Sonova Holding AG (SOON) Earnings Call Transcript & Summary

Good morning, everyone. Thank you very much for coming to Stäfa. It's a pleasure to welcome you here in person after 2 years of holding this event virtually. My name is Thomas Bernhardsgrutter. I'm the Senior Director of Investor Relations. Now before we start, I would like to go through a few housekeeping items for the people here in the room. First of all, we are currently in our quiet period. So please note that we cannot answer detailed questions about current trading or the first half results beyond what's included in the presentation. Now if you need the restroom, you can just go out this door and turn to the right and follow the signs. There is no smoking in this building. So for those of you who need a smoking break, feel free to walk up the stairs outside and enjoy the terrace and the nice weather upstairs. During the lunch break, there will be a marketplace where you can experience our Lumity products as well as some products from our Sennheiser brand. That will be held in the room on the left side of here. There will be signs outside guiding you to the room. Also, we'll have an exciting sound demo of the immersive sound of our new Sennheiser sound bar. Now there is a limited space in the room. I would like you to sign up for a slot during the lunch break. We will have a list available here during the coffee break to sign up. And it would be great if you would enjoy that live demo. We will have 3 Q&A sessions during the day today. There will be a short Q&A session after each block of the presentations. The first 2 will be for the people here in the room only, whereas the last Q&A slot will be a mix between people that are joining us virtually on the phone and the people here in the room. For those of you joining us on the webcast, you should have received a link to register for the live questions. If you have not done so, you can still find the link on our Sonova web page. And then I'm sure you're going to bear with me for the disclaimer. Just in short, this presentation serves marketing purposes. It does neither constitute an offer to sell nor a solicitation to buy any securities. And with this, I pass the word on to Arnd who will take you through the agenda of today.

Thank you, Thomas, for kicking us off. Good morning, everyone. Welcome to Stäfa. First time in 3 years in person, we're excited about that. Also warm welcome to the people who joined virtually. Just first, a quick wrap up here on the agenda. I hope that fits what you were hoping for on what we're putting together. Birgit and I will be here for the first half hour, talk about our progress on the strategy on the highest level, a little bit of a deeper dive into what we see in the market right now. And then Christophe, our Head of the Audiological Care business will be up to share what we're doing from a strategy execution and an expansion of the consumer access on the AC side. We'll then have the Q&A Thomas talked about and then hopefully appreciated and well served coffee break. When we come back from that, we want to dive for the second part into the Hearing Instruments business. Rob Woolley, who is the newest member to the Management Board who joined us 9 months ago to lead the Hearing Instrument business will, a, introduce himself. He hasn't spoken to you at least in the Sonova environment. Secondary, he'll talk about where he sees the opportunities in the Hearing Instruments business. And then we have Fabia Muller, from the marketing team join to introduce our new and exciting platform, Lumity, which we launched some 6 weeks ago with regard to what's in it technologically and what's in it from a customer benefit perspective. We do a quick Q&A, then go for a longer lunch break, to some degree because of the marketplace, but also an opportunity to mingle amongst all in the room, including some of the Sonova team. And then in the last section, we'll go deeper into the Consumer Hearing business, now 7 months in with Sennheiser being part of the family. You heard AMBEO soundbar. We seem to be expanding the type of products we shared with you and with the market. And then last but not least, we'll do a summary at the end and half an hour Q&A session on what you heard in the day, but also questions which may go beyond. With that, I want to lead over into market and strategy. From our vantage point, we're well on track with the strategy we laid out over the last couple of years, particularly when it comes to leading innovation with the new product launches, which we have the pleasure to share more about during the day. But also expanding our reach and that's where you see some of the M&A focus on in the last 12 months, expanding the reach to consumers on the Audiological Care side, but also with Sennheiser. But let me start off with the market on the highest level from an attractiveness of the market, also to some degree, the attractiveness of Sonova as a potential investment. And I know we're in a dynamic year and we probably would have hoped after 2 years of COVID it being less dynamic. But I think we're still somewhat in COVID. Then we have a high inflation environment. And on top, we have a war in Europe, probably not something we thought about 6, 9 months ago when we ended the calendar year. But independent of that, when we look at the market and the fundamentals, strong secular growth drivers, still significant potential globally to drive penetration for hearing aids and cochlear implants and still very significant opportunity to drive innovation, to add more value to the customer, which ultimately will help drive penetration but also value capture when we sell. Sonova, as you know, leading market position in the segments we play in. The broadest developed vertically integrated business model, broad product range but also broad channel access, which we think are all relevant to continue our journey forward. Strong financials, pretty strong profitability but also strong cash generation, which is relevant, particularly when we want to do more on the M&A side. But looking at the short term, I said it's a dynamic market environment. I know everybody is trying to read the tea leaves to a degree. We do too. So therefore, we want to share the most recent data on 4 of the largest markets in the world. And where we have it on a monthly basis, this is unit volume of market, not Sonova, and it is what gets published by the industry associations in the underlying markets. And it's complex. Therefore, it's a little bit more complex chart because you have to look at the year-over-year, and you need to understand where the markets were last year when they were coming out of COVID. So you have a jump-off point discussion and you have a current consumer confidence discussion. So there are 4. We have the dashed line, which is the prior year revenue. We have the solid line, which is this year's revenue or unit volume, not revenue. And then we were giving you the growth rate year-over-year for the first 6 months of our fiscal, but we also looked at a 3-year CAGR because of the jump-off point dynamic. So if you look at the U.S., the first half year was 2% (sic) [ 2.1% ] down in unit volume. We would have expected more. But I think also when we were wrapping our head around it, we didn't see the inflation being at the level it is and as resilient as it is in the U.S. You see the 5% (sic) [ 5.3% ] 3-year CAGR. Again, normally, we would expect a little bit more in the U.S. from a consistent growth rate. Keep also in mind, last year, the first half year was pretty strong in the U.S. There was a pent-up demand overswing from the COVID side. Veterans Affairs doing better from a year-over-year, but that's on the back of a weaker comp last year because they took longer to get out of the COVID because the clinics weren't as open and they were more careful, allowing people coming back to the clinic and probably also from a staffing. You look at Germany, at the cliff note 6% year-over-year, looks good. But on the other hand, the first half year wasn't that strong last year. And you can see it in the 3-year CAGR, 3.6%, probably would have looked for a little bit more. If I move to the U.K. That was a surprise, a negative unit volume development versus prior year. I think we all, especially the ones who are sitting in Europe here, consumer confidence in the U.S. (sic) [ U.K. ] lots of challenges on changes in their system, 7% 3-year CAGR, but still you would have expected more. So that's a little bit on the muted side. National Health Service, that's more the lower end of the market, very strong growth, but on the back of a weak last year, similar to VA, it took them longer to come out of COVID. France, very different dynamic, minus 8%, but on the back of 22% 3-year CAGR because of the reimbursement. So I would put France into the bucket of -- there was a huge change in reimbursement, got a strong growth last year. Most of it sticks, a little bit of a retraction here. I think everybody can make up their mind on the graphs. My mind would be. We're a couple of percent points lower in unit volume in the first half year than what we would have expected if the macroeconomical environment wouldn't have been as negative, particularly on the high inflation side and the energy level -- the energy prices as we have them in Europe. Our strategy, unchanged. We think we're on a good course. Obviously, we evolve it in the individual swim lanes. You know the chart. The first 4 are our organic growth vectors. Leading innovation, super important. And you see all of that represented in the decks later. Obviously, leading innovation, audiological performance, consumer experience. The second one, reaching more consumers. Historically, only in the retail or Audiological Care side. We now mentally put the consumer devices in the same bucket because as you will see from Martin, around 50% are direct-to-consumer sales in Sennheiser and we would expect that to grow over time. Then on the B2B, so cochlear implants and the Hearing Instruments business, broad set of channels trying to expand further, but also having to offer more value to the channel and driving commercial execution.#4, investing into high growth developing markets. In our world right now, highest focus is on the China equation because of the low penetration in China and a significant runway over longer period of time. It will take a while to build the market. Now #5 is super important to us. And I will spend a couple of minutes later on the question on how do we drive continuous improvement, not so much the structural improvement. But if you think about that #5 bucket here, for us, ultimately, going systematically about process improvement and structural improvement is ultimately fuel to fund organic growth investments. That's how we think about it. Yes, we drop some to the bottom line, but it's a swath of energy for what we want to go do to reach more customers and develop more innovation. And then M&A with a balance sheet, an opportunity if the right target and the right strategic vector is there. We tend to say our strategy is proven and works and we wanted to take 3 minutes here to show a little bit of how we think about and how we measure some tangible progress against those. And I know the colleagues will go deeper. Therefore, I just kind of highlight the items. But if you think about lead innovation and you think about the last 12 months, Lumity, a new platform, which we'll introduce in a second, but we also added more functionality about waterproofed hearing aids, which is important to the consumer. But also moving more sensor technology into the hearing aid from a longer-term innovation perspective. And then Sennheiser, on a good path with the products launched this year. Expanding consumer access in addition to the M&A. We have started a couple of years ago to go on a journey to build digital lead generation hubs. And we continue to invest to build more leads coming our way. We have developed a new store format World of Hearing store concept and we continue to roll this out globally. Extending customer reach, value-added services, a big topic in order to create more stickiness. At the same time, loyalty programs towards the independent, but also expanding our sales force for HI and CI to reach more customers. Investing into high-growth markets, I think you've seen that we have signed and announced an acquisition in China. Christophe will go in more detail. But before we did that for the last 2 to 3 years, you heard us talk about how we were building organically a lead generation hub in China even without having the network yet. Because we think in China, the drive to market will come a lot through awareness in the online side given the Alibabas and the Tencents of this world. In addition, we started some greenfield stores just to figure out best store formats, but also learning how we move the leads into the store. So with the acquisition, we have the ability to now move more of the leads we have and the capability we've created to generate leads into the HYSOUND and hopefully in a growing network at the back of HYSOUND. Continuous improvement. I'll talk later for a second, M&A, the colleagues will go into Sennheiser and the series of acquisitions we've done on the Audiological Care side. So many tangible moves over the last 12 months, in line with the strategy. I think well executed and taking advantage of the financial strength we have organically as well as inorganically. Let me move quickly to 3 elements on the what of our strategy and how we drive growth. Clearly, innovation is an important part. And if I stay on the Hearing Instrument, for some, this is not a new picture. We don't always change the pictures, if that's still the right way to think about it. But when you think about a hearing aid, most demanded by the customers is still improving hearing performance because they still don't hear as well as they want to. So with every new generation, that's a big focus of advancement. At the same time, comfort and fit is an important element. We've brought out the water proofing. We made significant changes to the way we're thinking about charging and making it easier for the user. With the connectivity to the device, the ecosystem of applications become more important. So with every new generation of product we launch application advancements. And then on the additional function analysis, still more of a future perspective, not the biggest revenue driver, but we do believe that over time, more medical applications are possible through different sensor technology in the hearing aids. And this year, we introduced step counter as well as heart rate monitoring in the hearing aid. So well on the journey here. Using the opportunity we have from the capability and investment capacity to stay ahead of the competition on the device side. Now the technology is the core and you could say the center, historically, is certainly the center, but there's 2 additional vectors. You see us marching down with quite some focus. If you go along the x-axis, it's about how do we expand value to the customers and consumers and ultimately, also how do we bring them earlier to the category. Two big moves you're going to see in the discussions today. Entering the Consumer Hearing business with Sennheiser and then why we have the brand starting to move down the path of early-entry devices. You heard us talk about the speech enhanced hearable. Martin will talk more about it under the Sennheiser brand. Staying closer to the Audiological Care environment, just simply moving up consumer access. On the left side here, the y-axis and the first big step for us is and continues to happen from an investment perspective, how do we become more digital in the interaction with the consumer. That can be on the lead gen side, which increasingly moves to digital lead generation, hence the lead generation hubs. It could be also offering to the customer as an interest to have an engagement without being in the store even once in a while. How do we enable that? And that's a big investment on the backbone, but it's also capability development and it's a development on the consumer journey. So big investment there on Christophe's environment to build that kind of a capability. And move at the speed the consumer wants to go more digital. Then the advancement of the network and the China market development all in the spirit of getting more consumers to -- close enough to our stores that they would pick us. So that's the 3 big dimensions of growth in what I would call the what. Now allow me to use about 5 minutes to talk about what we also think is important around the strategy, which we call the how. And as this how do we sustainably generate the ability to invest and to execute well. We went on the journey a couple of years ago to introduce something we call the Sonova eXcellence System. You can put it in the bucket which other companies call a business system. And it's ultimately bringing to all processes, into all employees, a structured approach to improve your process, big element of culture in there, a big element of toolbox. But at the end, the objective is to serve our customers better, to get better quality of products, to serve them better in the interaction and to make best use out of the money we're deploying. We broke this into 3 categories. And we said it starts with the growth side. And if you think about it, in the P&L, we move money from where we save money to places where we want to invest into going forward. Now the objective should be to get the maximum return on your investment. So how do you use the resources who work on reaching more customers or developing better product or whatever else you do to drive growth? To have efficient processes and get the maximum return out of the year 1 of the investment. 2 examples here. They are more on the company. One is about the sales process and the sales funnel management process. I allow myself to go deeper in the next page. And that's on the B2B side, big focus of ours over the last couple of years. The second one I want to raise, and I don't have an extra page, therefore, I was it over briefly. If you think about Audiological Care, one of the big frontiers and opportunities is, if people come for their second hearing aid. They want to repurchase. Now there's lots of other retailers out there who are going to try to get the customer into their store. So you need to start to think about what's your repurchase rate, right? And you can easily imagine that how you build loyalty, how you have good processes over the 5 years will help you keep people coming back when they can do a new purchasing decision. Secondarily, you can easily see that with regard to the way you're triggering them from a marketing perspective, you can get more back. So big focus of ours have been able to increase our average repurchase by 10% over the last couple of years. And easily, you can see that's a growth driver, but it's also a lead generation cost reduction. Continuous improvement, more on the operational processes. We have increased our labor productivity every year on average more than 10% in all of the factories we have. We do more than 100 kaizens a year. So you can see we do this on a broad basis, but you can see how that generates investment capacity. Last point here on the talent side, key ingredient for sustainable success. We are on the journey of driving internal fill of our leadership positions. We were below 50%, we're around 65%, which I would call as good best practice, but it does take a lot of work. It does drive engagement. It also allows you to have a consistent culture in the organization. Voluntary attrition big focus, particularly now, but was for us for many years and especially when you think about the stores and you have too many people leave you voluntarily, you ultimately even have a growth problem. So in the U.S., we went from more than 30% leaving some 4 years ago in the store to less than 10% and you can see how that enables you to run a stable Audiological Care business. So in brief, 3 examples on the commercial execution, quickly told story. Sales, standardized the sales funnel management process across all of the geographies we have in hearing instruments as well as in cochlear implants. We have added feet on the street in the places where we can reach more competitive accounts. Marketing is playing their role with regard to educating the rep before they go to the customer. And then we train the people in a systematic way on selling skills, negotiation skills and other things. And if you look at the achievements here, leading indicators, two I want to raise. Our conversion rate competitive went up by factor 3 over the last couple of years. Our visits went up by factor 2 per rep. You can easily see how you reach more customers. And from a result perspective, we have more than 20% revenue growth in competitive accounts over the last couple of years, right? So little bit of a, I call it, secret sauce in addition to what you do on the technology side. But it's really important for us that we continue to hone our skills on the sales front. Efficiency in manufacturing. We deploy that at all places, but obviously, also at the places which are new and which need help. I think Sennheiser, we said at the beginning, good brand, good product, not so profitable. So clearly, a focus area from day 1. Ludger and the team, he is the Head of Operations, together with his Sennheiser colleagues is on the journey. We've done 6 kaizens after we trained everybody in the Tullamore plant in Ireland. That's where we do all of the high-end transducers as well as all of the audio file headphones. And if you look on the #2 achievement here. We were able in just 6 months to get 40% more output out of the factory with the same number of people in the same factory, right? At the same time, this is a good proof point to the Sennheiser colleagues that continuous improvement makes sense and works. Last one I want to share on the talent side. Super important to get the hearing care professional demand under control. It's a scarce resource in almost every part of the world. If you go back 3 or 4 years ago, we were only relying on recruiting from the outside, no matter if this was from a school or if this was from the competition. And we had many openings in stores where we couldn't serve the customer. And so in the bigger countries, we've gone on the journey of building our in-house capability to train people and get them accredited. In Germany, we will build a complete HCP Academy which has a huge output in new hearing care professionals. In markets where you can do it in a less, let's say, confined way, we're using what we call the Swiss International Hearing Academy, which is from us, where we've developed the right material, the right testing and people get their accreditation in their country. We use that in the U.S., U.K. and in Asian markets. So you can see our biggest footprint. And if you look at the number, we now train at this point of time, 200 full new hearing care professionals a year. Relative to the size of the network, we can still do more. I'm sure Christophe will do more but it's starting to help us with regard to having all seats filled and not having to pay high recruiting costs and just stirring the pond of more competitive takeaway from the few hearing care professionals in the market. So I wanted to share those because we've talked often about SonovaX as a engine in the back. These are very concrete examples. These are the numbers we have internally, lots of more stuff we do. But just wanted to give you a chance to understand how we're trying to fuel the machine here. With that, I invite Birgit up, and I'll be back for the Q&A.

