Sonova Holding AG

Shire, thank you very much. Good day, good afternoon to everyone on the call.

Thanks for your interest and taking the time. As you’ve seen, we published our fiscal year results 2019-‘20 this morning, including some commentary about the current trading in the COVID-19 times.

I have with me Thomas Bernhardsgrutter, our Head of IR; and Hartwig Grevener, our CFO. And as usual, Hartwig and I will split the presentation; we’re trying to get through in probably 45 minutes to have ample time for the Q&A here.

Looking at Page 2, the standard disclaimer, everybody, I trust this well aware about it. If we go to Page 3, I think, I just want to kind of take a step back and reflect a little bit of where we’re standing, because it’s a somewhat unusual fiscal year report out.

I think if we were two and a half months ago, we would be sitting here and hoping that we finish all the year with the momentum we had and would feel good about it and just talk about all the positives and we would probably go on some slides a little deeper. But I think we had a good finish relative to the circumstances, but we’re obviously in a somewhat different time at this point of time.

So we want to reflect that, and you can see this year from the bullet points in covering first report out on last year. I think that’s important.

A, because we have lots of discussions around that want to make sure you see how we delivered on the things we shared with you, as we were going through the year. Also want to make sure that you see the strategy we’ve put in place in action, and also have a fair chance to say, how Sonova doing at the core before COVID, because I think that’s important to keep in mind on what’s your momentum and how do you keep your momentum even if you, in between have a pandemic as we have at this point of time, because we strongly believe that if you’re in a strong position coming into it and you sustain that position, it should fit well with you when you’re getting out of the pandemic.

Obviously, lots of things to be done and decided as you go through the in between phase here. So from our point of view, delivered well above expectations, at least the ones we put out when we entered the year, nice market share gains across the business minus on the AB side post the voluntary field corrective action.

Momentum coming on one side from innovation, but we also see clear signs that our focus on commercial execution as well as expanding sales coverage at the right places is paying off and adding incrementally to the top line. Good margin expansion, not just because of the strong top line growth, but structural improvements, starting to chip in and good G&A cost management.

And then, if you look at the March depending on the geo, obviously China was earlier than others, already some impact in the numbers and we’re trying to kind of peel the onion here as we go through the presentation. And then in the new world from a COVID perspective, recognizing this somewhere in the second half of March and putting a robust plan in place, taking decisions on where they were required from a safety protecting the core finances, OpEx as well as top line side.

Now sitting at a point where I think it’s not an absolute surprise, we have not put out a quantitative guidance for the year. I think lots of discussions around it, but at the end of today, quite difficult territory to navigate and be clear on what the next 12 months are.

So we will guide through on where we stand and where our head is and take any question. We’ve shortened the slide deck a little bit, so some of our normal pages on the appendix, we do not intend to go through them, but I know that based on the way you built your models, some of the information is helpful rather than you’re trying to figure it out on a spreadsheet.

So please refer to those pages. Now jumping to kind of the highlight at a high level report out or report card here.

All in, including the field corrective action and the COVID we had an 8.7% growth in LC for the full year and from an EBITA adjusted and you see what we’re adjusting for, being the restructuring and which we have announced as we’re going through the year, and the AB of one-time cost, we ended at 10.4% EBITA growth in LC. The EPS at 11.6%, couple of ins and outs which Hartwig will go deeper on.

And then, because we had discussions around guidance and changes to guidance in February, that was important for us to try and to portray here what our performance was February year-to-date. So ahead of any significant impact of COVID, and we were committed double-digit from a growth perspective and we were on a pathway to more than 150 basis points in LC.

And that point is particularly important for Hartwig and me, because we understand first half year there were some question marks in the room, just want to make sure that what we said at that point of time with regard to being able to generate leverage does exist as a capability in us. Last point here and this is, as of April, we have, given COVID, taken one of the actions was how do we get a very strong liquidity position?

We stopped the share buyback. You’ve seen we’re proposing a dividend in shares, which we have available to us rather than the cash dividend.

But in addition, we had a good cash performance in the company added the bond three weeks ago with CHF 330 million and have extended credit lines so that were at this point of time, from excess to liquidity above CHF 1 billion mark which we find the right action at this point of time given the uncertainty we have ahead of us, just to be on the safe side. From a summary perspective, I want to just focus on the things I haven’t mentioned yet.

I think important to note and sorry, we have more than one adjustment, though is a page in here I think Page 10 which unpeels the onion; there is one which we have not rolled into adjustments. I want to be very explicit about it and that’s the third bullet point, because of COVID we have assessed our accounts receivables, particularly on the wholesale side, and we took an, I think prudent approach to build a bigger allowance for bad debt than we normally have.

So that’s not in the adjusted number. This is in the number as we reported it under reported and adjusted, but there is CHF 20 million which we have put into allowance for bad debt.

So, in that regard, you would see an EBITA margin expansion of 90 basis points, if you would say that is really COVID related rather than the operational performance. You see the growth rates here Hearing Instruments, the highlight for us in this year, relative to the others.

Other ones were good too, but 11.8% in LC, despite the March getting weaker be in the continued progress on the Marvel platform, but also the steps we took on channels and commercial execution are the Audiological Care, 6.5% a little lower than it was in the half year to mentally would correct for what we did see in the March from the COVID here in the same range and in both half years we would have grown share. And then Cochlear Implants, unfortunately, hit by two effects here, the field corrective action and on the other hand, the COVID which in CI at this point of time is actually more severe than on the HI, because so many hospitals out of doing elective surgeries, quite a dramatic reduction of the growth relative to the half year point and just 3.4%, a good momentum on the system sales and I’ll comment on it what it was prior to the field corrective action.

Last point, I want to make here on EPS and cash flow. Again, Hartwig will go in more detail, but the strong operating free cash flow was driven by many things, but if you go to the operational side, a very strong focus and improvement on the accounts receivable throughout the year, and not just in the last month, as well as improvements on the inventory side.

So really process improvements that play in order to improve our balance sheet position here. On Page 7, our best attempt to unpeel the onion on the impact of March from a sales decline and the accounts receivable perspective.

You see the guidance midpoint on the left from February, you see our reported results on the right-hand side, the AR allowance follows out of CHF 20.3 million as you see on the chart, that gives you quite some impact on the EBITA. And then the sales decline larger than 130 basis points calculated for the full year as the respective impact on sales and EBIT.

And so you can see here kind of the rationale for the argument on the February performance. On the major developments, I think what you see here is a continuation of the execution of the strategy we have laid out in which we have re-shared with you last summer.

And in clearly innovation is important. We brought out the Marvel, we have 2 million units sold after 16 months only, which is a big number, by far the biggest we’ve ever achieved in 16 months.

And then with a Marvel 2.0 we’ve made improvements which kept the momentum, we have also implemented or elevated our myPhonak application to a level that we have very good ratings from consumers relative to the peer group, in how much they like it. And you can see it in the published data on the download number which went up quite some since we launched Marvel 2.0.

