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Operator: Ladies and gentlemen, welcome to the Sonova Half Year Results 2025-2026 Conference Call and Live Webcast. I am Matilda, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Thomas Bernhardsgrutter, Senior Director, Investor Relations. Please go ahead, sir.
Thomas Bernhardsgruetter: Yes. Welcome, everyone, to our half year 2025-'26 results presentation. The slides for this call are available on our website. With me in the room are Eric Bernard, CEO; and Elodie Carr, CFO of Sonova. During the call, Eric will take you through the performance across our four businesses and give you a quick recap of all the new innovations we recently presented at the EUHA Congress in Germany. He will then hand over to Elodie, who will take you through the financials in more detail and present the outlook for the current financial year. We will then move to Q&A, where those of you who have dialed in over the phone have an opportunity to ask questions. Before we dive into the presentation, please take note of the disclaimer. In short, this presentation contains forward-looking statements and serves for marketing purposes. It constitutes neither an offer to sell nor solicitation to buy any securities. And with this, I pass the word on to Eric Bernard.
Eric Bernard: Thank you very much, Thomas, and a warm welcome also from my side. And let's start the business review with the key highlights of the first half. A strong performance in our two larger businesses, Hearing Instruments and Audiological Care, resulted in a combined sales growth of 7% in local currencies in the first half. And this is around twice the estimated market growth and resulted in significant market share gains. Growth in the HI business was driven by the success of the Phonak Infinio and Infinio Sphere platforms that we launched in August 2024. The AC business benefited from continued investments in targeted lead generation, resulting in above-market growth. On the other hand, our two smaller businesses, Consumer Hearing and Cochlear Implants, both faced headwinds. The Consumer Hearing business struggled with weak markets and the lack of significant product launches. In the Cochlear Implants business, robust growth in system sales outside of China was offset by disruptions stemming from the introduction of volume-based procurement in China, so-called VBP, and lower upgrade sales. In terms of profitability, we have made significant progress. The strong growth resulted in substantial operating leverage and margin expansion in local currencies. Unfortunately, the strength of the Swiss franc continues to be a major headwind. Looking ahead, we are excited about our latest recent launches, and we are confident that they will contribute to a continued positive momentum in the second half. And I'll talk more about the new products a bit later. In summary, we remain confident for the remainder of the year and maintain our outlook for the full year 2025-'26. And before we move to the group highlights, I'd like to address the changes to the organizational structure we announced in conjunction with our half year results. As outlined in the release, we will retire the current business unit structure for Hearing Instruments and Audiological Care, shifting to a four-region model to strengthen customer proximity and regional responsiveness. It's all about customer centricity. And the heads of the four regions will report directly to me. Cochlear Implants and Consumer Hearing will remain distinct entities. Now looking at the highlights for the group. Sales reached CHF 1.8 billion, up 4.9% in local currencies. Normalized EBITA reached a solid CHF 316 million, up 16% in local currencies, which translates into a strong margin expansion of 180 basis points, again in local currencies. And we confirm our outlook for the '25-'26 financial year, targeting 5% to 9% growth in sales and 14% to 18% growth in normalized EBITA, both measured at constant exchange rate. Last but not least, we further built on our innovation and AI leadership with the recent launch of Ultra and entered the growing segment of ITE rechargeable hearings with Virto R, which so far is receiving a very strong market response, and I'll provide more details on this later. Let's take a closer look at the Hearing Instruments segment now. Total segment sales were up 5.7% in local currencies to EUR 1.7 billion. This was largely driven by organic growth, while acquisitions contributed around 40 basis points. The key driver was the impressive growth of 7% in combined sales in our HI and AC business. Based on market statistics and recent competitor results, we estimate that this represents around twice the market growth. This strong development clearly demonstrates that our innovative portfolio helps to drive growth, not just in our HI business, but also supports the momentum in AC or retail. On the other hand, growth in the segment was dampened somewhat by lower sales in the Consumer Hearing business. Normalized EBITA rose by 16.9% in local currencies to EUR 305 million. And this corresponds to a margin of 18.1%, representing a strong margin increase of 190 basis points in local currency. You will hear more details about the drivers for margin development later from Elodie, our Group CFO. Let's move on to the individual businesses, starting with Hearing Instruments. Building on the momentum from the second half of last year, sales increased 7.9% in local currencies to EUR 880 million, with positive contributions from both volume and ASP. Growth was driven by the ongoing success of the Phonak Infinio and Infinio Sphere platforms. And our innovation leadership can clearly be seen in the VA channel where Infinio Sphere sales alone are about 35% higher than the hearing aid sales of our largest competitors across the entire portfolio. Virto R now. Although this rechargeable ITE had only a limited initial impact as it was launched towards the end of the first half, it contributed to growth in the period's final weeks, reflecting a very positive market reception. Growth was further supported by expanding commercial relationships with large U.S. customers. I am truly convinced that Virto R, together with the recently launched Infinio Ultra and Infinio Ultra