sennheiser in sound quality. Sennheiser brings a great brand to the table, and we have complementary distribution networks, strong distribution networks. We count tens of thousands of ACPs as our customers, and Sennheiser is present both off-line and online in all of the key consumer goods retail chains. And what we have in common is a customer and innovation-centered corporate culture. And as we have been working together now for the last couple of months, we also feel that we have a good and similar culture, which we can work from, which is fantastic. So a great match as we come together with our respective strengths. Now if we start with the consumer, and we ask ourselves, what do consumers look for when they buy a headphone? They look, in the beginning, and if you look at the 5 key consumer needs or at the top of the needs hierarchy, you see that actually Sennheiser and Sonova, we have all the expertise to deliver great products in those areas, specifically, #1 is wearing comfort, an area we've gained expertise over many, many years, which we can bring now into this new consumer hearing business. Second, as you would expect, sound quality, something which Sennheiser is renowned for, and which their entire success has been built on over many, many years. Then you have long battery life and you have better hearing in noisy situations, a key competence of Sonova we have built over many years. And finally, you have noise reduction, something where Sennheiser, with its ANC technology, but also us as of late, have also built our ANC technology, and we are bringing these 2 technologies together. So again, if you look at the competencies we're bringing, and what is required in the speech enhanced hearable business, and I'll talk more about that later on, you see that we are well suited to play in this market and to win in this market. What does Sonova bring to the table? I would say, first and foremost, what we call our Sonova X business system. We have been implementing this Sonova X business system over the last couple of years within Sonova, where we identify key growth opportunities. We put initiatives behind them, and we invest into them. And in doing so, we drive growth. We also look at continuous improvement. And in doing so, we drive bottom line improvement, and we have a strong focus on talent management. And you have seen with our results in the past that this system is working. And we will be using this system, and we will be implementing it in Sennheiser. As a matter of fact, this week, I'm flying to Sennheiser tonight, and we are actually having our immersion workshop, which is all about the Sonova X business system. Then we have great technology in the area of wearing comfort, battery life, which is really relevant for the true wireless segment as well as custom fit. We have a global setup, and we have significant economies of scale in the area of purchasing and information technology. And we have, obviously, a very strong audiological care distribution network where we count tens of thousands of HCPs as our customers, and we have more than 3,000 stores of our own. And I'm -- I was delighted before to hear from Christophe that I already have a very, very excited customer who wants to buy our product tomorrow, which is great. Thank you, Christophe. Moving on, where do we stand in terms of our acquisition? Well, we are -- over the last couple of months, we worked together on carving out the consumer hearing business of Sennheiser and working on this period between sign to close. The collaboration has been really good, and we're working in a collaborative and great way together with similar values, similar culture, and we are, today, well on track to close this deal before the end of this calendar year. I'm also pleased to provide you with an update that we have received all relevant antitrust clearances from the relevant jurisdictions. And here, we are green and good to go. If we look into the future, and we have actually also kicked off another stream with Sennheiser what we call our 100-day stat plan. And we have been already working together with Sennheiser on what the growth opportunities will be and what the initiatives will be. And based on that, we, today, are confident, and we have an ambition to build a double-digit business or consumer hearing business. In addition, with our Sonova X system, which we will be implementing, we are also confident that we will be able, over time, to move this business from a single-digit margin business or beta business to a double-digit business. Let me now move on to Sennheiser and share with you a little bit how this business looks and feels. Sennheiser does about EUR 250 million in sales annually. It's stronghold or most of it shares close to 50% is in EMEA, but then it's nicely distributed between the Americas and APAC. And within APAC, they have a strong position in China, which we obviously like very much. Also, they have about 41% of their sales already today online, either directly through sennheiser.com or through outlets like Amazon or JD, et cetera. And we believe there's good runway there to further drive that online business. As you can also see here, Sennheiser is basically present in all key consumer goods retailers around the globe, and we will be able to leverage and further build these great relationships, which Sennheiser has with its customers. Brand, obviously, a key reason why we are doing this acquisition of the consumer hearing business of Sennheiser. If you look here, we have an aided brand awareness or Sennheiser has an aided brand awareness, which is higher than Bang & Olufsen and higher than Jabra, obviously, below some of the big players like Apple and Bose. But when you look at the conversion, meaning going from branded -- aided brand awareness down to commitment to buy, you see that actually Sennheiser has a 14% conversion, which is only shy of what Apple and Bose has at 17%. So they have a really, really loyal fan base, and that's a great point or a great base to start from. So moving on to Sennheiser's portfolio. You can see here, they are basically in 4 different segments. One is the premium headphones. The other 1 is the Audiophile, which is their heritage. Then they are in the Enhanced Hearing business. And recently, they entered the premium Soundbar business very successfully. I will now talk about each one of those in a little bit more detail and peel the onion. Let me first start off with Premium Headphones. This breaks down into 3 different segments. The big one and the really attractive one is True Wireless. Last year, it was around EUR 16 billion. You'll see later in the slide, it's already growing. This year, it's expected to grow to EUR 22 billion. It has double-digit growth. And we, together, Sennheiser and us, we have a good competitive position in here with our combined strength to drive nice growth in this segment. Over-the-ear is made up of both Bluetooth over-the-ear and also steel cable over-the-air. Bluetooth growing mid-single digit and obviously, cable declining. Most of Sennheiser's headphones today or over-the-ear headphones are already Bluetooth. Globally, it's a EUR 4.4 billion market. And again, Sennheiser has a good competitive -- strong competitive position here. In-the-ear, and here, we're just talking about in-the-ear as semi wireless and cable. It's still a big segment, but obviously, as you would expect, declining as we speak. If we now again dive a level deeper and look at the interesting segment, which is True Wireless, you see that Sennheiser has been able to build a strong portfolio over the last 12 to 18 months. They have launched their good product. They have launched their best product. And today, actually, as we speak, they are launching their better product, which is the midrange one. And you see we are now nicely covering the price points from EUR 129 to EUR 299 with all different technologies and benefits in those. And this portfolio has been driving nice growth for Sennheiser in the past. I'm now sharing with you a video of the launch of the CX Plus, which is basically out today, first time, so you're seeing something really new and fresh. [Presentation]