On the AC side, many geographies running in double-digit, UK, France, Austria and the Nordics and that’s one name missing from here which is a big number for us which is Germany. Not such a strong performance, a double-digit here driven by the third bullet point you may remember, we talked about that we want to get to one brand per country.

And we shared, Christophe shared last year that the one lagging one is still Germany, because when we started after the AudioNova acquisition, we had six brands. So we concluded the brand integration, everything on the gear so with Akustik went away, that is operationally not an easy task.

So we have done this in the last 12 months and I think from here we have the benefit and not the headwind anymore. And then on the CI side, strong momentum on upgrades and sales – an upgrade sales driven by the two new processor functionalities we launched in the spring and we had double-digit system sales until we got to the end of January, the field corrective action had quite some impact here.

With that on Page 9, I think you can all read the numbers only on the spell out here. Good leverage on the gross profit, keeping some puts and takes in place, including the continued kind of increase on the rechargeable side as well as some as effects we have, the OpEx at 10.4%, Hartwig will unpeel the onion more.

This includes the bad debt so you can mentally deduct this from the 10.4% growth. EPS, significant in and out with regard to the Swiss tax reform which you see on the as reported as a positive benefit here, and then a very strong operating free cash flow performance with 55%, more operating free cash flow than we the year before.

Page 10 is the one I referenced with regard to the adjustments, I think, three buckets, the restructuring costs and improving the footprint. This was predominantly on the HI side, some on the manufacturing, but more in retail back offices in Germany as well as the consolidation of sides in the US for retail in Audiological Care.

And the one-time cost of CI, a little bit larger than what we had shared in February. And then the Swiss tax reform impact here which I’m sure Hartwig will voice over that.

And so if you look to 11, this is in a bridge format. The sales side, you get to 9.1% so far, I talked about 8.7% out of the field corrective action in CI.

We have the new product available by end of March in 80% of the markets, but not in ’20, so if in those 20% somebody was handing back a device, we needed to do a credit note, that’s the CHF 11 million here. So the 8.7% is not correcting for that credit note element here.

And then you can see we had quite some FX impact on the top line and even more so on the bottom. 12, how did we do by region?

I mean keep in mind, we have not adjusted anything for COVID so the percentages on the right-hand side in LC would have been a little higher if we would have not had the March, I think EMEA, good number, slightly above market. Asia Pacific, different mix could progress in China until COVID that hit harder there.

And then obviously very strong number here on the US side, mainly carried by HI, had lots of positives from product to the new private label to contract with a product, the strong rebound on the VA side, but also what we did from a commercial execution side. And then on the AC, a high single-digit the year before we were double, so post the restructuring of our network we’re catching more top line per store.

This is pretty much same-store basis here, we’re not doing significant acquisitions in US at this point of time. From an EBITA perspective, you see the 30 basis points on the first step of the bridge, CHF 61 million in organic lift.

This would have been higher, if not for the CHF 20 million in debt and to get to the 90 basis points, if you would correct for this, and then significant restructuring CI voluntary field corrective action and then you can see still is a quite significant effect here for us. The split by half years.

The first half year was overall faster from a growth perspective, whereas hampered down in the second half if those two effects, AB coming from strong positive into negative territory and then the start of the COVID side. From an EBITA margin perspective, I voice it over the 90 basis points, if you would take the second half, it would be at 120 basis points if you correct for bad debt.

And that’s what I meant with an improving leverage, because at the 6.5 top line, it’s gotten to 120 basis points, if not for the bad debt and in the second half. Hearing Instruments on Page 16.

Most of the things I voiced over, you see a little bit better EBITA margin expansion, because it was going backwards on the Cochlear side, ongoing growth investments in R&D and go-to market you will see that later in the OpEx bridge and from a product perspective, really, the expansion to Marvel 2.0 and then pulling all of the Marvel benefits towards the end the Made For All phone, which we still have the unique benefit to the Unitron and Hansaton gave us a broad-based boost to the revenue side. Going only on the Hearing Instruments, I think you can read how we did organic versus acquisition.

The acquisition was in line with what we’ve done historically from a bolt-ons perspective, but obviously a strong organic growth here. And if you look at the bullet point under the table, you can see the margin expansion without the bad debt, quite strong in the HI business in the second half of the year, quite some good performance here.

On the Cochlear worlds, really a story of two worlds and it’s unfortunate that we not just had COVID, but also the voluntary field corrective action. But ultimately, it made us have limited growth reported, and at the same time, a significant step backwards on the EBITA margin perspective.

I think we continue to drive our productivity initiatives. I think if you look at the P&L overall, you would say, if you would have known, we’re at 3.4%, you would have probably not done the one other growth investment.

And I think as you can imagine, while you’re going through the quality work, we had to do there is specific cost and specific things you do, which we have not put into the one-time. So overall, I think the second half year was low on revenues and a higher cost than what you would have liked to have at that kind of a revenue line.

And that’s the financials of that. And that is obviously a pretty drastic change in the second half versus the first on the top line.

Now, keep in mind, CHF 11.1 million credit note, but it’s still a step backwards even if you would add that back, and it has pushed us to having a loss in the second half in the CI business, keep in mind, the two circumstances of field corrective action and the COVID situation. Quick comment here where we stand on the voluntary field corrective action, just a quick recap.

We have initiated that field corrective action based on observations we had over a period of time of a low number of we call that degradation of performance of implants, meaning, some of the recipients couldn’t hear better anymore with the implant based on some impedance issues. It was a very small number, we were still below the quality threshold we’ve given ourselves until which we have to trigger but we had a concern.

We also had worked on an improvement for the device. And so we triggered this middle of February and had to pull the inventory out of the hands of the customers who of non-implanted devices and that led to replacements at places where the new product was approved in other markets, it wasn’t approved and we needed to do their credit notes.

We are end of March at a place where about 80% of the market potential we have approvals. It is improving with every week.

These are lagging countries where regulatory approvals take longer. You can see the one-time costs here spelled out in more detail.

I think what’s important in such a phase is that, you focus your attention on gaining trust back where you may have lost trust with the customers and that is what the team has done over the last couple of months. You can imagine lots of meetings at the beginning in-person, now more virtual in the COVID environment where we guide the surgeons through what we have changed on the product, why it’s now better, and why the timing was the right timing for when we made the change.

And we’re now at 93% of the top 100 accounts being green or yellow in our color coding that was significantly different eight weeks ago. So relative to our own plan, we’re making good progress to reconvince the customers and probably the best metric to measure that is 90% have either reordered the improved device or have signaled this with a clear commitment post their COVID-19 non-implementation.

With that, I want to hand over to Hartwig, and then I’ll come back on the outlook.

Thank you, Arnd. Good day, everybody.

So on page – I’m on Page 23 and you see a number of bullet points that Arnd already voiced over, so I won’t repeat them. But let me just elevate one or two items and then elaborate further in the subsequent pages.