Sphere will contribute to continued momentum in the second half. So let's have a look a bit more in detail at these latest innovations. So what you see here, it's an overview of our latest innovations launched in the past months and presented during the EUHA Congress in Germany. In August, Phonak introduced Virto R Infinio, the company's first rechargeable In-The-Ear device. By combining Infinio's speech performance with a compact, custom-made design and universal connectivity, it no longer requires trade-offs from consumers in terms of performance, size or connectivity. It blends the look and feel of a traditional hearing aid with the styling of a modern consumer earbud, and it has received a very strong initial market response. And this device positions Sonova to capitalize on rising demand in this CHF 400 million market segment where we previously had no presence. A detail, more than 20% of our sales are in black. So people choose the black color. It means that this product is tackling the stigma. People are proud to show it, and that's a shift from what we've seen before. And then just over a year after the launch of Infinio and Infinio Sphere, we introduced Infinio Ultra, expanding our innovation and AI leadership. And in a benchmark study, Infinio Ultra outperformed competitors in the most challenging listening environment, speech in loud noise. And this is even without taking advantage of the unique Spheric Speech Clarity functionality of Sphere, which uses the power of our proprietary DEEPSONIC Chip, that mimics the human brain to extract and enhance voices instantly from all directions. Here, thanks to the continuous training of the deep neural network, we improved efficiency by 30%. Which means that with Infinio Ultra Sphere, now this powerful feature can be used all day and not just 3 hours. Virto R, Infinio Ultra and Infinio Ultra Sphere, all run the AI trends AutoSense OS 7.0 operating system for better automatic adaptation to different listening environments and offer a simplified one-step pairing process with phones and other Bluetooth devices. Our innovation extends beyond devices. We also introduced the patented EasyGuard wax management system, which helps protect the receiver with a sound transmitting membrane, simplifying cleaning and reducing service visits by up to 38%. That may sound -- may not sound as exciting as talking about AI, but this solution removes a very significant pain point from both the HCP and the user. So as you can see, we continue to innovate with a high cadence, and we expect these launches to be a key contributor to growth in the second half. Moving on to our Audiological Care business. Sales reached CHF 707 million, up 5.8% in local currencies; clearly outpacing the estimated market growth. And this was largely driven by organic growth. The contribution from acquisitions, including the full year effect of prior year acquisitions was around 1% and somewhat lower than in past periods. The strongest contributions came from bolt-on acquisitions in Germany, France, Canada and Australia. Our recent product launches, as mentioned before, were a major driver of healthy growth. And in addition, the business benefited from consistent and targeted lead generation. You may remember that when we published our full year results, we also discussed structural cost initiatives, including the streamlining of global and local headquarter functions and the optimization of our store network. The savings from these initiatives clearly materialized, delivering strong operating leverage and providing flexibility to reinvest in growth. Then a brief word on our Consumer Hearing business. Sales were held back by continued weak consumer demand across key geographies and the lack of major product launches in the first half. As a reminder, last year, we introduced the MOMENTUM True Wireless 4 earbuds, which were a significant growth contributor. In summary, sales declined by about 12% in local currencies to CHF 97 million. To address the growth challenge, we are sharpening our focus, concentrating on categories where we have a natural right to play, which includes audiophile and premium headphones and sound bars. One good example of this is the October launch of the HDB 630, our first wireless audiophile headphones. Great reviews, you can find them online. They deliver high-resolution digital audio with or without cable and 60-hour battery life on a single charge. This means that consumers no longer have to compromise between high-fidelity sound and wireless convenience. While it's early days, consumer and expert reviews really have been positive. I strongly recommend you look online, and you'll see it's really great. Sennheiser remains the market leader in audiophile headphones with an approximate 22% share, and this category accounts for around 1/4 of our Consumer Hearing sales. So promising beginnings for the HDB 630. Moving on to the Cochlear Implants segment. Sales totaled EUR 132 million, down 5% in local currencies. The development was hampered by tariffs and uncertainties around the introduction of volume-based procurement, so-called VBP in China. However, excluding China, sales were up 3% in local currencies. We had solid momentum in system sales in developed markets, supported by very strong commercial execution and improved D2C lead generation through our HI and AC businesses. As a result, system sales were up 7% in local currencies, excluding China, but declined by 6% overall due to the previously mentioned headwinds in China. Upgrade sales modestly down by 1.5% in local currencies, expected as we have previously flagged that during this financial year, we expect continued pressure ahead of the next processor launch as many recipients have already adopted the Marvel technology, which was introduced in 2021. Normalized EBITA reached CHF 11 million, representing a margin of 8.2%, and this was fairly stable versus the prior year period, supported by strict cost control and benefits from the weaker U.S. dollar, helping to offset the negative operating leverage in the segment. And with that, let me hand over to our CFO, Elodie Carr, who will provide more details on the financials and the outlook, and I will, of course, come back for the Q&A. Thank you very much. Elodie?