Thank you, Arnd. So let me first decompose the first half and the second half as there's various dynamics and some were expected and some others were not expected due to the macroeconomic situation. So let me first take you to the first half. So we saw a good and strong progress and this is due to the successful Lumity platform launch, then also our Audiological Care network expansion. And then we saw the Consumer Hearing business, which is a new business really performing as planned. And then we saw continued share momentum in the cochlear implants business. And then on top of that, we saw some benefit from the price increases, although limited because it's more towards the end of the period. So then next to that, we saw headwinds and these headwinds were primarily from slower market growth actually in our high-priced markets and then also coupled with headwinds from supply chain such as freight and also cost components. So although we planned with a first half -- with a profitability that was more skewed towards the second half. We did see that these headwinds really exacerbated the phasing effect between the first half and the second half. So let me take you through that second half and let's look at the drivers of profitability the second half. And so first, we see continued momentum for our Lumity platform. Second, we also will continue to drive the Audiological Care network expansion. And then third, what you will see is the H2 seasonality of our Sennheiser business kicking in. And then the fourth major element is the full period effect of the price increases that you will see in the second half. So what does that mean to our outlook? And here, we would like to confirm the outlook that we gave back in August. What does it mean for the first half? So sales grow between 16% and 18% and the EBITA remains largely unchanged versus the prior year period. And then for the full year, we set a sales growth of 15% to 19% and an EBITA growth of 6% to 10%. And this is all at constant exchange rates. So let me give you some flavor on the exchange rates because since May, we do see the strengthening of the Swiss franc and that has an impact, actually a headwind on our sales of 3% to 4% and 5% to 6% on the EBITA. So with that, I would like to summarize. We reconfirm the outlook for the first half and for the full year and also the midterm outlook that you see there. So with that, I would like to hand over to Christophe.

So you have to take this. Hello, everybody. I will talk about the consumer gain or consumer expansion or consumer access. And basically, my responsibility in the organization and the responsibility of AC is to increase the end consumer access. This is what we do for a living. So if we start first with the map and very interesting map to look at. On the upper left, so 2 column, it's -- you see here is the current situation, but also the growth we made over the year, so over last year, 1 year. So you clearly see a strong increase in number of stores. We moved to 3,800 stores. This is excluding the Chinese acquisition, HYSOUND. So you get here plus 600 locations clinic and consumer access into the year. With those development, which are related to strong M&A, 500 location, but also 100 locations in greenfield. You have audiologist specialists joining the organization in the range of 900 people year-to-year in the current situation. So that's very strong improvement of our reach to end consumer -- reach to consumer. And this is a big part of a clear execution of the strategy in order to increase also the quality of relation with the consumer. And you remember that we developed this hub in Berlin. We called at the beginning, lead generation factory. It's a digital marketing hub that we are developing for the organization. This digital lead generation hub has been deployed from Germany at the beginning to 5 markets. And presently 2 weeks ago in 4 states in the U.S. market to support our growth into the U.S. Talking about the growth into the U.S., and this is after the execution of the strategy. We'll see today, growth in the U.S. and growth in China. Starting from the strategy and this is also the agenda. Starting from the top, you have the M&A. And this is big part of our strategy. We keep on increasing our pressure on acquisition and greenfield for the organization. We see also the product service. And I will cover today in a short presentation and demonstration of video of how we do it in the digitalization, how we increase not only our focus on hearing instrument but also adjacent solution for the end consumer, adjacent services. And you have that clearly embedded now into the AC organization. We want to position ourself in the premium segment in the medicalization and from that to give access to different service to the end consumer. So second element of it or the third element here is the consumer journey, innovation, so the digitalization of the consumer journey. It's clearly to give access to the consumer on the omnichannel. I will cover it today. And finally, Sonova eXcellence. I will give you 2 examples Sonova eXcellence and Arnd covered it very nicely. It's a backbone of our organization in many aspect. I will extract from what we do in AC, 2 example of Sonova eXcellence on a daily basis. Moving now to the U.S. market. It's -- and here, you see the evolution is not only but it's also very much a big acquisition we did at the beginning of the year with the acquisition of Alpaca. So with this acquisition, we doubled our size into the U.S. market. But also 2 other acquisitions, 1 a couple of months ago, Puget, which is in nearby south of Seattle. And another acquisition, which is Miracle-Ear on Florida. And this acquisition took place 18 months ago. It's an illustration of what we do in the most important market for us in terms of size. Also in a market where, if you look at really, the market distribution is not very much consolidated. There's a lot of players. There is older players, but there is nobody having a large market share into the U.S. market. So we are after a bigger market share into the U.S. market. So here, you see a lot of dots and seems to be very full. In reality, it's just big dots on a small map. If you look at the map of the U.S., we have much more opportunity to grow the size of our network. We have currently in the 2% to 3% market share, and we have massive opportunity for future also. We are very active into U.S. But to be active in the U.S. market, you have also to have some quality of, certainly would say, integration. We are, call it, transition. And this is regarding Alpaca. So when you do the merger of 2 equal size organization, it's always -- can be always perceived as a challenge. I would say, in terms of transition process, it's very nice success. The new leadership of the organization in the U.S. is like 50-50, 50% coming from Connect Hearing historically and 50% of the leaders coming from Alpaca. And why we succeed to go to this level of integration and collaboration of the leadership? It's also because we are acquiring network organization, which are in the same family. And I mean by family, having the same brand equity or positioning into the market. They are leaders of the market, whereas in the case of Alpaca in stand-alone organization, they were always having audiology at core and medicalization at core. So merging with Sonova, with Sonova Audiological Care and Connect Hearing in the U.S., create a very interesting dynamic because people recognize themselves being in the same territory into the market and having the opportunity to grow into this category of premium segment positioning. So all that working very nicely for the U.S. Much more to come, as you understand from the market share and the opportunity of the market size. Second example of M&A is China. Where in China, we took the decision -- in parallel, we were negotiating some acquisition, but we took the decision to start into the market by the digital, what you see in the upper left on the presentation. So we went into a digital proposition to the Chinese consumer. And we developed 11 plus 2 stores, e-commerce stores in 2 different platforms, from Alibaba to Tencent into the Chinese market to understand the consumer evolution, the consumer data, the consumer interest, the price point and so on. In the meantime, in the second time 1 year later, we started to open our own stores. So really greenfield in Shanghai with 10 classic format plus 1 big format. We have this World of Hearing format where we are not only having hearing instrument, but larger proposition. By the way, we introduced Sennheiser into this big format store into Shanghai. And we started to also from that standpoint, to learn not only the stand-alone store, but also the connection between the digital and the stand-alone store into the market. In parallel, we were negotiating acquisition and especially the acquisition of HYSOUND. So what is HYSOUND? HYSOUND, it's very nicely organized retail in China. It's 200 locations, 600 people. If you look at the number and the dynamic per square meter per FTE number of hearing instrument of HYSOUND, is very similar to the average of AC of Sonova. So here, again, talking about acquiring and targeting people from the same family. So this is what we are doing from HYSOUND. One important notice on that one. We signed HYSOUND, not yet closed HYSOUND. It will be closed before the end of calendar year. That's the target. We are working on it. Working well, but to be confirmed in the next 2 months. HYSOUND cooperation will be our starting point of further development into the Chinese market, leveraging our digital platform, but also accelerating our in-store into the Chinese market. Moving to Sonova eXcellence, 2 very simple examples, very easy to see how we can apply the Sonova eXcellence, this logic into a retail organization. On the left part, you have the hearing service. So using the toolings and the kaizen and the problem solving and the logic of acceleration [indiscernible] of Sonova eXcellence, we went to increase -- significant increase of the service to end consumer in terms of repair. So that's the left. We decreased the time and increased by 50%, 40%. Increased significantly the quality to the end consumer in term of delivery. And this is for Europe and in rollout to the world. That create not only an internal benefit of having better processes, if you think about in term of consumer focus, this is very much what we do. We increase the quality of service to the end consumer. Big part of our economy is to have purchase but also repurchases for 5 years later, depends on the market for the consumer. So it's a lifelong journey of the consumer, it's a critical one. So by increasing the quality of service and delivery into the journey is critical to be sure that the consumer will continue to buy product in future. When you go to the right part of the presentation, so the optimization of capacity. We have 4,000 locations. I'm rounding the number, 3,800 plus HYSOUND, potentially 4,000 locations, 4,000 clinic in the world. If you start to work on what is the capacity management, means availability of time of the audiologist in all locations permanently, you start to create a system that you can not only increase the time to consumer but also availability for the consumer. If you connect this system to the lead generation capability, to the digital marketing logic, you create a very nice mechanism into the organization because you know when in every location, you are going to be to have audiology availability. And you know at the same time, how to funnel leads to this particular audiologist at that particular place, at that particular moment. And this is the concept of capacity management. We are in rollout of this capacity. We started already. And you have seen there's a gain of 10% in capacity. And we are in acceleration in term of tooling, and it will be a permanent acceleration because this is core of our activity in term of gain of performance to the end consumer, because we create freedom for the end consumer to have access to the audiology but also an economical factor into it. Moving to the digital part. I will not cover all the point. But starting 2 years or 3 years ago, we have been developing all the different building block of this flower, you see on the screen. And from the building block, we had simple one, look simple, which is e-booking means you go to the Internet platform and you can understand where there is a location next to you, hence the importance of density of network into the different country. And then from that standpoint, you can say, okay, I want to book an appointment tomorrow. Hence, the importance of the capacity management availability and visibility, transparency of where we have a spot for the end consumer into one of our location. And then the consumer from the web platform from other tool, I will develop one, we'll have access to this e-booking. You have also from the website, e-commerce proposition. We are having different e-commerce proposition. We have Sennheiser product. We have accessories. We have also a possibility to give hearing test on this e-commerce platform. And the customers that getting the entry into this e-commerce platform will have the opportunity to book an appointment, to do a test and to have access to our services and product and so on and so forth. We get at the end of the day 2 full omnichannel proposition. And we have everything in-house to propose this omnichannel proposition to the end consumer. How the end consumer will use it? We'll see and we are seeing different behavior in different markets. So market are more digitally advanced, some market less. Nevertheless, they have the opportunity to have the full journey online or to have the full journey in store or everything in between. And this is where we have not only an additional service to the end consumer and quality to the end consumer, but also a future leverage for our profitability because by not using the audiologist and the square meter of the location for a certain level of service, which doesn't need this kind of support that's increasing significantly the profitability of the network because you are leveraging system at lower cost. Moving now to Digital Lead Generation Hub. That's very interesting journey. So mission was very simple. It was to generate online leads for the stores. So we were, like any retailer in the world, using all the platforms to generate digital leads. So you call the guy and you say I would like to have X number of leads for that particular cluster. And the guy will deliver this lead at high cost. Since the leads management represent a big part or core of our business, big part of the top of the pyramid when it comes to digital, we said perhaps it's more interesting to do it ourself. And we had created this platform in Berlin 3 years ago to develop this ability to generate leads specifically for audio at certain moment via digital platform. From that standpoint, we enlarged significantly our knowledge to the end consumer. We started to have A, B campaign with all the customer and permanently measuring how the consumer were behaving into the different campaign. We started to understand much better. So data logic. So what type of customer is doing what at which moment, how to trigger a customer? From that logic, we improve significantly certain elements, which are our base for future development. We are addressing the customer 10 years younger into this digital platform. That's very interesting. Not only interesting for hearing instrument on the spot, it's interesting in terms of future consumer value. Because moving down the consumer by 10 years means we create the opportunity 1 to 2 additional buying in the journey of consumer life span. We increased -- also here significantly, the average selling price by giving access to more information, more selected information to the end consumer via a digital proposition. You create immediately a better knowledge and form the knowledge, logically increase of the technology. There is real content in our technology. You all know that. The end consumer doesn't know it because the consumer when he is buying the first product has no knowledge of the category. Big part of the role of all that is to increase the knowledge of the consumer about the category. Why should I spend this level of money? Yes, because there's services because there is content, there's technology. And by the way, so technology is evolving among the year. So why not only to buy the first hearing instrument and access to the first service, but the second one and the third one into the journey. You create this intel into the consumers. It's certain we'll call it category management. Yes, I think it is category management. But it's also a consumer penetration, consumer access logic into what we do into our daily core business. 27% more conversion rate. Same logic, because the consumer by knowing better the product and knowing better what the products are doing and what the service is doing, increase significantly our conversion into solution. That's working very well. Is what I said at the beginning. 5 markets and 4 new states over the last 2 weeks into the U.S. market with the ambition for sure to cover the full U.S. market solution for AC. Moving to very interesting example in term of additional services and medicalization. On that one, this is what we call the SilentCloud. It's tinnitus. I'm sure in this room, there is a significant amount of people suffering from tinnitus. It doesn't mean there is a significant amount of people having hearing loss, but I will guess so. Or if not today, it will come. And why it will come? Because you guys like me, we are traveling a lot. We are exposed to the lot of noise. We are in plane and so on. And so we are mechanically more exposed than the rest of the population. And already in the population, you have a large penetration of all that. And from that standpoint, when you think about it, we want to continue to be active longer, at least I want to be active longer. So connection in between impact of hearing loss plus the need to continue to be active in beautiful conference like that one and listening carefully what people are saying, you need to have support. Starting from the tinnitus part. It's a very interesting lead generation access and also solution provider. Our consumer are expecting us to give them solution, not only for hearing instrument, which continue to be cure, no question on that one, but also very much into other solutions from protection to tinnitus. And by the way, when you rank all of those proposition, medicalization, additional services, tinnitus in terms of consumer ranking is #1. So what do we do there? I will just show you a short video. I guess it will start immediately when I will push the button. [Presentation]