So you see on the operating free cash flow, the improvement, it’s 55% increase year-over-year, this year we had a cash inflow of CHF 112 million from receivable collection, last year was an 85% outflow. So it’s almost CHF 200 million just from that and allowing us to show cash conversion over EBIT – adjusted EBITA of just over 100%.

Looking at total shareholder return and balance sheet, you see that we are proposing not a cash dividend but a dividend in kind with company stock, a share for 150 shares owned, which is around, you know CHF 1.35 at the moment, and it’s down from prior year, but it is – we believe the right thing to do to preserve cash which is a subject that I want to transition to here. We had CHF 450 million gross cash on the balance sheet and we’ve collected another CHF 330 million you’ve just heard this early on.

So we’re still in a very comfortable position of actually having access to around to more than CHF 1 billion in the, you know, including the committed lines that we have with certain Swiss banks. Page 24, you have seen that, but let me just identify here, the Swiss franc delta versus local currency delta.

And just point your attention to that. So the Swiss franc has once again strengthened and so that gives us you know quite a spread of more than 500 basis points in the adjusted EBITA improvement and around 300 basis points in the – on the top line.

Return on capital employed. Let me just quickly say that this is around 20 – 20.5% in both years last year and this year, there was no IFRS 16 impact.

So we have adopted IFRS 16 the first time here. Then moving on to Page 25, talking about the OpEx here.

You see that we have pulled through at full speed in R&D, 10.8% in local currencies year-over-year so slightly ahead of our top line gross, sales and marketing about in line with our top line growth and G&A on the phase of it, double-digit, but if you take out the extra receivables provision, it’s between 5% and 6%. And if you would compare first half and second half, you would see that, in particular second half, we have been working pretty well there and for the year, as you remember from the first half, there were also some long-term contract provisions that we had to accommodate here.

So pretty good results from my perspective. Out of the one-time cost or adjusted cost that Arnd elaborated early on, there is CHF 43 million landing in OpEx, which is why you see them I mentioned here.

Page 26 talks here through from adjusted EBITA all in Swiss francs all the way down to net profit. And so really not big swings between reported EBITA and profit before tax.

And you see here that between before and after tax, we have the Swiss tax reform impact, which we have now considered here at CHF 64 million, in the half year we had identified a number of around CHF 150 million and so the reason why that has changed relates to that in December, the Swiss tax authorities have published or have advised on further transitional you know parameters that we are accommodating here and let me tell you that we are accommodating it in a very conservative way. Underlying tax rate around 15% which is in line which we have guided for the mid-term after the tax reform and accommodates for a bit of a negative from COVID-19 which relates to that in a number of countries we are now loss making in the distribution organization and we are reserving a little bit of the tax loss carry forward benefits there.

That’s why it is a bit over the 15%, else it would have been a little lower. Page 27 talks you through the operating free cash flow, as you see we are normalizing out the repayment of lease liability, so just overall robust against the IFRS 16 change.

And I guess we have talked about the 55% increase there. Page 28, our balance sheet, nothing that you would not have already expected from what I voiced over net debt to EBITDA by now 0.8.

Page 29 talks you about – talk you through our liquidity position and debt position. So you see the, more than CHF 1 billion excess accessible to us on the left side and our debt position with the maturities on the right side.

And as we have emphasized early on, it has been the priority for us to have deep pockets in the context of COVID giving us more options to handle risk and opportunities that come out of those conditions. With that, I return to Arnd.

Thank you very much.

Thank you, Hartwig. So as already indicated, the update and some voice over here on the recent trading.

The two columns on the left, the share of Sonova and the April of Sonova, the right-hand is commentary on what we see in the marketplace. And I think the first kind of significant high is the pure sales level in April, which was only at 35% of our prior year sales level.

You can see that APAC is doing better, EMEA and United States at the 35% and Americas around the 20%. If I start with the better performing one, China as a geography largely recovered.

A little bit of a question of this pent up demand is already a stable volume. We do not have Audiological Care there.

So we’re living more of what we hear from these wholesale customers. Australia and New Zealand improving although New Zealand was on a very low level given the strength of their lockdown there.

And then the, let’s say most dynamic region right now given that some geographies are starting to come out of lockdown is Europe. The first ones who are showing more sign of activity, Austria, which came out of lockdown, I think two and a half weeks ago, Germany, not exposed always not lockdown at least, Sweden.

And what we’re seeing there is if we’re looking on the appointment level, we’re looking at something in the range of 30% to 60% appointments relative to historic. So clearly not people coming back very quickly.

But the first ones are starting to come back. I’ll talk in a second on what we do from an AC perspective there.

And then the US, as you would expect quite a mixed picture, because you can’t look at the country as a holistic lock, given how many states are moving fast versus slow coming out of the lockdown, but I think pretty much comparable they are the ones who have eased their lockdown where starting to see the first consumer have come back. Now, if we wrap our head around this, I think and that makes it, I think for us right now, probably quite challenging.

There’s obviously a question on how many stores are opened and when are they going to open? And that’s the first step.

And then the second one is, how fast does the average consumer come back? I think we always need to keep in mind the average age is 71 and we’ve defined them “as the risk population” right and so we do see some coming very early.

But it’s hard for us to predict right now, how long does it take until let’s say 95% of the people are coming back. So, as such, we would look at the curve right now, I know there’s always discussions about the curve, it’s clearly not a sharp V, given how muted we are still, it looks a little bit more like a U shape, how fast is it?

I think that depends on the two things, how fast are the people in a large number are willing to come back? And then the second one, how stable are these recoveries by country?

We hope that everyone can move to the positives, but I think if you look at different approaches of countries of getting out of the issue, they have quite different scenarios people are trying here. I think second comment or I comment on the CI side in the western world, as well as in China at the early stages there, the market went into an almost complete lockdown with regard to know its elective procedures get done.

And even the pediatrics which would argue people needed an implant rather sooner than later. But even those were all in the big challenge, the hospitals had defined its electives.

We’re now in a world where the first hospitals are starting to do surgery, but not at the level in which we’re seeing the recovery happening on the HI, although HI was already not so high. And also in that regard, I think depend very much on how really the hospitals are working through all of the different procedures.

But right now, they’re on the lower level than the HI businesses. So that was what we wanted to share.

I’m sure there’ll be questions around it and from what’s our game plan for the COVID period. As I said in March, we wrapped our head around this and said look, let’s define three phases.

There is the first one, where our highest focus on health and safety, the second one and we’re predominantly in a second right now, which is protecting the core. And then there will be a phase of prepare for market rebound.

Now, depending on the country, those phases move differently, right. So in reality, it’s a mixed picture, but it’s still more in the protect the core here.

Health and safety is always important, we’ll keep the measures up went very early to full home office where possible, if they can quite extensive measures in the manufacturing environment, a, to keep our people safe, but secondarily, do not get in a situation where we may be quarantined. On site comments here, we had no issue with regard to supply chain or manufacturing.

