Financials

Financials — Sonova Holding AG (SOON)

Figures converted from Swiss francs (CHF) at historical period-end FX rates — see data/company.json.fx_rates for the rate table. Ratios, margins, multiples, growth rates and share counts are unitless and unchanged. Sonova reports in Swiss francs; the franc-translation dynamics discussed below are inherent to the business and are described as reported.

Sonova is the world's largest hearing-care company: a vertically integrated maker and retailer of hearing aids (Phonak, Unitron, AudioNova) and cochlear implants (Advanced Bionics). The financial signature is unusually clean for a med-tech — mid-single-digit organic growth, a ~74% gross margin, a normalized operating margin above 20%, and cash conversion near 90% — but the reported Swiss-franc numbers for the year just ended (FY 2025/26) look worse than the business actually performed. Two things distort them: a heavy Swiss-franc translation headwind, and the reclassification of the divested Consumer Hearing (Sennheiser-branded) unit into discontinued operations. Underneath, the core wholesale hearing-aid engine is accelerating.

A note on fiscal years and units. Sonova's fiscal year ends 31 March. Throughout this page "FY2026" means the year ended 31 March 2026 (the "2025/26" financial year), FY2025 the year to March 2025, and so on. Absolute figures are shown in US dollars (converted from the franc); "local currency" (LC) growth strips out the FX translation effect — for a Swiss company that sells mostly in dollars and euros, LC growth is the truer read of the operating business.

Sources: FY 2025/26 results release, group key figures [1] and balance-sheet / dividend sections [6] [7].

The thirty-second read

The quality is high; the optics are poor; the valuation now sits below Sonova's own history. This is a franchise business — a duopoly-plus leader in hearing aids with ~74% gross margins, high-teens-to-20% returns on capital, and cash conversion near 90% — that has spent three years converting genuine local-currency earnings growth into flat-to-down reported Swiss-franc EPS, because a relentlessly strong franc and a mix shift keep eating the translation. FY2026 is the sharpest example: local-currency normalized EPS rose 16.0%, yet in Swiss francs it was flat at $13.15 [1]. The balance sheet is a mild positive (net debt/EBITDA 1.1x and falling), capital allocation is disciplined (record dividend, buyback program run to completion), and the one genuine operational blemish is the small Cochlear Implants unit, hit by China procurement reform. The investment debate is not about quality — it is about whether local-currency earnings power finally shows up in reported francs, and whether ~20x forward earnings fairly prices a de-rated compounder.

How to read Sonova's statements

Sonova earns money three ways, and from FY2026 it reports them under new labels after a portfolio reshaping:

Wholesale (formerly "Hearing Instruments" manufacturing) — designs and sells Phonak/Unitron hearing aids to independent audiologists and retail chains. This is the high-margin engine (segment normalized EBITA margin 23.7%) and the source of the technology edge (the Infinio / Sphere AI platform).

Retail (formerly "Audiological Care") — Sonova's own AudioNova clinics that fit and sell hearing aids directly to consumers. Lower margin, steadier, and grown by bolt-on acquisitions of local clinic chains.

Cochlear Implants (Advanced Bionics) — surgically implanted devices for severe-to-profound hearing loss. Small (~7% of sales), structurally lower margin, and currently under pressure.

The two big reporting changes to understand before reading any FY2026 number: on 23 March 2026 Sonova announced it will divest the Consumer Hearing business (the Sennheiser-branded consumer-audio unit it built after 2021), so that unit is now carried as discontinued operations and all prior-year comparatives were restated to exclude it [2]. That is why headline FY2026 sales ($4,548.8m) sit below as-originally-reported FY2025 on a like-for-like basis: the FY2025 figure still contained roughly $318m of Consumer Hearing. On a like-for-like continuing basis, continuing sales were essentially flat in francs and up 5.9% in local currency [1]. Read the year-wise table below with that seam in mind: FY2017–FY2025 are total-company as originally reported; FY2026 is continuing operations only. (Note: because each fiscal year is converted at its own period-end franc rate, the US-dollar levels can move differently from the underlying franc trend — the franc-reporting dynamic described in the prose is the authoritative read.)