So if you're excited and pumped, we are taking preorders as of today on sennheiser.com and on any other major online retailer, a great product, which they're bringing to market today. The next segment is Audiophile. And this is obviously Sennheiser's heritage. It's where they've made their name, where they've made their brand. It's really handmade on transducers. It's a smaller segment, at EUR 200 million, growing mid-single digit, but as you will see in the latter part of my presentation, providing some great growth opportunities. And here, you have some headphones if you go to the real, real top end, they've got a range, which is called HD1. It starts at EUR 55,000. And obviously, depending what you put on there, there's no upper limit. So if anyone has some cash to spare, I can definitely connect you to one of those headphones. Soundbars. Well, this is actually a great sound bar, which uses immersive 3D AMBEO technology. Sennheiser launched this a year ago and entered the premium end of the Soundbars segment. Obviously, companies like Sonos play in there. This device, you see here, retails at EUR 1,500. So it's expensive. And they had a -- and Sennheiser has had a very successful entry into the premium segment. And if you read a little bit through future source, they have been able to establish quite a very nice market share in this premium segment within less than a year. And as I say, in this premium segment, I would say Sennheiser, with this technology, has a very good competitive position. Moving on to the Enhanced Hearing segment. This segment is for us, obviously, a perfect base to build our speech enhanced business from. Currently, Sennheiser sells the RF transmitters and headphones plus the Stethosets. The Stethosets are great for really elderly people because they're a good form factor, which really they can use, especially people who have problems with dexterity and so forth. These are still small markets, growing low single digit, But as I said, with the introduction of speech enhanced hearables, we believe that this will be an additional form factor, which will drive a lot of growth in this segment. And here, we will have complementary distribution channels. We will be leveraging our tens of thousands of HCPs, and we will obviously also be able to move into the distribution channels of Sennheiser with some of those devices, which are can be sold over the counter to consumers. So moving to the third part of my presentation, which is about future growth opportunities. If you look at the True Wireless market, it is, today, estimated that it will finish off this year with about EUR 22 billion. This is based on an attachment rate of 20%, meaning, today, only every fifth mobile phone will have a True Wireless headphone. This attachment rate is projected to rise to about 70%. And then you obviously also factor in some ASP compression over those 9 to 10 years, and then this market will triple from EUR 22 billion to EUR 59 billion. Our own consumer research shows that when you ask people or when people are looking for True Wireless headphones, 7% are interested in speech enhanced hearables, which obviously is a segment, where, as you've seen previously, then if we combine forces, Sennheiser and us, we have all the competencies you need to move into this market and be successful and win in this market. Other segments we're looking at is Audiophile. Here, the technology is not there yet, but we're going to get there soon. And that's all about potential loss-less wireless. And if that comes, then you're getting Audiophiles very excited about this opportunity. Then also, we're looking at custom fit. Again, the technology we master and we've been mastering for many, many years. And what is also interesting here, if you put a custom fit hearable into your ear the sound quality actually increases significantly. So another segment we will be looking into. So as you can see here, our ambition is not to kind of be everything for everybody and go after the big mainstream market and fight with the Apples or the Samsungs of this world. No, we're going to take a very specific, very dedicated approach on some very interesting segments where we, together, have all it takes to play in that segment and to win in that segment. So -- and this is one of them, the speech enhanced hearables, which, as you see, is on the crossroads of between True Wireless headphones and hearing aids. And you really need both competencies to be able to compete there and to be able to succeed there. We believe this market, in 5 years or so, will be worth more than EUR 3 billion. And we believe we have the right and the capabilities to have a significant share in this market. And so what does it take from our perspective to win in this market? A couple of points here. You need a great and recognized consumer brand, which by the way, we didn't have prior to the Sennheiser acquisition. So this is a great add-on for us. Then 2 things you need and which we have had is you need to have strong know-how in audiological technology. You need to be -- you need to have great expertise in digital speech processing, in algorithms and in chip technology. This we've had for years and so we can really bring this to the table. Then what you also need is great technology know-how in the area of true wireless and audio and sound quality. Sennheiser has proven to have that over many years. You need access to consumer channels, online and offline. Again, Sennheiser brings this to the table. And finally, you want to also leverage or move into or sell these products through an HCP network. And as you know, we count tens of thousands of HCPs as our customers, and as such, we'll also be able to leverage those channels. So as you can see here, if you look at the key success factors to really win in that segment, we are well positioned to do that. And here, obviously, just 1 more slide or 2 more slides. Here you see, we have been looking at this for quite some time. Back in 2018, '19, we did our market analysis. We came to the conclusion that this is a nice growth opportunity, and that we want to reach the consumers earlier on, on their hearing journey. We then, based on that, started our inorganic developments of solutions and products, and we are, today, well on the way to launch some of those products into the market next year under the Sennheiser brand. We then also looked at potential acquisitions because, as you saw in our analysis, we didn't have all the capabilities. We started analyzing that. We started nurturing some relationships and cultivating, and we are, today, delighted that we can partner with Sennheiser and acquire their consumer hearing business. So we are well on our way to enter this market successfully. And in closing, so the acquisition of the Sennheiser consumer business will allow Sonova to reach the consumer earlier on their hearing journey. We will also be leveraging some great assets, which Sennheiser has, it's brand, it's channel access and its technology. We are well on track with the acquisition of the Sennheiser's consumer business, and we will be closing this before year-end. We are perfectly positioned, together with our comprehensive strength, to play and win in this attractive speech-enhanced hearable market a number of other segments, too, but specific ones. And finally, from an organizational point of view, we will be setting up this business as an independent business, which I will be leading and representing on the Management Board moving forward. So that's it. Thanks a lot for your attention, and I'm looking forward to providing you with more updates in the future about this exciting business. And now I'm handing back to Arnd for some more topics.