I think most of you know we have a factory in China, but we were as soon as the government allowed any factory to reopen, we were reopened. So I think supply chain quite robust here.

From a cash flow and liquidity perspective, it was almost all of the points over, but we pulled every level we had. Because end of March, it was even less clear to us than today, how this is going to evolve here.

So we really wanted to make sure we take full opportunity on the liquidity side. From a cost containment, which we decided to keep R&D as it was planned, because we know innovation is important and we wanted to make sure we’re not getting our roadmap all over the map, because we will come out of COVID and we still want to be the leader in audiological performance and consumer interaction.

But outside of that, we also on the sales and market – out in the sales side and on the audiology side we made sure we kept all the people and if somebody leaves, we’re replacing, because we know they have scarce assets and we have stores and we have territory. Some of them may be on Kurzarbeit, but in principle, these were the areas where we said they’re not going into, we do not replace everything else.

We are super careful if somebody leaves to replace, we are using Kurzarbeit in all places where possible or government subsidies and the different shapes and forms you’ve heard I’m sure from other companies that many countries have adopted the model in their own shape and form. And so we leverage this to the full extent.

We have also cut non-critical activities and all outbound marketing, while consumers don’t come to the store. Certainly something we are considering step-by-step in the markets which are starting to pick up.

For maximizing the revenue, and I have a slide on that. Obviously, using what we have on the remote site, a, in order to realize some revenue if possible, getting people back, often in the scenario where they come for one visit, but do four visits on a remote site, but also in keeping us active on developing those capabilities and a big focus with regard to the salesforce and the audiologists to constantly reach out to customers and consumers so that the leads are there when the market is starting to come back.

One quick site comment on solutions here and times of crisis sometimes make a little fast on certain things. We always had remote fitting we had the Marvel, but in order to give an independent to our own store the ability to do the whole journey for consumer, if the consumer chooses to do that in a distant way.

We had to complete one step which is what we call the AudiogramDirect. So for the first fit and fine tuning, if we would send you the hearing aid, we could with AudiogramDirect do the fitting, we would expect that eventually the consumer comes back to the store for other adjustments on the device.

But there are some cases where we’re selling completely online where this is from a regulatory perspective also appropriate. I must say that the number of consumers who want to go this route is small, not different than what we thought a year ago.

There are few who are willing to do this we find more consumers who are rather waiting two weeks until the store opens to do the diagnostics and the initial fitting in the store. The other comment is to be a good citizen to our customers, we’re providing in some markets by now the customers particularly independence with hygiene equipment and safety equipment because it’s easier for us to source it to them.

On the Audiological Care stores, we went into leveraging Kurzarbeit to significant extend where it’s available, you have to imagine that some of the stores we closed completely, the vast majority, we kept open for few hours a day, because we also feel an obligation to help our consumers with repairs and other things they may have. In some markets, we could sell a new hearing aid if somebody was asking take Germany as an example in other markets, the regulation like in the UK was you’re not allowed to sell anything, you can just repair.

But in principle, our stores could operate because we’re accounted into medical devices which in almost every country got a pass on not having to close. But again, differentiated to between repair-only rest sales.

The current focus is on first, getting obviously back to the people to who aborted the process, because at some point of time, people didn’t go anywhere anymore, but quite positive on what we’re seeing as the momentum there, they want to conclude the process. The next wave is about the renewal of existing customers in the database.

And if we say, enough traffic in the market, that external or new consumer lead generation through campaigns wouldn’t make sense, we would move to that, but we’re quite careful there to want to see sufficient pull through with regard to the sales at the end. And on the in-store side, quite an extensive work even when we connect with the customers via the phone to walk them through what safety we provide, how we make sure people feel welcome and safe.

We only allow one person on the customer side and our audio in the store we do not allow walk-ins in most of the country. So lots of handholding with regard to signaling clearly that it’s extra safe the way the operate here.

So with that, pulling it back up to the highest level. There’s no question in our mind that this is an attractive market with attractive fundamentals.

The world still doesn’t have a high enough penetration of people with a hearing loss having hearing aid. The elderly population directionally is growing and having more and more money.

And so I think the longer-term outlook hasn’t changed for us. But the in between is tricky as we have laid out and we want and have to navigate that.

We feel that with a strategy we have pulled together over the last year with a focus on connectivity, some of the things we’re doing on the renewals side our Audiological Care being moving the omnichannel side forward, we’re in a strong position as well as on the product side. So sustaining that advantage is critical for us and that’s part of our focus as we go through the phase.

But we are quite confident that we can continue to be on the journey of winning market share in this attractive market. With that, I would open it up for questions and Thomas is going to help us how to do that.

Sure. Operator, we’re ready for the questions, if you can go through the queue, please.

Yes, thank you very much for taking my two questions. The first one maybe on your April figures you provided, thanks for that.

I’m positively surprised on the number in the US 35% of normal sales is quite positive in my view, given how the new square and can you say a little bit more where does this come from? Is it from larger chains like Costco, which are probably still open because they are offering much more than just hearing aids?

And then the second question maybe a bit more. Is it possible for you to provide a generalized answer on how much capacity in an Audiological Care store might be lost if everything has normalized again, given stricter hygiene rules, distancing and everything?

Is it 10%, 15%, 20% less of appointments you can do? Thank you very much.

Daniel, thank you. So April on the US, it was clearly not a, as you have seen from the VA numbers that volume was pretty much down.

And in Costco it was also, I got memory but clearly below the average was showing here. Costco first had moved people to helping to sell the things people were stocking up at home.

And they’re now having a very, let’s say methodological approach to opening a number of stores every week. So it is pretty much more the independence and our own Audiological Care, which has done better here.

Very different by states, some of the states have seen volumes which were above 50% even during the challenging times here. On the loss capacity for the higher hygiene, we don’t see that as such a big issue.

I know it gets discussed a lot in hospitals, but in our place, as long as we get the booking done well, and we do all the appointments before. The procedure as such take 45 minutes for a fitting session, will take 45 minutes.

I think you’re greeting the person at the entrance, they get a mask, they have to clean their hand, but the procedure itself doesn’t change for us. So we don’t see this as a significant loss.

And then the other one, I think as much as we would like to, we’re not always at 100% utilization in a store, so we’re not as attracted as a hospital. So we don’t see that as a major contributor here.

Okay, thanks very much. That’s very helpful.

You’re welcome.

Thanks for taking my questions. I’ve got two as well.

And so the first one was, I was wondering whether you could get any flavor on what you’ve seen in the first half of May versus April? If not, you made a comment on scheduling.

Did I hear correctly that going forward, you’ve got around 30% to 60% of your normal scheduled – normal appointments scheduled? How that’s going to across geographies?

That’s the first one. The second one is just on product launches given we’ve seen EUHA had postponed the conference of Congress into late ‘21.

Does that change at all how are you going to be approaching that product launches for the remainder of the year? Thanks.

