Sonova Holding AG
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Sonova Holding AG
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Ladies and gentlemen, welcome to the Sonova Business Update Conference call. I am Alessandro, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Arnd Kaldowski, CEO. Please go ahead.
Alessandro, thank you very much. Good morning, everyone. Thanks for calling in on short notice here. Let me start off with wishing everyone that you are healthy and safe in this special times. I want to voice over some of the highlights of the press release we published this morning in about 5 minutes and then open it up for Q&A, which I'm sure many are well prepared for. I think we published in between our normal reporting time line here, because we understand that you have a significant interest to know where the market is going and how Sonova is doing in that. And while we didn't have a guidance out, we felt it's important to come back to you after 2 more months after our initial signals here. I think as you've seen, we've given a guidance for the first half of the year in order to give you more insight go forward, but we didn't give one for the full year given some uncertainties, which I will comment in a second on. The first point out of the update, obviously, is around that the partial recovery is faster than we had expected in April. You may remember, we shared that we were at about a 35% sales level in April. And that now for the Q1, including the 35% from April, we were at 59%. Different by geographies, pretty much in line with what I think most people would have expected. Asia Pacific being at 75% of prior year; EMEA at 60%; the U.S. at 55%; and the Americas, without the U.S., at 50%. I think the second one, important to note, and we also talked about this in April. Our cost containment continued throughout the Q1. Although on the R&D side, we always continue to invest into R&D and the new product development because it's important for us from a market share gain perspective. With the increasing customer activities over the last couple of weeks, we have increased, to some degree, our lead generation as well as, obviously, our manufacturing, to accomplish the higher volumes here. So a little bit less pronounced from the savings relative to April, but still quite some focus on the operating profit perspective. Hence, the guidance we gave out for the first half year, we do this despite still existing uncertainties from the different movements of infection rates in the different markets. The revenue we're expecting for the first half year to be between 65% and 75%. Keep in mind, that's the first quarter at 59% and an uptick from there. And then from an EBITA margin perspective, for the first half year, we expect a single-digit percent of positive EBITA adjusted for restructuring costs. Despite the good partial recovery so far, we also remain cautious about how this is going to play out over the quarters to come post the Q2 for us. There's 2 things, which keep us kind of being on that careful side. The one is, I think especially with some uptick of infection rates in certain markets, we're not at a place where we exactly know how this is going to work out over the next couple of quarters. And I think at the same time, we recognize and appreciate that this is also a severe economical crisis for the world. And so in that regard, it's hard for us, at this point of time, to gauge what is the implication of that on the purchasing behaviors. In line with our strategy to optimize our footprint, which you may remember, we had a first step done about 18 months ago and then a second one 12 months ago, we are now accelerating some of the projects we had in mind with the objective to, in the next 9 months, save between CHF 50 million to CHF 70 million in run-rate costs when the measures are implemented, requiring some CHF 40 million to CHF 60 million in restructuring dollars. We will do this wherever possible by using voluntary attrition or attrition we have in general, hence, also the structural cost or the restructuring cost being relatively low for the saving potential here. And we're focusing predominantly on what we call noncustomer-facing roles. So think about G&A structures, think about many things in the logistics and key manufacturing sites. There's a second part, which we have shared that with regard to the audiological care network, we see opportunities, on a certain scale, to optimize our store footprint. If you think in terms of a market where you have a higher density of stores, you can imagine some of them might lower revenues and are not that far from other locations. And so that's the type of changes, we think on the audiological care network, keeping the strategy intact, but being able to move the consumers to neighboring stores. And then there are some opportunities on the logistics and the repair center side. Explicitly on the R&D and on the frontline salespeople, we're pretty much excluding them from those measures. You heard us talk about these being important areas for us to invest more last year. We're not dialing those back because we still see their contribution to our growth above market. We see us in a good position even in times of COVID-19, I think everybody remembers, we were growing share significantly last year. We think the, let's say, fundamentals on how we operate and the products we have are still intact and in place. And at the same time, when we think about our market, we think that midterm that this continues to be a very attractive market with good fundamentals, which we have discussed all along, which are not changed by COVID-19. So in that regard, I think we're in a phase of 1 to 2 years, which is holding us back from what our original, let's say, economical plans on the strat plan. But our strategy, to us, looks like the right strategy for us and the market looks continuously positive and attractive for the long term. So with that, I want to open it up for any questions. I didn't say this at the beginning. I also have Hartwig Grevener with me and Thomas Bernhardsgrütter. In case there are specific questions, they can answer better. I'm going to pull them in.