Thank you, Martin. Thanks for the summary of the Sennheiser consumer business, where we stand on the sign to close, but also the glimpse into the future here. I hope everybody appreciates the deeper insight. This is not a segment most of you are closer to are covering. And certainly, more to come as we get closer. Keep in mind, we're not closed yet with the acquisition, therefore, to some degree, we're still looking a little bit from the outside in. Before we get to the Q&A, and after we covered the business topics we wanted to cover, we wanted to give you an update on a topic which we know is increasingly important to all of us, the ESG topic. It's increasingly important not just because it's relevant for the investor community, although we do appreciate the increasing inquiries and interest. I think it starts off with being relevant for us as individuals. And then it moves on to all of the different stakeholders we have. It moves from the relevance towards the talents we rely on and their engagement. It moves to the consumers who want to know that we do the right thing while we're providing them with the products and services. We even start to see it in larger tenders as a topic coming up and the questions we have to answer. Clearly an increasing interest on the investor community. And interestingly, when we drive some of those priorities and initiatives, they're very often linked to things which are also good in order to improve the efficiency and effectiveness of our business. And so we wanted to share that in this, I would call, beautiful symbiotic relationship between all of our stakeholders and, ultimately, running a better business. We have defined a framework, which is not unusual in the topics we cover, but it is the right fit for Sonova. We call it IntACT. In order to put the right topics behind a couple of categories which resonate well and the starting point of Sonova with our customers, consumers and our global footprint. The 4 key focus areas for us is, advancing our people, acting with integrity, protecting the planet and serving society on a larger vision. Some of you may have seen that, with the fiscal year results, we also have published a CSR report. And as we always did, we renewed our commitments on the 4 different dimensions. And I would say, in a couple of areas, we also upped them quite some with our ambition level. So as you can see on the chart here, on the right-hand side towards the talent side, significant focus on a diverse population of leaders in the organization. Not just because it is important to the outside world, we do believe it is important for the business success over time. Significant focus on developing our talents from within. You see in the lower right governance topics from product reliability, supply chain, human rights due diligence. Then on the lower left, our commitments with regard to the ecological advancements. A couple of highlights here. While we're driving the reduction of CO2 as we produce it, originally also moved to more renewable energy. We, in addition to those efforts, have also committed to being carbon neutral in the operations this year. And then on the upper left, predominantly through, on the one hand, us expanding our product offering for the high-growth developing markets, but also dedicated in our own foundation to hear the World Foundation more support for people in the developing countries with regard to supporting children who can't afford the solution, but also being on the journey to helping to train hearing care professionals because, ultimately, as you heard earlier, we can't provide our products in a meaningful way if there's not the right trained personnel. And you can imagine in developing countries that easily becomes a bottleneck. So I want to dive a little deeper in the social dimension, and then Ludger will come up to share on the ecological side and the governance side. So on the social dimensions is one of the key topics, which we're moving forward with quite some focus is topic of diversity and inclusion. We always had good progress on those elements supported by the culture we have in place. But middle of last year, to no surprise to many of you, it became a more important topic, not just on the outside, but also within Sonova. And we used the opportunity to take our strategy to the next level and ember our ambition as well as our actions. If it comes to D&I, it's about diverse leadership structure because we really need to make sure we're diverse throughout the different levels of the organization. As I said, important for our people, but also important for the business we're running to be most successful in an innovation and consumer outreach environment. Driving an inclusive culture and then also empowering our employees. You can see on the lower level here, a couple of highlights of things we have put in place, we're driving with a particular focus. You see the government's element here. You see a particular focus on the diversity of leaders. Globally, we have concrete plans in place and driving on the internal promotion as well as on the external recruiting, a high focus to get more senior leaders on board and in position into the key positions. We also drive the same focus on ethnicity in the markets where it's relevant and have dedicated targets, if you come to the Americas, the U.K., Australia, others, if it is relevant for the brain pool we have. And then, on the inclusion side, 1 big element for us is not just the sharing, but also the active training of all of our leaders through unconscious bias training, but also for specific subsets of the leadership, a deeper education on D&I as a matter. The second one is all about how do we be a place where our people see they can progress with regard to their own professional aspirations and can stay at the company and continue to contribute. For some that just means to get better in what they do. And then there's others who want to move up in the food chain. And so we created a credo on the matter a couple of years ago, which now resonates widely throughout the organization, which is, every employee deserves a development plan. And I must say we weren't a particularly good place a couple of years ago if it came to development plans. And if it came down to documented and we're big fans of tracking and looking on things that are documented, it was in the single digits. And now we're couple of years on the journey, we have more than 90% of our employees having a development plan and with it, the constant conversation with a leader on how they get better in that trade and where the potential is. More importantly, from an output perspective, as the graph on the lower right, I think 50% internal fill, which we had '17/'18, '18/'19 is a good number. It's probably not yet a benchmark number for an industry like ours or for other companies in the tech environment. And so we've been able to move the needle up not by lowering the bar, but developing our talents and enticing them to get on the journey to now being at a 70% internal fill rate, which really shows our commitment to our people because we develop them. It also has a significant business impact because you can imagine bringing people from the outside, while this is sometimes needed for certain skills, is always a risky endeavor. So with that, I want to hand over to Ludger on the ecological side. Ludger?