The year-wise statements

Source: figures compiled from reported income statements, cash-flow statements and balance sheets FY2017–FY2026, converted to USD at period-end franc rates; FY2026 is continuing operations, prior years total company as originally reported; net income FY2026 includes a discontinued-operations loss. Latest year per FY 2025/26 results release [1]; DPS FY2026 is the proposed dividend [7].

Three things jump off this table. First, revenue has grown from ~$2.6bn (FY2017) to ~$4.5bn, but not in a straight line — FY2020–21 was whipsawed by COVID (a demand collapse then a sharp rebound), and FY2024–26 by the franc. Second, net income and EPS peaked in FY2022–24 and have drifted down in reported francs since even as the business grew — the central puzzle of this page. Third, the share count has fallen ~9% (from ~66.7m to ~60.5m diluted) through buybacks, cushioning per-share metrics.

Growth: high quality, badly translated

The honest way to see Sonova's growth is in local currency, where the market-share story is intact. Reported franc revenue is a distorted mirror.

Source: reported and local-currency growth rates, FY 2024/25 release [8] and FY 2025/26 release [1]. Local-currency splits are disclosed only for the latest two years. Growth rates are unitless and identical to the franc-reported page.

In FY2026, exchange-rate effects alone cut reported sales by $278.8 million — 6.1 percentage points of growth [1]. Underneath, group organic growth was 5.4% with bolt-on acquisitions adding 0.5% [1]. This is genuine market-share-taking growth driven by the Phonak Infinio / Sphere AI hearing-aid platform, not price or FX — the Wholesale business alone grew 9.5% in local currency and accelerated to double digits in the second half [3].

Where the revenue comes from

Source: segment note figures FY2019–FY2026 converted to USD; FY2025 Hearing Instruments is as originally reported and includes Consumer Hearing, FY2026 is the restated continuing basis. Latest year per FY 2025/26 release [3].

Hearing Instruments — the combined Wholesale plus Retail business — is ~93% of continuing sales and carries the company. Cochlear Implants is small and, in FY2026, shrinking: sales fell 11.1% in local currency to $318.0 million, hit by China's volume-based procurement (VBP) reform and a competitor's product launch in developed markets [3]. Excluding China, implant system sales were roughly flat — the problem is concentrated, not structural, but it is a real drag and the segment's margin more than halved.

Margins: structurally high, cyclically pressured

Source: operating and net margins derived from reported EBIT and net income over sales, FY2017–FY2026 (unitless, unchanged from the franc page). FY2026 net margin is depressed by the discontinued-operations loss; per FY 2025/26 results release [1].

Sonova's gross margin is a robust 73.7% [4] — hearing aids are small, high-value, IP-rich devices. The reported EBIT margin (18.7% in FY2026) understates true operating profitability because it is struck after ~$61m of acquisition-related amortization and one-off legal, legacy and impairment charges. The cleaner read is normalized EBITA: $1,023.3 million at a 22.5% margin, up 2.3 percentage points in local currency and a company record [5]. (Normalized EBITA = operating profit before acquisition amortization and before items management deems non-recurring; a fair proxy for underlying operating earnings.) The reported-margin dip from the FY2021 peak is partly FX, partly the growing weight of lower-margin Retail, and partly the FY2026 charges — not an erosion of pricing power. The genuinely positive signal in FY2026 was operating leverage: sales and marketing costs fell to 35.7% of sales (from 36.9%) as prior-year Retail cost cuts flowed through, even while R&D rose 3.8% in local currency to $274.6 million [5].

Earnings quality: does it turn into cash?

Yes — reliably. This is the strongest part of the story.

Source: reported net income, operating cash flow and free cash flow (operating cash flow less capex) FY2019–FY2026 converted to USD; latest year per FY 2025/26 results release [6].