I think this SilentCloud and this tinnitus proposition, it's a very clear one. It's a medically regulated app. So it's under registration. It's the app. It's working, it's finalized and should be on market next month or the following months. More to come in this territory. I said is the first one because it's the most important one for our end consumer but more to come in cognitive, in balance treatments. And this is very complementary to our offer in our digital platform, but also in our location, also in our big format, World of Hearing, where we have the time into this distribution in between hearing instrument and services to take care of the consumer. And that for us is value creation. It's -- is a monetization of it, but also is long-term value creation by making loyalty, creating loyalty to the end consumer. And so last one. Sorry, back -- is the MyAudioNova app. This app, it's a global app. So SilentCloud, it's a technical app for a particular topic. That one, it's a consumer app. And from this consumer app, you can clearly see that there is potentially or the app exist as well. It's remote HI control it's HCP, so audiologist access. So from the app you can have a conversation with an audiologist and get support to the audiologist. It's education. So again, to make the end consumer more familiar with the category. From that app, it's also a very classic app in term of consumer support like e-booking, like store finder, like finding accessories. It's where also all the new category -- product category of Sonova are coming into the app. So it's like a show window within of what the consumer can get in the relation with Sonova, with AudioNova, but not only also with the broader group. It's also potentially is a connection to different other third-party app to give support to the end consumer, if we believe is the right thing to do. This is not a final. This is just the beginning of it because from that standpoint, and this app will be on market for us, deployed to AC in January '23. From that standpoint, you have other additional potential solutions. So SilentCloud will be part of this app, will continue to have its own life in terms of consumer support and services, but also will go into this AudioNova app. We call it AudioNova because that's the commercial name of AC. But typically, in GEERS Germany, will be GEERS app. In Connect Hearing will be Connect Hearing and Boots will be Boots and so on. At certain moment, we'll be probably 1 brand, but for the moment, it's not the case. So we will be adapted to the different brands we have locally in the different market. And any new solutions also to the end consumer, like balance treatment, like cognitive support will come into this app and will be further develop into. This again, very much part of the digitalization of the group and very much part of what we want to be into the head of the consumer. Life support for not only every 5 years, having a relation with us regarding hearing instrument, but every month, every day, a relation with us into the journey of hearing support, but also hearing protection. So earlier in the journey also giving access to Sennheiser solution earlier in the journey or later in the journey other support like Connect support and others. So this is our commercial proposition in AC. At the end of the day, very simple. We continue and we accelerate our M&A. It was a very good year. Great opportunity in term of M&A, in term of additional development greenfield. We continue to have exactly the same strategy. It doesn't mean it will be 600 locations more every year, but we want to have a fly level, which is hundreds of additional locations, access to the end consumer on a yearly basis. So second element is in parallel for sure, we want to increase permanently our profitability. So it means increase our system and the Sonova eXcellence is very much supporting this logic and continue to be developed and continue to be used in every organization into the world. So third element, which is the omnichannel strategy, it's the digital journey. And the digital journey started not today, it started 2 or 3 years ago for us. I mean, in term of acceleration and will continue to accelerate in the coming years with more solution and more solution for the end consumer, more support for the end consumer at the end of the day. And a broader portfolio of solutions, giving access to the consumer to support all the type of hearing needs. And that's absolutely critical element. We want and we are already, but we want to reinforce our position of, if you need hearing support, you have to create a relation -- long-term relation with Sonova for the consumer. And this is our focus on daily basis. On that, this is it. I think I'm on time. It's time now for the Q&A. So Arnd and Birgit, I guess, will join me. Should I move on -- 1 click.

Q&A.

Q&A.

And on time. Thank you. Lots of questions. Thomas, you need to help us with the microphone.

Hassan Al-Wakeel from Barclays. I've got 2, please. Could you expand on the U.S. commercial market dynamics and the chart that you discussed and how you interpret the small recovery in August and particularly September, which looks to be flattish? Are you more concerned about this market shorter term? And what are your more recent thoughts on down trading here? And then secondly, could you talk about your appetite for M&A and/or greenfield expansion? And whether some of these current trends leave you more cautious, at least in the shorter term? And longer term, could you remind us of your priorities geographically?

Yes. It's relatively tricky to read. As you could see, the curves are very bumpy by month and I think our perspective hasn't changed in line with when we made a change to the guidance. I think the second half year is -- has a lot of uncertainty. Secondarily, is probably more muted relative to a normal growth rate. So I think we go into it with an eye of caution. I think the second one on the M&A side, when networks become available, they become available, right? And then you choose to participate or you don't. You can assume it's quite competitive out there if you want to acquire especially larger footprint because we're not the only ones who are interested. I think the saving grace, they tend to be pretty attractive from the multiples we pay especially in the U.S., still relatively low from a multiple, if I compare it with other markets, call it like Australia or so. So in that regard, I don't think a little bit of a change on the demand curve right now if we think long term is going to be attractive or make a change there. I think from the priority geographies, U.S., China, but then also other markets which are attractive at the core and where we have footprint. We do bolt-ons in Germany. We do a good number of bolt-ons in France. We do them in Brazil. I think Japan is more of a greenfield right now for us. We have a small footprint there, but pretty much focused on the geographies where we are and trying to densify their networks.

It's Oliver Metzger from ODDO BHF. Two questions from my side. The first is on acquisition multiples of acoustic retail. So we have somewhere more muted market. We have raising interest rates. Do you see any impact on acquisition prices that it becomes a little bit more attractive? Second question is on the repurchase cycle. Some years ago, there was a discussion that all this novel Internet-based customer approaches leads to [indiscernible] transfer of younger patients and open the market, but at the second round or repurchase cycle, then it's about more of a traditional channel. So do you see any changes of that? That's my question -- second question.

On the prices, I think we haven't seen a systematic reduction in purchase prices. I think if it would happen, and it probably takes a little longer until the market gets into that trend line, is also highly dependent on market and individual situation. But I would say, given the macro probably not expecting more on the increase but don't underestimate, it is quite competitive. There's other people who are acquiring. So I would say, so far, pretty much the same swim lane as we've seen in the years before, but no increases.

Yes. On the repurchase, we -- what you are saying, it's a possibility. It's not a possibility we see from the number today. It can happen in the future, but also we clearly see, despite the multiplication of digital offering that as the end consumer and also the new entrant continue to be a growing factor of our own classic stores. And as much as we are running after permanently the renewal, which we mentioned at the beginning, we have seen the renewal over the years increase significantly. So -- and then there is many different segments into that. So there is perhaps a segment of particular profile of customer, which is more digital. By the way, we are not, no arrogance into that, but not too much afraid of it because it's where we are investing a lot in term of digital to have also a pure online proposition to the end consumer.

Christian Ryom from Danske Bank. A couple of questions from me as well. First question is, over the last couple of weeks, we've seen your product in Costco disappear from being available. Can you shed a little bit of light into what is going on there? We have heard some anecdotal accounts of consumers being told that there might be some charger issues. But this, of course, also coinciding with what is the normal refresh time for the private label product? And then the second question is probably a more structural one and to the lead generation costs that you're experiencing in your Audiology Care business? Are you seeing any structural change here vis-a-vis what was the level prior to COVID?

So on the Costco side, can't comment on Costco. Never comment on a specific customer. But there is a customer, larger customer, which we have where we currently are in discussions with regard to reliability on the charging side. I think we have seen and, call it, moderate increase of repair numbers, put it in the order of magnitude of we're still lower than the prior generation of the product, if I compare to the model. Those things can happen. Those things can happen around if you're on the supply side with certain accessories. Think about a charging component, think about a cable. And so that's what we're working through with a particular customer. We don't have the same, let's say, reaction from other customers where we sell comparable product. So in that regard, there may be also a particular sensitivity about certain trend lines there. With regard to customer Costco, I think we have shared that at some point of time, they need to take a decision with regard to who is their next generation or the next cycle of the contract vendor. To our knowledge, there has been no decision taken at this point of time.

Regarding the cost per lead. So you know because that's the background of your question. It has been at, let's say, 100 level. It moved to 130 to 150 level during the COVID and it's very much driven by us, the industry, and not only our own industry of audiology, but also the full retail industry because during COVID everybody wanted to have leads coming to the location. So -- and the walk-in was declining or stopped in many aspects. So everything related to digital increased significantly as cost per lead. What we see already for the last 6 months, it's a steady decline of the cost per lead, and we went back to a situation which is 10% to 20% more expensive than pre-COVID not yet at the pre-COVID level, but getting in that direction, but we have higher cost per lead. What we see in parallel is higher conversion per lead. So you still have a cost, which is slightly higher or higher, 20% is significantly higher. But in this range, but you see at the same time, more convinced customers coming to the location. This is what we observe. Again, like the rest of the market is kind of volatile. So we'll probably continue to be volatile also getting to the end of the year of the different operators and so on. Especially also in December, as the retail operator will put a lot of money on lead generation will increase the cost mechanically.

Steve Wilson, Lapides Asset Management. I had a couple of questions. I'm very curious, you talk about trying to reach a younger consumer. And obviously, you made the acquisition to provide more of a product portfolio in that transition. Do you find that having the network of stores, a positive or, in fact, a negative that, that younger consumer the last place they want to be is in a store with 80, 85-year-old being fitted for hearing aids. So you need to come up with a different route to market or that you can actually leverage it? And then just talking about the condition of tinnitus in terms of -- it's not clear what the business model is. Is that a service? Is it just a way to sell more hearing aids? Or is there something else that's going to be an economic driver?

I'll take the 2.

The first 1 is [indiscernible].

Yes. The youngest customer, I fully agree with you in this proposition, it's a classic store format, doesn't fit nicely in large scale, the younger customer because exactly what you described, and I will not repeat it on the local version. We have a format and we are deploying a format which called World of Hearing, which is a different format, and this is where we are addressing youngest customer group. In the World of Hearing, it's we -- we have [indiscernible] Shanghai, Paris and London, different World of Hearing, which are exactly the same concept across the world. It's a much bigger format. It's a format in terms of location, which is not in the location, like traditional health care support stores, but very much in retail park in shopping mall. It's a format which is the size of this room where we are addressing the customer with not only the hearing support but also all the accessories. This is where you are going to find hearing protection, Sennheiser product, different experience room when they can test a product and see the evolution of this. And this is typically where mechanically we see currently in the data younger customer joining. So this is where we believe it will be. And for sure, there is a strong element of digital journey into addressing this younger customer. So second question was -- sorry, I forgot now. Your second question?

The second question was on tinnitus, what's the business model around?

It's a business model of tinnitus, sorry. I was so much focused into World of Hearing. Tinnitus business model. There's a different part of the business model. There is a monetization of the tinnitus app. So when you get into the treatment, you have to pay for this treatment. So it's not a service, it's real exchange of service to value. There is also another part of this tinnitus proposition, which is it's a lead generation. So you will see into the panel tinnitus leads replacing the cost of leads we just cover before because mechanically from the digital part, from the e-commerce proposition, people will see that and will come to the store to have a consultation from the video. You know that a large part of tinnitus people have also hearing loss. And this is where we see it's a lead generation mechanism. We see an opportunity to increase the stickiness with the end consumer at the long term, but also to capture customer into conversion to hearing instrument into the journey. We see how it's developed and we see what is a winning part of it? Is it the monetization of the lead, but this is part of new product development and launch into the market.

Rajesh Kumar from HSBC. First question is on -- you showed a very interesting slide on how you've reduced the churn in hearing care professionals higher than 30% to under 10%. You've also increased staff productivity. So should we -- when you look at less than 10% churn, you're almost in a perfection zone, you can't -- you can potentially get under 5%, but there's not a lot of road left there. So in terms of productivity gains and margins, are we coming to a physical limit? Or you need a real step change from digitization or something to take it further? That's the first question. Second is -- suppose we enter recessionary environment next year. what are your -- what is your strategy around it in terms of cost reduction? What are the levers you could pull? Or if people start moving to a lower price brand? How do you protect your margins? Or do you protect your margins? I don't know, maybe you go for market share, those 2.

So on the first question, I think when you are working through the multitude of processes and process opportunities you have from the first contact to the consumer to the end, there's lots of opportunities. So I would not lose sleep over. We fixed the first, call it, leaky bucket with regard to, we don't have enough people to staff the store to what Christophe was already on the journey of capacity management. He said he can increase right now in 10% if he learns how to increase the conversion rate further through standardization, if you learns how to get a 60-minute appointment to 45, I think lots of opportunities, right? So I think we're more at the early start, but the most logical one was for us to fix. If we can't staff the store, you have zero revenue in the store and more importantly, you're losing your customer base. Because I'm going to stay with you after the renewal, if you're half of the time not serving them around, right? So I think that's a beginning of a journey, but more to come. I think on the question of more recessionary environment next year? I think we adapt our strategy as we go, depending on what's happening. I think right now, we're in an environment in which we're tighter on how we drive efficiency, we're also going back to a playbook in which certain things we have done as forward investments were slowing down. And I think that gets us to what we shared in the guidance, which will be a good second half year from a profitability perspective, if the market would dramatically change, we would need to reassess. It's not our scenario right now that next year will be even stronger from -- perhaps not the recession discussion, I think other people to be in that. But I think from an inflationary perspective, we're probably at a high point right now. So I would rather say, hopefully not more of an inflation element, which probably pushes our customer base, which lives of their pension and the money they put away. So they're not so much worried about losing their jobs. I think the inflation is probably more difficult for us than more kind of some unemployment in the market.

I think we have time for 2 more questions.

So I'm Niels Granholm-Leth from Carnegie Bank. First question for Christophe. So what proportion of your buying customers have been referred to your clinics from your own digital referral system? And how has that evolved over the years?