Sebastian, thank you. So on the scheduling the 30% to 60% was the range which we’ve seen between Austria, Germany, Netherlands which I quoted as the first ones in Europe.

Okay.

I think a slight pickup in April, but not in a drastic form, if I look at the global level, I think we’re seeing some markets starting to move. And there’s initial good reaction to that, but as the 30% to 60% would indicate not at the normal level.

And from a product launch perspective. I think in general, we’re executing our roadmaps.

And so we have the discussion internally what we go do if we’re still at the tail end of COVID? And what’s the percentage of revenue?

I would think in the current time, you wouldn’t launch in a market in which you’re just at 20% to 30%. If you’re in the 60%, to 70%, probably different discussion, because you also need some draw to get people into the store and you hate to give up your time to market.

So I think we’re executing the plan, we keep the option open of delaying something, our slight preference would be to launch if we have something to launch, because we know how important time to market advantages in the market is, and having it on the shelf for six months and losing that six months against one of our most loved competitors could probably also bad economical decision.

Got it. That’s really helpful.

If I could just ask a follow-up then kind of thinking about the end of the year, is it – is your base case scenario, assuming no second wave, is your base case scenario that were kind of flattish year-on-year do you expect the end of the year, you know, in October, November, December down or what are your thoughts on the very end of the end in terms of volumes?

I think you – rather than thinking about the second wave, I think the thing which keeps us busy from a thinking perspective is yes, we will see movement coming back. But what’s the balance between pent up demand versus economical pressure and compression?

Now, so flattish would be good scenario in my eyes, feeling a little bit more cautious.

Got it. Thanks very much.

Yes. Hi, good afternoon.

Arnd, I would like just – like to come – get back to the last question and you know the outlook for the year and overall, when you know, your statements are not as negative as some of your peers are sounding, you’re also indicating that as 35% activity from last year your peers are talking more about 20% and you’re giving the economy as an argument for not seeing really a recovery, although, you know, given the age range, the economy shouldn’t really play so much into it. So, what is your biggest fear?

Is it that audiologists are actually – some of the audiologists who go lost, because they will have to face a prolonged period where there are no customers or that the fear factor is keeping people out? Or just to understand what it really is?

What could be slowing the market, and maybe also answer why you are seeing better numbers in April compared to your competitors? And then on your online offering, which is obviously very, very attractive in such times.

How aggressively are you pushing it in your own stores? And is that really something that you believe in and belief will stay or do you think this is just a temporary tool for the market?

Thank you.

Hi, Maja thank you for the questions. So on the better numbers, I don’t have a good explanation.

I think we did have a good momentum and that build over the last year so that maybe one. I think the other one I think you really need to look where people have significant market shares in positions relative to how other markets doing and our AC network is pretty much main Europe but with a little bit more focused on the markets were picking up earlier here weren’t as low.

I think on a wholesale we also have a strong hold in share more in certain parts of Europe and US. So this may be one explanation.

I have not run the numbers. And from an outlook perspective, no, it is actually what I said I think this is by the substantial economic crisis and we’re discussing COVID and that’s the first step of the equation, but then it is quite some burden on healthcare, on governments.

It is also an impact to people in how they perceive their willingness to spend significant amounts and we just don’t have the answer, but there tends to be some compression in our industry if you go back to 2008 or 2009 where you can say look over the years after it was muted we were not in the 6% to 7% growth rates at that point of time. So I think it’s just – I think it’s something to keep in mind, we still have 75% to 80% as out of pocket pay right.

The last one was on the –

Online –

Audiology side. Look I think we’re true to what we sent over the last year, which is, we do want to provide an omnichannel and we do want to provide an omnichannel of a high quality with a hearing care professional involved.

But if somebody would choose to take the whole journey where it’s possible remote, that’s okay with us. I think the two factors are, we want to have the hearing care professional involved to do it well.

And the second one is, we’d like to get good prices for good product and service, right. And so in that frame, I think it’s logical that our Audiological Care stores has some independence trying everything at this point of time to see if they can catch some revenues.

So in that regard, we’re pretty active with it in certain markets where it’s possible and where we have the right infrastructure. But in that frame, I think it’s a hearing care professional and we want to have a good price.

Thank you. Good afternoon, all.

I have three questions. Firstly, on new product launches.

How do you view 2020 as a year for launching new products? Does it make sense?

And if so, under what conditions would that be? Secondly, on audiologists?

Can you comment on what the legal requirements are for audiologists to return to your stores, if they feel it’s unsafe? And what is the return rate of audiologists in your stores?

And then finally on the online hearing aid test at TIFF data comparing how good the results are of the online test versus a test in a store? Thank you.

Hi, Michael. Thanks for the questions.

So on the product side, I think if we would be a player who has a product up their sleeve for the fall season. If you would like to hit the VA window with it, I think if you’re on the range where you see a momentum in the 60%, 70%, I would go do this.

Now, I think the VA window is a mechanistic – mechanics in our world if you had 60% to 70% at that point of time, you assume you get to 80% and 90%. And again, I think you need to create excitement to getting people in the store.

So I would go do this in this frame. From a legal requirement with regard to the audiologists, it depends on the country.

Interestingly, we do not have that issue. I think we’ve laid out the safety concept in-store, which our audiologists buy into that we had some quite some work early on to get all of the safety and protective equipment in place.

As I said, we went very quickly to, it’s only two people in the store. And keep in mind, they are caretakers, they want to take care about the consumer.

That’s why they chose the profession. So in many cases, we have people who say, I need to make sure I come enough hours, so that the people need a repair or need some help or getting help.

So we really – I haven’t heard any case, that may be the few. But we don’t have that issue on a broader scale.

From an online test perspective, I think the diagnostics you do for the patient has some physical elements with otoscopy, where you’re checking out the ear, they have certain elements where it’s more of a verbal checkup, where you go through certain tests and see the reaction and you get a lot of input from the person. And then there is some and more let’s say, electronic testing in some shape or form.

I think you’re not at a point right now where you get the full quality and the full benefit. I think you can do an initial fitting, but we believe right now that if somebody wants a hearing aid right now, that’s good enough to get started.

But we would advise them to come back at some point of time into the store to do the missing pieces. So I think I don’t know how to put a number around it, but you probably get 70%, 80% of the benefits.

But there is a couple of steps you have to do. Keep in mind for the severe to profound you normally also need to, that’s where the whole chain doesn’t work, you need to have an earpiece, which is made specifically for the individual.

Okay, thank you. So if I look at Slide 33, and you highlight as sort of new launch for an online hearing aid test.

Does this mean that the patient is only going to be maybe 60% or 70% as satisfied as they would have been as they go into a store?

No, I wasn’t saying the satisfaction level. I think if you give that patient and now comes a question, did they have a hearing aid or did they not?

If this would be a new patient that didn’t have a hearing aid, and I give them a Phonak Marvel with all the things I can do here, they would probably say, wow, and this is really good. And I would think I can even make it better.

