Sonova Holding AG

Good afternoon, here in Stäfa as well as the people on the phone line. We are now online.

Okay, super. Thanks for joining us today to our full year result presentation, either ones in Stäfa who made the extra effort to be with us in person, but then also the ones on the phone.

I have Hartwig with me, our CFO, and Thomas Bernhardsgrütter, our Head of IR. I am going to guide through the highlights.

Hartwig will pick up the financial section. I’ll talk a little bit about the guidance and then we have ample time for Q&A.

As always the disclaimer on the forward-looking statements, I trust everybody took notes. And then it’s time to jump into the Sonova Group results.

So as a quick reminder on where we started into the fiscal year because we are going to talk about the full fiscal year here. We started off on a somewhat lower point because we were at the end of our product lifecycle with the Belong platform and so we guided for the year with a percent lower than our normal guidance on the organic side and then divestments we had chose to do strategically.

So, our guidance was 2% to 4%. But with an acceleration in the second half of the year.

We also set that to – planning to have the Marvel at the end of the year and so being able to deliver the Marvel six weeks ahead of our original plan and on content, which is the most important, obviously important for us to accelerate the business in the second half year. For the full year, I’ll dissect the numbers as we go through the presentation, for the full year, 4.1% LC growth.

The little step ahead of our own guidance allowing us to produce a good adjusted EBITDA, adjusted because of the restructuring we had announced in the Q4 to help us drive productivity in the years to come with EPS growth at almost 12% in Swiss francs. And I think a strong sign of life and positive signal from an innovation perspective.

Obviously the Marvel on the back of the SWORD chip in addition on the cochlear side step forward with the 3D MRI electrodes and I will talk more about those during the presentation. This puts us at a good place from a sales momentum perspective coming out of the year and also educated us and led us to pick up our guidance by a percent relative to our mid-term guidance.

We still think for the mid-term. The mid-term guidance is the right number but expecting 6% to 8% growth in LC this year allowing us to drive towards an EBITDA from 9% to 13%.

From a strategy perspective, no change relative to what we have discussed at the Capital Markets Day. Clearly, innovation critical, but in two different directions in our business by now, the one have to best in audiological performance that’s why people buy hearing aids.

But in addition, we need to also keep the expectations with regard to the incremental capabilities of a hearing aid with regard to applications, sensors over time and really improving the consumer experience. On our three businesses, all of them with the right go to market and the right strategic objectives, differentiation and Audiological Care evolving our networks.

I have one example on what we are trying in – one pilot right now in the presentation and driving multi-channel, wholesale business and CI as well as in the hearing aid side and really getting better in serving the customers as they come in different forms, sectors, needs and expectations and then driving overproportional investment into high growth developing markets to participate in the underlying growth rates. That’s all about innovation, consumer access and participating in the emerging digitization.

On the innovation side, obviously, Marvel is the most important given the size and also the signal it sends to the marketplace and the back of its advancements to our e-solutions portfolio both of them launched ahead of time relative to what we thought at the beginning of the year in the middle of Q3. High risk 3D, MRI compatible electrodes which we brought out in September, so impacting the first – full second half year.

Now two newer ones, not that relevance of the numbers last year, but certainly important when you think through how we think about the first half of the year, the second half of this year. We are in the process we launched end of last week , the Moxi Jump R which is the SWORD technology and the capabilities we have on the Marvel side technologically also to our Unitron product platform.

And then the cochlear business has launched at the end of the year, two significant upgrades, one, we are bringing the SWORD chip to the processor not integrated, but as an incremental element which you can clip on which allows people to upgrade their processors if they have the right technology towards connectivity. And then the second one the Chorus really serves our “oldest population of people” the first electrode we had out which hasn’t received an upgrade on the processor for long time.

So, leading up to our commitment to the patient base, but at the same time a good revenue contribution. Now going back to the Marvel, why is the Marvel so important?

A, it represents so that product category represents 30% of our wholesale business overall. But then there is also the litmus test on are we ahead of the competition with regard to innovation.

And what we hear from customers after they receive the Marvel, we now see also in the sales figures. So then this is the next step forward.

Pretty important things be “the best hearing performance, and side-by-side, the best rechargability, second-generation of lithium ion and then the third one, a clear step ahead of others from the connectivity, A, because we can connect through Bluetooth to all devices and not just the iPhone. But at the same time, we can enable incremental features like picking up your phone on your hearing aids and choosing the microphone in there which you cannot with the MRI connectivity.

So, clearly, a strong packet. Let you ask your audiologists really for what makes the difference, they would say, I have to make no compromise and the most important criteria to buy hearing aid.

It’s a really good position to be in. If you think go forward through that technology, certainly, two to three years a unique differentiator it comes to availability to users.

So, good platform to continue to build our portfolio of products as well as applications. Now you hear to talk and understand number two, therefore a little chart here on the pickup for the Marvel in the audio product platform.

The audio is, what’s shown here as I said about 30% of the total wholesale revenue. We see the different products which we phased in over the years.

And you see this nice steep pick up here on the right-hand side since the Marvel launch. You can compare visually here with the Belong launch which we saw it was a good start – a good launch too.

But you can see that the Marvel picks up more momentum in unit volume than what we have on the Belong side for the quite steep curve. Incremental point here, high rechargability, we are clearly above 50% in rechargeable volume in the Marvel world, on the Belong it was more on the 30% to 35%.

So we are really seeing the market shifting to rechargability becoming the dominant mode. And I think that will continue over the years, but ultimately, I think rechargeable will be the way to go for all of the consumers.

Now getting to the summary of the financials. I don't want to wait over every bullet and some of the things I said already, let me cheese out the critical ones from my point of view, organic growth 4.9%.

Then you see the EBITDA adjusted, the adjustment we are taking here is, it is corrected for the restructuring cost we’ve announced around CHF 11 million, because these are things we do and don’t always know the timing at the beginning of the year to expect us to approach that way go forward. But then we will share what the saving expectations are out of those.

We see a nice EBITDA margin lift adjusted of 70 basis points, which I think particular coming out of the first half year where we are struggling on price, a nice pick up here in the second half. On the hearing instruments, 8.1% organic growth in the second half.

Keep in mind, Marvel comp came in middle of November. So they have a phasing you have to think through.

And then, the other big point for me, if I think about the hearing instruments business is just a good steady execution on the Audiological Care side, 5.2% organic growth. We came out of about a percent in the year before and the 5% were pretty consistent throughout the year and they were driven by many different geographies including the ones where we made adjustments.

So good stable execution here on the Audiological Care after we have consumed the AudioNova integration. Cochlear implants, 6.3% growth in LC.

The one mental correction I make is really taking out the China tenders. We know they come at low margins.