So we went through a moment during the COVID where the walk-in into the store disappeared totally where customers were not reacting to any solicitation above-the-line TV type of channel because a question of walk-in. And where the digital move to a 40% penetration to our lead generation. Now we are significantly moving this digital penetration down. It's in the range of 10% can be 15%. It's very much us to decide on when we want to activate based on the capacity. But this is in this range of target of digital leads.

Great. And then just a quick second question. How have you -- how was your customers responded to your most recent price increases?

It's a very global question to a lot of different flavors in the different markets and depend very much of the market. We are overall successful to price increase. Clearly, and we clearly see a price increase, which is according to where we wanted to be. And then we clearly see also that some markets like France or Germany, a certain polarization when a larger group of customers can go to in Germany in tariff type of product in France, the new reimbursement system. We keep growing and we keep gaining market share. Overall, we are serving broad customers, but we see this shift where there is insurance support in the market to -- for a part of the customers. So some customers which are more concern about future will probably go to a new tariff proposition where we have mechanically, already a big share, 35% in Germany of the customer coming via the new tariff for us. But nevertheless, we are driving the 2 forces, so addressing the customer on the direction they want, but also successfully shifting the customer and thanks to limited where new technology drive the appetite of the customer to get access to the technology and then pay a higher price. So this is a mixed picture and the equation we have to solve working pretty well.

Actually, I have 2 questions. The first actually kind of a follow-up on that. Can you actually discuss in a broader perspective on trading down in this current market environment and whether you see any evidence, particularly in the U.S. and German markets in particular? And whether you see any reaction on the discounting side with respect to new product launches, particularly by those companies that have older technology out in a better general kind of now what's the price discipline in the market? And the second question relates to your U.S. retail strategy. I'm still a bit unclear how that's really different from the past strategy. Could you maybe comment on that? And how are you -- what's basically the target in terms of market share? You think you need to get to in order to make this a really profitable proposition for you?

So I'll take the price, you take the U.S. So on the pricing side, and I'm now commenting the some of HI and Audiological Care. I think we see less down trading on a global level. When you say we're missing some of the revenue, it's more kind of -- the unit demand isn't there. We see both. It depends on the market. But it's not a dramatic down trading right now going on. It's more of the markets like in Germany where people have a choice, I get a hearing aid, but it's completely for free. Yes, less of down trading, more it was 3% lower, 5% lower than we should be, then that's really more unit volume. I think from a launching perspective, I would say, first, the industry on the hearing instruments side has, this year, for the first time, deployed consistently list price increases independent of new product launches. So I think everybody has the same economical challenge right now. And I think we see people move at different times with similar order of magnitude of list price increases. I think for the Lumity launch, as we always do, we've asked additional higher prices for the technology which is in the same zip code we normally do mid-single digit, and we're holding to that line, given the macro economical environment.

And for the U.S. strategic evolution, it's a big change in the way we look at the U.S. market and the way we are growing into the U.S. market. We came from an accumulation of historically in the past, 4, 5 -- 10 years ago in accumulation of stores, no real integration, no back office proposition, so more defensive strategy in term of market proposition. So we went there and we have stores and we try to capture some customers at the end of the day. That was historically the case. Not at all the case today. With the integration and transition of a company like Alpaca, like [indiscernible] Puget and new we are going totally in one brand strategy, one system strategy, all back-office integration, all the developed tools, the capacity management, renewal and so on are implemented into the U.S. So lead management is also, as I said, implemented into the U.S. So we create a system we go for one brand strategy system, one system back office, one IT system rollout into the U.S. to gain market share. So that creates a platform which is getting bigger and bigger and more sophisticated, open for new acquisition into the U.S. market. Strategically, in terms of acquisition, we'll continue to do the bolt-on or the small acquisition, but also look to bigger acquisition permanently.

And Chris, if I can add, I think you were referring to 5 years ago when we started to sell some of the footprint. I think -- when we looked at the footprint 5 years ago, we had 2 stores in 1 state and 1 store in another state, right? That's not a way to run a retail network. So I think we're going selective on the bolt-ons. We only do bolt-ons when they are already closed to a cluster because otherwise, you are living in the not productive scale side. So you can either do a larger cluster new or you do the bolt-ons where you have a cluster and then you need to integrate.

But you have seen into the map. We were all over the place. Before now we target, we said Sun Belt. And yes, we put Chicago and New York in the Sun Belt. So depending of the season of the year. But we put big cities also part of our strategy for the U.S.

I see there's a lot more questions, but unfortunately, we are out of time for this session. There will be 2 more Q&A sessions. So we have a coffee break now until 10:45. I would once again suggest that you sign up. My colleague is here. If you want to sign up for the sound demo for the new sound bar, feel free to put your name on the list, and then you can experience it yourself over lunch. We'll see you back here at about 10:45. [Break]

The virtual guests here, we get to the second part of the agenda. We're diving deeper in the Hearing Instruments business first with Rob coming on stage sharing his impression and his thoughts about the Hearing Instruments business and then Fabia with us who will dive deeper into our exciting Lumity platform. With that, Rob, all yours.

Good morning. My name is Rob Woolley, and I am the Global Vice President for the Hearing Instruments business. So I'm new to Sonova. So I thought I'd give a brief introduction. In case you can't tell, I am American, but I've lived a significant portion of my working life outside the United States, including here in Switzerland. And I've worked for a number of market-leading organizations, primarily in MedTech. And that's actually what I'd like to talk about today is market leadership, and that's why I've joined Sonova. I'm thrilled to be a part of a market-leading organizations in Hearing Instruments. And I'd like to frame the presentation today with 3 questions around market leadership. What is market leadership in hearing instruments? How do we achieve it? And why do we do what we do? So there are 4 key elements to market leadership in hearing instruments. First is excellence in the consumer experience. Second, is excellence in the customer experience, and we differentiate between the end consumer and the customer. You heard Christophe talk about how important for the Audiological Care business, the end consumer is, it's equally important for us in how we develop products, but our channels to market are equally important, and that's why we differentiate with the customer experience. Channel access also matters. It's not only geographic footprint, but it's also how we go to market in the new and emerging channels. And last but not least, it's the ability to scale and the capability to innovate, not only from a product standpoint but also from a business model standpoint. So let me go into each of these elements individually. First of all, excellence and the consumer experience. The end consumer at the end of the day, wants to have healthy hearing. They want to be able to understand their loved ones. They want to be able to hear in different and noisy environments. They want to be able to connect fundamentally. And you'll see some of that in Fabia's presentation, how important that is with our technology for the ability -- for the end consumer to connect. But they also want it to be hassle-free. They want it to be easy to use. They don't want it to negatively impact their lives. They want to be able to have connectivity, the ability to make hands-free calling. They want it to be rechargeable and they want it to be reliable and not impact their daily activities. So waterproof technology, other form factors that enable them to have an easy experience day in and day out. But one of the things that's fascinating about this industry, as I've joined is how underpenetrated it is. As we know, the end consumer takes on average around 7 years between the time of onset and the time they actually get a hearing aid. That represents a huge opportunity. So part of what we need to do from a technology standpoint and from a service standpoint is to make sure that, that consumer has a seamless buying journey. So what does that look like from a technology standpoint? Last year, we introduced Roger ON. That's a technology that allows end consumer to have speech recognition to be able to hear those around them in a noisy environment. We introduced Audeo Life which is a form factor that allows them to interact in different settings, including when they're working out or swimming. And it's rechargeable. So it's the first-ever waterproof rechargeable hearing aid. But we took it beyond just the hearing instrument and we took it to how they interact in their daily lives. We talk about the importance of healthy living and healthy hearing is healthy living. And the Phonak Audeo Fit product that we launched, along with myPhonak app we launched in July, enables that integration between the hearing instruments and their daily activity, and we're able to track and monitor that and help them. And we've culminated with our launch of Lumity. So we built on these technology and we've introduced and Fabia is going to talk a lot more about this, but the importance of the Phonak Lumity. So it builds on the technology but it also delivers superior speech understanding in noisy environments. And that's what the consumer -- the end consumer wants. But it's not sufficient to just focus on the end consumer. It's been interesting over the past 9 months since I've joined Sonova to visit with almost 100 customers and read tons of market research on what is a value for our customer. Once again, we're differentiating between the end consumer and the customer. Our business primarily right now in the hearing instruments business is a B2B model. We designed the instrument around the end consumer, but we also have to be laser-focused on what our customers need. And as I've interacted with the customers, the one thing that stands out in my qualitative discussions with them is the importance of trust and the importance of the history of our brand, both at Sonova, Phonak and Unitron. So those relationships that we have, that infrastructure that we have makes a significant difference for our customers in our different channels. What's also interesting about this space, from my perspective is our customers expect and need a high cadence of innovation. They need it to be able to bring those end consumers in, to be able to get them to adopt the new technology. And so that audiological rooted high cadence of innovation, which we're going to talk about with Lumity is critically important. And that's why we invest, and I'll hit on this a little bit later, a lot in research and development to make sure that we can deliver on that cadence. We also offer a broad portfolio of products and services. And last but not least, what our customers care about is they care about quality. And it's not just about product quality and reliability. It's about the quality of service. And that's another key component of this industry. This is a high service component industry. The end consumer requires a lot of help. And so our customers, as Christophe talked about before, they need to be able to provide easy-to-use solutions for the end consumer, and we can enable them to do that with our technology. So speaking of technology and the importance of scaling and having the capability to innovate. We've already spoken about the importance of high performance and sound quality. That is what we invest the majority of our research dollars in. But we've also started to expand beyond the chip design, beyond the artificial intelligence to what is that end consumer experience. And that is a lot of software development, but it's also looking at how we specifically design around reliability. There are certain components that make a big difference to the reliability of our products. We are focusing and innovating around those to make sure that we continue to meet our customer needs. It's also not just about the hearing instruments. It is about the workflow integration. So if someone walks into -- take one of the Christophe's stores and [indiscernible] or one of our independent customers, the hearing instruments needs to integrate with their workflow. And so we spend a lot of time and a lot of investment thinking about how our hearing instruments integrate with digital technology. And last but not least, what Arnd talked about earlier today, the importance of expanding a little bit on the adjacencies. We know that hearing health has a significant impact on our social health and also our cognitive health. So there are specific adjacencies that we're looking at from a technology standpoint that allows us to create and capture more value. And speaking of that, moving to the second question that I outlined, how do we go about market leadership at Sonova? And I think it's really important to highlight the scale of this organization. So we have a presence in over 100 countries, and the majority of those, we have a market-leading position with market share. We have over 30 subsidiaries. So we've invested in the infrastructure to have feet on the street and to have the biggest presence to be able to serve the customers. It's not just about size, it's also about focus. So I've worked in a lot of different market-leading MedTech companies. And I have to say the segmentation and the discipline around process and systems at Sonova is the best. It's outstanding. And so using a very disciplined approach on how we segment and target customers with very specific processes, we're able to be more efficient with those resources that we have. The other component that is really important here at Sonova is the partnership between sales and marketing. Many organizations that I've been at consider marketing and support function. That's not what marketing is here. Sales and marketing work hand in glove to help generate revenue to help understand customer needs and to help drive market share. And then last but not least, how we go about doing this is Sonova X. And all of you, I'm sure I've heard you heard Arnd this morning talk about the importance, but being a newcomer to Sonova, I can't emphasize how important Sonova X. And Fundamentally, it's the secret sauce because what it enables this organization to do. We get to look at a problem. Everyone has the same nomenclature. Everyone has the same tools. And all the time that you would spend trying to figure out how to solve a problem, we have the tools and the systems and the processes to go about it. And so Sonova X will continue to help us drive towards market leadership with continuous improvement across all the functions. So that's great. I can put that out on the slide. But what does that mean from a numbers perspective? We focus on customer excellence. So sales excellence. If you look at what we've done over the past couple of years, our productivity has increased by 45%. The way we've done segmentation and how we allocate the resources of our field team has allowed us to spend 40% more time on competitive accounts, okay? But it's not just the time, it's the results. So if you look at what we've been able to do from a competitive revenue gain, were up 15% from a CAGR perspective. That allows us to gain market share and continue to reinvest in our business to be a market leader. As I mentioned before, marketing is not a support function. It's a strategic function and it's a revenue generator. We have dedicated processes for B2B lead generation. We are also similar to the audiological care business that Christophe outlined, we do have some B2C lead generation to work with our independent partners, and we can see on B2B, it's a 90% increase year-over-year and a 75% increase year-over-year on B2C lead generation. And one of the things that I'm extremely proud of our team in the past 9 months is what we've been able to do on value capture. I know there are a lot of questions during the Q&A about what's happening on price. And I can tell you, we had to make some decisions without a lot of data earlier in the year. And we, as a market leader, decided we needed to make sure that we're capturing value on our new innovation. We spend a lot of money, as we've outlined, on research and development, we need to make sure we're capturing the value associated with those dollars. Now that also means that we also have to make sure we're addressing the unmet needs. But I can tell you this team has rallied and organized extremely well, and we've been able to capture value and pricing, not only on new products, but also on the list price increases. And with the data that we've been capturing in parallel, I think we still have some opportunity to improve across the board. So what does that look like from a go-to-market standpoint? Our sales organization has grown 30% in the last 3 years. We've made a significant investment there to continue with market leadership. And it's not only, as I mentioned before, about the size, it's also about the efficiency. So Sonova X enables us to be more efficient with those resources and leverage our P&L. So I've addressed what is market leadership. I've addressed how we achieve it. Let me just share the why. And I recognize this is an investor conference, but I think it's the why behind Sonova is really, really important. Because you can walk into this building and if you interact with our employees or if you walk into a hearing care professional's office, there's something different. And fundamentally, they are purpose driven. They care. Many of us will need a hearing aid in our lifetime. Many of us have family members that have or need hearing aids. And we know my father is one of them, where it made a significant difference in his life on how he interacted with me, with my wife and our kids. And so what we do on a daily basis matters. So before I turn the time over to Fabia to walk us through the exciting developments on Lumity. I just wanted to share a brief video that captures the essence of why. [Presentation]