Operator, we're ready for questions.
[Operator Instructions] The first question comes from Veronika Dubajova from Goldman Sachs.
If I can with 2, that would be great. My first one is, I mean, thank you for the update. It's incredibly helpful. Just curious if you can comment a little bit on -- you've given us the April number and the Q1 number, it'd be really helpful to see how you felt about June? And just maybe give us a sense by geography for the figures that you, Arnd, shared. If you could give those for June, that would be very helpful. And then sort of slightly surprised that you're giving guidance for the first half, but not for the full year. Would love to understand your thinking. I mean, do you have concerns that as we move beyond Q2, the situation could deteriorate? What are some of the indications that you're watching there? If you can share your thoughts on that.
Veronika, thanks for your questions. So we don't want to get into monthly sales updates on a regular basis. So allow me to try to describe it somewhere in between. If you think from the 35% and then to the 59%, if you assume something which is in line with a more linear curve in order to get you to the 59%, that's probably a good starting point. I think from a geo perspective, I think we did see the markets move with what we have seen from, let's say, the public lockdown behavior, right? So China was good. They started early. We said that in April. I think we did see countries like Germany, Austria, the Netherlands move reasonably fast because they started to allow traffic in the street and to our stores, and then we did see consumers coming back. And I think the U.S. was always a little bit in between, hard to call it one country with a different opening scenario. So that's kind of a mix. So they were a little slower. And I think in the extremes, you go to the U.K., active selling in the audiology store is just allowed since beginning of this week. So there are some laggards here. But it's very much tied to the lockdown scenario the government has put in place. I think we see good initial consumer response right out of the gate, but not at the normal level. And so I think we understand the first half of the consumers in that behavior. We're not so sure about -- if all of the consumers are coming back in short time. And I think that's one of the things we're watching with regard to how do we have to think about the second half year, because it could well be that there are some which are more "off the brakes" and want to get back to everything normal and other ones are really more reserved. And we have not seen that all of them vis-a-vis come back. I think our Q2 or first half year guidance is without the assumption that any market really significantly goes back to a lockdown again. So obviously, if somebody of significant size would go into full lockdown, again, that would have quite some impact, particularly in the second half of the year. So that's what we're watching. I think the infection rates are really hard to read because for us, ultimately, it's relevant in what the consumers do. So that's more kind of a leading indicator, but if people move back to lockdowns, we would get very worried.
Understood. And Arnd, can you maybe comment on the cost? I think in April -- that in April, your kind of OpEx was down about 35%. What is it on a first quarter basis or how are you thinking about on a first half basis?
Veronika, I mean we are giving you an idea on the first half, what it ultimately means on the bottom line. So we're taking measures and sitting tight on everything that is not customer-related and future product development-related. So I guess you need to read it a little bit from there. We believe that all that we do on the cost side is not at the expense of our future potential and harvest our position -- strong position as the business is coming back. But you can imagine most of the cost compression that we are doing as business is coming back is on the OpEx side. And that's as much as we can say, I believe.
The next question comes from Chris Gretler from Crédit Suisse.
First, on the sales trend. Do you have any indication about kind of what degree these now sales pickup was driven by kind of old or previously kind of -- by customers that have already kind of previously signed up for hearing care services? I'm just interested kind to see essentially where the lead generation is going so. And whether you had any similar kind of trends on the lead generation, just to see kind of the sustainability of this current recovery. And then maybe also if you could give some comments about the retail business and the implant business. Maybe more specifically, how that has been recovering? And then the last question is on restructuring. Just quickly, how much of that is actually cash-relevant? And how much is a writeoff of anything? That's all.