We had a lot of China tenders in the year before and when I think about what’s my real momentum, kind of adjust a little bit for those, if you adjust for China tenders in both years, you’d be sitting at 8.7% growth in LC on the cochlear implant side which I think is a fair measure of our current momentum. Last point here on the cochlear implant side.

Nice pick up from an EBITDA perspective. I will go over more in detail, but we understand that’s a critical point as we are looking at the CI business and we were on a good path to getting into the mid-teens environment over time.

Quick comment on the cash flow side, little shorten than we wanted it to be. Thinking through the strong shipments in the last quarter, particularly on the Marvel.

You could also imagine with the steep curve you are seeing that, it wasn’t easy on the supply side. Electronics are hard to get by in the market right now, electronic components.

So, it was very back-end loaded, and the execution of the demand side, and so, we had unusually high accounts receivables and inventory in the quarter. And then share buyback is continuing on the pace we wanted to go.

Diving deeper into the businesses here, just picking up the incremental information relative to what I said already. High-single-digit volume growth in Europe and Asia Pacific throughout the year.

A clear leveling here unit volume-wise. U.S.

held us back in the first half year, but then a strong pick up commercial segment in the U.S. in the second half.

How do we define the commercial segment for us, that’s the independent and that’s Costco environment so not VA. But VA as you can see, the numbers are published with the Marvel not launched into the year yet and other people having launched significant strong products before we showed up with the Marvel is a headwind for us at least in the numbers, second half year.

Always a lot of discussion about the cost of the rechargability and your margin levels. We have been doing fairly well on that.

The combination of the pricelist we get for rechargability, productivity gains, so driving in all of our manufacturing together allowed us to show good margin improvement for the business. But obviously the rechargability has a cost.

So you need to find ways to make up for that. And then, the last one, talked about it coming into the year, we had a good momentum in Costco in the second half, because we launched in the Costco world, new products with rechargability, and with direct connectivity on the basis of B-Direct end of the first half year.

Audiological Care, as I said, strong momentum in many major markets. High-single to double-digit and the one-time sharing here, particularly important Germany with the 850 stores we have.

Year before was softer, not just because of the AudioNova acquisition, maybe also are in the process of combining all the different change in brands we have. Prior to AudioNova, we had five different brands in Germany.

So, a lot of homework ongoing but despite the – in the last fiscal year, really a nice strong growth in the market share taking on the retail side in Germany. The strategic repositioning, U.S.

and The Netherlands, which we had initiated more than a year ago were concluded by the end of the first half year. But for the full year, we have seen solid same-store growth actually, pretty strong same-store growth above market for those both territories which to me is an important measure to see that while you are adjusting your footprint to it, at the same time able to drive the go-forward stores.

So, overall, very strong year on the Audiological Care side and then on the CI, at least on this chart, I think I said most one incremental information here, high-single-digit growth in U.S. and Europe.

Lower sales from the China tenders, but I think we know that price points are the highest in the developed markets. So, certainly important to win share in those markets.

Going to Page 10. I don’t want to dwell to much most number, as I said, but if you take a look on the gross profit and adjusted, you see a nice lift here of 90 basis points year-over-year.

You can see the EBITDA adjusted here and the adjustments 19.2 in 2017, 2018 came from still AudioNova integration work, 11.5 were dedicated to restructuring efforts this last fiscal year and you can see the EBITDA reported for the 8.4% growth. EPS depending on adjustment or reported between 12% and 14% the operating free cash flow is kind of the low right on the chart with the commentary I made with regard to accounts receivable and inventory at the end of the period.

Return on capital employed increasing by 220 points, about 100 of that are coming from IFRS 15. So going on to 2020, I would argue steadier.

The page, just as a visual on the growth sides, the divestment CHF 44 million that was the hearing care at the insurance plan in the U.S. which we sold to a significant insurer.

But keeping the wholesale business within it and then the chain reductions or the chain streamlining in the U.S. put organic growth at the 4.9 and then about the percent as we normally have on the retail bolt-on side.

A quick look on the spacing on the growth side between first half and second half, and the little bit of the few under the hoot, taking it down into our organic and acquisitions, 2.1 and 5.9 on the highest level, but then, even more pronounced step up on the organic side in the second half to 7%. So at the acquisition side, it was a little lower based on phasing of larger items in the Audiological Care acquisitions.

Looking by geography, that requires a little bit of an explanation here. If you start off with the EMEA side, strong in the first half year, strong in the second half year.

You see nice pick up from the Marvel. This is all businesses and we had double-digit growth in HI and in Audiological Care in EMEA.

And in the U.S., minus 3.7%, but if you correct for the year by the divestments, we are sitting at 2.3%, still not such a good number, but then if you look at the phasing here between first half and second half. And if you slowly have to add the 6% and just an assumption to both half years, you would see, A, we are having a nice step-up here in the U.S.

towards the first half and organically you are getting in the second half into some meaningful order of magnitude if I add the 6% as an assumption it would have been 7.7%, that’s not the exact number, but directionally I think that’s the sales assumption. Americas, good start to the year.

The second half more driven by a year-over-year comp situation with regard to specific tenders. From my eyes, nothing to be worried about from a macroeconomic perspective haven’t seen the market slowdown.

But there are really significant number of larger CI tenders, particularly which we participated in. And then for Asia, while New Zealand is going well in Audiological Care, we still have to do homework on the Australia side in our own network as they are all doing and then China and Japan ahead of the Marvel launch already slow.

Regulation takes longer in those markets. The only comment here, as you can see on the chart, the pick up half year-over-half year is all on the HI side as you would expect from the Marvel.

From an EBITDA perspective, 6.7% operationally, you see the restructuring cost here getting a sound by CHF 11.4 million. No other comments required.

I think, on the half year view for the Group, wanted to point out, if you look at the gross profit step-up and if you look at the EBITDA growth step-up, you can clearly see either volume, but probably more importantly the ASP side coming out of the Marvel launch, which helps us accelerate significantly in the second half, we get out on a better half and stay level from a gross margin performance here. Going deeper into the Hearing Instruments segment.

Talked about the 5.2% organic growth on the Audiological Care side. Two key things.

I think on the one hand, the team has gotten better to learn from each other, deploy best practices and capabilities and how we generate leads, optimizing how we use digital for driving leads, moving some more of the leads to the digital world, because it helps us to have the interested consumer at the right point of time in the right store, which is important to optimize your capacity and then the second one really continued good work on the store execution meaning, how do we train people that they sell well, that they upsell well, that they manage the consumer well. We see 100% point improved conversion rates relative to what it was a year ago.

So really, retail execution would be my argument. Talked about the divestments here and the important one in the EBITDA bucket and Hartwig, I think will go a little bit into the P&L.