It has been 2 years since I last stood here, last time virtually, and I'm super excited to share with you the newest Phonak platform, Lumity. Sharing with you the new innovation from the team that will bring our hearing aid to the next level. You might be wondering what kind of innovation will she show us today? And will this truly matter for the customers and the clients? Those are very valid questions and questions that I will be answering for you today. But let's have a first look at innovation or more precisely, innovation with a purpose. What is innovation? According to the ISO, the International Organization of Standard, an innovation is a new or improved product or process that differs significantly from previous products and processes and is made available to the users. Now for us here at Phonak, the just new or improved is not enough. We strive to innovate where it truly matters. What truly makes a difference for our clients, the hearing aid wearers. For us, innovations and especially new platform has to have a very clear purpose tied to the core needs of our clients. So what are the core needs of our clients? Is it the look of a hearing aid? Is it the comfort? The price? Sound quality? What do they truly want from a hearing aid? You might have guessed it correctly. It is understanding speech. Over the years, our consumer studies have consistently shown that the top needs of our clients all revolve around speech understanding. In fact, the top 5 needs of our clients are all speech understanding needs. They are in order of importance, speech understanding from a distance, one-to-one conversations in noise, speech understanding without visual cues so for example, if you cannot see the speaker, he or she is talking to you from the side or from behind. So you cannot lip read or see their facial expressions, soft speech. So if somebody speaking at a lower volume, maybe in a quiet room. And the last one is group conversations in noise. Understanding speech means being able to participate in conversations again in any environment, whether that is a loud environment. So for example, if you're having a very animated discussion with your date in the newest it restaurant over a fabulous plate of spaghetti alle vongole or whether that means understanding soft speech, maybe from your niece or first grandchild in the quiet of your home. The ability to communicate with ease and to connect to the people around us is important for our social connections and in turn, our emotional health. A key driver in Phonak's product development is our philosophy that well hearing is well being. Now if you know Phonak, you also know that we've always been at the forefront when it came to innovations in speech understanding. It's basically in our DNA. And that's also what we focused the newest innovation with Lumity on. That's why we call it innovation with a purpose, a clear purpose to help our clients live a life limitations where they can truly participate in conversations again. Now looking at these top 5 needs of our clients in regards to speech understanding, we already cover all of them with our previous solutions. So for example, speech understanding from a distance, our larger technology will be the first choice. Or the speech enhancer feature from Paradise would be that feature for soft speech. Now with Lumity, we are taking 3 of the 5 to the next level. We're tackling one-to-one conversations in noise, speech understanding without visual cues and group conversations in noise. So let me introduce to you the Phonak SmartSpeech technology, which is part of our automatic operating system, the AutoSense OS now already in its fifth generation. The Phonak SmartSpeech technology is a collection of features all designs and backed by scientific evidence to improve speech understanding. A lot of these might sound familiar to you. So for example, the dynamic noise cancellation, the speech enhance or the motion sensor hearing, were all features that we brought out with Paradise 2 years ago. You might also recognize the Roger technology or the ActiveVent receiver. Now with Lumity, we're bringing out 2 new features, the StereoZoom 2.0 and the SpeechSensor. Both are directional microphone technology to help with speech understanding in difficult situations, so noisy situations. Now let's imagine a situation for our clients, the newest coffee shop in time. May be famous for the best capuccino and croissant so crunchy they literally melt in your mouth. That place is so busy in the morning with lots of people getting their caffeine fix before they're heading into work. Imagine our client likes to go to the coffee place to have a sit-down coffee with her friend before she's heading into work. What was the hearing aid is normally do in such a setting? It's a difficult setting for her to understand what her friend is saying, right? So they will move from a more open setting to a directional microphone setting. But they move rather quick and the sudden move from an open fitting to a more directional inform, directional microphone setting, also means that our client loses out a little bit on the environmental awareness around her. So how did we improve that situation with the StereoZoom 2.0? With StereoZoom 2.0, we introduced a feature that is smoother, smarter and stronger. In this situation, the smoother means that as the noise level goes up, there is now a smooth and gradual transition of the beam former to the front, more focus on the conversation. And the smart part means that if the noise level stays the same, the beam former actually stays at a little bit of a wider opening. But if the noise level increases and it gets increasingly harder for our client to hear, the beam former can decrease and narrow down even more for even more focus in the front. And that gives our clients an additional 3.0 dB better signal-to-noise ratio. Now signal-to-noise ratio is how audible the speech signal is over the noise. But here comes to smart part. Here comes the wow. In margin, our client is very tired in the morning. Maybe she didn't sleep so well, maybe she has a stressful time at work. The effort to listen in that coffee shop is huge, huge effort. Barista yelling orders, coffee machine grinding lightly, people talking to each other. Now with our app, the myPhonak app, she has the ability to further improve the speech focus to narrow it down even more. And that gives her an additional 2.5 dB signal-to-noise ratio. But the wow doesn't stop there. Thanks to the redesign of the myPhonak app, our client now also has a slide to independently adjust the noise reduction. So she can decrease the noise even more for more focus on the front or she can increase the noise to get a little bit more of those surroundings. So StereoZoom 2.0 is smoother, it is smarter and it is stronger. I've already talked about the technical measurements that we've made with the 3.0 dB better signal-to-noise ratio in -- from speech from the front in these challenging environments and an additional 2.5 dB on top at maximum strength when they use the app. That's already quite impressive. But what does that truly mean for our clients? And that's where the clinical studies come in. The study subjects were all experienced hearing aid users with a mild-to-moderate hearing and we were able to show that with Phonak's previous fixed directional microphone, we already achieved a 26% better speech understanding in those situations compared to unaided, so no hearing aid. That means we already had quite a high jump of point, quite a high baseline to improve upon. But now with Lumity and the StereoZoom 2.0, we gained an additional 16% speech understanding. That is a significant improvement. Can you imagine what kind of a difference that would make for our clients in these types of environments? The conversations don't always happen from the front now, do they? There's actually a study by Walden and his colleagues that shows that 80% of the conversation does come from the front, which is what we would expect, right? But what happens in those 20% of times when the conversation does not happen from the front, but you're approached maybe from the side or from behind. Let's imagine a second situation for our clients. This time, she's at a networking or pro. Maybe meeting our colleagues from all over the world for the first time again, after 2 years of mainly home office, how we missed those informal gatherings haven't we? So what happens at this networking event? She gets approached from the side, maybe from her French colleague that is approaching her from beside. Here, we have the speech sensor, which is new feature that has a 360-degree speech detection algorithms and monitors the environment, 360 degrees at all times to try to determine where the loudest speech signal is coming from. Now in our example, let's say, it's our clients colleague -- French colleague approaching her from the side and asking her whether her travels were safe and whether all her luggage made it as well. The limit to hearing aids notice that they determined the loudest speech signal comes from the side and with the AutoSense OS, our automatic operating system, they can define the most appropriate beam former setting for that situation. And that gives our client 3.4 dB better signal-to-noise ratio. I am happy to share some study results with you, which will get published later this year. There are 2 important numbers on this slide. The first one is this accurate detection of speech from which side the speech is coming from, translates into 15% better speech understanding if speech is coming from the side or from behind. And that, in turn, translates into 11% less listening effort. Now thinking back about that scene, the networking or pro. So many people, a loud environment, that can already be tiring for us. Now imagine what 11% less listening effort would mean for our clients. And of course, all of this happens automatically. So our clients can live at the moment and only focus on the conversations that they're having not the hearing aids or the perfect setting. Our AutoSense OS has been upgraded to version 5.0. It is our AI-based machine learning automatic operating system that scans the environment 700 times per second and chooses 1 of over 200 unique setting combinations for every individual hearing situation. Because our clients want and deserve a hearing aid that works seamlessly and automatically no matter where they were there. And it also orchestrates our smart speech technology features as well as all of our other previous features. Now let's have a look at the fully rechargeable portfolio. With its first introduction of Lumity, we are launching 3 rechargeable form factors, our smallest Audeo Lumity as well as a telecoil option. Both can be charged with the new charge with ease, a new charger case with magnetic retention, which is easy to use. And then we're also bringing out the Audeo Life on the Lumity platform. So our waterproof and sweatproof device now on the newest platform, of course, with its own charger case. Now in summary, it's all about value and experience for the clients. Focusing on the right priorities to whether we understand the communication hearing needs and to whether we can deliver the innovations for it. The innovation that then will lead to the experience for them and the experience is what adds value for the end users. Value in terms of well-being and quality of life. The innovation, the smart speech technology delivers improved speech understanding in very many situations, 16% better speech understanding from the front, 15% better speech understanding from the side or from behind and 11% less listening effort. We have a fully rechargeable portfolio that is easy to use. Phonak is still known for the universal connectivity. We connect to a multitude of Bluetooth enabled devices, and we are still truly made for all. And we're also bringing out the second generation of the world's first waterproof rechargeable hearing aid the Audeo Lumity Life. Now that all sounds almost too good to be true. But how -- what really counts is how that translates into impacting our clients actual lives. So I would like to share with you 2 statements from early adopters, actual hearing aid users and how they experienced Lumity in their everyday lives. Remington wrote to us, "the improvements from Paradise to Lumity may not seem or shattering on paper, but in everyday life use they are so dramatic in any amount of noise." And [indiscernible] wrote to us, "I'm now more confident I can rely on my Lumity to serve me when needed, and I'm not constantly confronted with the fact that I have a limitation. I do not have to think constantly about my surroundings and try to have influence on the placing at the table. I'm more open to being to people regardless the spoken language and setting and relaxed, faster and able to focus on my work due to having more energy." They say it much better than I ever could. And this is why we relentlessly work to further bring more meaningful innovations to our clients because we truly believe that everybody should be able to live a life without limitations. And we are confident that we will allow our customers, the hearing care professionals, but especially our clients as soon as they get to experience Lumity in their everyday lives. And we cannot wait to get more feedback like the one from Remington or [indiscernible]. Thank you for your time.

[Audio Gap] 16 countries and we'll be in 40 countries by the end of the year. So we did live events, which Arnd and I attended, and we have had over 4,500 hearing care professionals attend. And so if we look at the actual -- there are 2 key metrics that we use with the new product launch, we'll probably introduce a third. But the 2 key metrics are penetration and repurchase rate. And we're happy to say, compared to our Paradise, which was our last platform launch, we see a consistent ramp both on penetration and on repurchase rate. I think one thing that we've been very disciplined, as I mentioned before, is what we're trying to do on value capture. So unlike previous launches, we're being very disciplined on bundles and how we manage our margin. And so we're seeing tremendous success, and we expect that to continue for the remainder of the launch program. So in conclusion, we want you to know that we are committed to market leadership and hearing instruments. We're going to do that by focusing on the end consumer by making sure that we meet the needs of our customers. We're going to continue to focus on different channels and different geographies to grow and to penetrate the market, and we're going to continue to leverage our scale and capabilities to innovate both from a research and development standpoint, but also from a business model standpoint. And last but not least, we're continue -- we're committed on this journey of market leadership with the launch of Lumity. So with that, we'll open it up to Q&A.

Well ahead of time. I hope it was still worthwhile listening in, but we did see that there was lots of questions before us, hopefully, we can cover everybody now. And we need to speak a little louder is what I heard, but we can also share a mic.

Yes, this is Maja from Kepler. I have a question about your market leadership in wholesale. I mean you have a very significant market share already. So obviously, the incremental unit is harder to get by. Can you talk to how important private label products are for you? And I understand it's not Costco only, there are numerous private label contracts out there. How are you going about that? Has that share increased in the past? And maybe you would be so kind to share a number, a percentage of sales in unit terms if you are allowed to?

Yes. So private label does play an important role in the space. I think one of the things that we're trying to evaluate is we also know brand plays a key component. And so obviously, if you're one of our large retail customers, they obviously would want the latest technology with the brand. But we need to make sure we capture the value associated with that. So private label will continue to be a role. I think what we're going to try and do is we're going to try and continue to differentiate on our new technology and we're not going to necessarily offer the latest and greatest with our private label and it's going to be not branded the same way. The other component that I mentioned before, this is not just a product business, this is a service business. So we differentiate with our different brands with different service levels. So that's how we're approaching both the branded market and the private label market.

And any indication on how much of your units, not on the value, but on your units would come from more private label contracts? Is it like 15%, 20%?

It's -- you mean that the total is right now or where do you see -- if you see a significant shift?

You can answer both.

I'm helping myself, right? Really good at it. I think it depends on some larger contracts, right? If you count them in or not, there's 2 large customers in the world where we have private label positions, right? If you factor them in, I go off my memory here, you're probably in the zip code of something like the mid-teens or so in the private label. I think if you take the less bulky large accounts. I would venture to guess, you're going to see an increase in the private labels, which we do kind of in the mid-tier customers. I think the other one is bulky. But we're probably in the mid-teens or so in the private label right now.

Oliver Metzger from ODDO BHF. At previous launches, you always showed a chart comparing the latest platform compared to the previous one. Should we be concerned? At least in volume terms.

That's interesting because we debated whether we're going to include it. And so the past 2, I guess, Thomas can comment on this, we did not include it. We're happy to share that, but you'll see the revenue ramp on the 2 metrics that we've outlined both on penetration and repurchase rates are at the same slope. So this launch is a little bit different because we did accelerate it. Typically, we do a global launch. This is the first time in any organization that I've been in that you launched simultaneously across every geography. We did it a little bit different this time. We launched first primarily in the U.S. and then we've phased it in. But if we look at an apples-to-apples comparison between Paradise, the slope looks like this.

In the respective country because we need to kind of factor out. We started to launch in Germany and the U.S. because we were able to accelerate by 4 weeks. But in those, the slopes are the same as we had in the Paradise.

Okay. Second question is on the manufacturing cost. So this morning, you presented also about productivity and better output simultaneously, we see all the tendencies with soring ship prices. You also added some features with this water coating and so on. So how do manufacturing costs compare to Paradise's platform?

I think in general, in the hearing instruments, we are able to reduce the cost slightly from generation to generation. That's a combination of what we do from a design to cost, but then also kind of negotiation with suppliers and the microelectronics, things tend to come down. I think right now, the second part is going in the wrong direction as you have seen. If we add significant functionality like a center, a totally different discussion. But on the hearing aid flat to slightly down as generation over generation.

One thing real quick. I would like Andrew Coulter to come up. He is our launch manager for Lumity. So if there are any very specific questions on audiology, Andrew is an audiologist, and he can answer them for you.

I have 3. That's okay. And if that's okay. I apologize. One is the spillover from the earlier session. So I hope that's all right. First, can we just address the charger on Lumity and how different it is from Paradise? And to what extent you're confident that you've eliminated some of these issues that Costco, but anecdotally, I think some of your other customers have seen as well? So if you can talk to that, how much beta testing you've done? How confident and comfortable you are with that? That would be my first question. My second question is from the earlier session, I think there was a discussion of trying to improve profitability further in the care business. So Arnd it'd be great to get a refresh of where you are today, retail versus wholesale when you look at the profitability within the business and how much more scope do you think there exists? And then my third question is, I think we've all circled around the market. And I think we're all trying to understand what's happening. And I guess if I compare and contrast what you were saying to what some your peers are saying, I think there's a slight disconnect, right? I think one of your big competitors is talking about the issues not consumer behavior. The issue is just tough comparisons. But obviously, look at some of the data that you've shown us, it does seem that there is some slowdown in the demand. I kind of love to hear your prediction on when you think that gets better? And is this a Q3 only event? Is this a we need to get to year-end? Or is there a more durable headwind that you think we have to deal with? And what are you watching for as the key drivers of that?