Elodie Carr-Cingari: Thank you, Eric. And also a warm welcome from my side to everyone on the call. So let's take a closer look at the financials, and starting with the sales development. Eric has already discussed the growth dynamic by business, so I'm going to focus on regional performance. I'm pleased to report that all regions achieved solid positive growth in the first half. Sales in the EMEA region rose 4.5% in local currencies. This was driven by success of new products and a limited contribution from bolt-on acquisitions in Germany and France. Growth in the hearing aid market was strong in France and the U.K. private market, while Germany and Italy experienced some weaknesses. The U.S. posted the strongest growth, up 7% in local currencies, driven by double-digit growth in our HI business, indicating substantial market share gains. Growth was further supported by expanded commercial relationships with major customers and positive growth in the VA. The Americas region, excluding the United States, rose 4.3% in local currencies with solid growth across our Hearing Instruments segment. Standout countries were Canada and Brazil. Sales in the APAC region grew 0.5% in local currencies. As mentioned by Eric, CI sales in China were held back by the VBP introduction. However, our hearing instruments and Audiological Care business posted double-digit growth in China and solid gains in Australia and Japan. Excluding CI, APAC grew by 4.7% in local currencies. As you know, Sonova generates almost all of its revenue in currencies other than the Swiss franc. With a strong appreciation of the Swiss franc against all major currencies and in particular, the U.S. dollar, reported sales were reduced by CHF 107 million or 5.8% due to FX translation. Now let's look at our gross profit margin development. In local currencies, the gross profit margin fell by 80 basis points. Higher volume and ASPs in the HI and AC businesses had a positive impact on our gross profit margin. In H1, we incurred temporary costs related to regionalizing our manufacturing and logistics footprint as we further ramped up activities in our plant in Mexico and in our distribution center in Germany. In addition, lower operating leverage in our Consumer Hearing business contributed negatively to the development. Here, the FX impact on gross margin was 40 basis points. We have a better balance between U.S. dollar revenue and cost due to regionalized production and sourcing, moderating some of the impact of currency. Moving on to operating expenses. Normalized operating expenses declined by 0.2% in local currency despite strong sales growth, and that resulted in significant operating leverage. R&D expenses were up 2.4% as we continue to invest in innovation to advance our product portfolio. You heard from Eric about the results of these efforts with the launches in recent months. Sales and marketing expenses were effectively stable in local currencies. Launch investments were lower as we had our big Infinio and Sphere Infinio launches in the prior year period. On the other hand, we continue to invest in growth through ongoing lead generation efforts in the Audiological Care business. G&A expenses declined by 2.7% in local currencies through disciplined cost control and also the benefit from last year's structural cost initiatives. Whilst FX reduced operating expenses in Swiss francs by 3.8%, the impact was less pronounced than on sales as key functions such as R&D and headquarters are largely located in Switzerland. So when we bring it all together, let's look now at EBITA components, looking from left to right. In local currencies, normalized EBITA rose by 180 basis points or 16% year-over-year, driven by operational improvements in our two largest businesses, Hearing Instruments and Audiological Care. Acquisitions had no material impact. Normalization totaled CHF 29 million, mainly related to legal costs from patent litigation fees and settlement. As you may remember, we incurred significant legal costs in recent years related to a patent dispute in the Cochlear Implants business and were temporarily prevented from selling some products in Germany back in 2022. With this settlement, pending litigation in all jurisdictions worldwide is now resolved. Moving on to FX. I talked about the translation impact on sales, gross profit and operating costs already. And in sum, adverse currency developments reduced the reported EBITA margin by 150 basis points. Let me now quickly summarize the key P&L figures. Sonova delivered strong profitability growth in local currencies across all metrics. All regions contributed to higher sales. And all in all, normalized EBITA grew 16% in local currencies. Moving on to normalized EPS. We achieved a strong growth of 20% in local currencies. Including FX movement, this resulted in a stable EPS versus the prior year period in Swiss franc. Now a note on our cash flow. Cash flow from operating activities rose 12%, primarily driven by lower cash outflows from changes in working capital with positive effect from lower receivables and inventories, partly offset by lower payables. Moving on to operating free cash flow. The lower CapEx was more than offset by net investments in financial assets, which is related to financial equity investment. During the first 6 months of the year, Sonova spent $31 million on M&A, reflecting continued bolt-on acquisitions in our Audiological Care business, mainly in Germany, in Canada and in the U.S. In summary, this resulted in a free cash flow of CHF 38 million. The cash outflow that you see from financing mainly reflects dividend payments as well as repayments of lease liabilities, and that was partly offset by new financing arrangements. In October, after the balance sheet date, Sonova repaid a CHF 200 million bond and issued a new fixed rate bond of CHF 150 million with an attractive coupon of 0.92% and a maturity of 8 years. Now let's look at our balance sheet, which remains strong. Days of sales outstanding and days of inventory outstanding improved versus a year ago and versus March 2025. This is a good development, reflecting better receivable collection and was achieved despite some inventory buildup to mitigate impacts from trade disruptions. Day payables outstanding remains largely stable. Overall, we saw an improvement in the return on capital employed, which rose to 17.5%, and this is entirely driven by the higher profitability over the past 12 months. The leverage measured net debt to EBITA reached 1.5x, down from 1.8x a year ago, but up from 1.2x at the end of the last fiscal year. And with this, let me move to the outlook. So let's look at our outlook for the year, and I will start with our assumptions going into the second half. First of all, while markets remain volatile, we continue to expect overall market growth of 1% to 3%, in line with what we saw in the first half and reflecting weaker demand from macroeconomic uncertainties and tariffs. Please note that this outlook assumes no significant additional tariffs or other major disruptions beyond those already known at the time of this publication. Normalizations are expected to be in the range of CHF 30 million to CHF 35 million for the full year. And based on end October exchange rates and looking at a full year 2025-'26, adverse currency developments are expected to reduce sales growth in Swiss francs by about 6 percentage points, and normalized EBITA growth in Swiss francs by 13 to 14 percentage points. So coming to the outlook for the year. With the launches outlined by Eric, including Virto R, Infinio Ultra and Infinio Ultra Sphere, we expect to maintain good sales momentum in our Hearing Instruments business, building on the momentum we had in the first half. Coupled with continued growth in Audiological Care and an expected sequential improvement in Consumer Hearing and Cochlear Implants, we reiterate our outlook and continue to guide for sales growth of 5% to 9% and normalized EBITA growth of 14% to 18%, both at constant exchange rates. So with this, Eric and I are happy to answer your questions. Operator, can you please open the line for the Q&A?
