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Investor PresentationAugust 2017
Disclaimer
This presentation contains forward-looking statements, which offer no guarantee with
regard to future performance. These statements are made on the basis of management’s
views and assumptions regarding future events and business performance at the time the
statements are made. They are subject to risks and uncertainties including, but not
confined to, future global economic conditions, exchange rates, legal provisions, market
conditions, activities by competitors and other factors outside Sonova’s control. Should one
or more of these risks or uncertainties materialize or should underlying assumptions prove
incorrect, actual outcomes may vary materially from those forecasted or expected. Each
forward-looking statement speaks only as of the date of the particular statement, and
Sonova undertakes no obligation to publicly update or revise any forward-looking
statements, except as required by law.
This presentation constitutes neither an offer to sell nor a solicitation to buy any securities.
This presentation does not constitute an offering prospectus within the meaning of Article
652a of the Swiss Code of Obligations nor a listing prospectus within the meaning of the
listing rules of SIX Swiss Exchange.
August 2017 Page 2
Contents
1 Sonova Group Page 4
2 Hearing care market Page 14
3 Corporate strategy Page 21
4 New products Page 27
5 Go-to-market Page 35
6 eSolutions Page 40
7 Financial information Page 44
8 Outlook Page 64
August 2017 Page 3
1. Sonova Group
At Sonova, we envision …
… “Hear the world”
Sonova Group
A WORLD WHERE
EVERYONE
ENJOYS THE DELIGHT OF
HEARING AND
THEREFORE LIVES A LIFE
WITHOUT LIMITATIONS
August 2017 Page 5
Significant market share gain potential – High R&D spend – fast product introduction
– Differentiated multi-brand strategy
– Optimized multi-channel approach
Strong and expanding global sales &
distribution network
– Phonak, Unitron, Hansaton, Advanced Bionics: over 50 wholesale group
companies and more than 100 independent distributors
– AudioNova: over 3,300 POS retail clinics in 12 key markets
Broadest product and service offering – Phonak, Unitron, Hansaton: Leading position in hearing instruments
– Advanced Bionics: Strong contender on cochlear implants
Strong new product pipelines – High innovation rate and rapid new product introduction
Productivity / efficiency gains – Leverage existing global infrastructure to expand margins
Mid-term financial targets – Sales growth of +5%-7% p.a. in local currencies
– EBITA growth of +7%-11% p.a. in local currencies
Clear and focused strategy – Customer driven innovation – Strong cash conversion
Summary
August 2017 Page 6
HI Hearing Instruments Behind-The-Ear hearing instruments (BTE)
Wireless systems
Custom In-The-Ear hearing instruments (ITE)
Hearing protection
Wireless communication systems
Invisible extended-wear hearing instruments
Cochlear implants
CI Cochlear Implants
Broadest and most advanced offering – Hearing instruments, cochlear implants …
… and professional audiological services
Sonova Group
August 2017 Page 7
Seniors
Workers
Adults
Teens
Students
Babies
Unique vertically integrated business model – Focused on customer value
Sonova Group
Page 8August 2017
DISTRIBUTIONSUPPLY CHAINPRODUCTS
HI Phonak
HI Unitron
HI Hansaton
CI Adv’ Bionics
3rd party
AudioNova
CHANNELS
Manufacturing
Customization
Service & repair
Logistics
HI Distributors
HI Wholesale
CI Direct
CUSTOMERS
SPEECH
INTELLIGIBILITY
NATURAL SOUND
EXPERIENCE
Own technology, products, supply chain, wholesale and retail networks
Breakthrough products & technologies – Setting industry standards
Sonova Group
Page 9
Phonak – Pioneer in hearing instruments for 70 years
2007 2010 2011 2012 2014 2015 201620132009 20172008 2018
PALIO 1
First free
programmable
DSP platform
PALIO 2
First single-DSP
platform
PALIO 3
First dual-core
DSP platform
ROGER™
First PROPRIETARY
2.4 GHz digital
wireless platform
SWORD ™
First UNIVERSAL
2.4 GHz digital
wireless platform
CORE
+ Real-time
binaural audiolink
+ SoundRecover
SPICE
+ Binaural beam-
former
(StereoZoom)
+ TARGET fitting
software
QUEST
+ BVST
(BinauralVoice
Stream
Technology™)
VENTURE
+ AutoSense OS™
BELONG™
+ Li-Ion recharge
+ AutoSense OS™
+ SoundRecover 2
+ Titanium shellPR
OD
UC
TSTE
CH
NO
LOG
IES
RECHARGE
First Li-Ion
rechargeable
wireless platform
August 2017
Strong global presence – Well established network and infrastructure
Largest global sales and distribution network in the industry – Wholesale and retail
Sonova Group
– PH, UT, HA, AB: over 70 wholesale group companies – more than 100 independent distributors
– AudioNova: over 3,300 POS retail clinics in 12 key markets
– R&D: 6 product and development competence centers (2 CH, 2 US, 1 CA, 1 CN)
– Operations: 4 production centers (1 CH, 1CN, 1 VI, 1 US)
42%
AMERICAS EUROPE APAC