So yes, let me address reliability with Lumity. There is different technology included in Lumity and includes -- and I don't know if we have demos, but if you were to actually take the hearing instrument in and out, you'll see that there's a magnet that kind of locks it in place. So there's a different interface that allows good chargeability, let me frame it that way. There's also certain things within the charger that make sure that it has a consistent voltage, and that's important to deliver rechargeability to the hearing aid. So with every hearing instrument, we track it over the lifetime. We have quite a few warranty periods that we need to track over the life of the hearing instrument itself. The initial data shows that we do see very good rechargeability with Lumity platform.

So with regard to profitabilities, we don't have profitabilities by business, but I can comment on, a, how we think about profitability going forward in general? And then secondly, I'll make some comments on the audiological care if that's okay. I think historically, we've been in a world of, call it, 80 basis points we've guided in the midterm targets in the 40 to 60, I think that's a good number for what we can do from an efficiency increase, you heard us talk about value capture. On the other hand, you heard us talk a lot about investment into growth and, I would say, over-proportional Audiological Care. The Audiological Care business is, if you look at same-store at a pretty good profitability, not identical to HI, but I would say we wouldn't be shy to compare with other people in the market who are of scale, right? But you heard Christophe talk about 100 greenfields. Well, that's an organic investment. You heard them talk about lead generation factory hub right, where we're expanding. You heard us talk about in China, we took a big step even before we had a network, and we have more than 50 people in digital marketing in China today, right? So we were using the tailwind we had over the last years out of continuous improvement, structural improvement across the organization to double down on some of the stuff we do in AC. I think you've seen today, Christophe share more on the digital journey, right? myPhonak app, tinnitus, silent cloud and things like that, right? So we're using our ability to increase productivities. And to even CI, I think CI over the last 3 years was on a good journey getting from no profitability to in the zip code of 15%, right? So we allow ourselves to use the portfolio we have and to say where is the best opportunity to move the money, right? So in that regard, I would say, if you look same-store, not making dramatic changes on greenfields, not making dramatic changes on investing into digital, I think we stand the comparison. But we're allowing ourselves to do more on the AC on the same-store level, Christophe has the same expectation as everybody else needs to chip in productivity. That's why he works on elements like capacity management in other corners. So that's much to the profitability question. On the market, I tend to like data. That's why I share very bluntly what data we have. I think if I look at the data, I would say, in most of the markets, the 3-year CAGRs were not as beautiful. And I think last year, in particular U.S., the 2-year CAGR was pretty beautiful, right? So yes, there's a comp matter in there. If you look at the shape of the curve, I like quarter-over-quarter. And you did see in Europe quarter-over-quarter slowing down. So hence, unfortunately, we didn't see that coming 6 months ago, but we're seeing it right now. Therefore, we move a little bit more careful into the second half from also what we did in the guidance. But I think if you look at the data, you'd be the judges, but look on quarter-over-quarter, look on year-over-year and look on the 3-year CAGR, I think right now, the market is not as healthy as you would have expected if there would have not been incremental headwinds. No surprise, we have not been in a high inflation environment before I think you expect some headwinds.

[indiscernible] with BNP Paribas. You mentioned that it's one of the first time you do an accelerated or launch in multiple geographies. Can you probably come back on the reasons behind that? Trying to fill in a gap somewhere or macro, which prompted for that? And second, I think -- could you maybe just give a bit more detail on Veronika's question around Lumity's and improvement versus Paradise? And maybe beyond that, could you maybe share with us some data that you might have already -- probably early days, but on those improvements stack up against new competitors platform? Or when can we expect to have some more data on that?

So I'll take kind of the launch time line. So if we were to look at a best practice, I think it's been remarkable that this organization has been able to launch simultaneously across the globe. But I think there's a certain advantage to doing different phases where we can learn and adjust. And so very openly, it was a 30-day advance from what we originally targeted, and we wanted to make sure that we learned in our largest market. We had launch plans in place, and then we wanted to make sure that we phased and learned as we went. So it's not a dramatic change, but it was a 30-day change from how we've, I guess, traditionally done it. We'll evaluate as we do this Lumity launch to see if there's an advantage to do it in a phased approach like we've done here if we go back to the original model. I will say from a supply chain perspective, I've never seen something like what this organization does with a simultaneous launch. It's pretty impressive. We decided to do a little bit different methodology here, and we'll see how it plays out. But so far, so good from that perspective. We don't present technically competitive side-by-side data on the certain -- on features. I think if you want to comment, I think, in some ways, Fabia or Andrew, you can talk about how we compare to our previous platforms, which will give you a proxy because there's information out there versus competitive platforms. So maybe Fabia or Andrew, do you want to hit that?

Yes. So the Paradise versus Lumity, the significant difference really -- the significant difference with Lumity is all focusing on speech understanding predominantly in the most challenging environments. So as Fabia talked about, StereoZoom 2.0 is new, so it gives a much narrower focus when it's at a stronger setting. And then we also have a SpeechSensor, which then will open up the directional microphone systems to hear speech from the back end side, that is all integrated within AutoSense, which is the real unique thing that we have in the market, although we don't compare directly to competitors, nobody else does treats automatic adjustment the same way as we do. And some of the changes that we made within AutoSense to make sure that StereoZoom 2.0 and SpeechSensor are really great, is about the lower noise level activation, the lower noise floor that they come in at and the parameters that we then activate to make sure that people can hear speech clearly in the most challenging environments. So the real key difference is all around speech understanding and noise and reduction of listening effort.

[indiscernible] from Bank of America. Quick question on Lumity. So you've decided to launch only a rechargeable version if I'm right, like 85% of the customers are willing to buy rechargeable, but you have still, let's say, roughly 15% of customers who don't. Just can you explain the reason of the choice and if we should expect a non rechargeable vision coming in the coming months?

Yes. So specifically on this launch, we were dedicated to rechargeable. And I think there are a couple of factors for that. We see the adoption rate and the trend. I talked about the importance of end consumer satisfaction and focus. Market research indicates that's what the end consumer wants. And so we're going to develop technology based on that data. There are certain markets in certain geographies that want traditional battery. We'll consider that, we'll look at it, but we're looking at the market data that suggests we need to focus on rechargeable. There's another component. There's new regulations, specifically coming out in the EU about medical devices and consumer electronics and rechargeability. So we have to stay ahead of the curve there to make sure that we're going to be compliant both short, mid and long term on rechargeability.

I would like to add one point there. Also, a lot of our features or, for example, the sensors that we've already built in, in the Paradise platform, they need the rechargeable device to be able to work. So in the future, like a lot of the features that we're looking at need this rechargeable battery. That's another reason, just from a product perspective.

Dave Adlington from JPMorgan. Just on the price increases -- on the list price increase. I just wonder if you could give us some quantum on the amount that you've managed to put through and actually get to stick in terms of realized prices? And just following on from that, in terms of those price increases, is that as a reflection of the general cost inflation we're seeing? And will that offset that impact on the margin?

I think probably first to frame it, when we talk about price increases, you need to segment the market into various large customers who have either 1-year or 2-year contracts, and then we have, call it, smaller, medium-sized customers who are kind of living off an existing contract. So the impact right away is just on half of the market. I think the larger contracts up to the negotiation which I will not comment in those discussions. I think in general, we increased prices with new technology. We're doing that with Lumity. But look at the list price increases we've done this year as incremental in order to compensate for some of the inflationary headwinds we have. I think we as an industry are learning that I think I said earlier, we have not done this as an industry before list price in addition to product. I think it's broadly the better model going forward, but we also need to see how the competition kind of moves and what the customer accepts there. From a, let's say, how much of that sticks, I think you would expect that if you increase by call it, 5% in the list price increase, you're probably not getting the full read through. But I think we're getting a fair read through in line with what we have expected.

Urs Kunz from Research Partners. Maybe on CI, you say you're on a good journey. Could you elaborate a little bit on how is going growth rates, profitability? And then also on the recalls, the provisions, maybe a little bit flavor on that?

I would not like to go down this path because it would be being within the quiet period and making specific statements. My range was what we had achieved end of last year. I think coming into the year, we were confident that that's a good level from which we can further improve. I think that's far as I would go. But no concerns to the level that we would have shared them to the outside world on anything on the CI side, I think we're making good progress.

[indiscernible] from HSBC. First question again, actually goes a little bit back to the previous presentation about connected to this one as well. So the 6% to 9% revenue growth that you have for the midterm, in price reduction, we said it resumes over the long run, some reduction, and then you have the slide with increased retail stores. I guess that would represent some switch from the previously 85% wholesale, 15% retail model. How do you see that in terms of the price impact and as well as the switch, so the volume impact? And my second question in Lumify, does it your launch, obviously, it comes with increased or resumption of sales and marketing activities. How -- I know that in terms of the pricing, you've already indicated that it will be higher. In terms of reimbursement, how does it look in the countries you launched? Some indication so we can put the two and two together in terms of impact -- estimate for the impact on the margins from Lumify.

So I would say on the pricing, we're new to this, trying to step up pricing beyond what we did on the technology side. Therefore, we have not factored that in any shape or form of a change of our midterm aspirations. So leave us some time to think about it until we get to a conversation perhaps next year. But we need to see how much of the pricing is achievable. Secondary, we had a little bit of a discussion about down-trading also need to see more stability in the trends there. So for now, the 6% to 9% top line is based on what we said when we launched that pretty much on a unit volume perspective and price constant, we'll update when we get to commenting on our midterm objectives here. From a -- I think your second question was about -- can you repeat your second question, sorry?

Yes. The second question on was in the Lumify launch. You obviously have launched it so far in 16 countries, but you probably have some indication on reimbursement levels.

So do you want to?

Yes. So it depends on market, right? Every market is different. There are only a few select markets where we're seeing maybe some potential headwinds, specifically with reimbursement. But overall, considering the hearing instrument. I could ask Christophe that question, the hearing instruments is a very small portion of that cost of the reimbursement. And so it's typically the independent or the retailer that has to determine what that end prices. So there's a lot of room for price to be absorbed from a retail perspective.

So 2 bigger picture comments on the reimbursement. Reimbursement as a total source of income to us is not as high. There's lots of countries where people get kind of a basic amount. In Germany, that's a high end. There will be EUR 800 and now the place is a EUR 300 or whatever. And then most countries have a model of where you can up pay and upsell to higher levels, right? So in reality, the vast majority of the revenues coming to our industry is actually private pay. The reimbursement levels over the last couple of years, there are some puts and takes, Netherlands has gone to a negative for 5 or 6 years ago. Japan has increased coverage. France, you can debate. I think they introduced a new model, drove a lot of volume. Germany went up some 6 or 7 years ago. So I would say in the sum across all different countries rather stable in reimbursement and increase of coverage. And if it is because lower levels of hearing loss already get access like we've seen in Japan. But our general sentiment on reimbursement neutral to slightly positive.

Very helpful. Thank you very much.

Everybody hungry, or anybody -- No more questions. By the way, here.

[indiscernible], Patinex Management. A question on productivity. It seems that you made a lot of progress. And if you had, let's say, 100% as perfect efficiency, at what level are you today? And maybe how can we think about it in the future if you have to improve so much every year and you still don't see it in margins, where would have been, maybe without these initiatives in terms of profitability? And maybe one forward-looking question that respect. Can you do something today what you will decide in 5 years that you will do to have a step improvement in profitability, either efficiency via the machine itself or by innovations?

So a couple of comments. I think if you think in terms of efficiency based on processes, I wouldn't think about you do something and then you end. You may talk about different percentages if your early innings on a lean journey. You are able, if you do it well as we to be in the 10% or higher, I think over time, you get to 5% to 7%. But if you would go to companies like Toyota, like Danaher or whatever, they're still getting in the 5-ish percentage or so out of the processes where they started to work on 10 years ago. So I think the level comes down. But at the end, there's always something you go find and improve. I haven't seen that stop. There's a structural site, which we have done over the last 3 to 4 years with quite a focus, where I think in the summer, we've probably taken out about EUR 100 million structural cost out of the organization. I think that's more of a place where you ought to think about you have a certain, let's say, container of opportunity. And then if you have the ultimate optimal structure, I think you're getting to an end point. I think on the structural, we've depleted most of the ideas were not at an endpoint, but probably not at the same range we had last year while we were going through COVID. I think with regard to step function change in profitability, allow me to say that I remember a time where we were under 20% EBITDA, and then we came to 25%. Currently, we're slightly depressed. Big part of the depression comes off on the -- on the EBITDA margin side actually is the Sennheiser business being integrated, right? So we didn't give a lot of basis points. So I think we made a step function change. I wouldn't predict the same in the next 5 years again, 400 bps, 500 bps is a lot. And I don't think we would be well advised for our shareholders to march down the path of drop all of that to the bottom line, right? As you've seen us talk about, there is an element where innovation drives penetration and market share. There's an element where we can build earlier access to consumers, and then there's an element where we can just get more catchment area from a retail perspective. So we're trying to balance the profitability increase versus where we invest the money into the growth side, yes. So no attempt here to get to the maximum profitability for Hearing Care business. You can achieve at one point of time, I think a fair deal between some margin expansion while we like to reinvest some of the money we get out of the productivity. Not an endpoint to the productivity at this point of time in my side.

But can -- maybe even more today, more in our indeed to have accept lower margins for a while, but then have more scalable products to sell?

I think we were doing a lot. I think if you look at the P&L on the hearing instruments side, we stepped up about 40%, 45% in R&D over 3 to 4 years. The objective was not to only put it all in algorithm, some of it is the application side. Some of it is the sensor technology, some are some other stuff we're working on. So I wouldn't do more than that because you're overheating the system. Because at the end, all of this needs to be integrated into a teeny tiny, very complex device, right? So it's not that we're building things which are independent of each other. So it's really doing significantly more, even 10% a year, and do that effectively that it all comes together is probably a clip I wouldn't go higher than, right? On the go-to-market, I think if there's one corner where you can do in a skilled way a lot more, I would say, is that in greenfield. You can do 1, you can do 2, you can do 5, you can do 10, you built the organization to do that, right? If that's where you want to overinvest, right? But other things are more dependent of each other. But I think we've done quite a lot of step-up from the spend level organically, because we were able to get so much out of structural improvement and productivity. We feel we're at a point where we are at a good heavy investment for the organization to swallow.

I suggest we take one more question, and then you can ask some more questions over lunch.

Can you remind us what proportion of your hearing aid manufacturing that retails through your own hearing care network? And if you have made any changes in the way that you prioritize your own network or deprioritize your network in terms of launching new products as you're going through right now.

So we're around mid-teens units through our own network, 80-mid through third-party, which is needed to reach 30% market share. I think from a prioritization perspective, we are now current with our most important customers on the third-party side, and we think that's good. I think, as you heard Rob say, in certain private label situations, we may take 3 months longer, 6 months longer, whatever the time line is. But if it comes to the branded and the Phonak brand, we like that to be at the same level as our audiological care. These customers are super important. They have significant price differences they pay, and so it will be hard for our loyal third-party customers to even accept price increases, that AC is faster. I think our audiological care doesn't necessarily need it, they just don't want to be behind.