Operator: [Operator Instructions] The first question comes from the line of Hassan Al-Wakeel from Barclays.
Hassan Al-Wakeel: A couple, please. Firstly, if I can ask on the guidance and your confidence around the acceleration in the second half, particularly on the top line amidst broader market uncertainty. Do you view the lower end of the range more likely? And what are your key assumptions for the top end? And then secondly, on Costco. Can you talk about your share here given you had expected to get to 25% pretty quickly and had recently mentioned that you didn't think you were quite there. Is that still the base case despite a trial of a potential new entrant into the channel?
Eric Bernard: Thank you, Hassan. So Eric here, I will take the second question first. As a general principle, we do not comment on specific customers. But if we talk about a very large account in the U.S., we have reached a reasonable share, stable, and we believe we have solid plans that we are designing together with this customer. I think what you may see is that now five players are invited at the table. I won't comment any further about what will happen next. I'd say that it was great for Sonova to be back at the table of this large account in the U.S. and things are progressing nicely.
Elodie Carr-Cingari: So I will take the question on the guidance, Hassan. So as you will have seen, in the first half, we grew 4.9% in terms of revenue growth and in Hearing Instruments and Audiological Care combined with a growth of 7%. We do expect to benefit from the recent launches of Infinio Ultra, Infinio Ultra Sphere and as well the entry into a growing new market segment with Virto R successfully introduced in the month of August. And so building on this innovation leadership, we have reiterated our guidance for year 2025, 2026, which remains at 5% to 9%.
Eric Bernard: And I could add to give more color about the potential impact of Virto R over time. It's a segment valued at roughly CHF 400 million. If we reach our natural share of 25% to do the math, it could be an additional CHF 100 million of revenue over time. It's starting very well. We've launched in the VA a few weeks back. The numbers are very promising, as an example, but great numbers as well in general in all other markets where we've launched it. And I won't give the specific, but wherever we've launched it, it's extremely well received.
Hassan Al-Wakeel: That's really helpful. If I could just follow up on the North America strength, 7.4% constant currency growth. How much of that was down to Costco and the VA price uplift, please?
Eric Bernard: So we won't be as granular as you'd love us to be, but they had a significant share or contribution to this growth. But in general, we've done well in the U.S., also in other large accounts, but our innovations launched a year ago were very well received. So the U.S. market has been very favorable for us also beyond these large accounts.
Operator: The next question comes from the line of Andjela Bozinovic from BNP Paribas Exane.
Andjela Bozinovic: The first one maybe on the VA. Eric, last month at the EUHA Conference, you mentioned that you have had some difficulties in the channel up until November. Can you please elaborate what these difficulties were, and if it was just specific for the VA and how confident are you that these are behind us? And the second one, just on the market share and the products, and maybe it's also a follow-up on Hassan's question earlier. But your outlook assumes significant market share gains in H2. Can you comment if you're seeing any kind of slowdown in the market share gains in the last 2 or 3 months? And when we look at Ultra, because it's just a platform upgrade, it's not a new product. Can you walk us through your assumptions of market share gains versus Sphere?
Eric Bernard: So I'll start by trying to answer the second question, which is rather complex. No, we haven't seen a slowdown in market share gains. We have kept gaining share quite across the globe. If you look at the last 3 to 6 months, we gained share in the U.S. We covered that just a minute ago. In Germany, in France, we have less precise data in China, but we know that in HI as well, our development in China has been very strong. So I think there's very, very good momentum. I'm a bit sorry to hear you describing Ultra as just a small improvement, and let me reflect on that. When Sphere was launched, and it will, by the way, be a good segue to the question you asked about the VA. When Infinio and Sphere were launched back in August 2024 -- and by the way, I was not in charge of the company. So I'm reflecting on this as an observer. The choice was made to bring to market a product that was not perfect, but it was a product ahead. Ahead because the only one with a dedicated AI chip, leading to a much better sound performance, especially when you want to listen to conversation in noise. And even with a product for Sphere that is 20% to 25% bigger than others, it's been selling very well. And this is almost a proof in the pudding, if I can be a bit simple here, that the sound is significantly better. When the product was launched, there were some imperfections. One of them was related to a component called the receiver. The problem is completely solved now, completely solved and for a while. But in the VA, where intensity in the clinic is much higher than at an independent, speed is important. This generated some challenges. And this is what I was alluding to when we were together in Germany. All of this is behind us. And so we are very confident that with all of this being addressed and with Ultra being what, it's a Sphere that works all day long, not just 3 hours, that connects perfectly. It's a bit more than just a platform upgrade because it just keeps increasing the gap with all the other competitors. And what we've seen is some resistance sometimes because of the size of the device. But what we see now is that the word of mouth, when people try it, we sell more and more of the Sphere. So Ultra is a significant improvement in many ways. I believe I've addressed both the question of the VA and why we are confident about why we will keep gaining share over the last few weeks and few months. I could add to this that really, really talking about AI is certainly more exciting than talking about wax. EasyGuard really addresses one of the worst pain points that both the HCP and the user have been facing historically. And this is a door opener for our sales teams, and this is going to help us enter new accounts. I'm sure it's a great entry point and it really addresses a significant pain point, which, by the way, we are able to monetize.