48%
10%
August 2017 Page 10
Sonova Group – Performance history
Sonova Group
Notes: FY 2012/13 excluding one-off cost for AB Vendor B provision increase, AB Rixheim restructuring and settlement with a group of investors
FY 2016/17 excluding one-time transaction and integration costs related to AudioNova acquisition
FY 2012/13 FY 2013/14 FY 2014/15 FY 2015/16 FY 2016/17 CAGR 5-y
Sales growth reported +10.8% +8.7% +4.3% +1.8% +15.6% +8.1%
Sales growth in LC +7.4% +11.7% +6.2% +5.8% +15.3% +9.2%
Organic sales growth in LC +5.2% +11.0% +5.1% +2.2% +4.3% +5.5%
EBITA margin +21.5% +22.0% +22.4% +20.8% +20.1% n/a
Basic EPS 4.60 5.08 5.37 5.11 5.58 +8.5%
Page 11August 2017
SALESin CHF million
EBITAin CHF million
1H 2H
0
400
800
1'200
1'600
2'000
2'400
11/12 12/13 13/14 14/15 15/16 16/17
0
100
200
300
400
500
600
11/12 12/13 13/14 14/15 15/16 16/17
1H 2H
Hearing Instruments – Performance history
Sonova Group
FY 2012/13 FY 2013/14 FY 2014/15 FY 2015/16 FY 2016/17 CAGR 5-y
Sales growth reported +8.2% +6.5% +4.8% +2.4% +16.2% +7.5%
Sales growth in LC +4.9% +9.5% +6.9% +6.6% +15.9% +8.7%
Organic sales growth in LC +2.6% +8.8% +5.6% +2.8% +3.8% +4.7%
EBITA margin +23.3% +23.8% +23.6% +22.9% +21.6% n/a
Page 12August 2017
0
400
800
1'200
1'600
2'000
2'400
11/12 12/13 13/14 14/15 15/16 16/17
0
100
200
300
400
500
600
11/12 12/13 13/14 14/15 15/16 16/17
SALESin CHF million
EBITAin CHF million
1H 2H 1H 2H
Note: FY 2016/17 excluding one-time transaction and integration costs related to AudioNova acquisition
Cochlear Implants – Performance history
Sonova Group
Notes: FY 2012/13 excluding one-off cost for AB Vendor B provision increase, AB Rixheim restructuring and settlement with a group of investors
FY 2014/15 normalized for non-recurring items mainly related to indirect tax and partial release of AB Vendor B provision
FY 2012/13 FY 2013/14 FY 2014/15 FY 2015/16 FY 2016/17 CAGR 5-y
Sales growth reported +52.3% +33.1% -0.6% -3.7% +9.8% +16.3%
Sales growth in LC +47.1% +36.0% +0.0% -2.4% +9.6% +16.4%
EBITA margin* +1.2% +6.6% +5.4% -0.1% +3.9% n/a
Page 13August 2017
0
50
100
150
200
250
11/12 12/13 13/14 14/15 15/16 16/17
-40
-20
0
20
40
60
11/12 12/13 13/14 14/15 15/16 16/17
SALESin CHF million
EBITAin CHF million
1H 2H 1H 2H
2. Hearing care market
Hearing care market – Attractive size and growth potential – Strong fundamentals
Market
TOTAL HEARING CARE MARKET
- Market Size
- Market CAGR
- HI Size (units)
- CI Size (units)
~ CHF 16 billion
~ + 4-5%
~ 14 million
~ 60 thousand
COCHLEAR IMPLANTS CI
- Market Size
- Market CAGR
- CI Size (units)
~ CHF 1.1 billion
~ + 5-10%
~ 60 thousand
HEARING INSTRUMENTS HI
- Market Size
- Market CAGR
- HI Size (units)
~ CHF 5 billion
~ + 3-5%
~ 14 millionIndependents
Large Retail
Buying
Groups
Governments &
Hospitals
CI
HI
August 2017
Note: Unit split
Page 15
Around 15% of adults have some degree of hearing impairment
Low penetration rate – Around 20% in developed countries
Market
August 2017 Page 16
With hearing system Without hearing system Source: WHO¹, Marketrak 9 (USA)², industry statistics, Sonova estimates
70%
50%
Worldwide prevalence
of hearing problems¹
Hearing problems
by age group²
Market Penetration
70%
50%
10%
Profound
Moderate
Mild
15%
<64
65-74
>75
Expanding into larger hearing care market – Leverage strong HI position
Market position
August 2017
Note: Unit split
Page 17
COCHLEAR IMPLANTS CI
- Market Size
- Market CAGR
- CI Size (units)
~ CHF 1.1 billion
~ + 5-10%
~ 60 thousand
HEARING INSTRUMENTS HI
- Market Size
- Market CAGR
- HI Size (units)
~ CHF 5 billion
~ + 3-5%
~ 14 million
TOTAL HEARING CARE MARKET
- Market Size
- Market CAGR
- HI Size (units)
- CI Size (units)
~ CHF 16 billion
~ + 4-5%
~ 14 million
~ 60 thousand
Trend 1 – Increased adoption of implantable solutions – Aging population increasing
Conclusion – Provide complete HI and CI solutions – Leverage eTechnologies
Market trends
August 2017
AGE
HE
AR
ING
LO
SS PED MARKET ADULT MARKET
IMPLANTABLE SOLUTIONSIMPLANTABLE
SOLUTIONS
1 IMPLANTABLE SOLUTIONS: over-proportional growth and adoption rate
2 PEDIATRIC: newborn screening – expansion to milder hearing loss
3 ADULTS: over-80 segment, baby boomers, iPod generation – additional potential
4 e-TECHNOLOGIES: new solution formats – increasing earlier adoption
MIL
DM
OD
ER
AT
ES
EV
ER
E
Page 18
Trend 2 – Accelerated bi-furcation of professional service channels
Conclusion – Vertical integration to access value-added potential and consumer
Market trends
August 2017
2005 2010 2015
SE
RV
ICE
LE
VE
L
PR
ICIN
G
INDEPENDENTS LARGE RET
B2C
B2B
B2C
B2B
INDEPENDENTS
LARGE RETAIL
Page 19
Trend 3 – eHealth and eHearingcare – Expanding digital value proposition
Conclusion – Develop eHearingcare solution offering based on eTechnologies
Market trends
Diabetes App
Self Diagnostic
Online Care Services
Virtual Care
Remote Patient Data
Monitoring
Hand Prosthesis App
Self Adjust
August 2017
i.e.