Okay. I would say we break for lunch. We will be back here at 1:30. Don't forget, for those of you, and there's quite a few of you who signed up for the sound demo, we will try to remind you for your time slot. And in the meantime, I hope you enjoy the lunch and take the opportunity to talk to management members also during the break. Thank you very much.

Thank you. [Break]

Good afternoon. Welcome back. I hope everybody had a pleasant break. Something to eat, some mingling, hopefully some information for whoever wanted on the product side. As I've said earlier, we are expanding the offering we have, and that's kind of the introduction to Martin. You know, Martin, from way back when is the Head of Marketing for the Hearing Instruments business. He in that role, took on to expand our thinking towards early entry devices, and that made him the logical person to help us through the acquisition of Sennheiser and now creating this new consumer hearing business we have. And with that I want to invite Martin up for a deeper dive into, to some degree, education on what did we acquire with Sennheiser, how do we think about the different segments, and how does it all fit together with the Sonova World. Martin?

Thanks a lot, Arnd. And also a warm welcome back from my side to all of you. I hope many of you got a bit of [indiscernible] of the soundbar in the demo and the experience which we had over lunch. And by the way, don't forget to pick up your welcome gift, a Soundbar, before you leave. Just kidding, just kidding. But as of end of October, we are taking orders. So what I'd like to do is just provide you with an update on our consumer hearing business, what the Sennheiser business is all about, how we've done so far this year in terms of our launches, and then what our strategy is going to be moving forward in terms of focus. So for those of you who are new to Sonova and who are new to Sennheiser or our Consumer Hearing business, just a bit of a look at how our product category split looks like. 56% of our sales are in Premium Headphones, which is headband headphones and the True Wireless form factor. Then we have 25%, which is in Audiophile which is really the heritage of Sennheiser, where they have a strong market position and which is also a nice profitable business. And then we have 14% in Enhanced Hearing, which some of you may not know, but actually Sennheiser has been in Enhanced Hearing for many, many years, with the TV listener form factors. And they have actually a very strong market position in those segments in Europe and in the U.S., and so this is where we are really combining forces, and I will talk more about that in the next couple of slides. And then Soundbar, Sennheiser entered into this segment 3 years ago with the launch of the Soundbar Max, and really have made great inroads in the Premium segment, and now we are expanding the range with A+ and the Mini, which will come in this fiscal year. In terms of regions and channels, you can see that Sennheiser is already a significant online business. 48% of our sales are either are online, either B2C or B2B. And then the other 52% are in traditional brick-and-mortar outlets. In terms of regions, Europe is still by far the biggest region, but we have a strong presence in APAC, and in particular, in China. Already 15% of our global sales are coming from China. We have in the Premium segment, a great brand awareness there, and the strong position we can build from in the Chinese market. Looking a bit more at the dynamics of the 2 biggest markets we are in, and of the markets where we have external data from JFK and from NPD, you see True Wireless is the big market. EUR 9.4 million for those 5 markets. Overall, globally, the market is estimated to be around EUR 20 billion. You see Bluetooth headband is smaller, about 17% of the True Wireless market with EUR 1.5 billion in those 5 markets. In terms of dynamics, you can see True Wireless, super exciting growth rates over the last couple of years with a CAGR of 24%, but now slowing significantly when you look at the last half year. Conversely, actually, Bluetooth headband has picked up a little bit. Still flat growth, but went from a negative to flat, the negative growth really comes from True Wireless as a form factor eating into the headband form factor. But the pickup, which happened as of recent is really the launch of the -- the Apple Airpod MAX and the Sony in the very Premium segment, which has driven a lot of nice growth in that market. And you will see, thanks to our successful product launches we've had in both those segments, we have and are gaining share in those markets. In terms of integration, some of you may remember, we did sign the deal in May, then it did take us 9 or 10 months to actually close the deal, and carve-out had to obviously happen. And it felt a bit like a pregnancy and then a successful birth of my fifth child. And trust me, I'm taking care of it, and I'm nurturing it as if it were my fifth child. It's a wonderful experience, and I love it. And we've done a lot since the acquisition. We didn't wait during the 9 months, we were lucky that we could engage early on with the Sennheiser team. We developed our 100-day strat plan so that we could hit the road running as we closed on first of March. We have now in our regular strat process, which just finishes now, updated that strategy and refined it. Then we spent a lot of time with the senior leadership onboarding with immersions in our [ SOON X ] philosophy and concepts and tools. That is working really well. I just came back from a week where we had 40, 50 people at our Tullamore factory in Ireland, going through a whole [ SOON X ] workshop with all the continuous improvement mindset and tools, because we see a lot of opportunity in that area moving forward within our Consumer Hearing business. Then obviously, a lot of visits around the globe to get to know the teams, the leadership and make sure we have the right leadership and teams in place. And then our IT migration has also successfully been completed end of September. So all in all, on track and progressing well with the integration of Sennheiser into our Consumer Hearing business. At the bottom, you see a number of launches. Altogether, we've actually launched 8 products in 6 months, of which 4 are major or significant. And I'll talk more about those in the next couple of slides. And here we are. So I'll cover 2 launches in the Premium Headphone segments, then one in Enhanced Hearing and one actually, which is happening in October, but I'll give you a sneak preview of our campaign and how that is doing. So in terms of our product which we launched back in May, our new True Wireless product. Here it is, our Momentum True Wireless 3. I -- before having this role, I must say I was an Apple fan. I have quite a big Apple ecosystem, which I'm going to have to start to kick out one after the other. But this is a fantastic product. It's got great active noise canceling, great sound quality, as you would expect, and a great wearing comfort. So I love them. I can just recommend them as a Christmas present. And you see great ratings, Amazon, 4.2, great reviews we've got, and as I said before, this launch has really allowed us to gain share in this market. On average, kind of 0.5 percentage points in those markets where we have launched the product. We also have a great media campaign. We had a big billboard on Times Square not so long ago, which then was amplified with a lot of social media content. Moving on to our Momentum 4 launch, which has just happened. Again, a great product. I usually only use this form factor when I travel in planes, but amazing. And actually, with this one, it's got 60 hours of battery life. No other product has that. You can fly back and forth to Sydney without recharging. It's pretty impressive. But again, we got great reviews. Amazon rating of 4, then we just recently -- we got 5.5 or 5 out of 5 stars, 1 out of 1, really extremely positive. The feedback we're getting from consumers is great wearing comfort. It's really light and comfy and snug, then great sound quality. And obviously, the battery life is liked by many, many consumers. And it's really doing well. Then our TV Clear Set. This is the first product or the first Sonova product we launched under the Sennheiser brand. So we've been developing this product now for quite some time, and so we are really happy that we can now launch it or we've launched it under the Sennheiser franchise. It's a product which is really for people who have a mild hearing loss and have problems listening to the speech when they watch TV or watch a movie, and it's the first time you actually have a True Wireless form factor in this area. The other form factors to date were the stethoscope, which didn't really look that sexy, or the headband form factor you had. So this launch doing well, off to a little bit of a slower start because it requires quite some explanation. And obviously, it also has a certain price point. We had -- this one retails at 399. But a great product, and also good reviews. And now, moving on to Soundbar. So those of you who have been able to experience it, have really experienced this immersive sound experience which one gets from the sound bar, it's all driven by software. In principle, the software tricks your ear or your brain, I must say, into creating this virtual sound experience, which otherwise you'd have to create with 6, 7, 8, 9, 10, loudspeakers, and the software just slightly delays certain loudspeakers which are in the Soundbar to basically trick your brain into creating a virtual 3D sound experience. The bottom one, the Max was launched kind of 2.5, 3 years ago very successfully into the premium market. We are in October, launching the Plus in the middle. And then in our last fiscal year or in Q1 of '23, we'll be launching the Mini, both of which will be at more competitive price points, but it still provide the same sound experience. And obviously, in particular, for the Asian markets, the Mini will be interesting because the apartments there are quite a bit smaller than in the U.S. or in Europe. And from that perspective, often the Max does not even fit into those rooms. So now let me basically share with you a sneak preview of our launch campaign. [Presentation]

Every time, I watch this video, it kind of goes emotionally under my skin, and it's a great video which the team has put together. So moving on to strategy and our future. Obviously, we want to build on the strong heritage, which Sennheiser has built over the 70-plus years, so extending our leadership in premium consumer audio. But then, we'd obviously want to leverage synergies and move into a new growth opportunity, which is becoming the go-to brand for the situational hearing solutions in the future. More specifically, what are we going to focus on moving forward. So we're going to focus on Audiophile, premium true wireless and hearing care/enhanced hearing. In Audiophile, it's building from a strong base from Sennheiser's heritage from a strong positioning and a position where Sennheiser has strong market shares in all the market it operates. We will be continuing -- we will be focusing on the premium segment, and we will be leveraging our state-of-the-art transducer technology, which sits in our factory in Ireland and really enables this great sound quality, which Audiophiles across the globe have come to experience. In terms of true wireless, we will be focusing on the premium segment. If you look at the products which we sell at a premium price, they do really well. Also, that is a market which is actually as of lately growing faster than the average market. So from that perspective, a nice growth opportunity. In terms of feature set, we will continue to focus on sound quality at something Sennheiser does really well. They're also wearing comfort where we can again leverage synergies from Sonova from our ITEs in-ear competence that's already happening as we speak. And we will be looking at our custom fit and also our sensor technology. So in principle, from a strategy point of view, it will be the premium segment, and then we will look at there's a couple of subsegments. Let's not forget, when you have a $20 billion market that is not just 1 market. You have subsegments in that market with specific consumer needs. For example, we launched a sports true wireless recently, which is doing really well, which has a great fit. And from that perspective, that is 1 subsegment we will focus on where we have a right to play and a right to win. Another 1 is wearing comfort that I said and sound quality and also speech enhancement, which is part of our hearing care and enhanced hearing opportunity. In terms of enhanced hearing and hearing care, that's really why we acquired Sennheiser because we believe with the deregulation, which is happening that the consumers will be seeking solutions for their hearing earlier on and not necessarily go to a health care professional as their first port of call. And we obviously want to be there when consumers ask for some sort of hearing help on the journey. And so here, we will be launching our speech-enhanced hearable, I'll talk more about that on the next slide, but we will be launching that into the market in this fiscal year, our first product in that area. But this segment or market has 3 other interesting growth opportunities. So on one side, we will be expanding our product portfolio. Right now, Sennheiser only has 2 or 3 TV listeners. Here we'll launch speech-enhanced hearable and there's other exciting products, which we will launch into this market in the near future. So the one growth factor is broadening our product portfolio in hearing care. The second growth factor is geographical expansion. Right now, Sennheiser is very strong in Europe and very strong in the U.S. that has not really launched this category into APAC and into the Asian markets. We just got some exciting research back from China, which also shows that there's a lot of opportunities there. So we'll be moving geographically much more into APAC. And then the third dimension is channel synergies. We can now leverage the Sonova channels, 4,000 stores with my colleague, Christophe, where we will put the Sennheiser portfolio into all those stores over time. And then obviously, with my colleague, Rob, from wholesale, they have access to, I don't know, if it's 20,000 or 30,000 HCPs around the world. And so we will also be pushing our Sennheiser products into those health care professionals over time. So nice growth opportunities for this segment or market in the future. In terms of go-to-market kind of priorities and focus. As you saw in the beginning, about 50% is already online sales. We want to continue to drive that. And we've set ourselves a target in a couple of years to reach 75%. There are some really big strategic benefits of having more sales online. You can much better control your brand positioning. You can much better interact in an intimate way with consumers online. And you can also control your price and price positioning better when you are selling direct to the end consumer. So a number of strategic interest why we want to do this. It also means we need to get better at key account management. We just held a customer worldwide. Then we believe there's a lot of opportunity in the area of marketing effectiveness, really building our competencies around data analytics, also improving our performance marketing. I think we can drive more efficiency there, get our cost per orders down in terms of marketing investments. And then finally, also create a better digital consumer experience with a proper and good CRM tool and automation along the consumer journey and be able to interact a lot more closely and intimately with the consumers as they move through the consumer channel. Generally speaking, if you look at premium headphones around today already -- in certain markets, if you go to China, already 85% of all premium headphones are bought online. So it's really a category which is well destined to be purchased online. In terms of regional focus, we are focusing, obviously, on the biggest -- U.S. is the biggest market, by far, still dominated obviously by Apple. China, we have a great positioning and awareness in the premium segment, and that's a great growth opportunity moving forward. So we will double down there. In both of those markets, we're looking at really defining and sharpening our brand positioning and then targeting those consumers and making sure we go after those consumers really are looking for the Sennheiser brand and the Sennheiser experience, also working together with key influencers, which we have already started in China. And then finally, there's still a lot of opportunities to double down in Audiophile in those 2 markets, in particular, in China, where this is still a bit of a nascent category. And here, this slide is really about the opportunity and why we acquired Sennheiser. It's really how do we reach the consumer earlier on in their consumer journey as they start to have a mild hearing loss, and they're only looking for a situational support like when you are in a loud kind of office or you are in a loud restaurant, but you really want to understand well what your counterpart is saying and then you just pop in hearable, which is a speech-enhanced hearable in order to better understand your counterpart. Research has shown that about 7% of the people are looking for such features when we did the research. So if you do the math, it's a big market, it's a growing market. You come to something around $3 billion if this market emerges. Then as we tested our product concept with 1,500 consumers, you see that about 60% find this very or quite appealing, or relevant, so to speak. So from that perspective also, something which consumers want. And it's great because we've been working on this product for quite some time now at Sonova. And it's actually a perfect timing now that we were able to acquire the Sennheiser consumer business. And now in this fiscal year, still launch our first speech-enhanced hearable under the Sennheiser franchise. And finally, to wrap it up, just a brief summary. So our kind of transition and integration of Sennheiser into the consumer hearing business and into Sonova is working well, and we are on track. We're making great inroads with our Sonova X mindset tools and our experience and expertise. It's working well. There's a lot of potential opportunities and upsides there as we roll that out with Sennheiser. We've been able to launch 4 products except -- in terms of vision and strategy, it's all about expanding that leadership in consumer premium audio and then becoming the go-to brand for situational hearing solutions. Focus on Audiophile, premium true wireless and hearing care. In particular, hearing care, we believe that that's a great opportunity. And maybe just to, again, say you have hearing care, a lot of expertise from Sennheiser and from Sonova Audiophile, a lot of expertise from Sennheiser. You take those 2 and you bring feature sets into the true wireless segment and then you have a real right to play and to win in certain subsegments of the true wireless market, which is huge and growing. It's estimated to continue to grow at about 15% a year moving forward. And finally, we are ready to launch our speech-enhanced hearable within this fiscal year. So on that, thanks a lot for your attention, and I will hand back to Arnd.

And you need to stay because we need you for the Q&A.

Right.