Many thanks, Arnd. And it's such a great honor to talk to you about what we have done in the past and what we will do in terms of CO2 reduction on the one hand, but then later on, on what we do on the reliability side, which is part here of governance. So first slide shows you a bit about where we are a little bit on the history, and you see that we already reduced in 2017 about 23% -- a bit more than 23% of the CO2. And we have to do a lot more because we gave the commitment out that we will be operational CO2 neutral by the end of this year. And we will reach it because we said we will do it and we will do it. So what are we talking about? We're talking about here on the right side, Scope 1 and Scope 2. This is what we call operational, and that's what everybody talks about when we talk about operational CO2. And then what we put in scope as well is business travel. So these 3 areas have been in scope all the time for last 4 years. And now we're enhancing the scope to the remaining topics of Scope 3, And that's something where we are driving the -- all the actions going forward on the one hand. On the other hand, when we talk about Scope 1 and Scope 2, we are looking for a lot of making sure that we are saving the energy and that we are really driving it to renewables, and that's something which we'll talk on the next slide here. On the next slide, it's about the 3 things, which we can do to really get to CO2 neutrality. The one is avoidance of wasting energy and the other one is replacing the energy. And then the last one is the compensation. What we do is, we are working on all 3 areas. On the avoidance, think about when you go through office buildings in the night and how often have you seen lights still on when nobody is there. So that's something which is a simple solution where it's something where we can have a timer in the office buildings and make sure that we're saving some energies. And the same is on computers, which are still running. The other ones are light bulbs. We have got conventional light bulbs still in the buildings, replace them with LED. It's not very costly, and it saves a lot of energy and at the end, it saves cost. Replacement. It's all about making sure that you have conventional energy, which you're replacing to renewable energy, which can be done by, on the one hand, going into contracts with energy providers, on the other hand, we can talk about what we can do to install renewable energy sources as well as making sure that we are, yes, replacing old heating systems. And the third one, the compensation, that's something everybody needs to do in the short term, but we will make sure that we only compensate what we have to absolutely compensate, and therefore, we have selected carefully 3 projects. And these 3 projects are all in countries, which we have a lot of business in, where we have -- and where the money is not as much available than in the areas where we see in the Western world a lot of money flowing into these programs. So you can read it on the right side where the projects are. But this is something which we have to do, but we want to compensate more and more of these ones by replacing and avoiding energy consumption. What has been done already? I mean not that we only started in 2014 -- in 2017 with all the efforts on reducing the energy, even in 2014, when we built a new building in Suzhou in China, we have solar panels on the roof, and that's how far we go -- it goes back, but people think about how we -- what can we do to really reduce the energy consumption or to replace it by renewable. The middle part, modern, brand-new building, one of the first office buildings, which are carbon neutral in Switzerland. So this is something that we are really proud about. We want to go more and more into this standard, and there's a lot which we can still do. But if you look to the big ones, which is Ho Chi Minh City, Vietnam, as well as Suzhou, we already are working on that 1 and the other ones are in the planning. When we look at Vietnam, there's one where we painted the roof with a special paint, which is holding back the energy in the building as well as installing on the building some solar panels. So that's one of the areas -- one of the things which has been done already. When you look at Stefa, which is one of our big sites, that's where we are doing the same job of installing solar energy very soon. And next week -- next year, we can talk about that one as well. And then we have got the other one in the U.S., which is another big one, which we are in the planning phase to do the same thing. Now switching topics, not by saving the energy, but now talking about packaging and wasting a lot of packaging or energy by oversized packaging. I mean, everybody knows about the problem that they get big packages, but then the amount of what is in the package is very small. This is a real big energy wasting because you're transporting it via air most of the time, and therefore, you pay for the room and the weight, and therefore, what we had and what we have started already years ago to think about what can we do in terms of reducing our packaging. And as we've seen before, our goal is, by the year 2023, to reduce 20% of the packaging. And we are well on the way on this one because the slim packaging, which you see on here, with great results, 56%, 50%, 66%, talk to it for itself. That's something which is applicable now for all the newer products. And as the older ones are kicking out, or the newer ones will be replaced with the slim packaging, that means that we are on the way there. But we're not stopping there because this is only the packaging, which is going out to the customer. We have a different project running to make sure that we are saving packaging when we talk about intercompany, when we talk about the internal transportation. So all of this, what you see here on the packaging, has been ending up in a 38% reduction of CO2 for these impacted products, which is a fantastic result. But -- and it's the start is not the end. There's more which we can do in this regard. So switching topics again, going away from CO2 neutrality, going more into one, which we want to talk about in terms of governance. And that's about making sure that we are getting better and better on reliability of our products. And this talks about this slide is about on the new generations, every new products, which we are launching to the market is getting better and better in terms of governance. We are talking about a 15% in the lowest one, up to 30% in the higher ones. So generation for generation, with the new products, they're getting more and more reliable. Of course, we are working on getting the old ones better as well. But the big jump comes all the time when we're launching new products and with the new products, there is an expectation, and there's a goal, a goal set out for all the new products which we are launching, that the reliability will be better generation by generation. With that I would like to hand back to Arnd.

