GuruFocus -
- Revenue: CHF1.8 billion, representing a 5.9% increase in local currencies.
- Organic Growth: 4.5% increase.
- M&A Contributions: 1.4% increase.
- Gross Profit Margin: Improved to 71.9%, up 50 basis points in local currency.
- Adjusted EBITA: CHF325 million at a margin of 17.7%, down 3.7% in local currency.
- EPS: CHF3.74, down 9.6% in local currency.
- Operating Free Cash Flow: CHF104 million, a decline of 30.7%.
- Leverage Ratio: Stable at 1.8 times.
- Hearing Instruments Growth: 7% increase.
- Cochlear Implants Growth: 12.5% increase.
- Consumer Hearing Segment: -1.7% decline.
- Net Debt: Increased by roughly CHF200 million versus year-end position.
- Return on Capital Employed: Declined from 18.9% to 16.7%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sonova Holding AG (OTC:SONVY) (SONVF) reported solid sales growth driven by share gains in hearing instruments and cochlear implants.
- The launch of Infinio and Sphere has received positive customer feedback, particularly for improved hearing in noisy environments.
- Cochlear implants showed strong momentum with a 12.5% growth for the first half of the year.
- The company maintained a high gross profit margin of 71.9%, up 50 basis points in local currency from last year.
- Sonova Holding AG (SONVF) confirmed its guidance for the full year on both the top line and bottom line, indicating confidence in future performance.
- Challenging market conditions and headwinds from lead generation in the audiological care side are impacting growth.
- There are pressures on profitability due to product launch costs and lower average selling prices (ASP) prior to new launches.
- The Swiss franc continues to be a headwind, impacting financial performance negatively.
- Operating free cash flow declined by 30.7%, mainly due to profit development and elevated inventory levels.
- The company faces elevated lead generation costs in its Audiological Care business, impacting profitability.
A: Arnd Kaldowski, CEO: The share loss is partly due to our Europe-centric mix and a strong prior year. We had a low lead-generation funnel and existing customers delayed repurchases due to the new platform announcement. We have maintained high lead generation investments and expect to stabilize share in the second half.
Q: What is the status of your relationship with Costco (NASDAQ:COST), and what are your expectations?
A: Arnd Kaldowski, CEO: We are in a pilot phase with a limited number of Costco stores. The revenue impact is minimal this year, but success could have a meaningful impact next year. Our product and service need to prove themselves in this pilot.
Q: Can you explain the expected margin improvement in the second half?
A: Arnd Kaldowski, CEO: The margin improvement is driven by a shift from negative to positive ASP, volume growth, and cost control. We expect a 3% higher growth in the second half, which will contribute significantly to profitability.
Q: How confident are you in negotiating a price premium for Infinio in the VA channel?
A: Arnd Kaldowski, CEO: We are in discussions with the VA, and while I can't comment on specifics, we are confident in the product's value. The price premium for rechargeable products is meaningful, and we expect similar outcomes for Infinio.
Q: What are the dynamics in the European market, particularly in Germany and France?
A: Arnd Kaldowski, CEO: Germany faces consumer confidence issues and insurance-related challenges, while France is adjusting to ENT gatekeeping and past reimbursement changes. We expect these markets to recover over time, with France potentially seeing growth next year due to renewal cycles.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.