Chris, thanks for the questions. On the sales trends, clearly, at the beginning of the quarter, the focus was pretty much on trying to bring people back into the stores who were halfway through the fitting process or were at least convinced that they want to get a hearing aid. I think we, as well as others, then moved towards going to the existing customers who may be ready for a second version of a hearing aid after 5 years. And I think by now, people are getting their toe into the water with regard to new customers. I think from a mix perspective, we're clearly in -- even the June, still over-proportional in existing customers over new ones. And you can see that based on -- it's still being a relatively low level of outbound marketing and TV and other things. People have started with it, but we're still more on the existing customers. So I think there's more opportunity to go after on the new customer side. It's going to be somewhat more costly on the OpEx side, but there was some pent-up demand we could work from on people who are boarded the process. On the recovery of the different businesses, audiological care, we can't say if our wholesale is faring better or our audiological care at this point of time. The audiological care from the revenue is a little lower than normal sales, but that's mainly because of the revenue recognition which can be anywhere between 2 weeks and 8 weeks, depending on the market and how long people can give a hearing aid back. But it pretty much looks like similar recovery curves, as you would expect, because ultimately, we're all after the same consumer in a specific market. I think AP is significantly slower. They are -- the hospitals, especially in the markets where they are still reasonably close to kind of the emergency rooms being full with people who need attention to COVID, are not doing elective procedures and the ones who have started doing elective procedures were first going for opportunities, which have more hour and more dollars per operating room hour and we're not the highest there. So I think that's lower. It's -- we carefully observed the U.S. I think there are certain states where they went backwards with regard to elective procedures, still on a small number here. But if you go to certain counties in Texas or in Florida, given their high infection rates, they're starting to -- not wanting to do elective procedures. So there's even some more uncertainty on the AP number. But as you know, it's 10% of our total, so probably not that much of a big needle mover for us, but more interesting to know and observe. I think on the restructuring cost side, Hartwig can comment better.
Yes. It's -- the overweight -- clearly overweight will be cash. There will be some cases of store equipment write-down, but Chris, it should not be more than 10%, 15% of the overall restructuring bill. However, not everything will be cash in this fiscal year. It could be that we have to make provisions in this year, recognize it in the P&L, but the cash realization might then only trail a few months later.
Okay. Maybe can I squeeze in one more, just kind of to get a confirmation? I know you mentioned in your press release that our first half sales should reach around 65% to 75% of prior year level. And I think in your call on May -- in mid-May, you commented that about this level is required for you to confidently launch a new product. Would you consider the current market condition to be satisfactory to kind of launch a new product then?
I think if we see a good, steady curve over the next months, yes, then the math would get you to that point. Our perspective hasn't changed on that order of magnitude. If you would be sitting here and you're seeing the curve getting flat or even for 2 or 3 weeks going downwards, then you would worry about the go forward, right? But from the general level, if we have still a steady curve with some improvement month-over-month, I think we're at the same place.
The next question comes from Patrick Wood from Bank of America Merrill Lynch.
Perfect. I've got 2, if I may. First, I'm just curious, what are you guys hearing from your independent retailer partners and sort of a broader sense of the market and how they're seeing things? Is it similar to generally what you're seeing in your retail franchise or are they having an easier or harder time of it? Just curious to get some color around what you're hearing there. And then on the second part of the question, you sort of touched on it briefly, but should we consider the cost savings to be relatively meaningful within the first half numbers or is this much more -- that cost savings program, is this much more a function of the back end of the year and into the later years?
Patrick, thanks for the questions. So on the independents, we don't see a significant -- a structurally significant difference, let's put it that way. I think we see some which are more progressive, they've opened up earlier, they're more active on the marketing activities. And then there are some who were a little bit more careful and cautious. Some of that may have been out of safety concerns, some of that may be just they were worried about that they don't have enough volume to pay for the salaries when the people are coming in. But no structural change. I think with regard to the accounts receivables and the provisions, we feel pretty good at this point of time. We will need to see a couple of more months because at the beginning of the journey in many countries, independents got some subsidies. But overall, we haven't seen, so far, any significant challenges with regard to people not being able to pay. They may be a month late, but that's the pattern we see. I think from a cost savings perspective, it's not 100% written in stone. Some of the projects need more, let's say, planning. Also in some markets, we have situations where we need to be aligned with works councils and other things. But I think if your starting assumption would be somewhere in the 50-50, that would be probably the best estimate we have right now. It may fall a little bit to the left or the right from there, but some of the projects take longer, and other ones can be executed faster.
Next question comes from Falko Friedrichs from Deutsche Bank.
I would have 3, please. When you look at your competitive landscape, do you sense that you can recover faster and can emerge the strongest from the pandemic? And secondly, when looking at the returning customers, are those rather a younger customer group? Or is it pretty broad-based so far? And then thirdly, you mentioned that you freezed some of the nonessential CapEx. Is that still necessary given the fast recovery?