We are not just trying to save all away through the EBIT, but we are making choices. So one of the choices we made last year is that, in the selected areas to our feet on the street in sales as well as in marketing capabilities we invest and so you will see that we invested more in OpEx on the sales and marketing than the top-line growth for us, which we believe is a right thing to do, because we see growth runway in our business.

Hearing Instruments, just – so that you see the numbers here, the one I want to voice over, because this is the integrated Audiological Care and Hearing Instruments business side, so the wholesale side is predominantly the EBITDA because I’ll unpeel the onion one level deeper on the top-line, you can see how strong these pricing impacts was to the HI business as a whole coming out of the Marvel lift. So now, on the level of Hearing Instruments business, so the wholesale business products and selling to channel partners.

We step up from 4.5% growth to 8.1% organically and very strong execution of the team but also very strong reception of the products. With regard to ASP versus unit volume, we talk to the place we said, we want to get to and deliver on that when we voice it over after the first half year.

So, think about the price lift versus what we had in the first half year of the low teen environment price improvements for that product category audio and that was what we said we want to achieve and an significant unit lift as you could see on the chart. VA understood competitive pressure.

VA’s every half year allowing people to come to the party and join. So we are lifted with VA and telling in VA the Marvel since two weeks, which obviously should have a positive impact in how we sustain growth momentum.

And then, one comment here on the relationship to the hearing service plan. I know other people take different choices, strategically, we felt it’s the right thing to partner closer with one health insurance.

It’s going very well from the growth momentum in there. We are exceeding the objective we have when we made that change from an acquisition or from an divestment perspective for the unit volume and the revenue we are realizing at the wholesale.

Audiological Care, you can see a pretty steady organic growth. I would say, little bit of a pick-up in the second half, also the comp level was higher in the second half.

So, in minimum, keeping the momentum if not building some. On the acquisition side, a little bit of a different profile, but overall, a good contribution in line with what we want to achieve from a bolt-on perspective.

A slowdown in the French market because of some reimbursement changes and people waiting longer. But that’s a temporary impact, but it’s in the numbers.

So, you can see overall, we put even kind of withstand a little bit of a headwind here in France. Last point I want to make in the progression of how we think about building our differentiated audiological network.

We think in terms of clusters. It’s not that we have this in all places, but ideally, we would like to have – put a number 10 stores or 15 stores were standard stores and then one in the middle which has a higher level of capabilities, because some consumers will need have continue to us, some may move to cochlear implants, some of them have a lower interest on whatever.

And so, we build the first pilots in The Netherlands which we call the World of Hearing will prove deciding where we put the next pilots in various countries, but really getting to a higher level of sophistication on the retail and at the same time, bring it more to an experience with regard to people really being able to see all the different technology, test the technology, get simulation about the technology. Get their partner to get a simulation on the hearing loss.

The partner is important in this sales process. So, I am not saying that’s the perfect solution.

I am just saying, we are piloting different ways of getting more specialization into the store and trying different formats of our retail. With that, I want to move to the cochlear implant side.

Most of it I said. On the system sales, we already got some questions today.

But we had already also in the slide. So we did anticipate them to some degree to talking about the strong 3D MRI and then the systems sales isn’t that strong.

Not to argue that we have a higher number than the 6.3 and the 8.7 which is for us to make strength of out if. We went back and said, how much is in dedicated tender, not high-end products.

And if you correct for that, we end in kind of a meaningful growth runrate for developed markets, high priced, 3D MRI and having done that mass, we are ending with the momentum on the 3D MRI driven high-end markets for the developed markets and the high-teens growth year-over-year in the second half on the systems sales side. The upgrade revenue still very low.

It comes out of a very strong year before as we see in the numbers later, it’s relatively normal – we have to depend on when we get new processors out. But as I said earlier, we’ve launched the Chorus for the oldest electrodes.

We also launched some upgrade to the existing processor newest generation. So we expect some pick up from those new product launches there.

On track with these structural and productivity improvements we talked about last year, continued work, certainly not done. Those improvements take a while to pick easy ones first and then you go to the more difficult ones, but we see clearly the potential to get us over the next two years to the mid-teen EBITDA level for this business which I think is the right commitment in the right direction.

Just the numbers fort eh cochlear implant business, the one point I think to point out, I know it’s low percentages as a margin that we were able to improve the profitability by 65%. There was a provision which we have shared in the first half of the year.

On the Vendor B, we have to take some accruals for a pending patent litigation with the company Naída. Those two balance each other out order of magnitude and I think the EBITDA you are seeing here is a fair number.

It’s not one-timers. Implant Systems, I spoke about 7.7% even with the emerging markets tenders and clearly above that is still mentally correct for those.

With that, I want to ask Hartwig to come up and then I will be back for the guidance.

Thank you Arnd and good day everybody also from my side. I’ll take you through some additional information and try to be – try to not repeat what Arnd already said.

So, Page 27, on the first three categories, Arnd already identified those measures. My chance specifically confirm that we see the Board’s proposal of a dividend of CHF 2.90, up 11.5% in payout ratio 41% as we have always identified in our TSR strategy.

The share buyback is progressing, 930,000 shares acquired at around CHF 160 million and we have a net debt-to-EBITDA ratio of 4.4 at this time. Page 28, you have seen all those numbers.

So allow me to skip that and directly move into our breakout of operating expenses. You see that the total OpEx on an adjusted basis has exceeded 4.7% in local currencies and you’ll know that this is just slightly ahead of the 4.1% revenue increase.

The underlying OpEx increase though is slightly below the 4.1% and as Arnd has said, we are allowing ourselves to invest in certain areas and that is mainly the sales, marketing piece here where we are expanding in the store network. But we are increasingly investing in Greenfield and we are also increasingly investing in wholesale sales capabilities.

You see that the R&D cost have moved up by 3.2% stable in a ratio to sales at 5.4%. It doesn’t mean that we have any different approach to R&D.

R&D can fluctuate a bit year-over-year. But we commit to continue invest into innovation.

On the G&A side, you see a number of 6%. But it’s – to an extent it’s misleading.

There is two elements here that should be noted as a non – let’s say, ongoing runrate matter. One is that we have a patent litigation, a matter that we had to provide for in the year under review and on the other hand side, we are investing in retail IT systems, I should say, Audiological Care, IT systems, that manifest themselves here in the G&A pockets underlying, this would be an increase of 2.6% which is much more healthy ratio to the 4.1% top-line increase.

There is other income and expenses that identify fluctuations in things like capital gains from disposals and the releases in product liability provisions. You can read this here and you see those adjustments that Arnd already broke out in regards to the OpEx part.

So, CHF 2.6 million of the CHF 11.5 million of restructuring costs for the 2018, 2019 fiscal year capital rise and operating expansion. Let me quickly identify the bridge from adjusted EBITDA down to net profit.