Operating cash flow ($926.6m) consistently exceeds net income, and capex is light — under 4% of sales — so free cash flow is fat. Management's own framing is cash conversion of roughly 90% across the FY2021–25 cycle [14]. FY2026 operating free cash flow of $654.8 million was down 10.8%, on adverse FX and the phasing of tax payments rather than any working-capital blow-out; net working capital did build to $315.9m (from $126.9m), which is worth watching but is modest against ~$4.5bn of sales [6]. The one caution: reported net income has been falling while cash flow holds up, so the price/earnings optic looks worse than the price/free-cash-flow optic — a reason to lean on FCF when valuing this stock.

Balance sheet: a mild tailwind, not a risk

Source: net debt FY2021–FY2026 (converted to USD) and net debt/EBITDA FY2024–FY2026 (unitless) per FY 2023/24 release [10], FY 2024/25 release [9] and FY 2025/26 release [6].

Sonova carried net cash as recently as FY2021 (COVID caution plus a bond raise), then leveraged up to fund the ~$1.5bn buyback and acquisitions, peaking at net debt/EBITDA of 1.5x in FY2024. It has since de-levered every year — to 1.2x in FY2025 and 1.1x in FY2026, comfortably inside the company's stated 1.0–1.5x target range [6]. Net debt of $1,254.3 million against ~$1,140m of EBITDA and $910.7m of cash is not a constraint; the equity ratio is a healthy 46.8% [6]. The balance sheet is best read as optionality: it can fund the retail roll-up, the ~$7.6bn strategy, and a resumption of buybacks without strain.

Returns and capital allocation

Source: ROE derived from reported net income and equity; ROCE (EBIT / average capital employed) as reported by the company, 19.0% in FY2026 and 19.9% in FY2025 (unitless, unchanged) [6]. ROE and the company ROCE measure use different bases and can diverge (FY2026 ROE is depressed by the discontinued-operations loss).

Returns are attractive and, on the company's own capital-employed measure, rising — ROCE reached 19.0% in FY2026, near the top of the 18–20% band management cites as its through-cycle track record [14]. (ROE looks like it is falling only because the FY2026 numerator carries the discontinued-operations loss.) Capital allocation is textbook-disciplined for a serial retail acquirer:

Dividends — the Board proposes a record $5.93 per share, up 7%, at a ~45% payout ratio [7]. The dividend is declared in francs and tracks earnings at roughly 40–45% of profit — it eased in franc terms when EPS fell in FY2024, then recovered [12].

Buybacks — a ~$1.5 billion repurchase program ran from April 2022 to April 2025 and was completed; no shares were bought back in FY2026 as the company prioritized de-leveraging and the dividend [11]. Over FY2022–FY2024 buybacks cut the share count by roughly 5%.

M&A — steady bolt-on acquisitions of retail clinics ($57.4m of cash consideration in FY2026, down from $85.3m), funding the Retail network's expansion rather than transformational deals [6].

Source: dividend per share by fiscal year converted to USD at period-end franc rates (the franc-declared dividend rose every year except the FY2024 earnings-driven ease); FY2023 [15], FY2024 [12], FY2025 [8], and the proposed FY2026 dividend [7].

How Sonova stacks up against its real peers

The auto-selected peer screen is noisy — it pulls in EssilorLuxottica (an eyewear giant) and Sony (a conglomerate whose OTC earbuds barely touch Sonova's core), and it even mis-resolved "Amplifon" to a US asset manager in one data feed. The three genuinely comparable listed businesses are Demant (the pure-play hearing rival), Amplifon (the largest hearing-aid retailer) and Cochlear (the implant leader).

Sources: Sonova FY 2025/26 release [1] [6]; Demant Annual Report 2025 [16]; Amplifon Annual Report 2025 [17]; Cochlear FY2025 as reported (company filings). This peer table is unitless (growth, margins, leverage) and identical to the franc-reported page; each company is shown in its own reporting currency.

The table tells the quality story cleanly. Sonova has the best reported operating margin, the highest ROCE, the lowest leverage, and among the fastest local-currency growth of the group. Demant, the closest rival, is growing slower (2% organic), saw its EBIT margin fall to 17.2%, and has levered up to 3.4x net debt/EBITDA after the KIND retail acquisition [18]. Amplifon, a pure retailer, runs structurally thinner margins (8.2% reported EBIT) and shrank slightly in FY2025 [17]. Cochlear is the only peer whose quality is comparable (17.3% margin, ~18% ROCE, net cash) but it is smaller and slower-growing. Sonova is the quality leader of the group — the debate is only about price.