Falko, thanks for your question. I would say, we feel good about the speed with which we have executed our first 3 months of the COVID playbook. We had safety first than protecting the core, as you can see from some of the things we did on the liquidity side, but also the cost side. We have a third phase in which we entered into a couple of weeks ago, which we called Protect the Rebound, and have very focused initiatives with regard to how do we nurture our existing customer base, how do we use digital means, how do we use remote in these times. I think the other one -- I think our product with a marble is still kind of well thought of in the marketplace. So I think from those metrics, I would say, we feel good about it. It's not that clear on all the published data that I would exactly know. Are we winning? Are we winning a lot? Are we equal with some people? So -- but I think we've done a pretty good job with regard to the playbook we're playing here. And I think the other one, as you can also tell from us going after structural opportunities to secure that we can continue to invest into our growth drivers, I think there's a clear mindset of facing the situation and making sure we're not cutting back on the things like feet on the street and the product road map. From the returning age, we have not seen a big bias towards the one or the other. I think it's really more kind of the mindset of the individual and also the need level. But we have not seen a big bias. I -- we have not seen that now magically lots of younger people are coming. I think it's probably more in line with how severe is the hearing loss. And then the other one is really kind of a personal preference question. On the nonessential CapEx side, I think at the beginning, we really wanted to tighten down many things. And I think we're now in a place in which we say, "Look, we're recovering. We're getting better. We're seeing a way to single-digit profitability in the first half. We've done significant steps on the liquidity side." So we'll continue to be a little bit more careful, but we are starting to free up things where we know these are important things to kind of march forward on our strategy.
The next question comes from David Adlington from JPMorgan.
So firstly, I just wondered if you could give us some idea about the number of stores being closed and the potential revenue impact. Secondly, just wondered if you could give some comment as to what you're seeing in the VA and how you see that progressing from here? And then finally, maybe just an update in terms of -- around the FX impact in the first half, both top line and at the EBITA level.
David, thanks for the questions. So on the number of stores, we're not giving an exact number. To some degree, we also still need to work through this. Again, it depends a little bit on things you can do in certain countries. But it's on the -- let's say, we don't want to give a number. So let me park it here. On the VA progress side, the -- let me say something to the revenue first, because you asked about the revenue. In the Netherlands, some of you may remember that because of a changing reimbursement environment 2 years ago, we reduced the store network by about 20% of the stores. And this is not the number which answers your question, certainly not, not anywhere close. We were able to post a year afterwards, good double-digit growth and then a second year of close to double digit, and the market wasn't particularly good. So we were able to, over the course of the year, 1.5 years, to be share-winning in the marketplace despite those closures. Now why was that? Because the team has done a great job on how they move the database, how they select the particular stores, which were close to other stores. So in that regard, while there may be some short-term impact on the top line side, I don't think it is that significant that you should pack that in to your model here. But I think we have the experience that when you execute those network optimizations well, you can recover those over that period of time of a year to 18 months. On the VA progress side, it's slowly getting better. We have not seen a broad-based guidance in VA that people should open everything. It seems to be more local or regional decision-making, but it is the slowest of the channels with regard to pickup in the United States. On the FX side, Hartwig?
Yes, David. So the prior year comp for euro and dollar is coming down in the second half of our first half. But certainly, in the first half -- in first quarter, the impact was significant. Last year, we had a bit more than 3 percentage points negative impact on the top line. I guess this is still the magnitude that we would be expecting for the first half of this year at this point.
The next question comes from Maja Pataki from Kepler.
Just very quickly, Arnd, just to get back to your answer on the retail side. Could you provide us maybe an update on which regions you're mainly targeting? Is it global broad-based or is it a couple of markets where you have a specific focus on? Understood that you don't want to give the number of stores, you indicated it's less than 20%. Is it in the single-digit percentage points or would it be around half of the 20%? And then on the U.S. market, which is seeing, unfortunately, a very grim picture. Have you had an update on the performance over the last 2 weeks? Have there have been renewed store closures on a voluntary basis or the VA clinics that have pushed back openings?
Maja, so on the retail side, it is, let's say, broader-based in the countries, but it is the countries where we have, let's say, more significant footprint in terms of density of stores because the concept is really to keeping the consumer database. On the question on, is it single digit? I would say it's clearly single digit. I will not narrow it more, but that's, I think, a fair comment here. On the U.S. side, we have not, in the last couple of weeks, seen people going backwards who had opened stores. And I'm talking big picture, there maybe 1 or 2 somewhere. But if we look at our leading indicators, the U.S. stayed at the same level of store openings. We also did see still some positive momentum week over week. I think in that regard, it's okay, it's just hard to read what are the next 2 to 4 weeks in the U.S. right now. But so far, okay.
The next question comes from Tom Jones from Berenberg.