Here you see that the year-over-year increase of 70 basis points in margin that we see on the adjusted EBITDA, ultimately carries through to a 130 basis points on the net profit and you see that there is not really big moving items here. We have found a little bit of less acquisition-related amortization giving us 10 basis points and then there is 20 basis points from a year-over-year reduced tax rate.

So, down from 14.9% to 13.1%. The 14.9% is related to the in the years 2017-2018 is related to temporary conditions related to the AudioNova acquisition that we had identified at the time of acquisition.

We are now back to what was a normal level in the years before the AudioNova acquisition. Some of you would have seen that here in Switzerland, we had a public vote on the weekends about the tax reform.

So allow me to say that we are happy with the outcome. The tax reform is now coming through.

It was confirmed on a federal level. There is more, let’s say confirmations to be done on the continent levels.

For us the Canton Zurich is the relevant Canton and even though we should expect in the longer-term a slightly increasing tax rate we are expecting that this will be still in the mid-teens and very attractive tax environment altogether. Moving on to Page 31, a bit more color on the operating free cash flow.

Arnd has already identified that the year-end pattern of high – in particular wholesales revenues have increased net working capital. But you see a couple of other items here, as well that was fluctuations in when income taxes were paid.

So that is CHF 17 million or CHF 18 million as a contributor to the cash flow structure. And there was also higher CapEx than the year before of CHF 22 million, which is impart related to brick and mortar that is built here in Switzerland in regards to an additional, let’s say, actually replacement of a head office building in our satellite in Murten.

But on the other hand side, we are also continuing an investment in the Audiological Care business and refurbishing or adding Greenfield towards there. Some additional metrics on the balance sheet.

So, DSO has gone up in the frame of what was has been just discussed before. DIO is actually be not really trending up by the DIO metric, but underlying in total value it has.

Capital employed is impacted to a certain degree by IFRS 15, but not a big change anyway and Arnd has talked about the ROCE increasing 120 basis points underlying and 100 basis points by IFRS 15 and effects. Net debt up by CHF 25 million and net debt-to-EBITDA within rounding or stable.

I want to reconfirm that the share buyback with the one-time leverage is absolutely on rails. We have delegated this program and not just delegated the program for just a month or a quarter, but for a longer array of time.

And so, the edge in the street to choose when they buy, but it is in a narrow corridor and we will see it’s progressing as the months ago. With that, I give back to you Arnd for the outlook.

Thank you, Hartwig. I voiced toward the numbers already.

Let me give you some rational here on the outlook. First, let me start on the right-hand side.

We hold to our mid-term target of the 5% growth including 1% on the net M&A, which would be representing a constant increase of our market share and with it 7% to 11% EBITDA growth in LC which represents 60 basis points operating margin improvement every year. Looking at the current sales momentum and the strength we have on the particular innovation side from Marvel and from the 3D MRI.

We think, 6% to 8% is a good guidance for this year. And something we have planned with and driving for taking the guidance up by a percent and then from the EBITDA side, increasing the guidance to 9% to 13%.

If you think through how the last fiscal year played out, I think it’s fair to assume that the first half year is easier from the comp side. Second half will be more difficult, because Marvel and 3D MRI will annualize.

And so, that don’t gives a specific number, but just making a fair logic here. With that, I would like to go to Q&A.

There is more material in the deck as always being more scheduled. But I want to open it up for Q&A.

We want to start in the room first with Thomas, as the traffic cop to see what’s coming in from the phone call and then we will try and address to.

Good morning. Good afternoon.

[Indiscernible]

Thomas is a traffic cop.

Okay. Thanks.

And then I’d like to sorry if it is an answered question, in your restructuring announcement you have basic restructuring cost and you also pay the annualized cost savings should be some $7 million. Can you tell us whether you’ve already seen something in this current years when we know how to draw the model?

And then, two please, if I may for the cochlear implant system, you told us it’s in high-teen system sales for the new model. That’s great.

But could you give us a bit of a feeling how much can you develop high priced market accounts for your overall CI sales? And then, the B question would be related to the marginal development of the cochlear implant business.

Is there anything you can give us of the health of – thinking bridge, how should we think about the margin progression in cochlear implant over the next two years to get to the mid teens? Is it going to be a small step-up now?

And then you have the hockey stick or is it more fairly, okay, you are nodding, so fairly split. Okay.

Understood. Now I am blinking on the first question.

The restructuring cost. So, these are longer projects where you announce and then you need to negotiate with the works counsel at least in Germany and UK you go through a certain process.

So, we expect the impact to start kicking in, in the second half of the year. So I think, depending on how those negotiations go refers to half of the impact is what we expect to realize in the second half year and then that remainder and in the following year.

I think on the cochlear side, the most simple one first, on the how the margin progression – not an exact number, because we don’t give guidance on individual lines, but in principal it should be fairly equally distributed, because, A, it’s many different initiatives and projects and you would expect that some of them are implemented and kicking in already. And we know those.

Secondary, I wouldn’t like us to take the risk of having a hockey stick. And that’s another good way of doing it.

And on the growth side, the share on systems between developed and developing Hartwig, do you have a order of magnitude?

Yes, I would say, revenue was about three quarters the balance.

Thanks. Just on the VA, I know, it’s very early, two weeks only since the May closing, but overall I hope and since we have wider – those few inclusions.

Can you already give some – I am sure you have an year in the streets how the optical profits is difficult to judge. But I am sure you have something take hold after two weeks.

How you compete and how you regain market share in the VA?

So, it’s two weeks, therefore you have some strong start and it’s hard to get an exact number. But in general, the VA audiologists who like the product lot, and so directionally, I think I would expect something in a similar good response to it compared to competitive products as you see in the commercial market.

So, good feedback from the…

Good feedback from – as we trained them and what we are seeing in the initial pick up.

And second question regarding Marvel Below now with the other form factors. Can you add – I mean, I know that probably you don’t …

So we launched in the spring, I think in February two form factors which we didn’t have. You may remember we have five – the two first ones we launched in November.

They make up I think 60 plus percent of the revenue. We are now at around 90% of the revenue impacted in February.

And then I have one form factor missing which is still to come which is the most complex from a realization perspective.

Thanks. It’s Chris Gretler, Crédit Suisse.

I have two questions. First related to the buyback.

I don’t really understand who is taking actually the risk kind of the share price goes up, is it you or the bank, because as I look at the kind of the speed of your share buyback relative to the original assumption kind of is it just demonstrated without you are substantially behind. So who is taking on that risk?

No, it’s in the overall three year perspective, we have seen the first sort of ten months, right? So, it’s not that we have kind of not even at the midpoint.