So look at it more as my quality standard, I would put on my audio on how much they can fine-tune it. But I would not worry that you’re ending up at a place where they say, this is really not worth me doing it.

Okay, I’m just sort of curious about the return rate if it’s only 60% to 70%, maybe the return rate ends up being quite high –

And it’s certainly –

In two or three months’ time.

Yeah, I understand, Michael and that’s certainly something we keep a close eye. And keep in mind, we now close this loop.

As I said it’s from the initial tier. This is not like a firestorm there are certain consumers open for them, but clearly it will educate us on how happy are they measure it in satisfaction and later return rates.

So we watch it carefully. We have not done that in all countries, so not a big risk here right now.

But I think in the places where you can do but you can’t do the full process in some of the countries.

Great, thank you.

Thank you. I have two, please.

The first question which is around some of the cost containment measures that you’ve laid out. Can you just quantify how much savings that’s going to be either for the month of April and May also for, maybe for the rest of the year as well?

And then my second question is coming back on the remote fitting or the remote solutions. I guess of the sales that you’ve done in April, how much of that was done through remote solutions?

And how do you think the adoption will grow in the current situation for the rest of the year? Thank you.

Hi, thank you for the question. So on the cost side, looking on April and keep in mind, we were, I would say, pretty draconian, except for the R&D and the backfilling on sales and audio positions.

Order of magnitude, we were able to compress our OpEx by about 35%. About 20% of that is out of government subsidies.

So you can see we’re pushing very hard, because most of it didn’t come from the government subsidies. If this longer-term sustainable, I think at such a low business volume where you don’t need to do lead generation, it would be I think, you need to be careful.

That’s why some markets opening up, because we didn’t allow any lead generation you would start to get your feet wet and but that was kind of the order of magnitude. On the Coch side, we were able to get out about 45%.

So you can see there still quite some fixed elements in our cost of goods sold, I think that would probably improve, because we put measures in place at the end of March. So for that, I think quite a good read through of the cost side.

But again, I wouldn’t plan with this off the bat when I want to drive some recovery. Now on the remote side, small numbers relatively speaking, I think we are excited for trying, I think we are excited to offer the consumer, we have two choices.

You can go all remote or we can get you a process in which you come to the store and we handle you safely. I think the majority picks that I come safely to the store side as I said.

So I think not a significant number. I think we will learn over the next couple of months but again, I think the vast majority of consumers rather waits until you can open the door which in more and more markets were able to do.

Okay, that’s very helpful. Thank you.

You’re welcome.

Good afternoon and thank you for taking my questions. I have three, please.

Actually I want to start first asking about the Cochlear Implant business. And I don’t know, Arnd how you’re thinking about this.

But looking at the impact of the voluntary recall, it seems to have been a bit more severe than you anticipated. So I guess just your thoughts on the achievability of some of the medium-term targets that you’ve laid out for this business, including, you know, getting to a double-digit profitability, do you think either COVID or this is going to have an impact and how you’re thinking about that, you know, business on a two-year to five-year outlook that would be helpful.

So that’s my first question. My second question is just a follow-up on the return of traffic that you have seen in the markets where you’ve seen that, if you can characterize kind of the mix between new customers and returning customers who are coming in for fine-tuning or do an upgrade.

It would help us understand kind of what you’re seeing on the ground. So anything you can share on that would be helpful.

And then I’ll have one follow-up after that if that’s okay.

Yeah, thanks. Hi, Veronika.

On the CI side, you catch me on an uncomfortable foot, because I was the one who said, well, we can run this business around. So for the two to five, there is no reason why we cannot get this business to 15% then afterwards to meaningful numbers with a two in front, right.

There’s not it’s a high margin business. We’ve done good progress, you may remember we had 400 basis points year-over-year for two years for every half year, not from the voluntary field corrective action.

It is very hard for us to depict what is now the voluntary field corrective action versus what’s the COVID side. I think in the recovery of customers who were willing to, while they were not in COVID reorder, but now are clearly on the path of planning with us and we can see that when they talk with people who are waiting for a surgery, we feel good about that.

It was not expected that you had 100% at this point of time. I think, if any, our team would say, well COVID puts it in perspective and the surgeons may forget a little faster that they were frustrated with us, yeah.

But it’s the sum of the two. And I think we need to get through the back to all buying from us.

We also need to see how the COVID evolves. So I don’t think you’re going to see us this year at the 15%.

I think that’s already the start wasn’t good enough. But I think in the one year to two years’ timeframe, which I need to add to my timeline, which was this year, I think is what the game plan is.

From the traffic perspective, it is predominantly consumers whom we have in the database, meaning people who were at the four years to six years. And so the first one is, we’re going after the people who what I call the aborted to the sales process, because they were early.

So those are the normal mix, because these are leads, which we had convinced and it just stopped the process. I think the second one we go after is the consumers who are renewing, because we can size them more from an analytics perspective, we can call out, we can use our audios.

So it’s cost effective. We have not driven significant volumes of new consumers.

I think we’re starting to think about in the markets where we see more traffic. But right now it’s pretty much existing and I would venture to guess that’s true for everyone who’s not out with big campaigns at this point of time.

Now, your last question.

Yes. My last question was sort of a clarification around some of the comments you’ve made on the cost reduction.

And in particular, I’m struck by your COGS or reduction of 45% or so my understanding of the hearing aid businesses was that they had a fairly small variable at a high fixed component when it comes to manufacturing. So maybe can you give us a little bit of insight of how you’ve gotten to this 45% plus reduction?

Is it that you’ve reduced your manufacturing capacity and furloughed some folks and just you know how we should be thinking about that cost line coming back as you move through the next couple of months? Thank you.

Yeah, I think you’re pointing to the right places, you have the material side, which is a smaller percentage. But labor is still a quite a number in our world, because all of the hearing aids get hand assembled.

That’s why we have Vietnam and China, right. And so there are significant opportunities here in Vietnam and China also, by the way here in Stafa, as well as in our American center and so we went very aggressively after reducing the hours in the country available model Switzerland there will be Kurzarbeit in AODC that would be furloughed down, but we have very significantly reduced the hours in the factory.

And that together gave us this 45%.

Understanding and how quickly do you think you’ll need to ramp that up?

I think we’re seeing on the repair side, more units coming in than in the first, so we’re starting to ramp up more on the repair side. And I think we will see a pickup over the next two months to three months in repair as well as some new products.

So I think the 45% is the low point what we can do from the hours.

Understood. Thank you very much guys and hope you stay safe.

Thank you, same to you.

Yes, thank you. I actually I still have you now three questions to ask as five – on five objects.

Hi, Chris.

Hi. One is now on supply chain you know since you touched it you know.

Actually how comfortable you feel and over it, you know, you’re a substantial part of your supply chain you know concentrated in Asia you know, these days you now, we all know, what’s been going on, you know, we had tariffs now and the year before I think already, kind of often and now basically with all you know, kind of these health issues et cetera. Is the company considering you know, any potential changes you know going forward?