Ludger, thanks a lot. I hope there was an appreciated somewhat deeper dive in some of the topics, but we want to make sure you see it's real, and we're working on it the same way as we're working on many other things in the organization if it comes to ESG. Now if you want to have an impact across an organization with 15,000 people and all the different contact points we have, you also need to think about how do you drive this in a systematic way. And so rest assured there's clear goals and KPIs, which link what we do in the individual actions and activities back to the commitments we have to the outside world. There's governance in form of a dedicated ESG Council. There's collaboration where we need it. You could easily see some of the products can't be done by just 1 department, but we always have, from an accountability perspective, one of the management Board members being responsible. We, by the way, have also elevated the game a little bit towards the management Board members by introducing, a year ago, some of the personal targets and with the bonus achievement of the Management Board towards specific ESG targets. And then we also leverage ESG in our communication towards customer as well as our colleagues given the positive impact here. Now on a bigger picture, how are we doing? You heard it. We were on the journey. We're accelerating the journey, but even with being on the journey, as you can see here from the various rankings of, I think, the renowned rating agencies, we tend to be in the upper percentiles relative to others on the ESG journeys. So in summary, on the ESG part, we keep advancing on our ESG journey because the topic becomes more important for us as individuals, but also to all of our stakeholders. We have defined clear ESG commitments, which are linked, ultimately, back into the business the same way we do with financial and operational targets. We see good results, particularly in the areas where we put a high focus on and where we move the resources required to make a step function change. And ultimately, the external perspective is a positive one with regard to the rankings we see. With that, I'm coming to the end point of the prepared presentations. We have shared that there is a Q&A session, and the people want to participate in the Q&A session with active asking need to switch to a different system for the dial-in so that we can hear the question from the speaker in person. Everyone else who doesn't want to raise a question just wants to listen in to the Q&A. You can stay on the system you're on. The other ones have the guidance, so please call in. I would suggest we take a break until the hours or 8 minutes from now, and then we will start the Q&A. Thank you. [Presentation]

So welcome back to the Q&A session. I trust that people wanted to raise... [Technical Difficulty] Okay. I'll restart. Sorry for the interruption. Perhaps somebody had called in and was on hold. So welcome back to the Q&A session. I trust the people who wanted to raise questions are on the other system, just explaining the logistics briefly. You have me here on stage. If one question goes to one of the colleagues, I will bring them up. But from a distancing perspective within COVID and us wanting to be without face masks in front of you, we needed to use a somewhat unusual format here. So operator, can you bring on the first set of questions, please?

[Operator Instructions] And the first question is from the line of Oliver Metzger of ODDO BHF.

The first one are on the market dynamics. So on a 2-year period, it's clearly above historic average. So what have you seen as the driver? Is it, in your view, the disposable income, savings related from pandemic or which reasons do you see? Second question is, you talked a lot about the speech enhanced variables, which direct towards also the whole OTC discussion. So first, do you look on it from this perspective? And second, currently, there are 2 kind of OTC approaches in the market. So what's your view about the design for OTC devices? Do you see closer to one which was presented by Bose some months ago? Or do you think that additional wireless approach similar also to Jabra will be the one for OTC?