Generally, it is us taking the risk. And so, it’s not that we have turnkey delegation.

But at the same time, there is a so-called de-lapse mechanism behind that and so we get the certain guarantee, let’s say margin that is accretive not through the P&L over the average daily stock prices for the time.

Is there anything to read through that to know the speed of the buyback is relatively slow? I mean, your leverage is about the same as it was a year ago?

No, there is not, there is not. This is kind of the agents – the bank that is known and I believe even represented in this room is that, identifies what’s committed and the pathways.

They have a certain channels to fulfill. But there is a corridor, right?

So they can’t easily just stay at 50%. They need to move.

Okay. And the second question relates to the CI business.

If you look at the mix of that now you have, you know the last – relative to the previous year, it was, I guess, now substantially better. Are you happy with the kind of the margin pick up you got to know in the last year?

Where we want it to be, that’s explicit with the CHF 2.90 million, if you correct in the two years for one-timers which we have certain provisions we are actually at 390 is like-for-like. So it’s about 100 basis points better.

I think we continue to invest o the sales and marketing side. So we feel we are in the right corridor.

We need another two times for 100 to deliver.

And then, I’ll touch quickly to confirm the Naída litigation, probably that was taken in the second half?

Yes, second half and it is in the CI number, just it’s an one-time.

Excellent. Thank you.

I suggest we move to some questions from the line. Just one more.

I am Fabien [Indiscernible] Could you give us some light in terms of cash flow? You had quite some impact of the net working cash flow and capital.

What are you expecting as to develop it this year?

So, there is certainly a rebound of the - let’s say the accumulation that we have seen on accounts receivables at the end of the last year. So it would kind of have to normalize this out in three years.

And the other one which should normalize out is not making a prediction, but the tax with the CHF 17 million, that’s really a phasing issue on when the tax comes through?

Okay. And as a follow-up, on the investments, could you also give some light what you are expecting this and maybe next year?

So, capital expenditure, we expect in the range of 3% to 4%. That hasn’t really changed.

It can be that where we have for instance, the finalization of the building in Murten that I mentioned is yet not finalized. So depending how this progresses it can be like, a CHF 5 million, CHF 10 million fluctuation let’s say.

Thank you very much.

Operator, can we get a question from the line?

Thank you very much for taking my question. And the first one is on Slide 7 where you show the unit volume for Phonak.

It’s quite interesting to see that Audeo platform hold up relatively well after the first half. Can you say a bit more why this is the case because it seems that the previous platform is indicating what was faster in this case?

And the second one, I am interested a bit more about how you see demand move with Oticon as soon as they are announcing. They have announced a deeper collaboration with Philips, now first that they introduced it basically on used branded products for this brand and how do you expect this to impact the market as I would say the first product after Siemens which has a real strong consumer brand that is very well known in the market.

So those are two of my questions. Thank you very much.

Sorry for re-asking. We were not loud enough with the speaker.

Can you re-ask the first question on Page 7?

Yes, exactly. I mean, on Page 7 what is interesting to see is that Belong is keeping up quite well in unit terms after a first drop and that seems to be different compared to the previous platforms and where the drop was more pronounced.

Can you share a bit more light why that is holding up relatively well as it was older product already?

Yes, I think on the Belong, two factors here, the one, keep in mind, we launched B-Direct, which was unusual to us to bring out a new chipset half way through the product lifecycle and we probably have hopefully more lift. But in general, we had the first connectivity solution with customers for, which you would see middle of 2017, 2018 kicking in.

I think the other one, as we said in the first half year, we used technically priced in the end of the product cycle stabilize on the unit volume side. With regard to - I think you asked for Oticon S, and then the Philips brand.

I think the jury is out on the Oticon S. Certainly, some product available.

I think we feel good about where we stand from our product and the pick up as you can see from the chart we are sharing here. We are not seeing yet any kind of negative impacts on this curve.

So we are carefully observing. I think it’s fair to say, Oticon is a good company and we have respect for them.

So, I think we are observing and we are strengthening we do. On the Philips brand, too early to tell.

I would just make a comment on the Siemens brand. I think the Siemens brand was helpful to Siemens, particularly in the Asia Pacific emerging market growth.

I think if we go to our audiologists which are the gatekeeper to the consumer, keep in mind, consumers today still trust their audiologists and I think they will in the future. For the audiologists it’s very important to have a trusted brand which is long time in hearing.

And then the other thing there really looking under the hoot from a technological perspective. So, I wouldn’t see a significant change to that behavior in the developed markets.

I think developing – we have to see – I think the biggest impact for Siemens was in China and please accept Siemens in China is a place for itself given all the infrastructure they have and how early they went to China with many things. So, I don’t think Philips has the same kind of one place where Siemens was benefiting strongly.

But early interesting move. Something to observe how this plays out.

Thank you very much. Very helpful.

Patrick. Thank you very much.

I have two questions if I can please. And the first one be, it looks like given those all from the others and correct me if you feel otherwise that the market in terms of volumes has over accelerated from these product launches, and it seems like there is probably been a little bit less cannibalization than I think at least probably we expected.

I guess, my question is, do you think that the new products have brought in real new consumers a pull-forward demand, i.e. are we going to get a dip a little bit later after this product cycle as consumers as we pull-forward demand or is this a genuine expansion in terms of a market penetration?

So that would be the first question. The second question is on the tax side.

Thanks for the comments that sort of a mid-teens number makes sense. It'd be helpful just we were less well informed.

How long should we expect that phasing to a new tax rate to take to come through? That would be helpful.

Thank you.

Thank you, Patrick. On the first question, it will be better to answer.

The first one was whether – the good growth rate that our industry shows, this was new consumers or legacy.

So, I think we see a gradual improvement of early adoption. As an industry, we do track consumer behavior and we question every of the developed markets every three years and we see a nice gradual improvement.

We haven’t seen the spike in some shape or form as people get a little younger when they adopt hearing aid. I think the place where we have seen more of a unit volume lift up was U.S.

for the last two years. I would put that mentally towards more reimbursement being available through private insurances.

There is quite a run between the insurances to add a hearing plan to their offering. They normally have dental and they have an optical plan and hearing wasn’t on the menu and we know from the partners we work with that they are really aggressively moving more and more people under coverage there.

So, I think that’s kind of a not a step function for the whole world, but clearly for me expanding some of the U.S. penetration.

But the rest is just steady improvement of product and they kept us of the products.

On the tax sizing, so my comment with regards to – I’d say broad expectations of future tax environment, that would be – it could be next calendar year, it could be also just the year after it depends on how the new tax law is being introduced. This fiscal year of Sonova which has nine months under the old tax regime that will expire December 31 to our expectation and three months under the new one.