Valuation: a de-rated compounder

Source: multiples derived from the 23 July 2026 close (~$258 equivalent) and reported/normalized/consensus earnings; net debt and equity per FY 2025/26 release [6]. Multiples are unitless and unchanged from the franc page.

At ~$258, Sonova is a roughly $15.4 billion company trading on about 20x normalized / forward earnings, ~15x EV/EBITDA, and a 2.2% dividend yield, with a free-cash-flow yield near 3.8%. That is a material de-rating from the 30x-plus multiples Sonova commanded at its FY2021–22 peak, when the shares traded above $400-equivalent. The stock fell as low as ~$207-equivalent on the 23 March 2026 strategy-and-divestment news before recovering. Consensus is cautious — a "Hold" tilting to sell, with a mean target around $255–294 equivalent.

Is 20x fair? For a business compounding earnings at high-single-to-low-double digits in local currency, throwing off ~90% cash conversion, earning ~19% ROCE, and carrying trivial leverage, 20x forward is neither cheap nor demanding — it is roughly a market multiple for a clearly above-average franchise. The bull case is that the FX headwind eventually neutralizes (or reverses) and reported franc EPS growth re-couples with the ~16% local-currency normalized growth, re-rating the multiple. The bear case is that the strong franc is structural, Cochlear Implants stays impaired, and reported EPS keeps grinding sideways, leaving the stock stuck. The valuation is supported by quality but not obviously cheap — you are paying a fair price for a de-risked compounder whose reported earnings have been hostage to the franc.

Strategy and outlook: the ~$7.6 billion ambition

In March 2026 new CEO Eric Bernard laid out a renewed strategy targeting CHF 6 billion in revenue by FY2030/31 (~$7.6 billion at current rates), up from ~$4.5bn today, refocused purely on hearing care after the Consumer Hearing exit [13]. The supporting mid-term financial targets are sales CAGR of 5–10% and core-EBIT CAGR of 7–12%, both in local currency [14]. For the year immediately ahead (FY2026/27), guidance is sales growth of 5–8% and core-EBIT growth of 7–10% at constant exchange rates — with a reminder that current FX would shave 1–2 points off reported sales and 3–4 points off reported core-EBIT growth in francs [7]. The framing is credible precisely because it is anchored in local currency and backed by the track record the company shows — high-single-digit LC sales CAGR, above-20% core EBIT margins, ~90% cash conversion, 18–20% ROCE [14].

What the financials say

What they confirm: this is a high-quality franchise — best-in-class margins and returns among hearing-care peers, ~74% gross margin, ~90% cash conversion, a fortress-lite balance sheet at 1.1x net debt/EBITDA, and disciplined capital return (record dividend, completed buyback). The Wholesale hearing-aid engine is taking share and accelerating on the back of the Infinio/Sphere AI platform.

What they contradict: the headline "sales down, EPS down" optics. FY2026's reported declines are an FX-and-reclassification illusion; the underlying business grew local-currency sales 5.9% and normalized EBITA 17.3%. The market's "Hold" and de-rated multiple price the reported franc trajectory, not the operating one.

The tension to resolve: three straight years of local-currency earnings growth failing to reach reported franc EPS. Until that re-couples, the stock likely stays range-bound regardless of operational quality — and the one small operating sore, Cochlear Implants, needs to stop bleeding.

The first financial metric to watch is Wholesale (hearing-aid) organic sales growth in local currency. It is the highest-margin engine (23.7% segment EBITA margin), it drove the entire FY2026 acceleration (+9.5% LC, double-digit in H2 [3]), and it is the single line most exposed to the Infinio product cycle maturing. If Wholesale LC growth holds high-single/double digits into FY2026/27, the ~$7.6bn ambition and a re-rating are live; if it fades back toward low-single digits as the launch tailwind wanes, the reported-EPS stagnation gets harder to explain away as "just FX."