You know, that will be the first question. I’d probably take it one after the other and so.

Yeah. So from a tariff perspective, because that discussion was with us a year ago.

We’re pretty comfortable, because we have the ability to shift volumes depending on the deal we deliver to between the different sides, and in that regard, having three main non-manufacturing plus the US makes us safe relative to anything which may come out of US, right and Europe is not as aggressive. I think from a from a potential future pandemic perspective, I think our initial reaction would be we’re not that worried, because, at least in this one, we could see that from a product perspective and manufacturing, plus from a product movement perspective, there was no limitations.

And I wouldn’t expect this with an infection. And from a manufacturing perspective, having 4 is safer than having 2, even if 2 on Asia.

So, I would feel better about that. It was interesting, we had in the whole China factory until two weeks ago, I haven’t checked in the last two weeks, no COVID case amongst 1,000 people, not that we had a reported one of the families and they have to report this every day and they get measured every day.

So I’m not so sure where you’re safer given the different lockdown scenarios people are able to implement and we can like or dislike certain countries, but the lockdown scenarios in China are pretty effective. So, I feel good about having 4 rather than having 2 just in the Western world.

Then you know that the second question relates to you know kind of structural cost adjustment you know I noticed now you know basically we are kind of running kind of low on cost, because now you know using government monies et cetera and you know kind of doing some kind of near-term cost savings, but under what would be the trigger points you know that you would look at you know, when you know, you would you know decide on actually adjusting cost, you know structurally so I mean we have already seen some you know, this company for example, doing you know kind of you know headcount reductions, et cetera. I’m just interested in your thought process you know kind of what will be kind of the key indicators you know kind of that you would monitor?

I think we’re in a different position than the Swiss company you’re naming there with Straumann. I think you remember, we’re discussing structural optimizations and have two steps which we’ve done already as part of our strategy.

And I think there’s still opportunity in Sonova. And I think you have to pick the ones at the right point of time.

It’s not a knee jerk reaction on some compression at some point of time. There’s different ways in how you can manage your P&L.

But in principle, we still have things in mind, which we want to go do over the next two years. Now, in the current time, you may feel invited to do a little faster, a little more, but in principle, I think less of a COVID reaction, but more of when is the right time for us to pick the next ones which we have in mind and what does it take to implement them without breaking the stability of your business.

We don’t have one which would be so big that one project alone could do it. That’s why we also did already two steps, because I think an organization can’t do too many at same time.

So expect us more to be on the same plan we were before, we have a couple of things we want to go do and we will do them over the next couple of half years.

Okay. And maybe the last question is just on the rechargeable ratio you know if you do maybe elaborate on that in particular also what you had you know in terms of negative you know effect on gross margin in the full year in the second half you know just basically to see where we stand there and you know, kind of maybe also comment about you know using rechargeables more towards the lower end of your product range will be great.

Thank you.

Yeah, so we always made the rechargeable available to all of the different performance levels in the brand. So at this point of time, everybody has a rechargeable option, but we’re clearly above the 70% and we expect this to move gradually to the 90% that in six months or that in 12 months?

I don’t know. But in principle, I think rechargeable will be the dominant mode.

And I think from the gross margin, it’s a little hard to pick it out in detail. I think we had a significant step up in rechargeable ratio in the first half last year, because on Marvel we were – on pre-Marvel, we were in the range of I got memory 40% or so and we stepped up to 70%.

So I think the headwind wasn’t as big in the second half as it was in the first half. And that’s what we shared also why we expected a better fall through and not just because of it, but that was one of the reasons.

So I think more steady changes which we’re countering through productivity.

Yeah, thank you. Appreciate the comments.

Thank you.

Hi and thank you for taking my question. So my first one is on your guidance and I understand that you currently can only provide qualitative statements.

However, at what point in time can we expect it to quantify your guidance? Will this just happen with the next half year results or can we expect an ad hoc update once your visibility improves?

And my second question is on Costco. I wonder whether you could provide us with some ballpark figures of visibility about your unit market share there and maybe how that has evolved in your view since you have been awarded with the KS9 contract?

Thank you.

Markus, thanks for the questions. So on the guidance perspective, I think it would be logical to have far more clarity when we come with the next half year results.

If we feel in a far more stable situation or something has significantly changed relative to what we’re flagging here, we would do the extraordinary step, which we normally don’t do to inform in between. On the Costco side, I think it’s pretty stable in the share of wallet within Costco since we launched our product there.

And in Costco, you tend to be 50% tends to be on the KS side and 50% on the branded side. Our products fit so well in the channel that we’re doing somewhat better than that normal 50% but it’s pretty stable from all we can tell.

Okay, great. Thank you so much.

Thanks, Markus.

Yes, hello. Also three.

The first one, the VA market share just significantly declined in April, but also the volume was very low, actually at 10% or 15% of the normal level. Can you clarify a bit why this was the case and also when do you expect more VA activity in general?

And the second one, can you also give some indications how your wireless business developed? I guess was quite good as well.

And the third question is on the waiting list. I mean, with your insight in your own retail, is there a waiting list so for instance, in dentistry, some dentists are occupied for the next two months already booked out.

Do you see some similar things in your own audiologist’s channels? That are the three questions.

Thanks.

Hi, Daniel. Thanks for the questions.

On the VA side. The VA overall has closed the fitting in almost all of the centers that VA operates by themselves.

Now, there is a small portion normally at high volumes of the VA, where the work is contracted out to normal independents. Now I experience in a world of normal independence, independents tend to have a preference to a certain manufacturer.

So we believe what we’re seeing with the market share drop at such a low volume is a far higher share of this independent fitting going on, where ultimately, it’s the audiologists who kind of chooses what they do. And we do not have 50% plus market share in the US on the independent market.

So that’s how we were wrapping our head around it, obviously it’s important to see what’s going to happen if the volumes go up. I think it’s unclear to us at this point of time when the VA goes back in normal operation mode.

We see the independents being more eager or the commercial channels more eager than the VA people to reopen stores. On the waiting list side, overall, we do not have long waiting list.

If not, we would have less Kurzarbeit and we wouldn’t have more revenue. It could well be that in a particular store, you just have a larger number of people who want to come.

But we’re quite sensitive in almost all countries where we use Kurzarbeit we can on a daily or weekly basis, flex up the hours. But clearly not in the waiting list environment yet.

Hartwig, on the wireless, do you have a read on the –

Well wireless is a little bit more, let’s say within the year cyclical, because there is a quite a share of school business that is very low in summer and is higher towards the end of the year. We launched a new version of our Roger business – Roger product last year that is running very well, accelerated our growth in fall last year.

And within the COVID movement, also new contracts were, you know, hampered quite a bit, because, you know customers be different schools et cetera, were not available, but our existing contracts continued. So I would say a little bit their own dynamics, but good product level momentum there, Daniel.

Okay, thanks. And just on the VA, again, you have no indication when they will start or reopen for normal fitting given by the VA?