We would rather expect more of the tax rate level that you have seen last year, plus a little bit of a three months impact. With the let’s say – we could say advanced warning, sometimes when those taxation changes takes place, you have certain accounting, let’s say distortions.

So, as we don’t know yet, fully how the transition will be managed by the regulators that is yet a bit more difficult for us to foresee.

Helpful color. Thank you very much.

Yes. Thank you.

Thanks for taking my question. The first question will be on the retail.

What will be the CapEx budget that will be allocated to the network in the next years be? And second question was just a clarification regarding the headwind from the French reform.

If you could quantify the impact that you experienced. Thank you.

So, retail CapEx, you should see us broadly in the same bracket as Amplifon and you can see the numbers there. So, like a 4% to 5% CapEx over sales ratio is what you should generally expect there.

On the tax reform, I am not sure if I acoustically understood you well.

It was the tax reform on what the French reimbursement on retail?

Okay. You want to take that?

Yes, I can take that. So, what we’ve seen is with the changes in the model and the consumer having to think about what they go do and what they get.

But we’ve seen about a one to two quarter shift in some demand. On a global level, I think it’s worthwhile to note it.

It didn’t had a material impact into our growth rate. So, I wouldn’t read too much into it and we don’t see this as ongoing.

We’ve already seen some recovery against that. So, rather interesting for the French market, but not that relevant on a global basis.

Thank you very much. And just one if I may, because I missed it.

You speak about the current tax rate that we should consider looking forward and I missed the number. Thank you.

Sorry, it was again, yes. I was – when I was saying, sorry for that – when I was saying, mid-teens, I was talking about the mid-term tax rate.

Yes.

Okay. Thank you very much.

Yes, good afternoon gentlemen and thank you for taking my questions. I have two please.

My first one is, what is your expectation for your VA market share, now that Marvel is in there? I think, prior to R&D joining the business, I think the company had had an ambition to get back to 50% market share.

I wonder if you kind of look at your business now, what do you think is realistic on a six or twelve month basis? That would be helpful for us too, so that we can track how you are outperforming against those expectations.

And then my second question is on retail. Just curious to understand whether you think that the current runrate of growth in this 5% or so is sustainable as you look forward.

Anything you can provide on what is driving that? Because it is noticeably better than some of your peers and how sustainable you think that is?

That would be helpful. Thanks

Veronika, thank you. With regard to the A side, I am – we are not sitting here planning with a 50% to start off with that.

I think things have changed with regard to also having more competitors on the rechargability side. If you go back one and a half years ago, we were the only kid in town.

But I would say, the majority of what we lost in market share against the runrate a year, one and a half years ago should be our target here because of the strength of Marvel. And so, I don’t want to give an exact number, but that should help you directionally.

On the retail side, honestly from going through the improvements we are doing and how they are going step-by-step, there is no reason for us to believe that we can’t continue such a growth rate. There may be things which change in market.

There may be particularly aggressive competitors with moves we don’t know. But right now, if you unpick the 5%, you are probably in a 80% of that coming out of better lead generation and store execution.

The other percent comes out of some Greenfield directionally which we are driving and are controlling. So, it’s well earned.

No single item which is one-timer in there. We will continue to get better on the lead generation side.

There are initiatives to do that. Sales execution is possible.

We have enough capacity in most of the stores at we can sell incremental units. So, the lead generation is the most important part I think.

But no concern there that this was a one-timer.

That’s great. And Arnd, can you comment on how the U.S.

performed within retail since there have been a drag?

So, in the U.S. it had 300 stores went down 100.

We are measuring the revenue year-over-year and the remain 200 that’s strongly in the double-digit growth rate same-store through drivers, I think we’ve gotten better to keep the people in the store focused on the things they do. Because in the years before, we made so many changes coming from the headquarter new initiatives that’s really Hart was just one person in this work.

So we really paid more attention to them getting productive and happy in what they do and that pays off. We also have improved our voluntary attrition significantly which also helped.

I think the second one is, particularly in the U.S. market lead generation, we have driven up the digital leads we are generating at a meaningful price point and that helps the funnel more consumers to the stores.

That’s great. Thank you.

Thank you and good afternoon. I have two questions please.

Firstly, when it comes to the warranty provision, if I look to your provision as a percentage of sales, it’s full noticeably and in my calculation, it probably boosted earnings for the current fiscal year by around CHF 20 million. Is that correct?

And why would you go from 4.7% down to 4% when it comes to warranties in general? Secondly, a question on the U.S.

region, or if you like the Americas, can you comment on what your growth outlook is, the organic growth outlook is for fiscal year 2020 or your next fiscal year? Because if I look at the last five years, the region is pretty much averaged 1% organic, and it feels a little bit like a broken region to me.

So some sort of commentary around that long-term trend why would that now be broken? Why should we improve from here?

Thank you.

So Michael, the underlying warranty provision principles haven’t changed. I have to get back to you what could happen is that, in the course of IFRS 15 implementation, that there is recategorizations.

But I want to confirm that this was not any – no driver on the earnings progression. I am happy to follow-up by email to give more specifics.

Michael on– on the U.S., I think you asked U.S., not having the benefit of all of the years on the back here. I would think the two biggest swing project three, because swing factors we had was on the one hand movements on the Costco side, depending on what we launched and when in Costco.

I think the second one was when arrived at the planning business and the independents and the third one is the VA we have discussed, right? I think VA talked about Marvel having an impact.

I think there is more operational things we are currently doing to improve how we serve the VA is that for different time. If you look at the independents, you have heard us say during the Capital Markets Day, we are putting more attention on how do we get intelligent loyalty programs in place, which we know other people are better than we are.

But clearly have built capability and capacity and we are driving up partners in our U.S. loyalty program which for certain services be delivered to them that commit to higher volumes and that is going well.

One point of reference, in the independents, we actually last year started to grow based on those process changes prior to Marvel, we don’t see that because of all of the pluses and minuses. But there is really some work going on, on how we are serving them better and how we improve also the sales execution side there.

On the Costco side, again, there is many factors in there. We had launched a new versions in my eyes last year little too late.

The rechargeable came about 18 months after we launched commercially. I think that’s leading to quite some swings in the Costco environment and we just need to take those making sure we have the right distance but not too much at any point of time.

Now, having said all that, I think all of those are good work and hard to measure having new products though with each year from the analysts side. But we spend a lot of time on refining the strategy and at the same time making sure we are really improving the sales execution on the ground.

So, Arnd, if I may please follow-up on that is, so, is the USA then more of a mid-single-digit grower for the new fiscal year? Is that a reasonable target for you?

I think the U.S. should contribute a fair share to the growth we’ve put out from a guidance perspective which it’s too big and not helping us to lift the shift.

Okay. It’s only if I look about five years, it didn’t make much contribution at all.