Operator: We now have a question from the line of Veronika Dubajova from Citi.
Veronika Dubajova: I will keep it to two, please. One, I just want to understand sort of your -- I know this question has been asked by Hassan, but I kind of want to decompose it maybe a little bit. I think if I look at the sort of 8% growth that you did in the first half of the year in wholesale, there's about 2.5 points in there from the VA. You don't want to comment on the large customer, but assume for argument's sake that, that's kind of 100 to 200 basis points, which is I think what your ambition was at the time of the guidance. What that leaves the wholesale business growing at excluding that is an above-market number, but not a meaningfully above-market number at sort of a 4% growth rate against the market growing at 2%. I guess, are you satisfied with that momentum when you think about it, excluding those two big tailwinds that you've had? And as you fast forward to the back half of the year, what do you think that number could look like given the things that you're launching with Virto and the Ultra upgrade? So that would be my first question. The second question is a little bit of a financial one around the gross margin. Pretty meaningful compression there. Obviously, I appreciate that. FX played a role there. But Elodie, I don't know if you have any guidance for the back half of the year and whether there's anything you can do to improve the profitability in the short term. Or is this kind of the new normal, given the changes you have made to the manufacturing footprint more fundamentally?
Eric Bernard: Veronika, thank you. So I will take the first question. So yes, we're happy because I've got numbers that I cannot share in details in front of me, but it's clear that beyond the VA, beyond a large account in the U.S., we have gained share very nicely in France, in Germany, in Canada and in U.S. commercial in general. So it's been a very, very solid past quarter and first half as far as gaining shares are concerned. And again, we are confident that Virto R, Ultra and no longer any issues around the receiver like the ones we experienced after the launch back in 2024 of Infinio, this is gone. So we are confident that in the HI space, we're going to keep growing very, very nicely.
Elodie Carr-Cingari: Good. And I will take the question on the financials. So you were asking on the gross profit side and generally on the margin side, regarding the second half outlook and what the expectations are there. So from this perspective, I would say, 3 different impacts. One is obviously operating leverage that really drives -- comes from the revenue growth and that should -- as you see in the first half was also a positive element there. So we expect that also to continue in the second half. Second is the cost improvements that we have seen and are coming from the initiatives that we've taken -- structural initiatives that we've taken in previous year. So obviously, these will also continue in the second half. And then last but not least, as I explained, we talked about some temporary costs relating to some regionalization of some of our manufacturing footprint with the ramp-up in Mexico and the ramp-up of the distribution center in airport and the expectation there is that this should also drive further improvements in the second half.
Operator: The next question comes from the line of Oliver Metzger from ODDO BHF.
Oliver Metzger: The first one is a little bit more general about the hearing aid market, and this has obviously also some impact on your guidance. So you assume a continuation of the 1% to 3% market growth which is still compared to what we have seen a more muted -- continuation of a more muted development. So history has shown, and Eric, you are for multiple years in hearing in industry. So you -- that normally, weaknesses are more of a temporary nature. And I completely understand why your guidance had and your market assumptions are where they are. But what do you think about -- you're talking about 6 months for the second half. When do you think that we might see also growth in hearing market back to a north of 3% towards the 4% level? That would be great to hear. The second question is about your Cochlear Implant business. So even excluding China, it's not doing well. And it would be great to have your view, what has changed over the years. So we saw it was growing steadily over multiple years, have been there any changes in reimbursements? Less willingness of copayments? Or what do you see behind this structure slowdown we see now for quite a while?
Eric Bernard: All right. Thank you, Oliver. So I will start with the second question Cochlear Implant. As you know, we have 2 types of revenues systems and upgrades. And if we are fully transparent, our latest innovation was brought to market in 2021. So we are slow to innovate versus our competition. In 2026, we will come to market with great innovation that will allow us to sell not only systems but also upgrades that will be very relevant. By the way, the change that we have put in place in our organization is to have one head of R&D supervising both what's called HI and what is called CI. The speed at which what is developed for hearing aids gets into our implants is not satisfactory for me discovering Sonova from the inside. And this explains most of the weakness behind the numbers. But I will repeat that if you put aside China, not having anything new to offer to still grow at 3% is the testimony that from a commercial standpoint, the team are doing a great job, and this is something that we will keep in the future. But expect us some time in '26 to come up with a brand-new solution that will allow us to get back into growing both systems and upgrades. And by the way, by then, we will have absorbed the bumps and the challenges coming from the VBP deployments in China. So I'm positive about what we will see from the Cochlear Implants business units sometime later in 2026. About the market, and I'm sure you've heard that from other players, we cannot neglect the impact of in-Europe inflation only tariffs and the impact of the volatility of financial markets for retirees in the U.S. where it's 401K plans and so on and so forth. So what we think is that people have waited. And that at some point, we're going to see the market bouncing back. The question is when. Is this going to be towards the end of 2026 or second half of 2026. I'm talking calendar year. Is this going to be early 2027, that I honestly don't know. So we are working with the assumption that the market at least for the next 6 months will keep growing at around 3%. And by the way, one has to be careful behind the 3% because France was a very large contributor of the global growth, and it's a bit of an outlier, growing at a much faster pace. So we are conservative as far as the market growth is concerns. And I will repeat what we've described. Leveraging our innovations, we expect to grow at a faster pace in the HI segment.