Page 20
3. Corporate strategy
Focus on hearing care – Continuous innovation to grow sales, earnings & cash flow
Strategic focus
August 2017
Lead digital (r)evolution and eBusiness transformation in hearing care
Page 22
1 NEW PRODUCTS
2 GO-TO-MARKET
3 eSOLUTIONS
INN
OV
AT
ION
HE
AR
ING
CA
RE
Strategic focus
August 2017 Page 23
Business strategies – Focus on hearing care
Continuous innovation to grow sales, earnings & cash flow
RET BusinessHI Business CI Business
Secure market access Expand market reach Build medical position
Offer best-in-class
professional services
Drive solution
innovation leadership
Strive for performance
leadership
HI Segment CI Segment
Implement consistent platform approach for HI & CI solution development
Drive strong new product pipelines – Gross R&D around 7% of sales
New product strategy
August 2017 Page 24
Grow market position along 4 main vectors – Drive vertical integration
Increase customer demand generation – B2B and B2C eMarketing approach
Go-to-market strategy
1
2
3
4
Develop consumer base– e-Marketing / direct marketing
– Demand generation processes
Integrate service channels– Retail network expansion
– Integration & productivity
Expand accessible markets– Emerging markets
– New product formats
Penetrate existing markets– Multi-brand strategy
– Continuous product innovation
4
3
2
1
August 2017 Page 25
Develop complete solution and service offering based on eTechnologies
Expand technology platform approach to include e-based technologies
eSolution strategy
August 2017
AWARENESS COUNSELING FITTING TRIAL USE
PROFESSIONAL
CONSUMER
MANUFACTURER
eAdjust
eScreening
eBooking
eAssistance
eAftercare
eHealthCare Platforms
eGoals
eCoach
eMonitor
eHealthCare Platforms
Page 26
4. New products
New product strategy
Leverage platform approach to offer complete range of products
Product pipelines: Consistently meeting product development targets
August 2017 Page 28
RIC BTE Custom Power Pediatric
PremiumAudéo™ B/B-R 90Audéo™ B90-Direct
Bolero™ B/B-PR 90 Virto™ B90/Titanium Naída™ V90 Sky™ V90
AdvancedAudéo™ B/B-R 70Audéo™ B70-Direct
Bolero™ B/B-PR 70 Virto™ B70/Titanium Naída™ V70 Sky™ V70
StandardAudéo™ B/B-R 50Audéo™ B50-Direct
Bolero™ B/B-PR 50 Virto™ B50 Naída™ V50 Sky™ V50
Essential Audéo™ B30 Bolero™ B30 Virto™ B30 Naída™ V30 Sky™ V30
Basic Baseo™ Q Tao™ Q
RIC BTE Custom PowerFlex:trial™& Upgrade
Premium Moxi™ T Pro Stride™ T Pro/M R Insera™ T Pro
Any Performance Level
Advanced Moxi™ T 800/700 Stride™ T 800/700 Insera™ T 800/700 Max™ 20
Standard Moxi™ T 600 Stride™ T 600 Insera™ T 600 Max™ 6
Essential Moxi™ T 500 Stride™ T 500 Insera™ T 500 Max™ E
Basic Shine Rev™ Shine Rev™
Leadership in innovation and customer experience…
…across all product brands, form factors and performance levels
August 2017
New products
Page 29
Independents
Large retail
Hospitals
Online
CHANNELS
Phonak Belong™ platform – expanding technology leadership in …
New products
Page 30August 2017
Audiology
Automation
Small designs
& comfort
Wireless
communication
eTechnologies
Low power
consumption
Performance
Esthetics
Ease-of-use
Commercial
value
… hearing performance, automation, power supply and design
VALUES
TECHNOLOGIES
STRATEGY
NEW
PRODUCTS
GO-TO-
MARKET
eSOLUTIONS
SPEECH
INTELLIGIBILITY
NATURAL SOUND
EXPERIENCE
Services
Hearing aids
Implants
Accessories
PRODUCTS
– Hearing aid batteries
– SWORD™ is the world’s first Bluetooth®* Classic chip
compatible with small hearing aid batteries
– Low-voltage radio chip with lowest power consumption of any
hearing aid using Bluetooth ®* Classic
– One radio chip and one antenna
– 40 nm CMOS technology
– Future proof
– Entire Bluetooth® protocol stack on the chip
– Ready for additional features and future Bluetooth®
standards (e.g. HAP) to connect to hundreds of multimedia
audio sources
– Additional applications
– Also supports Sonova proprietary 2.4 GHz wireless
protocols such as AirStream™ technology
New products
SWORD™ (Sonova Wireless One Radio Digital) – New wireless chip
Proprietary 2.4 GHz chip that handles multiple communication protocols* Bluetooth® is a registered trademark owned by Bluetooth SIG, Inc.