So I am trying to work out with the 2020, is that an inflection year where the U.S. finally picks up to a – let’s call it mid-single-digit number.

I understand and I – that’s our intention and that’s where the focus of lots of energy from many of us including the senior management goes. So, we will make sure we put out after the first half year and the second half year.

Okay. Thank you.

Thanks very much. I have three questions.

So, the first question is on the cochlear implant business. Your competitor Cochlear also came out with a three key compatible implant.

Just wondering whether your experts have had a chance to looking to that product? And how competitive is that versus your product and how sustainable do you think the advantage that you have with the HiRes 3D will be?

And then, the second question is, on the cost of litigation that you have with Naída, how much cost have you provided for that in your guidance for the coming year? And then, the third question is, you commented on Greenfield development for your IC business.

Just wondering what your plans for the China market which is growing very quickly in retail? You don’t have that there is much scratch or damage associated with that market.

So, some commentary there would be great. And then lastly, Hartwig, what would be the – at current rates, what would be the impact of FX on revenue in the market?

Thank you.

So, on the first one on the CI from Cochlear, obviously interesting their move probably also interesting to see an announcement in a relatively slow rollout in my book. You may wonder what has triggered that.

We have not had a product in hand yet. It’s not certainly in U.S.

and the selected places where they are working with it. Let me first make a comment on how our 3D MRI is different than the Naída and then we can speculate which route Cochlear is able to go.

But we have made a different approach to the MRI which allows the magnet to always orient with the magnet direction of the MRI or the MRT – MRI, which is not the case for Naída. So we are in a better place from the technical realization of the alignment of the field, which also leads to – we don’t need to worry anything around the headwind people do their MRI, because these system corrects itself to a level that no pain now.

I don’t know exactly if Cochlear have gone the whole way or not. So that will be interesting to see but we have not seen any drawings of product anywhere in this point of time.

I think from the litigation cost.

Yes, maybe I can take that, what we are able to say is that overall, the past year includes a charge of around CHF 4 million allow us to not be specific of what of that is provisioned for future and what of that is already consumed, because we are in an ongoing dispute here. But the number is intended to cover the future risk that we have in that dispute.

Maybe quickly also going on to the foreign exchange question. The year-over-year is, from today’s spot rates not as significant to be – we don’t expect a significant FX impact for the new year.

But at today’s rate, as the euro is a little bit softer against the Franc than what we had seen on average for the last year, there is a mild negative effects from there.

So, on the China retail, certainly a big market with its own set of challenges. If you think about entering an M&A, two of them you always have to be mindful on compliance in a retail environment, particularly the operating in markets which maybe higher on the compliance score.

The second one, I think it’s still with regard to the dynamic in the marketplace of 100% clear which model will win, particular if you factor in that in China many of the customers look for kind of more of a mixed model with more online lead generation and then some execution in the store. I think there is a traditional market which we are serving well on the wholesale side.

And then couple of questions you can ask about how did you get more consumers into the system there. Both of them keep us certainly alert.

I think increasingly understand the Chinese market well. We are spending enough time there, but at this point of time nothing to give clear and just to announce first.

I think those are three questions which we came for. I guess…

Thank you.

Hi, thanks a lot for taking my questions. The first one is on the rechargeable penetration rate.

So you described already an attractive pick up in the usage to write-off above 50% and potential EBITDA is higher when you had initially thought as you presented your first rechargeable device. Could you give us your view – are you ideal until which level you believe the market can reasonably grow?

My second question is on your German retail business. You clearly described on the improving organic momentum.

First, would you describe the bottleneck of the audiologists service and gears has solved and secondly, has the German network already sized where you already wanted to have or do you see some further acquisition opportunities?

So, on the rechargability, I think factually there is not a good argument why you wouldn’t say the market moves completely the rechargability. Think a number above 90%.

The question what’s the curve. I think the cost for the rechargability, even if you pay up from the little bit more, it’s lower than the cost of the battery and then you get incremental benefits in two forms.

A, you don’t need to fill around with the battery which for many people with difficulties of moving the hands is very important. That’s one of the challenges they have.

The second one, the way we have implemented is you don’t – you can’t’ open the hearing aid anymore which could be incremental reliability. So, I think all of those would indicate that there was a move there.

I think it’s an S curve and we moved from 30% to exceeding 50%. I think, eventually we are going to arrive in the 90% that would be my best read on it.

With regard to the Germany side, the first question was on the bottleneck on the audiologist, two answers there. The one, we were not good in the prior years on making sure we have enough people, but we have all positions filled in this work.

There was more of an internal exercise to improve the voluntary attrition of people but also getting more up front in the way we recruit and potentially over recruit in certain regions so that we have enough capacity somewhat - we've done that, which is part of the lift you are seeing. We are now in the process of rolling out our own academy for audiologists in the U.S.

as some other players have because it's always tight in the German market. We collaborate with a school which is there from the industry association.

It also helps us getting "some more piece" with our wholesale customers because the more we build our sales, the less may recruit from some of our customers now. So, I think we are working on that bottleneck.

It is not holding us back right now from a sales execution, because if I look at the vacancies in the stores, we are at a level which is clearly significantly lower than before.

Network quantity.

Yes, on the network quantity, if you go into the regional mapping in Germany, you would find certain areas where there is potential for our retail. Now there is areas where we clearly have a density which is at highs we want to go and then there are other areas where we don’t.

And so the team continues to do smaller bolt-ons and obviously, with a very focused effort to understand how much potential there is the catchment area, and because it’s a good place where we have some of our stores, but we are doing smaller steps in Germany.

Okay. Thank you very much.

Operator, if there are no more questions by phone, we will see if there are further questions here in the room.

Yes, thanks two questions. One again, a bit of financial question.

You’ve been - when we witnessed you in meeting you were always talking about a couple of ASP impact about Marvel. You were talking about mid-teens, now you’ve been talking about low-teens.

In the meetings you've been referring to 25% share of the portfolio whereas now you said already 60% of the portfolio basically was launched in November. So I am just trying to understand how we put those lines together?

And then the second question refers to your online strategy in retail. I think you have integrated in March and there are more and more online stores popping up in Germany are you focusing on the dedicated online platform for your retail network?

So, sorry, if I am using a slightly different terms. I meant to say, if I said, low-teens, we used mid-teens.

We achieved the price realization we wanted as we said in the first half year. It’s was in the mid-teens to lower end.

So lower end of the mid-teens. That’s – sorry for it.

We don’t want to confuse you. We have not seen prices being lower than we want it to be.

That’s t he most relevant answer. I think from the share of the portfolio when we came out in the – with the Marvel, we first addressed two form factors, but in between we launched the next two.