Oliver, thanks for the questions and for going first here. On the market dynamics, I think we see some markets which are above, as I showed the U.S. market at 9% CAGR, the U.K. at 11%. I also showed some which are still depressed. So I think from a global perspective, it is the mix of the 2 worlds. But the ones where we see more, I think I would believe it's more of a pent-up demand matter. At this point of time, you've seen...

I can't understand you.

Can you hear me? I should be unmuted. Oliver, I think the others were hearing me. So I don't know what the matter is. So allow me to finish the question here. If need be, we get back to Oliver with the answer. So I think at the moment, I would look more at a pent-up demand matter rather than a fundamental change to what's such a higher growth rate. We will see as we come out of the COVID. But I think right now, there's too many variables in the equation. From the speech-enhanced hearables, I think we tend to think less about OTC from a regulatory perspective. Ultimately, we believe that there's a segment of consumers, which does not come to the full hearing aid yet, and they want to have an early entry device. And there's 2 use cases. There's one use case for a couple of hours in a day for a noisy environment. I think the hearable is the right form factor here. I know there's discussions and we also explore the question of a full day easier entry device. That's, I think, what you tie more to the Bose environment here. I think the speech-enhanced hearable for us is a very logical one because the hearable does exist, it provides value and you can increase the value and clearly, there is a market and there's users. I think on the full-day fitting device, I think the jury is out, if you can really deliver such a device with all of the requirements that you get to low lead generation costs and a high satisfaction of the consumer. Operator, the next questions, please.

The next question is from the line of Martin Parkhøi from Danske Bank.

Martin Parkhøi, Danske Bank. I would just say that I think Oliver could not hear the answer to the first question, and I clearly do. But anyway, my 2 questions, I hope that will go better. First question is on the active vent. I was just curious because I'd like to understand that guarantee that the active vent is lasting for at least 6 months and then we -- you should need to replace it. What happens to the quality of the product if the users do not replace the active vent after these 6 months? And what is actually the price on a lifetime if you need to replace this every 6 months? And then second question, can you maybe just talk on the -- you didn't mention so much on the development in Japan. Can you maybe talk a little bit about how this is developing right now and the position of Sonova?

Thank you. I think for the active vent, I've invited Tom to join.

Sure. Yes, I can start to answer that question. So the active vent, as you mentioned, we guarantee 6 months. The device does not break as such. But I mean, the ear is a -- or can be a nasty environment with all the ear wax. So what will happen eventually at some point is that, that valve that you saw in the presentation does not open and close anymore, right? So the hearing aid is still working, but you don't get this additional benefit of the open versus the closed vent in certain specific situations.

I can't hear you.

Anything we can do here? 1, 2, 3? No. Keep going. Okay. So we have -- I get the signal here. I have to keep going. So I hope the others at least can hear me.

Can't hear you.

Can you hear me?

I can hear you, but I couldn't hear the answer to my first question.

Okay. I think the answer from Tom was that the hearing aid fully functions, but if there is debris coming to the active vent and the mechanics don't work anymore, you would get to a place where the opening and closing doesn't work anymore. So you have full functionality of the hearing aid, but you would need to come to get a replacement for the active vent. From a pricing perspective of our life cycle, I think, Tom, you're closer to that, but I don't know if they can hear you. So I may want to give you my mic quickly. We're getting a hand mic, so let's see if that works.

All right. So I hope you can hear me now. For the life cycle, we offer -- we sell the solution to hearing care professionals. We sell the solutions to hearing care professionals and, of course, we don't have control about what -- to what price they will sell it to the end user. And they will then ultimately judge what the business model is that they will apply on the retail side. So on that point of view, I cannot really give you the life cycle or the cost -- life cyle cost of that solution from a consumer point of view.

And on the development in the Japan market, I think it's in line with the consumer sentiment in Japan being muted. And so I would -- I don't have the exact number, but from the last reviews we had, I would think about it more like in the German environment, where we are sharing that we're slightly below 2 years ago. Because of the lower movement of the consumer, I think it does require a more open mind and an opening of the society for that market to recover.

The next question is from the line of Veronika Dubajova of Goldman Sachs.

I have 2, please. One is just sort of on the midterm guidance and one technical sort of what you envisage is a reasonable midterm time frame. I didn't notice that on the slide, but kind of more importantly, when you think about that roughly 40 basis point EBITDA margin improvement, would you expect to deliver that in every single year? Is it front loaded, back-end loaded? How would you think about the shape of that? If you could comment on anything if there is anything to flag on that, that would be helpful. And then my second question is just kind of more conceptually on your positioning in the hearables market. I appreciate that there's quite a lot happening here. But I look at your efforts and I compare and contrasted, obviously, with [Sonoma Capital] who have now added a variety of hearing aid-like features to the AirPods. Obviously, you are going ahead against some really significant consumer brands. Why do you think this is a market where someone like yourselves or Jabra is more likely to succeed? And conceptually, how do you think about being able to compete against the likes of Apples when it comes to "this new hearables category?"