August 2017 Page 31
1
2
4
3
New products
Phonak Belong – Audéo B-Direct – Key features
First Phonak product based on new SWORD™ chip
*with Bluetooth® 4.2 wireless technology and most older Bluetooth® phones
Ease of use
– “Made for All” direct connectivity with any cell phone*
– Answer/reject phone calls by touching a pushing button on the hearing aid
– Hands-free calls using your hearing aids as a wireless headset
– Excellent TV sound quality using proprietary AirStream™ technology
Hearing performance
– Phonak Belong technology
– New AutoSense OS™
– SoundRecover2
– Across three performance levels (90/70/50)
– Esthetics and design
– Bigger push button
– Smallest Phonak RIC with a 13-size battery
1
2
August 2017 Page 32
3
Ease of use
– Non-wireless models benefit from 20% longer battery life vs. Virto V
– Various improvements including colored battery doors for all sizes
Hearing performance
– Biometric Calibration provides a 2 dB improvement in
directionality leading to better hearing performance*
– Phonak Belong technology with new AutoSense OS
– Esthetics and design
– New model: 312 NW O for optimal battery life at appealing size
– 10 Omni models significantly smaller thanks to the new
electronics from Virto B-Titanium
Phonak Belong – Virto B – Key features
Biometric Calibration provides 2 dB improvement in directionality
New products
August 2017 Page 33
1
2
3
*Field Study News under development. Full details available in September, 2017 at www.phonakpro.com/evidence
Biometric Calibration:
acoustically customized
on the inside
Physically customized
on the outside
Advanced Bionics – Performance Leadership
Competitive portfolio of sound processors, implants, electrodes and accessories
New products
Implants Electrodes Sound Processors
HiRes 90K™ Advantage HiFocus™ Mid-Scala Naída CI Q90
HiRes 90K™ HiFocus™ 1j Naída CI Q70
HiRes™ Ultra HiFocus Helix™ Naída CI Q30
Neptune™
August 2017
Sound processor
Magnetic
headpiece
Implant
Electrode
Magnetic
headpiece
Implant
Electrode
Sound processor
Page 34
Naída™ Link bimodal hearing solution
– Key performance benefits:
– Shared signal processing, automation and controls
– Ear-to-ear audio streaming
– Bimodal streaming with wireless accessories
– Easy to program:
– Adaptive Phonak Digital Bimodal fitting formula
– Bimodal Fitting Report in SoundWave
HiRes™ Ultra cochlear implant
– Most advanced technology in a thinner package:
– 30% overall size reduction compared to previous generation
– Minimal intrusive implantation
– Built Kid Tough™, with superior impact resistance
– Improved MRI compatibility:
– 3T compatibility with magnet removed
– 1.5T compatibility with magnet in place
Advanced Bionics – Building momentum with new products…
…ideal for adult and pediatric recipients
New products
August 2017 Page 35
thickness: 4.5 mm
Single CI with
contralateral hearing aid
5. Go-to-market
2000 2005 2010 2015 2020
Go-to-market
Independent market – Strong position – Including own AudioNova group
Large retail market – Growing relationships
INDEPENDENT MARKET
LARGE RETAIL MARKET
August 2017 Page 37
BE
AT/HUN
CA
AU/NZ BR
UK
US
EU
FR
AMERICAS EUROPE ASIA-PACIFIC
– A leading global retail
platform of over 3,300
stores
– Over 6,000 employees in
Sonova retail across 18
markets
– One of the leading store
networks in Europe with
over 2,500 stores in 12
countries
– AudioNova brand used as
umbrella name for Sonova
retail
AudioNova – Sonova retail business – over 3,300 stores – 6,000 employees
Go-to-market
August 2017 Page 38
AudioNova – Example GEERS shops in Germany
State-of-the-art shops/clinics and professional services
Go-to-market
August 2017
Key initiatives:
– Spirit of ambition and customer orientation
– Aggressive network growth approach
based on greenfield openings
– Up to 30 POS/a
– Sophisticated geo-targeting process
– Marketing approach built around Multi-
Channel Customer Management
– Conventional (TV, print)
– Web, call center, CRM
– Standardized operating procedures for
efficient customer satisfaction
– Employee engagement
– Employer branding investment
– Meister education sponsorships
– Leadership programs
Page 39
AudioNova – Example Boots Hearingcare shop-in-shop in the UK
Premium market access by partnership with leading pharmacy chain
Go-to-market
August 2017
Key initiatives:
– From 391 shops in 2013 to close to 500
today – expansion into Boots Pharmacy
format beyond Boots Optical
– Capitalize on Boots footfall of
8 million customers/week – access to 18
million Boots Advantage Card customers
– Creating awareness: Collaboration with the
International Longevity Centre (ILC)
– Continuously increase efficiency by best in
class appointment scheduling and
colleague deployment (many stores fully
utilized 6 days per week)
Page 40
6. eSolutions
Develop complete solution and service offering based on eTechnologies
Expand technology platform approach to include e-based technologies
eSolution strategy
August 2017
AWARENESS COUNSELING FITTING TRIAL USE
PROFESSIONAL
CONSUMER
MANUFACTURER
eAdjust
eScreening
eBooking
eAssistance
eAftercare
eHealthCare Platforms
eGoals
eCoach
eMonitor
eHealthCare Platforms
Page 42
eSolution strategy
Example Boots – Online support in critical phase to 1st fitting
Page 43
eScreening
eGoals
eCoach
eBooking
AWARENESS COUNSELING FITTING
Note: Start of market trial eScreening April 2015, eGoals June 2016, eCoach December 2016
August 2017
eSolution strategy
Example Phonak DS 1.0 – On-line follow-up fit – Connecting consumer and HCP
Page 44
TRIAL
eAssistance
USE
Key features:
– Distance support solution compatible with all
directly connected products
– System including support App, target fitting
software, backend services
– Business model provides for:
– Billing services
– End user authentication
– Data collection
Development steps:
– VA HearAssist pilot project in 2017 on track:
→ New direct BT connected HA in use!