Operator: We now have a question from the line of Urs Kunz from Research Partners.
Urs Kunz: I have 1 question again about Cochlear Implants business there. And where do you take your positive expectations of having a better H2 there? When you were hinting at a new products in 2026, I guess that's a new processor. Is there more than a new processor that we can expect. But even then, this would have no impact, I guess, in the current fiscal year yet?
Eric Bernard: Correct. It will have no impact in the current fiscal year. That's going to come next fiscal year. Absolutely.
Urs Kunz: And where do you take then the positive expectations of having a better H2 in the Cochlear Implants business?
Eric Bernard: I don't think I mentioned that. Maybe I wasn't clear. That's not what I suggested. What I explained is that when we come to market with a new processor, then we will see a different pattern in our growth. And that will come sometime in the next fiscal year. Sorry, if I wasn't clear.
Urs Kunz: So this -- but the problems in China, do you think that should be something that we can expect to be better in H2, or is that also something that you have to keep in consideration?
Eric Bernard: Yes, I'm hopeful that towards the end of H2, we will see a normalization of our business in China, but there's still a bit of work to be done in that space.
Urs Kunz: Then my second question would be on share buybacks. I see that the net debt-to-EBITDA level is at 1.5 now, which would allow at some point relatively soon to come back on that question. Is there anything to mention from your side?
Elodie Carr-Cingari: So we are, in fact, at 1.5x net debt to EBITDA, as you mentioned. Our capital allocation strategy as discussed in May is still relevant, and we are not considering a share buyback at this point in time.
Urs Kunz: Then next question, short question about acquisitions that we are in a really low level in H1, do we have to expect that there will not be a lot more in H2? Or did you already do something that you can say H2 should be a bigger impact?
Elodie Carr-Cingari: In line with the capital allocation strategy, we do expect an envelope for what we call bolt-on acquisitions. So basically in the Audiological Care business so there was about CHF 31 million in the first half. We do expect to ramp that up in the second half to come in line with the overall envelope that we have previously talked about for the year.
Urs Kunz: Okay. Then my last question on this new organization structure that you start to implement now. I guess there's no significant restructuring costs involved is that because otherwise, I guess you couldn't stick to your normalized EBITDA guidance?
Eric Bernard: Absolutely no restructuring costs. It's about creating regions reporting to me directly with region head supervising both wholesale and retail. It's about making sure that we meet the specific needs of customers, which are very different from China to the U.S., from Europe, the U.S., et cetera. It's all about customer centricity and being very close to the market needs. And it follows something that we did not comment about, but I can share that for already a few weeks both the head of R&D, and I explained supervising now both Hearing Instruments and Cochlear Implants and the Head of Quality report to me. So if I summarize this very briefly, to win in this industry, you have to keep innovating and you have to be on quality on time. And this is why both R&D and quality report to me directly. And the second step is to create 4 regions so that we are clear on what needs to be delivered for the specific needs of customers which are very different region by region and coming into Sonova, I see, for instance, real significant opportunities in Asia Pacific.
Operator: The next question comes from the line of Martinien Rula from Jefferies.
Martinien Rula: I hope that you can hear me okay. So I would have 2 questions, if that's okay for you. The first one is that I just wanted to circle back on the EUHA related discussions that we had, it's my impression that patients equipped with the Infinio and Sphere products can get the Ultra software upgrade for free. So I was wondering if you could comment on the commercial strategy for the Ultra versions. Will these be priced in line with the classic versions? Will these be priced higher than the classic versions and/or will clients have access to both the classic and Ultra version at different price points? These are kind of the questions I'm asking myself at the moment. And I'm asking that because if I understood correctly, your comments during EUHA so your newer wax management system is something that is only available on the Ultra version so far and that is something that you intend to monetize. This was the first question. So maybe I can give you some time to answer this one before asking the second one.
Eric Bernard: Okay. Thank you for the question. So yes, indeed, for existing wearers, the upgrades to Ultra is available for free. Well, assuming that the HCP is offering it for free. However, for new wearers, Ultra is priced at a higher level from us, so wholesale price. Again, I have addressed that question already at EUHA, so there's nothing new there. For the EasyGuard, first point, we can monetize it, and it's going to be available beyond Ultra over time.
Martinien Rula: Okay. That's perfect. And for the second question, it was about the momentum in Consumer Hearing and Cochlear Implants. So I would appreciate any comments that could help us do the modeling stuff for these 2 divisions as the momentum has been pretty bumpy and that comp-based differences makes it even harder to get a proper view on what could look like when it comes to the second half of this year?