Veronika, thanks for your questions. So on the midterm targets, I think this is, let's say, the next 3 to 5 years. Obviously, if there's a change to the environment and our pathway, we'll note that. But it's really what is guiding us. Obviously, we will always establish the next year guidance at the right point of time. From the EBITDA side, I think for us, this is a goalpost we will strive to achieve every year and the sum you would then probably expect will be slightly above that. But I think it gets a corridor of kind of the commitment to what we want to put back to an increasing operating profit while we use the rest of the investment capacity on the growth side. With regard to the hearing aid market, I appreciate kind of the size and stature of some of the players. But on the other hand, if you look at -- into the market: a, there's lots of different consumers and their expectations and their approach, I think if you look at Apple, it's pretty much a closed system. There's a whole world of non-closed system people out there on the consumer side. But more importantly, I think if you look at what we can bring forward between Sennheiser and ourselves, I think we're in a unique position to really have a high audio quality and, on the other hand, bring enhancements faster than others with regard to the speech enhancement side. That's the core business of ours. It's embedded in certain technology in the required miniaturization. So I think we're going to be ahead of others. I think if I look at the large players, ultimately, they also need to keep in mind that they need to serve hundreds of millions of consumers. And so I'm not particularly believing that where it becomes to very specific solutions in that segment that somebody would go very deep on what it takes from a technological perspective versus what they need to do for a broad consumer base. So that's our thesis, I think, to be proven, obviously. But I think with bringing the Sennheiser brand together and our capabilities, a good starting point there. And again, I think the market, you really need to segment more finely by age group, by needs. And as Martin was sharing, there's about 7% of the people who really look for speech enhancements. So that already cuts the playing field into a smaller proportion.

Understood. And can I just ask a follow-up, and thank you for sort of Sennheiser guidance. What does that hitting that double-digit margin number depend on? I presume it's a certain revenue level? Are you willing to commit to what that revenue level would have to be to hit that double-digit margin?

Yes. I think we can get to that level, less so driven by volume, more by things we know how to do. Keep in mind, we're bringing a smaller organization to a larger organization. This is a carve-out situation where not all of the costs come over as a starting point. There's many synergies even if it comes to just some of the sourcing side. And then on top of that, I think you've seen us over the last 2 to 3 years being quite effective in driving the productivity. So I think I wouldn't attach it to it needs to be twice the revenue. I think with the growth Sennheiser has at this point of time, we're able to get to that kind of a profitability.

The next question is from Maja Pataki of Kepler.

I have 2. One on the Audiological Care, I would like just to clarify one of the slides. Did I get it right that you're intending to add mid- to high single digits to AC growth through greenfield and acquisitions? And if this is correct, is that one -- or the main reason for your increase in the medium-term top line growth guidance?

Maja, thanks for the question. I think it's part of the reason, not all of the reason, if you calculate the numbers through. But clearly, we expect that after Christophe and the team have built a more robust and stable retail business over the last couple of years, we can move forward to expanding the network. I think it does require us to make the appropriate investments. So we need to fund this despite the improvement on the operating margin expansion, but it is significant why it is a part of the total math, but not all.

And then just to understand, I'm not quite sure I got your answer on the enhanced hearing -- hearables or maybe you didn't answer. Are you intending to get like an OTC approval for the product down the road? And if not, why is that so? If we're looking at [indiscernible] are trying to get the FDA approval for their products, Jabra is doing something. Why are we then choosing to stay out of it? How do you think you can compete with the augmented hearing if there will be products categorized with an OTC stamp on it, and that's what obviously in the U.S. market?

Yes, I'm not so sure, personally, if the OTC stamp gives you more potential or less potential in selling. I think you need to go through is it required for the type of device. And if we get to the elements of speech enhancement, we have in mind for the Sennheiser type of product, I don't think you need the regulatory approval and the medical positioning as you can also see from other people who are endeavoring to go there from a hearable perspective. I think if you're getting to more specific improvements in line with testing and self-fitting you're doing, we would, obviously, need to go for that. I think on the OTC side, I repeat what we said a couple of months ago. For us, the jury is out. I think: a, we don't need to be an early starter to the segment; secondarily, I think still needing to see the proof through the right testing and prototyping that ultimately, the consumer gets what they're looking for. And what we see from products in the marketplace right now, we see significant return rates. We see high lead generation costs. So we haven't seen the perfect product yet.

The next question is Daniel Jelovcan of Mirabaud.

Yes. Just one left. Just to better understand the active vent potential, is that -- I mean, just for the RIC segment on Paradise or is that also for, let's say, older RIC stands or is it also in the ear segment? And is there also a solution meant in the future? I mean I know a lot of patients, they would like to have a kind of [indiscernible], but they still have to where these old, what's it called, the big prosthesis in the ear. Is that going into this direction as well?