Thank you, Martin. I hope that was shorter and crisp and sweet. Before we get to the final Q&A, we've allocated 30 minutes and he was shorter again. So we have a little bit more time in case there's got many questions. Just a few takeaways here. Clearly, marching down the path with Sonova, which we have said with our strategy frame, leveraging innovation, but at the same time, broadening our consumer access and our market reach. That's the 3 main dimensions of growth. You've seen in various ways, systematically applying the Sonova X business system to fund the journey on the organic growth side, put some to the bottom line, but we had the discussion in one of the Q&A that the higher focus should be on driving the growth side. And then the 3 businesses we had here to present driving the omnichannel strategy on the ordiological care. This year with a particular meaningful step-up with regard to the POS, but hopefully also some more insights on how we define the digital side, the services, we're in the process of creating beyond the hearing aid, clearly, strengthening our offering on the hearing instruments with [indiscernible] and other functionality we have added over the last 12 months. And then last but not least, Martin showing how we expand the market reach going towards the earlier consumer on the listening hearing journey with the objective to be at the interface between normal hearing and the onset of a hearing loss. With that, we're here to answer any further questions. Just one reminder, Birgit reminded me on it. We're on the quiet period. Therefore, she will stay very muted as well I if it comes to deeper number questions. But if there's other questions in her direction, I'm on for it.

I will disclose everything, by the way. Just kidding.

That's why you don't get the question for me. Can we get closer together. I was told we should be careful with the camera.

[Operator Instructions]

A couple of questions to you, Martin. Thank you very much for the presentation. I've just double checked on the hearable that goes with the TV connector. In Switzerland, it's CHF 440 as a price. What is the return policy on that product? I mean it is a big-ticket item. Can we try it out maybe for a couple of days and then return it? That's question number two -- one. Number two, mentioned that there will be people walking into retail in the U.S. asking for products with enhanced hearing. I think probably more likely people will walk in and ask for an OTC, not like the product that makes me here better, I guess. So what is your strategy on the OTC? And if you're still saying that you don't want to go into the OTC category, how are you going to stack up and compete to versus Sony with WSA that probably is going to choose a hearable function as well? And then the last question is on the pricing. I'm not sure whether you can say anything about the enhanced hearing hearable that you're about to launch. Where is it going to be between the TV stuff and the OTC, somewhere in between and again, the return rates?

So your first question, so it's rated retail is at EUR 399, which now meanwhile is around CHF 440. So you will -- in terms of return policy, we -- basically, it's country by country, so it's not like -- but in essence, when you buy something in most countries, you will have a 30-day no question asked return policy. So from that perspective, it's no problem there. Then the second question was around OTC. We actually believe that probably OTC is, to some extent, a regulatory term, which consumers don't care about other than the fact that they've maybe read about it in the media. So we do think that consumers will actually go into a store and ask for some sort of solution, which helps them hear better in specific situations. And then you'll either have early entry devices like speech-enhanced hearables, you may have OTC devices, too. So you have a whole set of different solutions before you come to a classical, let's say, hearing device. And in terms of OTC, we have not made up our mind yet how we are going to play this, but we're obviously looking into this, as you would imagine. And then the last question was around pricing, yes. So obviously, as you've seen with the TV clear that is also priced if you compare that to a hearable, a premium hearable will be like CHF 249, CHF 279. So here also, we've priced it higher because it provides additional benefits. And our speech-enhanced hearables will also be priced at a higher price somewhere between a TV Clear and a full-fledged hearing aid.

[indiscernible].

Somewhere -- somewhere there. Yes. It's a big range, I know, but I don't want to provide too much details to our competition, obviously, as you may appreciate.

Okay. Thank you. Operator, can we have the first question from the phone, please?

The first question comes from Martin Parkhøi from SEB.

Martin Parkhøi from SEB. First, a question on managed care. Maybe you can make some comments on that in U.S., how large a part of your U.S. sales -- retail sales is coming from managed care? And what is -- how much is driven by own leads? And how much is actually coming from TPAs? And then secondly, on the large retailer in U.S., you don't want to put a name on, just on the slide where you show the development in the first half and your considerations for the second half, could you add what considerations you have for the development in this so-called large retailer in the second half compared to what development you have seen in the first half? And in that context, if KS11 will land at another manufacturer, will you then immediately be available with a competitive offering and price in the branded segment?

I didn't fully understand the first question on managed care. Can you repeat the first question, please? .

Yes. If you look at your retail clinics in U.S., how much of that sales is coming from managed care? And if we look at the part which is coming from managed care, how much is driven by your own leads and how much is driven by leads sent from third parties like TruHearing?

I think, first, we are under-indexing on the managed care side, but that's pretty much because Alpaca had chosen to not participate, so they focus only on private pay. I think otherwise, in the Connect Hearing side, we were probably comparable to market. I would think we're probably in the 20-ish to 30-ish percent. And we felt that is a good ratio, particularly at clinics where we don't have as much private pay consumers. I think the second question on the large customer. I think we feel comfortable with the guidance we have provided independent of that discussion. Secondarily, I think we're not in a position to share what our strategies are in case A happens or B happens and what we then go do. Please understand, we're in discussions, and some of that is also an element of negotiations.

Okay. Can I just [indiscernible] on a follow-on. That's just on the market growth, Arnd, because you're talking about the high inflation is more toxic for the hearing aid's market growth that maybe than we have seen in previous recessions. But if we look at the U.S. commercial growth back in 2008, it was minus 1%, minus 3% and then minus 7% from Q2 to Q4 2008. Do you then fear due to this inflation that we will actually -- could see even worse scenario in the next couple of quarters? Or do you actually believe that the COVID-related pent-up demand actually could be some kind of cushion on the market development this time around?

I think it's a little tricky to compare now one quarter and the next quarter and trying to guesstimate numbers. I think we have shared what we've seen in the last 6 months. If you look at it, it was a minus 2%. You have a little bit of a difficult jump-off point. But in normal environments, you would expect the U.S. probably to be in the 4 to 6 percent points year-over-year. So I think there's a couple of percent points compression. I think we need to see how the situation pans out in the U.S. But I'm not going to comment on an individual quarter basis for one market here. I think we've taken a careful approach in how we have guided. I think we're currently well covered.

It appears everybody is here in the room, so we'll move back to questions in the room. .

Thanks, Thomas. Two for me, please. One is just a question around product quality. If I look at sort of the 2 things that have happened this year, obviously, you pulled the [ Styletto-type ] product off the market in July. There's now reports of issues with the rechargeable, the cradle. Just kind of curious how you feel about the product quality? Is there a problem? Is there a systemic issue we need to worry about given we've now had 2 incidents in a fairly short amount of time? And are you taking any remediation action, work, oversight? I know it's a broad question, but that would be helpful. And then Martin, a question for you on Sennheiser. Obviously, I think you've guided for low double-digit growth this year. From what I understand, you're on track for that. Just would love to understand how you think about growth beyond this year. And maybe give us sort of a version of what does the revenue growth at Sennheiser look like on a 2- to 3-year basis, in the case of a recession and in the case of not a recession? And how you think about that sensitivity as well?

So on a reliability perspective, I think first one, clear statement, everything we've seen is not a safety-related matter, as we unfortunately having experience in a different part of our business. I think you're talking about certain level of failures where devices don't charge when you put them into the cradle overnight. I think from a level perspective, we're in the good position independent of the conversation currently ongoing. If I just look at the numbers, we're in a better place than with the model. Even if we have a little bit of an upward trend in some of the product right now, and that's pretty much based on certain accessory elements like wall plugs, cables and whatever. So as much as we dislike that something goes up, we like it to go down every year. And I think we have that kind of trend line over the last years. We're in a good position, at least relative to Marvel despite us knowing a couple of areas where we can put some countermeasures in place. We have figured out an appropriate number of countermeasures to get back to the old level on the same product line. So...

[ Dramatic ] issue with third-party supplier or suppliers that we're going to see through in the business over the next couple of years.

No. I think if you take the charging per se, we're still in the world on where we're trying to do a little bit of what 5 years ago, people would have [ said a miracle ]. How do you get all of the capacity of energy into the small footprint in a lithium-ion battery, which is easy from a usage and lasts for 5 years? And then you do that in a difficult environment like the [ ear ], right? So I say this as simplistically to say what we're trying to do has not a potential to get to [indiscernible] repair rate. It's just not doable. Nobody has that. We're in the same swimlane as others in that regard. We haven't seen big trend going the wrong direction. It could happen at any point of time that in your supply chain somebody makes mistakes on the variances on their cable connector on the wall plug. It could be even that somebody makes mistakes on the manufacturing of the batteries. You do post-market analysis, you find the stuff, and then you go fix the variance. That sounds easy. It's not that easy in the bigger picture, but that's what we're talking about. But there's not anything I would say the suppliers all much dramatically in the wrong direction. There's nothing we have changed, which is fundamental to the device. And what we achieved today from a rechargeability and from the failure rate is a lot better than when we came with the first generation or the second generation.

Yes. I think generally speaking, if you look at the 3 categories, Sennheiser or [indiscernible] Audiophile, True Wireless and hearing care, those are markets which under normal circumstances show nice growth rates. Obviously, it's very difficult to predict now you saw the market slow down quite significantly in this first half year. So it's a little bit anyone's best guess where the second half will end. I think what I can say is in light of the product lineup we have right now, we've gained share in the first half, and we believe we can continue that into the second half. In terms of looking out a little bit longer, in my presentation, you heard that hearing care is a big opportunity for us because we have the product expansion. We have the geographical expansion and the channel expansion. So a lot of our growth is -- pins on that vector. And then as I say, if True Wireless comes back up to 15% growth rates, you can do the math. And Audiophile is also a market which inherently grows nicely. So it's hard to give you a number, which I obviously wouldn't do. But I hope kind of what I've alluded to gives you a bit of a sense where we're going.

And your sense for sort of the economic sensitivity of the business, and as I said, we don't have the history for this business looking at '07, '08, '09. If I look at the 1 peer that [indiscernible] if you have a sense for, whether your business held up as well or held up better during the period or not?

And the period you're talking now...

2008, 2009.

That's financial [indiscernible].

The financial [indiscernible].

Yes. I can't answer that question. I don't have the historical data.

I don't have it either, sorry.

So on the Sennheiser business, so at which level of revenue would you estimate the business to breakeven? And can you talk a little bit about your future ambitions in terms of profitability provided that the world doesn't fall apart?

So I mean we did obviously say that we are kind of low single digit right now, which means we are already above the breakeven threshold. And obviously, as we continue to grow, you have more fall through down to the bottom line. We're obviously managing our costs very tightly. So I would say, assuming, as you said, the world doesn't fall apart, we will have nice growth rates in those markets. And then we have the [indiscernible] initiatives we are driving. There is a lot of opportunity with Sennheiser to become more efficient, drive costs down. We're also exiting many TSAs we have currently with Sennheiser. As we exit them, we also are driving synergies. So from that perspective, assuming the world does not fall apart, I think the plan is sounding good in terms of profit improvement.

We said at the acquisition that eventually, we want to get to a mid-double-digit profitability in EBITA. And then from everything we've seen so far, that's possible, haven't attached an exact year, number to that. But I think no changes to that perspective.

And so just on the OTC launch, is it a fair assumption that you would be able to launch OTC regulated products in fiscal '24?

In fiscal?

Fiscal '24.

So if we choose to, yes, and I say we are still looking at all our options in terms of OTC. But yes. Arnd, if you want to add something on it?

I think the challenge with OTC is the following and makes it really hard. It's not yet convincing that this will fly economically, right? So if you go to some of the well-known examples of people who made a big declaration that they're going to show up and then they soon before left the market or you look at the people who are in the market and who burn through a lot of capital they raised, [ and then ] you listen carefully, there's 3 generators: one, what's the lead generation cost? Secondarily, what's the return rate? Thirdly, how much help do the people an average expect even when they call it an OTC? That's exactly the 3 things we hear from all the people who were involved, right? And so technologically, we can create something. But does it meet the expectation of 80% of the people who bought it in the store online? And that's what we're testing out. We would not like to launch a product where they have a return rate of 60% and a low Net Promoter Score because of the lack of happiness with what people acquired. What we do with hearing losses is quite complex even with the best audiologist. We do have an unfortunately high return rate, which is not 30%, but which is somewhere in the 15% to 20%. And that's with all of the handholding we do, right? So I think we're all testing out. But make no mistake, we could launch a product, we just don't want to launch it if it's economically not viable in what is possible with Mr. and Mrs. Consumer. And that goes very deep into the discussion on do they know what they're buying and are they going to be happy at the end. And that's what we're trying to tease out. I don't think we have a need to be the first in the market. I think other people can go do that, right? And so we're in an observing position, trying to optimize all of the elements. And if we get convinced that 80% would like what they want, I think it's a good expansion to the category. But otherwise, it's economically not viable nor is it good for the brand, we stand for to bring this out to customers. So that's why we're so difficult, right? But you look at all the people who [indiscernible] not that many compelling offers out there right now. So...

And maybe just to add, if the things aren't alluded to show that they can be overcome, then we are obviously -- we've done our homework and we are ready.

We're in the business to bring people to better hearing. That's our vision. It was difficult.

Julien Ouaddour, Bank of America. Quick question. One of your competitors in consumer audio called for a market down 25% in 2022. Given your, let's say, market [Audio Gap].

[indiscernible] down 9%, if my memory serves me well. So obviously, that's not 22%. Right now, if I look at the market and also our performance to date, I would not expect that severe decrease. And as I said, we are in a lucky position that we -- in terms of our innovation cycle, we are in a position where we're launching a number of new products, and that always helps.

Let Martin go first.

So I mean, specifically, I'd have to -- I don't have the data, so I'd have to go back and look at it. We obviously could because we're tracking that on a monthly basis. What we do obviously see is there's also a bit of a -- when you have very -- to your point, when you have very expensive products, then you have a slightly higher return rate because people, they try it, they may help the economics early on.

And then no-shows, I think we can share that the no-shows over the last 6 months are higher by a couple of percent points, very different by market. It's very perhaps culturally dependent too. We either way, have very different no-show rates depending on the country. But we do see some trending up in the no-show rates a couple of percent points over the last couple of months.

Also on the short term?

What's the first one? I don't know if I understood correctly. Was the first one around the acquisition side of retail?

Exactly. You talked about the price levels by [ positions ] and then I said that could your activity level be higher now because some of your competitors is somewhat amputated due to their financial position?

We -- honestly speaking, in the last couple of months looking on the M&A funnel on the bolt-ons, we haven't seen a large deal anywhere [indiscernible] filling your stores. I think don't miss the point if it comes to purely the cost side, it's also all other retailers because Facebook and Google sell the slots and the leads to whoever, not just our industry. And I think there's also other retailers who are struggling right now to fill their order books.

It's Oliver Metzger from ODDO BHF. One question regarding this lower activity in some areas. [Audio Gap].

So [indiscernible] safely. I'm sure we'll meet you at the airport. Thanks, everyone.