– Strong interest from large retail
– Broader commercial solution
August 2017
7. Financial information
– Sonova Group: Strong progress in HI – solid growth in CI
– Sales of CHF 2,395.7 million up 15.6% as reported in CHF and up by 15.3% in LC
– EBITA of CHF 481.4 million – margin of 20.1% (normalized for AudioNova one-time costs)
– Hearing instruments segment: Solid organic growth – AudioNova integration on track
– Sales of CHF 2,190.3 million up by 15.9% in LC – driven by organic growth and acquisitions
– Marked 2H organic acceleration in particular driven by Phonak Audéo™ B
– AudioNova net sales contribution of CHF 216.1 million for 7 months in FY 2016/17
– Integration on track – CHF 18.4 million one-time costs
– EBITA (normalized) of CHF 473.4 million – margin of 21.6%
– Cochlear implants segment: Strong acceleration in 2H – return to profitability
– Sales of 205.4 million, up 9.6% in LC – strong momentum from new products
– EBITA of CHF 8.0 million – year-on-year improvement driven by higher sales and cost control
– High cash conversion – very good cash flow – sound balance sheet
– Operating free cash flow at CHF 424.8 million – Strong cash conversion of 88% (OpFCF/EBITA)
– Equity ratio 54.2% post AudioNova acquisition
Business highlights FY 2016/17
Sonova Group
August 2017 Page 46
Major developments and initiatives
Sonova Group
August 2017 Page 47
Go-to-market
– EU: Strong growth despite headwind in DE – accelerating with new products
– EU: AudioNova integration on track – creating one of Europe’s largest retailers
– US: Increase in VA market share to 45%
– US: Introduction of next generation product at Costco – 2H strong acceleration
– BR, CN, IN: Reducing exposure to low margin channels and products
New
products
– HI: Phonak Belong™ – successful new platform, high share of rechargeable
– HI: Phonak Virto™ Titanium – smallest Phonak custom product ever
– CI: HiRes™ Ultra – latest generation implant with thinner profile
e-Solutions– Distance support: Partnering with VA – pilot project on track
– Continued investments: Developing complete solution and service offering
Executing well on strategic initiatives for sustainable profitable growth
Sonova Group
Key Financials – As reported and normalized – Variances in CHF
Normalized EBITA up CHF 51 million or +11.8% in CHF
Page 48August 2017
* One-time costs, consisting of transaction cost and integration related restructuring costs in connection with the acquisition of AudioNova
Note: EPS:CHF 5.67 (+11%), adjusted for one-time cost and temporary tax rate increase pending full integration of AudioNova
in CHF millionFY 2015/16
as reported
FY 2016/17as reported
Δ % in CHF One-time
costs*FY 2016/17
normalizedΔ % in CHF
Sales 2'071.9 2'395.7 15.6% 2'395.7 15.6%
Gross profit 1'375.5 1'651.8 20.1% 1'651.8 20.1%
- Gross profit margin 66.4% 68.9% +250bps 68.9% +250bps
OPEX -944.8 -1'188.8 25.8% 18.4 -1'170.3 23.9%
EBITA 430.6 463.0 7.5% 18.4 481.4 11.8%
- EBITA margin 20.8% 19.3% -150bps 20.1% -70bps
EPS (in CHF) 5.11 5.35 +4.7% 0.23 5.58 +9.2%
Operating free cash flow 344.2 424.8 +23.4%
ROCE 26.0% 20.4%
Sonova Group
Key Financials – Normalized – Variances in LC
Significant acceleration in the second half
Page 49August 2017
in CHF million 1H 2016/17 Δ % in LC 2H 2016/17 Δ % in LC FY 2016/17 Δ % in LC
Sales 1'069.9 5.5% 1'325.8 24.5% 2'395.7 15.3%
Gross profit 723.8 8.2% 928.0 31.1% 1'651.8 20.1%
- Gross profit margin 67.6% +160bps 70.0% +350bps 68.9% +270bps
OPEX -517.9 10.5% -652.5 36.6% -1'170.3 23.7%
EBITA 205.9 2.7% 275.5 20.0% 481.4 12.1%
- EBITA margin 19.2% -50bps 20.8% -80bps 20.1% -60bps
Sales and components – YoY
Sonova Group
Page 50
28.4
90.0
216.2
2,350
2,400
2,250
50
2,100
2,050
2,300
2,150
2,200
2,000
0FY 16/17
Reported
+15.3%
FX
impact
6.2
FY 16/17
LC
2,389.4
M&A
2,395.7
FY 15/16
Norm.