Good. So on the compatibility, at this point, active vent is compatible with rechargeable Paradise RICs but it can be used to retrofit already sold Paradise RIC hearing aids. Whether we roll this solution out to more form factors, I mean, what you mentioned is a great idea. It could technically also work on custom products, we still have to discuss.

But keep in mind, the RIC form factor from a business impact as the vast majority of our business, I think you need to know somewhere in the 70% of the total. I think we normally do not bring technology backwards. We're relying on people buying into the new technologies. So I think we're addressing 2/3 of the potential of the new business, and we tend to not go backwards. And also, the bigger impact is the ability to win competitively with the new product sales.

The next question is the line of Lisa Clive of Bernstein.

I have 2 questions. Number one, it sounds like you're making good progress in Advanced Bionics. But while the sales performance has been pretty strong over the years, profitability seems to remain a challenge. How should we think about the margin trajectory? What are your guidelines for when that becomes profitable? I think in the past, there's been some guidance around needing to hit $300 million, $350 million in order to reach a reasonably strong sort of high teens EBITDA margin. So just thinking about how we could get to a more profitable business. And then secondly, just speaking about your margin trajectory overall, it sounds like you're very comfortable with the ability to explore margins. So it was just like a little bit of understanding where that can come from. Is there leverage in your retail business? Will that come from sort of just increasing your penetration and your scale in certain markets? Or are there specific areas of the wholesale business that are not as efficient as they could be? Just any color there would be helpful.

Thank you, Lisa. I think on the AB side, we said that when we shared the full year results that while unfortunately, the quality situation 1.5 years ago and then COVID was pulling us backwards, we see structurally the business to be at the place where we can achieve that 15% we had put out as a goal post. We said we feel we're a year delayed, probably 1.5 years delayed. A year delayed would be your exit run rate this year, 1.5 years would be first half of next year. And I think we're feeling comfortable given the cost structure and what we're seeing on the real improvements we've done from a productivity in the business. I think with regard to the margin from here go forward, I think at the end, yes, there's leverage in the Audiological Care business, particularly with the effort Christophe is ongoing to get more consumers into the same store. Keep in mind, that's a big fixed cost, and he drives lead generation, but also in-store execution. But I think it's broader. It's across the organization where we have opportunities, no matter if this is in operations from a lean conversion perspective. But how we improve other processes, there is enough potential for us to continue to improve. I think, as I said, it's a balancing act for us on how do we want to navigate this business, but there's more potential on the productivity than the 40 basis points, but we want to keep some of the money dry for the growth investments.

Okay. Just a follow-up on the retail side. As the business moves forward to more blended model of in-store and digital, will this affect your store footprint? Will you need fewer physical points of sales, some stores be more efficient, selling more units per store? Or do you think that the physical infrastructure will stay sort of largely the same?

Yes, Lisa, I think you're correct. If I think longer term, and we see a lot more of the activity going virtual. And again, we're not believing that the whole journey will be totally virtual for the vast majority of the people. But more in the actions, you ultimately don't need to have as much storage space. You may remember, we went after closing these stores last year in order to get a kick start on optimal footprint. I think the team continues to plan greenfield more in line with where we have catchment area, which we haven't gotten after. So in reality, I think you're seeing 2 effects here weeding out where the stores are to close and with a reduced load in the store or the higher utilization you can drive in the existing stores really not needing as many close to each other, but us trying to reach more consumers. I think in the sum, you are probably going to see an increase in the network, but that would be then over proportionately adding to the growth rate if the utilization is improving.

The next question is from the line of Niels Granholm-Leth of Carnegie.

My first question would be, how much is the price premium expected to be for the active vent solution? My second question would be, if you look towards the U.S. market in particular and the effect from the Delta variant spread, are you really not seeing any effect on the U.S. market from the spread of the Delta variant?

So the active vent is like in addition to the hearing aid, right? It's not a new product as such. And on the wholesale side and, of course, there is a spread market-to-market, country-to-country, we are looking at something around CHF 70 on the wholesale side.

Which would then fall into the category of something like a 10% lift probably a little bit above that relative to the product cost, right? And then on the U.S. side, we have not seen a significant change on the demand side. We're watching very carefully. The teams watch every day. We, on a global level, watch every week. So it is interesting to observe, but even with the increase of the Delta variant, so far in the U.S., we haven't seen that having a significant impact on the demand side. And as I was laying out when we tried to compare those different scenarios, it is interesting that a country like Germany, which has significantly lower infection rates and hospitalization rates, is the one amongst the larger ones, which is recovering the worst. While other ones where you see infection rates higher, but also movement more and more -- less, let's say, negative messaging from the government are doing fine. So I think the infection rates are an interesting factor, and we will observe carefully in the U.S., but where we've seen headwinds was really more kind of the sentiment of the consumer and then wanting to stay put no matter what the infection rate is. Are there more questions?

There are currently no more questions at this time.

Okay. Then we're kind of at the end. I want to thank you on behalf of the team for your significant interest in staying with us over these 3 hours in a virtual format. As we said before, we would love to welcome you next time in person. We see how that works out. Thanks for your questions and your attention. We wish you all a good rest of the day. Thank you.