I have 2. The first question I wanted to ask is just on mix and whether you're seeing anything in your mix trends as you emerge or as markets emerge from lockdown that would give you some cause for concern about the financial health of your customer base? Because my guess is that once someone is committed to a hearing aid, they'd probably continue through to the purchase, but if they're worried about their financial picture, they may look to down brand sort of during the purchase process. So just some idea of mix trends would be helpful. And then the second question I had, which is really to try and understand how margins might progress in H2 more than H1. But I wondered to what extent has your single-digit margin in H1 been supported by various government-backed furlough schemes? And if so, at what point does that roll off and the cost base become entirely your own again, so to speak?
And thank you for the question. So on the mix trend side, we have not seen a significant change in mix in Q1 relative to the year before. That's good news. We're observing it carefully. I think it's hard to take from that, that if we're half a year further down the road, 12 months further, if there may not be an impact. I think in 2008, 2009, we did see that in the U.S., there were some mix changes after an economic crisis. But so far, we have not seen that. And that may be due to who is in the funnel right now and how convinced were they already. I think on the margins -- here in the first half here, let me answer first the question on government subsidies and furlough and others. We said that when we were at the 35% OpEx reduction in April, that about 20% of that 35%, so meaning 7% of the total OpEx, we were getting from government subsidies in furlough. So the, by far, larger, let's say, OpEx savings came out of other things we did. We're now at a significantly lower dollar amount in government subsidies in furlough, so I don't think the ratio has changed a lot. Now in some countries, they're going to run out in a month or 2, but we're also getting to volumes where you don't get that much anymore. So I think in that regard, we're really more in a world of managing OpEx overall. And needing to decide where is it driving growth versus not, and that's what we put here into the plan for the first half of the year. I think the fact that we are talking about structural optimization indicates that we also think we want to do something for the longer-term here, which ultimately will easily replace what we've gotten in subsidies.
Perfect. That's very helpful. And I had 1 just quick follow-up question on the retail side. I just wondered if you're seeing any different levels of activity between stand-alone shops, and shop-in-shop type concepts? Because my -- I guess, my fear is that customers might be happier to go into an audiologist, which is usually pretty dead, whereas they might be a bit more cautious about going into a busy pharmacist. I just wondered if you're seeing any difference in the pickup in your shop-in-shop versus stand-alone center business.
So here, we are kind of not the best to help you out because we have very few shop-in-shop except for the U.K., where we have all of our stores in booths, but U.K. was closed until this week. So we have so few shop-in-shops that I couldn't derive from there any kind of meaningful answer for you, sadly.
The next question comes from Michael Jungling from Morgan Stanley.
Great. I have 3 questions. Firstly, when it comes to your comment about a gradual recovery for the market. Can you comment on what this now means in your own mind and how this relates to your restructuring efforts of keeping the sales force intact at the same level as before? That's sort of my interpretation. That's question number one. Question number two. When it comes to the a EBITA margin in the first half, you're guiding in constant currency. Is it fair to assume that the transactional FX headwind is probably going to be somewhere about 140 plus or minus basis points in the first half. If it's wrong, then perhaps you could provide me with some better guidance. And then on question number three. Can you comment on the Apple announcement of the AirPort Pro with the new iOS providing some hearing functionality. How you feel that this sort of product will eventually be accepted or not accepted in the market for people who may have hearing difficulties?
Michael, thanks for your questions. On the sales force side, I think last year, we went through an exercise to analyze how many consumers -- customers are in a marketplace and chose that for the larger ones we were analyzing to increase our feet on the street. And that was pretty much derived from how many competitive accounts can a rep handle effectively. We are very pleased with what we're seeing now 9 months in, particularly prior to the COVID time when we're looking at how much more competitive accounts have we knocked on the door, how many of those did buy something who never bought from us. Until this dynamic hasn't significantly changed. We still have the same number of customers in the marketplace. And we see the positive benefits here. So if you're in a world in which you are at the same level as prior year, a couple of percent points lower, a couple of percent points larger, we don't think you want to restructure your territories just because you think it could be 3% different somewhere in the productivity. So in that regard -- and the other one, just to factor in. Per rep, in those markets, you had a couple of million revenue per rep. So if you have the opportunity to convert some more competitive accounts, it's always worth it. So in that regard, it is one of the things, in addition to R&D, we keep very secret here because we see the potential on the competitive account side. On the EBITA margin side, I'll point to Hartwig.
Yes. Mike, we're not spelling it out to the 10 basis points. I guess we see 140 basis points. You're a bit on the high side when I'm looking at the currencies coming down in the next 3 months, thinking of the first half year. That's as much as I would go here.