Elodie Carr-Cingari: So I will pick up that question. Looking at Consumer Hearing, we do expect a stronger sales in second half than what saw in first half. I think a part is really driven by the introduction of our new products, the HDB 630. I don't know if you've seen, but it's very exciting product. It's the first wireless audio file product, and the reaction in the market has been very positive. So we do see a better growth on Consumer Hearing compared to the first half. I think there was some on Cochlear Implants as well. So Cochlear Implants, as Eric has mentioned, I mean you have 2 sides. One side is the VBP situation in China, which he has already mentioned. And the other side is the weakness that we have seen in upgrades versus systems. So while systems have been strong in all areas, except China, upgrades have been lagging behind because of the fact that the product there is starting to be quite aging and the new products will come in the year 2020 -- in the fiscal year 2026. So that's currently the underlying business assumptions that we are taking.
Martinien Rula: Okay. That's perfect. And just a quick follow-up on the Consumer Hearing business. So I got it that you should grow the sales on a sequential basis. But what about sales growth for Consumer Hearing on a year-on-year basis?
Elodie Carr-Cingari: As I said, our assumption is to be on a stronger sequential basis. And that should come, as I said, from the new products and stronger momentum there. And then I will not give a specific number year-over-year.
Operator: We now have a question from the line of Susannah Ludwig from Bernstein.
Susannah Ludwig: I have 2, please. I guess, first, I just wanted to follow up about your comments on the opportunity in APAC for Sonova. Maybe if you could just comment a little bit more on what it is that Sonova needs to do differently in that region to take advantage of the opportunity. Does this require sort of different products, different brands or a different go-to-market strategy? And then second, just following up on the question on gross margins into H2, I guess, could you maybe quantify the sort of 80 basis point headwind this half? What percentage of that comes from the temporary cost from the ramp and the regionalization of manufacturing? And then is that expected to fully abate in the second half?
Eric Bernard: Thank you for the question about Asia Pacific. I spent more than 20 years of my life across Japan, China, Singapore, et cetera. So your question is what does it take to win bigger than currently for Sonova in Asia Pacific. Well, you've seen that we are creating a new role of Head of Asia Pacific, excluding China, knowing that China already reports to me directly. And this head of Asia Pacific ex China will be based in Asia, in Singapore. That's the first change. Managing Asia Pacific from Switzerland is probably very challenging, irrespective of the quality of the leader. Then awareness, access, affordability, consumer journey. This is what you need to tackle if you want to grow in this category. And in Asia, it's particularly acute. You need to be able to bring products at different prices and yet keep profitability at the same level. So here, you're talking about more simple products, maybe defeatured products and not just selling in Asia, what you have designed for Europe or the U.S., then there's a lack of qualified professionals. So you also have to think in terms of more simple solutions for dispensing. So products, price points, and certainly, as you've touched on brands, presence on the ground. China, for China, I speak about China, in particular, this is what we need to get our fair share of Asia Pacific, which I believe we do not have today. This will take time. And it's giving you some insights about one of the dimension of the strategy we will be talking about when we go into next year. but certainly very good opportunities for the group in this part of the world.
Susannah Ludwig: Great. Thanks for the comprehensive answer. And then I guess just on the gross margins.
Elodie Carr-Cingari: Yes, I will gladly answer this one. So you were asking about the gross margin, and specifically the impact of the ramp-up costs for the regionalization of some of our manufacturing footprint. So as I mentioned, we ramped up activities on the manufacturing side in Mexico and also with our distribution center in Germany. We did absorb some ramp-up costs in the first half. Those transfers are now in the completion stage. And so we do expect a sequential benefit half over half to come from cost improvements in these areas. But I will not give a specific number.
Operator: The next question comes from the line of David Adlington from JPMorgan.
David Adlington: Most have been answered, but maybe just to put a clip a little bit further on the second half implied guidance for the top line. Obviously, that implies at the top end, sort of 13%, 14% growth in the second half. I just wondered maybe put another way, why not narrow the top of the range down a little bit just to make -- it seems a very, very wide range? And then secondly, just on the Section 232 probe and the scope of the tariffs, I just want to get your thoughts on the tariffs and what mitigation you might be able to put in place if they do come in?
Elodie Carr-Cingari: I will pick up the first question on the guidance. So we stick to our range in 5% to 9%. So I mentioned...
Eric Bernard: David, may we ask you to go on mute because there's noise in your background. Thank you very much.
Elodie Carr-Cingari: Yes. So -- and as I mentioned, we achieved 4.9% in the first half with 7% in HI and AC. And we do expect some growth in the HI side based on new products. So Infinio Ultra, Sphere Ultra and Virto R, and that allows us to basically stick to our range in the second half.
Eric Bernard: And about the tariffs, as you know, we are currently exempt from U.S. tariffs based on the [indiscernible] protocol. If you were referring to the sector 232, if my recollection is correct investigation. As a matter of principle, we don't comment on ongoing investigations. If we take time anyway. If we were really in a difficult situation, we have facilities in Mexico, in the U.S., in Canada, and we will be agile about adjusting the way and the location where we manufacture.
Operator: We now have a question from the line of Michelle Buchler from Zurcher Kantonalbank.
Unknown Analyst: Do you hear me?
Thomas Bernhardsgruetter: Very well.