2,054.8
Divestments
-17.1
FY 15/16
Reported
2,071.9
Organic
Growth
components-0.8% +0.3% +15.6%+15.3%
FX
Sales +15.3% in LC as reported – Sonova legacy business +5.8% in LC
in CHF million
+4.3%
ANI
+11.8%-0.8%
PY NORM OPERATIONAL
August 2017
Key Financials – Normalized
Solid organic acceleration – Further supported by acquisitions
Sonova Group
Page 51August 2017
1H 2016/17 2H 2016/17 FY 2016/17
In CHF million
Nor-
malized
Δ %
in CHF
Δ %
in LC
Nor-
malized
Δ %
in CHF
Δ %
in LC
Nor-
malized
Δ %
in CHF
Δ %
in LC
Sales 1,069.9 +6.7% +5.5% 1,325.8 +24.0% +24.5% 2,395.7 +15.6% +15.3%
Δ organic 20.6 +2.0% 69.4 +6.5% 90.0 +4.3%
Δ acquisitions 44.8 +4.5% 199.8 +18.7% 244.6 +11.8%
Δ disposals -10.0 -1.0% -7.1 -0.7% -17.1 -0.8%
Δ FX 11.4 +1.2% -5.2 -0.5% 6.2 +0.3%
EBITA 205.9 +5.2% +2.7% 275.5 +17.3% +20.0% 481.4 +11.8% +12.1%
EBITA-margin 19.2% 20.8% 20.1%
Sales by regions and key markets
Solid LC growth led by EMEA – Acceleration across all regions in 2H 2016/17
Sonova Group
Page 52
EMEA
– HI Business (WHS): Good growth momentum – accelerating with new products
– Retail Business: Growth boosted by acquisitions
– CI Business: Double-digit growth in system sales, held back by limited upgrade business
US
– HI Business (WHS): Solid and accelerating growth in Phonak, partially offset by Unitron
– Retail Business: Streamlining store network, focus on productivity and efficiency gains
– CI Business: Double-digit growth in system sales, held back by limited upgrade business
APAC
– HI Business (WHS): Growth in AU and JP – reduction of lower margin business in CN and IN
– Retail Business: Solid growth supported by small acquisitions in AU
– CI Business : Exiting low-margin business in selected emerging markets
August 2017
1H 2016/17 2H 2016/17 FY 2016/17
in CHF million Sales Δ % in LC Sales Δ % in LC Sales Δ % in LC
EMEA 470.0 +12.2% 692.2 +53.2% 1,162.2 +33.8%
USA 383.0 -0.1% 404.3 +2.0% 787.3 +1.0%
Americas (excl. USA) 102.7 +3.1% 108.2 +4.5% 210.9 +3.8%
Asia / Pacific 114.2 +1.6% 121.1 +2.3% 235.3 +2.0%
Total SONOVA 1,069.9 +5.5% 1,325.8 +24.5% 2,395.7 +15.3%
EBITA and components – YoY
Sonova Group
34.8
20.0
490
480
470
460
450
440
430
420
0
+12.1%
FY 16/17
Reported
463.0
FX
impact
-1.5
FY 16/17
LC
464.5
One-time
costs
-18.4
FY 16/17
LC excl.One-
time costs
482.9
Cap.
gain
3.9
M&AOrganicFY 15/16
Norm.
424.2
PY
Norm.
-6.4
FY 15/16
Reported
430.6
Margin 20.8% 19.3%
in CHF million
-0.1%-0.2% 20.6%
Page 53
OPERATIONAL FXPY NORM
20.2%-0.8%+0.2%
ONE-TIME
19.4%-0.8%
*
* Capital gain: CHF -8.7m; FX loss on W/C: CHF +2.3m
+0.2%
August 2017
Expanding organic margin despite investments in marketing and innovation
Operating expenses
Continued investment in innovation and marketing – Expansion in sales & distribution
Sonova Group
Page 54August 2017
* Excludes one-time costs of CHF 18.4 million, consisting of transaction cost and integration related restructuring costs in connection with the
acquisition of AudioNova
in CHF million FY 2015/16 FY 2016/17 Δ % in CHF Δ % in LC Comments
Research & Development- in % of sales
-130.36.3%
-137.15.7%
+5.3% +5.0% Continued investment in next
generation platform – ratio change
driven by larger share of retail
Sales & Marketing- in % of sales
-638.230.8%
-811.033.9%
+27.1% +26.9% Driven by AudioNova acquisition
thus resulting in higher share of
retail
General & Administration- in % of sales
-194.29.4%
-228.59.5%
+17.6% +17.3% Driven by AudioNova acquisition
thus resulting in higher share of
retail
Other income and
expenses
17.9 6.3 -64.8% -64.8% Lower capital gains vs prior year
Total OPEX normalized*- in % of sales
-944.845.6%
-1,170.348.9%
+23.9% +23.7%
Total OPEX reported- in % of sales
-944.845.6%
-1,188.849.6%
+25.8% +25.7%
Key Financials – As reported and normalized – Variances in LC
Normalized EBITA +10.3% in LC – Expected RET/HI mix effect on margin
Hearing Instruments
Page 55August 2017
* One-time costs consisting of transaction cost and integration related restructuring costs in connection with the acquisition of AudioNova
in CHF million FY 2015/16as reported
FY 2016/17as reported
Δ % in LC One-time
costs*FY 2016/17
normalizedΔ % in LC
Sales 1'885.0 2'190.3 15.9% 2'190.3 15.9%
EBITA 430.8 455.0 6.0% 18.4 473.4 10.3%