Therefore, the percentage is about the same. And we moved up to off the Marvel if that was the question 90% of what people are looking for in form factors is now available in the Marvel which before that was more 65% when we came out in November.

So two new product launches.

At least within our deal, right the rate. We exercised - we fully exercised the rich form factor in all of its facets.

Sorry with you. Let's be careful.

So if I think about the Marvel getting to all form factors we have in – five main form factors. And the first launch was two form factors were available middle of November.

They make up 60% to 65% of the potential. We then launched in February two more form factors which we needed more work on, which make up, up to the 90% mark and there is one more launch to come.

You could imagine that may happen later in this year which is 10% of the potential which is not current and it’s the version. So that’s how we go to the percentage.

But no change relative to what we said at the end of first half of year. The incremental information we launched two more factors since early March.

On the, you call it, online. I would not call Blamey Saunders online in any shape or form.

Blamey Saunders is a business which we knew for quite a while. It’s in Australia couple of about a percent of the Australian market and what the team has done there is developed a model in which they have traditional retail customers come to this store.

Everything pre-sales and post-sales gets done traditional. They have a model in which some of the customers come in the store through 50% of the interaction and 50% they call in.

And then they have a model where people buy a hearing aid in a combination of online relationship, phone relationship, and then fitting of the hearing aids and sending it out to the consumers. That’s the far smallest part of the business.

The biggest percentage is what I would call and you hear me talk about omni-channel, that’s a world in which you see your hearing care professional for the most important meetings other ones you do over the phone with remote fitting and capability being as small as we developed. They have developed their own hearing aid which has these capabilities and so, I think about Blamey Saunders first as an attractive retailer one percent market channel in Australia.

But growing and with a good pathway to good profitability. And then a world in which we particularly run about the omni-channel, because that was – it’ a tricky one.

We think about a 3500 store network which are running very tight and very much on a traditional sales model on whether we find opportunities to learn, what all the consumer want to have from a fitting perspective online, what interaction to they want to have through call center, what interaction do they have in person. So, they are predominantly an omni-channel model.

The second largest bit is people come completely to the store. They sell at normal prices in the marketplace.

They sell at comparable prices in all of the three different business models. And clearly good prices and so for us, it is a good addition to the Audiological Care.

It gets us some market share with some profitability LCM in Australia. But at the same time we have a place where we learn particularly omni-channel side which we believe we will move to at least to a subset of the consumers in all of our regions.

And when you are looking at the learning curve, I believe they also have a self-fitting hearing device that is launched last year with a very modern rechargability functionality whereby you have to do?

No, it is still that’s the product you are talking about is called the – it still has an interaction on the fitting side with regard to the interaction with the hearing care professional in the store. Now there is a relationship between the product and the store and there is a conversation and interaction between the store and the product.

The other one product is in the store optimized before they send it out. So, I don’t see that as self-fitting in any shape or form.

First is done by the hearing care professional and then there is a remote fitting connection in which they further optimize the device. So for me it’s an omni-channel.

We are not seeing this – we had this discussion when we discussed OTC. We are not seeing non-U.S.

and BOC, non in Australia or other places this enormous demand for few online. We just don’t see it.

In the unit volumes, we don’t see it in our VOC. But what you will see is many consumers who say, look, some of the interaction we want to handle differently.

And more they are looking for any place, any time interaction, I think you saw our homework to figure out how we do that. But we do believe that the hearing care professional plays an important role in the selection of the right technology, the coaching of the consumer as well as the fitting of the device, but, I think the model will change over time to a more any time any place interaction with a hearing care professional.

Thank you. As a follow-up question, now first on the DTC, actually could you elaborate on your investments and also the returns you are seeing on these investments and know how you basically I am sure that you also kind of benefits directly from the investments and is it only in your strategy markets where you also have old retail channel, such as Germany?

And the second question is just on restructuring and are there any more measures now we should expect in order to come up?

On the DTC side, I think DTC is normal for the retailer, right? Because we need to generate the leads.

If you break down where the leads come from, some of it may come from an ENT. Some of it we have an outreach in the real traditional world since you go to a senior home and educate people, some of it is foot traffic coming to the store.

But we do see a share the 10% to 15% depending on the market which comes out of the digital component. We historically have in certain markets used TV as do other of our competitors use TV, that’s a good way, where you have big store network, so you really benefit from the demand coming.

So we always have that DTC side. It’s the normal in the Audiological Cares side.

On the wholesale it’s difficult to economically make that sliding was ultimately, that’s the task of the independent, right and they are not a good business model in that. What we're doing is we're working with different elements there on the online side with certain U.S.

that had a significant contribution to the lead generation. The ultimate growth of our U.S.

network. In Germany, we went down a different path, partially because of the need to position us well in the eyes of the consumer ask that we had acquired gears which had a certain lower price positioning in the market over the years.

And so they have – we put our money together. We didn’t increase the spend in marketing, but we put our market – our money together in a dedicated TV campaign which is currently ongoing which has two objectives driving leads and at the same increase the brand awareness and the perceived brand quality of care.

And for the ones who German speaking, we have signed up with Mr [Indiscernible] which I think is a good person for that kind of target audience. And the second question was on the restructuring.

I think we said, mid of last year that there are – based on all of the acquisitions we’ve done, there are places in the organization in which we can find ways to streamline the way you operate first to get agile, get faster towards the customer but ultimately, also get to more efficiency in the system and so there is more opportunity which we will uncover and work through t he next two to three years. We will not – with any of the projects set the place where exactly this is the timing.

We are currently working with the ones we have shared with you and they are going well from what we have laid out as the plan. We are teaming up other ones.

And so, I would ask you to wait until we come forward with some more information on them.

Thank you.

Just a small one, you mentioned in the press release, Canada, which has price pressure, I guess, you are talking about wholesale and was that because of another competitor or what happens there?

So, in Canada, big part of the business gets distributed through tenders of a certain Canadian region or states. And so, they move on long time cycles.

I am not sure for the specific one was five years or longer and so this one was up after we held it for a long period of time. And so, we had to participate in that tender we didn’t want to deal with the business.

So we wanted – but we have a price headwind out of it relative to a couple of years steady pricing in that particular to land it, because it is state-wide and it covers a lot of the patient and the lives under management. We can have a meaningful impact with our country results.

Canadian business relative to the U.S. business is a proportion-wise, ballpark, like the population or I guess, it’s stronger.

We are a bit overindexed in Canada because we have this is the original volume that comes in. The other one we have a quite nicely built out Audiological Care business in Canada or also some of our bolt-ons are happening, because it’s funding well for us on both sides pretty strong in Canada.

It looks like no more questions in the room, none on the phone, then thanks for your attention. Thanks for the questions.

Thanks for coming and let’s speak soon.