To the best of my knowledge, and I may be short of an update, I was not aware that Thomas is raising his hand.

Now I’m talking to our US colleagues, it seems like at the earliest would be in June.

Okay, great. Thanks.

Hey, guy thanks for the questions. Yes, just one just on the authorization for additional capital at 10%.

Just wondered if that additional capital we should be thinking about that as being raising money for either opportunity or protection on the risk side? And then secondly, just on OTC in the US just wanted to get any updates for us in terms of what’s happening with the legislation now?

Thanks.

Hi, David thanks for the question. On the additional capital, I think from the purposing, we keep it relatively broad.

If we get the approval from the shareholder base for that I think our initial when we came up with this idea and as you can tell also from our liquidity side, not all of the things we’ve done over the last couple of weeks were in the bank a couple of weeks ago. Our initial thought came more from the defensive side and saying, look, we just want to make sure that things are at our perusal if we need them.

I think if very attractive things would emerge, we would obviously think about it. But the initial came out of the defensive side.

From an OTC perspective, no updates. We have not seen any document yet as a guidance document, there was no significant signs on progress and it making it to the next level at Congress or at the White House.

So I think we’re sitting here and right now it’s a day for a day. I think our assumption is that you’re talking earliest end of the year until early next year, because we know the times are timelines for getting input and finalizing.

But that would require them to come out rather sooner than later.

Great, thanks very much.

You’re welcome.

Yeah. Hi, thanks for taking my questions.

I have three. First one is on retail, so over the years you have executed a pretty straightforward strategy to strengthen your retail network.

So first, are there on the back of current crisis, any thoughts to revise this strategy? And second, do you see more – in contrast even more opportunities to grow externally now on the back of a challenging environment which might lead to some distressed situations for smaller players?

My second question is on the shape of a recovery. So in China, where some recovery already visible, do you see some strict structural differences between the shape of a recovery in China compared to other markets?

And my last question is also about the recovery in VA, so you just said that the stores are most likely open up from June or not earlier than June. So, the VA for the whole fitting process their point process is quite structured.

Do you think that this structured process will help that the VA market might recover much faster than the private markets?

Oliver, thank you for the questions. On the retail side, no, we have not seen a reason to revise our general retail strategy.

I think it’s aligned with what we said last year stores play a role. Obviously more moves in a particular on the lead gen side into the digital world and you need to build the capability.

And then as people want to have some touch points remote, you need to put omnichannel in place, but no change to that, I don’t see it from COVID and as I said earlier, we haven’t seen many people picking up a pure remote fitting as much as we’re offering it. But many are waiting to get to the store.

From an opportunity perspective, we keep our eyes and ears open. But it’s probably still a little early, particular if you would think about larger assets.

I mean on the one store to five stores probably. But we need to get the balance right here between being selective while we want to make sure we’re safe on the cash side.

But I think that will be a phase in which probably more opportunities come along could be also outside of retail. And from a structural change to recovery, China versus the Western world, allow me to put this in a broad basket as much as I said every country is different.

I think from the outside clearly China was very draconian on a lockdown. I think China has the ability to mobilize the population more centrally than the average western country.

I hope that’s fair to say, I don’t want to step too much into a political debate now. So in that regard, I, as much as I like what looks like a fast recovery in China, I’m not so sure you will see exactly the same curve in other countries.

So I’d rather be a little bit more careful in my thinking. We clearly look at China to see what we can learn.

But for us, the Austria’s, the Germany’s, the Netherlands’ are probably better proxies than what you’ve seen in China, so in general, probably a little bit more muted from the curve. On the VA recovery perspective, I’m just guessing we’re assuming, but because they’re holding longer tight apparently, I would expect they have more people who are waiting until they open, right and so they have a quite a number of people who know they’re up for renewal of a hearing aids and that’s a big part of their job.

And so I would think the longer they wait, the more the people build the waiting line.

Okay, thank you very much.

You’re welcome.

Thank you. I would have two questions, please.

Firstly, also on OTC. Do you think the current environment will increase the appetite for OTC hearing aid solutions?

Or do you think it rather pushes it further away? And then secondly, regarding the allowance for bad debt, have you already noticed customers not being able to pay or is that something you rather anticipate over the next few months?

Falko, thanks for the questions here. On the OTC, not on the basis of a good [VOC] [ph] analysis, but from the conversations we have in the markets where we see people coming back and from the conversations of people saying, hey, hearing loss, and particular in times of physical distancing is actually more important than they feel more separated.

I think we rather see people putting more value about a good service and a good solution. Again, this is not based on VOC, but I would have no indication why I would assume that because of COVID OTC will have a higher penetration than without COVID.

And again, I think you can as we have laid out with the new solution of AudiogramDirect and the better remote and all that we can offer people if it comes to convenience from – for high end system we can offer more as we go. I think from a bad debt perspective, I probably leave it to Hartwig, he’s doing closer to managing that side of the house.

Yeah, Falko you now it’s more of a precautionary measure. It reflects a reasonably detailed analysis of our mostly independents and buying group accounts, that’s where this concentrated on.

So you know, we just want to be on the cautious side here, but it’s not that we have vitals at this point.

Okay, thanks very much.

You’re welcome.

Hi, good afternoon. Two quick questions for me.

Can you please remind us what is the replacement share in terms of volumes for hearing aids? And I think you mentioned that out of pocket accounted for roughly 70% of the price of devices.

Is that correct?

So, replacements here, you mean from every one we sell how much is the replacement versus a new consumer?

Correct.

Yeah. I think here in the range of probably a little bit above 50% being replacements.

I’m just going off average age of people when they get the first hearing aids. So I’d say probably around 60% is replacement, 40% is new consumer.

Out of pocket, I said 75% to 80%. It’s actually higher than 70%, particularly because many people get a reimbursement, but they tend to buy the higher performance level.

So in most markets, you get the reimbursement and granted, and then you pay up.

Got it, so in practice it’s 70% to 80%?

Yeah.

Okay, super. Thank you.

You’re welcome.

Yes. Thanks for taking my follow-up question.

Just out of interest, Arnd you and your management, do you anticipate to see a difference in consumer behavior in those markets where you’ve seen the environment being hit hard. So basically, the countries that you’ve now mentioned have been, you know, seen a fairly okay situation.

What and if we look at UK, France, Italy and some areas in Spain – some areas in the US, do you think there will be a significant difference in how consumers behave?

I think relative to hard hits from a, let’s say infection and mortality rate, I would not. I think it’s relevant to see how much fear was created and the way people have communicated and have guided through.

I would venture to guess if you have a double – if you ever read it, then you’re probably longer out until they come back. But so far, we haven’t seen that.

So, for me it comes more down to what are the economics and where people get the money from.

Thank you very much.

You’re welcome.

Okay, so then we conclude this call. Thanks for the engagement, the questions, the interaction here and we wish everybody good rest of the day and stay healthy and safe.