- EBITA margin 22.9% 20.8% -210bps 21.6% -110bps
Key Financials – Normalized
Solid organic acceleration – Further supported by acquisitions
Hearing Instruments
Page 56August 2017
1H 2016/17 2H 2016/17 FY 2016/17
in CHF million
Nor-
malized
Δ %
in CHF
Δ %
in LC
Nor-
malized
Δ %
in CHF
Δ %
in LC
Nor-
malized
Δ %
in CHF
Δ %
in LC
Sales 977.5 +6.5% +5.4% 1,212.8 +25.4% +25.9% 2,190.3 +16.2% +15.9%
Δ organic +15.0 +1.6% +57.4 +5.9% +72.4 +3.8%
Δ acquisitions +44.3 +4.8% +200.0 +20.7% +244.3 +13.0%
Δ disposals -10.0 -1.1% -7.1 -0.7% -17.1 -0.9%
Δ FX +10.4 +1.1% -4.6 -0.5% +5.8 +0.3%
EBITA 206.9 +4.3% +2.3% 266.5 +14.7% +17.2% 473.4 +9.9% +10.3%
EBITA-margin 21.2% 21.9% 21.6%
– HI Business: Significant acceleration in 2H 2016/17
– Phonak Belong™: successful launch of new platform – strong demand for rechargeable products
– Strong organic growth in EMEA – some headwinds in Germany after AudioNova announcement
– Unitron: slow-down ahead of new platform launch
– RET Business: Growth driven by solid organic development and acquisitions
– AudioNova acquisition adds net sales of CHF 216.1m
– Europe, Canada and Asia Pacific continue to perform strongly
– US – streamlining store network, focus on productivity and efficiency gains
Sales by business
Broad based sequential improvement in 2H 2016/17
Hearing Instruments
August 2017 Page 57
1H 2016/17 2H 2016/17 FY 2016/17
in CHF million Sales Δ % in LC Sales Δ % in LC Sales Δ % in LC
HI Business(third party sales)
629.6 +0.1% 681.6 +5.6% 1,311.2 +2.8%
HI Business (incl. sales to own retail)
+2.0% +10.0% +6.0%
RET Business 347.9 +16.3% 531.2 +67.7% 879.1 +42.7%
Total HI Segment 977.5 +5.4% 1,212.8 +25.9% 2,190.3 +15.9%
Sales by product groups
Continued positive mix trend with healthy ASP effect – Solid growth in wireless
Hearing Instruments
Page 58August 2017
1H 2016/17 2H 2016/17 FY 2016/17
in CHF million Sales Δ % in LC Sales Δ % in LC Sales Δ % in LC
HI Premium 272.8 +6.3% 331.7 +22.4% 604.5 +14.7%
HI Advanced 207.8 +1.3% 256.9 +24.2% 464.7 +12.8%
HI Standard 318.6 +4.9% 395.3 +26.7% 713.9 +15.8%
Wireless communication 50.5 +10.9% 56.2 +18.7% 106.7 +14.9%
Miscellaneous 127.9 +9.6% 172.6 +38.5% 300.5 +24.9%
Total HI Segment 977.5 +5.4% 1,212.8 +25.9% 2,190.3 +15.9%
Key Financials – As reported
Significant sequential improvement in 2H 2016/17
Cochlear Implants
Page 59August 2017
Note: EBITA includes CHF 1.8 million net benefit from non-operating items
1H 2016/17 2H 2016/17 FY 2016/17
In CHF million Reported
Δ %
in CHF
Δ %
in LC Reported
Δ %
in CHF
Δ %
in LC Reported
Δ %
in CHF
Δ %
in LC
Sales 92.4 8.2% +7.0% 113.0 11.2% +11.8% 205.4 9.8% +9.6%
Δ organic 5.6 +6.6% 11.9 +11.8% 17.6 +9.4%
Δ net acquisitions 0.4 +0.4% - 0.4 +0.2%
Δ FX 1.0 +1.2% -0.6 -0.6% 0.4 +0.2%
EBITA -1.0 NM NM 9.0 +264% +289% 8.0 NM NM
EBITA-margin -1.1% +100bps 8.0% +600bps 3.9% +390bps
Sales by product groups
Continued positive mix trend with healthy ASP effect – Solid growth in implants
Cochlear Implants
Page 60August 2017
1H 2016/17 2H 2016/17 FY 2016/17
in CHF million Sales Δ % in LC Sales Δ % in LC Sales Δ % in LC
Cochlear implant systems 73.1 +13.7% 86.9 +11.8% 160.0 +12.8%
Upgrades and accessories 19.3 -10.7% 26.1 +11.3% 45.4 +0.5%
Total Cochlear implants
segment92.4 +7.0% 113.0 +11.8% 205.4 +9.6%
Reported results and income taxes
Sonova Group
Page 61
Temporary higher tax rate for ANI – pending full integration
August 2017
in CHF million FY 2015/16 FY 2016/17 Δ % in CHF
EBITA 430.6 463.0 +7.5%
Acquisition - related amortization -27.2 -39.3 +44.6%
Operating profit (EBIT)in % of sales
403.419.5%
423.717.7%
+5.0%
Financial result -6.4 -6.3 -0.5%
Income before taxes 397.1 417.3 +5.1%
Income taxes -51.2 -61.2 +19.4%
- Income tax rate 12.9% 14.7% +180 bps
Income after taxes- in % of sales
345.816.7%
356.214.9%
+3.0%
EPS (in CHF) 5.11 5.35 +4.7%
Note: EPS:CHF 5.67 (+11%), adjusted for one-time cost and temporary tax rate increase pending full integration of AudioNova
Cash flow
Sonova Group
Page 62
Growing operating free cash flow – strong cash conversion – AudioNova acquisition
August 2017
in CHF million FY 2015/16 FY 2016/17 Δ % in CHF
Cash flow before changes in NWC (incl. taxes paid) 449.1 517.1 +15.1%
Changes in net working capital -20.6 5.3 NM
Operating cash flowin % of sales