Unknown Analyst: It's actually not is Michelle, it actually me, Daniel, as you hear. So just a question on the ASP uplift. I'm not sure if it was already answered. But when I look at the great 7% local currency growth in the Hearing Instruments segment total. Can you talk about the unit growth there or the other way around the ASP uplift, must have been quite an impact, right? First question.
Eric Bernard: Yes. Okay. So of course, without being too granular because this becomes a competitive information. If you look at HI versus AC to wholesale versus retail, a rather good balance in the wholesale business with both growth in units and some ASP increase, more skewed towards volume than prices. And if you look at our retail business, the opposite. We had both positive impact but more skewed towards price increases than on volume, and this is a reflection of the fact that our own retail stores are able to drive, create value growth out of the innovations that we brought to market. So a good balance if you look at the combination of both.
Unknown Analyst: Okay. Good to hear. And the second and last question, I mean, with your background at Essilor [indiscernible] we all tried this great eyeglass with hearing aids. Is that an idea for the future as well for you? Or is it too far away? Just -- yes that's the question.
Eric Bernard: First, what's great when you see such initiatives with large organizations with market power is that they help us increase the awareness of the importance of good hearing. I would not comment about whether we're going to go there or not. I won't make any comments about it.
Operator: We now have a question from the line of Niels Granholm-Leth from DNB Carnegie.
Niels Granholm-Leth: First one on the launch of Virto R. So wouldn't you expect any cannibalization from this CIC form factor on your other form factors? And perhaps you could elaborate on the amount of sales that would come from your CIC category now. So where could this category actually go as a percentage of sales. We know that it's about 10% of the market. And then secondly, we have had this discussion throughout this year about these 5-year reimbursement cycles and to what extent it has affected the overall hearing aid market this year. So do you prescribe to the idea of market growth being under pressure this year because of less people or fewer people renewing hearing aids in 5-year after the shutdown since 2020?
Eric Bernard: Yes. So I'll start with the last question. We believe there's a longer repurchase cycle for the last few months. So yes, I think it did increase. So first question. Second question is Virto R. So again, we estimate that this segment is about CHF 400 million per annum. And so it will take a fair share of that segment. At some point, we hope to -- it's a cruising at altitude of CHF 100 million, which we see as incremental. We don't see a risk of cannibalization what we see is that we're entering the new accounts and that we are reaching to new type of consumers. So we don't see a risk of cannibalization, maybe marginal. But for us, we really see it as incremental. And I will repeat what I said in my introduction, what's very interesting is to see that black as a color is more than 20% of the sales. And that's really something new. We've never seen that otherwise. And when I'm wearing it, when I see people wearing it, the reflection you get it, it's really cool. It's really different. And I think this product is helping us not only within the industry to get into a segment where we have no right to play because we had no rechargeable solution. And by the way, we were not best-in-class for custom products and there, we have significantly improved. But we're also tackling the stigma in a new way, and that is very, very exciting. By the way, what I mean by we were not that great in the custom segment is now with the new way we tell the product this process called right fit, which is using AI. You get really to an optimal feed and acoustic performance in the smallest possible size. It's really the smallest of all and the returns are much, much lower than what they were before. And we mentioned that at EUHA, but now we have a bit more -- we have 3, 4 more weeks on top of when we met at EUHA. And so it's a very promising category for us.
Niels Granholm-Leth: So you would expect your CIC to -- you would close the gap to the market where -- which is currently at around 10%?
Eric Bernard: We believe so. Very promising.
Operator: The last question comes from the line of Sibylle Bischofberger from Vontobel.
Sibylle Bischofberger: As a first question, in the past on the outlook slide, you always mentioned the midterm outlook. Now it was not mentioned anymore. So is the goal still valid? This is my first question.
Eric Bernard: Right. So yes, indeed, we are not sharing the midterm targets any more why. And I'll be very candid and straightforward here. We have a new management team, we have a new chair, and we are currently working on updating our strategy and our strategic ambition. And so sometime at -- in the first half of 2026, we will be very specific about this updated -- upgraded midterm targets. Elodie, anything you'd like to add to this?
Elodie Carr-Cingari: Well, I'd just like to add that we have strong fundamentals in the industry. You have an aging population in the world. And in that sense, the industry is an industry that will grow because more and more people are getting older and more and more people will need some hearing aid. So in the scope of that, I will say, and now with a focus on the regions and growing in those markets that will be -- these are strong fundamentals we can talk about.
Eric Bernard: We don't expect our ambition to go down. The market growth has slowed down over the past few quarters, but demography doesn't change. The world is aging, aging very fast, and so demand for hearing solutions will increase. But again, we have now started the process to refresh in depth our strategy in our strategic ambition. And so expect us in the first half of 2026 to come back with probably a capital day to be organized to present this to all of you.
Sibylle Bischofberger: And then my second question, you several times mentioned your market share has gone up. Could you give us a hint how large is your market share now?
Eric Bernard: Do we share that, Thomas? I'm not sure. So...
Thomas Bernhardsgruetter: No, we don't really share that, but I think, historically, we've always talked that we had more than a quarter. And you can imagine that it has gone up from there, but I wouldn't go beyond that.
Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Eric Bernard, CEO, for any closing remarks.
Eric Bernard: Well, thank you very much for all these questions. We will talk not too long down the road and looking forward to further calls and meetings in person over the next few weeks and few months. Thank you very much. Bye-bye.
Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.