428.420.7%
522.421.8%
+21.9%
Cash flow from investing activities (excl. acquisitions) -84.2 -97.5 +15.8%
Operating free cash flowin % of sales
344.216.6%
424.817.7%
+23.4%
Cash consideration for acquisitions, net of disposals -91.6 -657.5 NM
Free cash flow 252.6 -232.6 NM
Cash flow from financing activities -325.6 290.5 NM
Changes in cash and cash equivalents -73.2 57.2 NM
Balance sheet
Sonova Group
Page 63
Tight working capital management – AudioNova acquisition effect
August 2017
in CHF million 31 Mar 2016 31 Mar 2017 Δ % in CHF
Net working capital 185.5 169.7 -8.5%
Days sales outstanding (DSO) 64 61 -4.6%
Days inventory outstanding (DIO) 132 127 -3.7%
Capital employed 1,608.0 2,535.9 +57.7%
Net cash / (debt) 298.3 -404.6 NM
Equity 1,906.3 2,131.3 +11.8%
Equity in % of total assets 69.3% 54.2%
Total shareholder return – Cash deployment strategy
Share buy-back suspended following the acquisition of AudioNova
Total shareholder return
August 2017 Page 64
Total shareholder
return strategy
4. Share buyback
Return of excess
cash to
shareholders after
amortization of debt
3. Solid cash
position
Return to a solid
net cash position
2. Dividend
Maintain payout
ratio of around 40%
1. Acquisitions
Bolt-on
CHF 50- 70
million p.a.
5. Outlook
Mid-term outlook – Solid growth and margin expansion
Transformation into unique vertically integrated business model
0
1,000
2,000
3,000
4,000
11/12 12/13 13/14 14/15 15/16 16/17 17/18E 18/19E 19/20E 20/21E
WHS BUSINESS MODEL TRANSFORM VERTICAL BUSINESS MODEL
Sa
les
(C
HF
m)
HI
RET ANI
CI AB
CA HAISM
Mid-term CAGR*:
5-7%(M&A: ~1%)
6-10%
6-8%(M&A: ~2-3%)
3-5%
EBITA CAGR:
7-11%
Mid-term*
Page 66
RET Business
HI Business
CI Business
August 2017
Outlook FY 2017/18
* Expected development based on FY 2016/17, excluding FX impact
Outlook FY 2017/18
Factors impacting performance – expectations and considerations for outlook
August 2017 Page 67
Market
Hearing
Instruments
Cochlear
Implants
Growth of HI and CI market in line with long-term average and trends
Continued retail channel bifurcation – independents versus chains
Further retail consolidation in focus of major players – channel conflicts in cases
eSolutions becoming a key topic for the industry
Sales momentum supported by new and modern product portfolio, new product and
technology introductions
EU: market share expansion by AudioNova product portfolio transition
NA: further gains in independent channel – building on strong position at VA and
Costco – recovery of Unitron on new product platform
AP: solid position in AU, re-acceleration in CN and IN
AudioNova: continued integration
Acquisitions: strong contribution in 1H 2017/18 due to annualization (AudioNova)
Sales momentum supported by with new product portfolio and launches
NA and EU: further market share gains with new and modern product portfolio
Positive leverage through close cooperation with Sonova retail and Phonak
FY 2017/18 guidance and mid-term target
Outlook FY 2017/18
Page 68
* EBITA FY 2016/17 and FY 2017/18 excluding one-time transaction and integration costs related to AudioNova acquisition
August 2017
Actual*
FY 2016/17
Guidance*
FY 2017/18Mid-term
Target
Sales
Sales growth in LC +15.3% 10%-12% +5%-7% p.a.
thereof M&A +11.0% ca. +6.0% ca. +1.0% p.a.
FX-impact +0.3%
Total sales growth in CHF +15.6%
EBITA
EBITA growth in LC +12.1% 10%-14% +7%-11% p.a.
FX-impact -0.3%
Total EBITA growth in CHF +11.8%
FX impact on sales and margins
USD and EUR account for roughly two thirds of the overall FX exposure
Outlook FY 2017/18
USD/CHF EUR/CHF
Rate Sales EBITA
USD/CHF +/- 5% +/- CHF 43 million +/- CHF 10 million
EUR/CHF +/- 5% +/- CHF 45 million +/- CHF 18 million
Page 69August 2017
FX rates – Seven main currencies account for around 85% of Group sales
Positive impact from USD and EUR strength – Largely offset by strong GBP decline
Outlook FY 2017/18
Page 70August 2017
USD
EUR
GBP, CAD, BRL, AUD and JPY
Other
Note: Split includes AudioNova for 12 months
FY-15/16 1H-16/17 2H-16/17 FY-16/17 EffectSpot
May 2017
USD 0.97 0.97 1.00 0.99 0.99
EUR 1.07 1.09 1.07 1.08 1.09
GBP 1.47 1.34 1.24 1.29 – 1.28
CAD 0.74 0.75 0.75 0.75 0.72
AUD 0.72 0.73 0.76 0.74 0.73
BRL 0.27 0.29 0.31 0.30 0.31
JPY 100 0.81 0.93 0.90 0.91 0.88