And then Michael, on the Apple announcement. I think probably timing-wise, it wasn't clear to us when they kind of make another addition technologically to their product. But I think given what they've done over the last years, you would have expected that because those technologies are available. I think if you look at their device, I would put it in a category of first, and that's the current version, which is as beta in the market, it focuses on streaming, not so much optimized for a speech environment. Don't know if they're working on that. But it is also a device which is, from its wearing comfort as well as from its battery life and potentially, from the latency time of the transfer of the signal, more a situational hearing device then it is something you would wear as a regular hearing aid. And so we think it is actually a good thing that Apple is driving, even with some of the applications they have now on their cellphone, the awareness about hearing health. We think it is similar to what we have discussed all along about OTC, a good way of getting people earlier into the marketplace but with what they're assembling there, I don't think it's a substitute in any shape or form for a real hearing aid.
Great. Can I briefly follow up on question number one? Is the gradual recovery of the market, the commentary in your press release, what does that now mean in your mind, please? Are we talking about a recovery to pre-COVID levels in calendar year 2021? Or can we achieve that sort of run-rate by the end of this year?
I think end of this year, I would be rather optimistic to assume given the uncertainties we see and the carefulness of people in the economical situation. So I think 2021, I think, is a fair scenario. Obviously, certain things need to be seen on the journey there, but I think end of 2020 would be quite an optimistic scenario.
The next question comes from Daniel Jelovcan from Mirabaud.
Yes. Just one question. Your first half guidance of the minus 25%, minus 35% growth inversed. That gives me a second quarter of minus 9%, best case. And the second quarter of minus 29%, worst case. So can you maybe describe what is the base behind that? Because minus 9% actually would be a further improvement versus June, according to my calculation. Is that entirely related to COVID-19? Or are there other factors like pent-up demand and so on?
No. I think if you take the midpoint -- Daniel, thanks for the question -- I think you would see a gradual improvement in Q2 versus what you've seen here as an exit run-rate in June, as you did the math. And I think we're giving a range around that because there's lots of uncertainty as we've laid out. But I think if you think in terms of midpoint, we do see continued improvement. I think there's at least the U.K. as a market which needs to open or has opened now. I think I would expect that other people also see some further improvements of consumer demand. So no major metric to that.
Next question comes from Issie Kirby from Redburn.
Firstly, on the restructuring costs. It would be great to get some color on what is contained within that CHF 50 million to CHF 70 million annual savings going forward. Particularly, how much of this is expected from retail streamlining versus the optimization of other cost lines? And then just on remote care, how are you thinking about remote care where we're sitting at the moment? Any color on what you're seeing in terms of the uptake? And has this influenced your decision around the retail footprint in any way. It'd be great to get your thoughts on what role you think this will play in the business going forward given the recovery.
Issie, thank you. I think I in terms of where are the savings falling, I don't have the exact number, but you're probably somewhere in the half and half between the retail side and the rest of the business directionally. It's not all there, but given that we make a step towards the network optimization, it's a little overproportional to the rest of the business. On the remote side, I think the positive news story is we see 4x to 5x as many people doing remote from a hearing care professional as well as from a user. They -- for the ones who want to see a lot of remote, the negative part of the story is you're still in low single-digit number of fittings being done remote even in COVID times, and it's not for the lack of trying of us, for sure. I think people know that we launched even some new tools during the crisis, and we were pushing them quite aggressively with our independents because we want to make sure they have something in their hand. We did see some hearing care professionals pick it up, but the number is pretty low. We think it's still, long term, an important part of the offering to a consumer. We do believe that the omnichannel offering is the right way to go, meaning you have stores for some of the interaction where the consumer wants that. There's diagnostics to be done. There's other things to be done. There's an initial fitting to be done, which we see the vast majority of consumers wanting to do in person. We think that as a small proportion of people who are happy to do their first fitting, perhaps from a distance with some audio support, but in principle, COVID hasn't changed the dynamic towards -- a landslide shift towards more remote than we were surprised. So we're continuing our journey on our audiological care to build those kind of remote capabilities and the different tools consumers want on their digital journey if they choose to do part of the journey digital with us. We're building call center capabilities for helping them when they're in distance. And on the wholesale side, we have completed our portfolio of tools, which they need in order to do even the initial fitting, if that's allowed from a regulatory perspective. But we don't see a change here towards the world is going into this as the only scenario or going there quickly.
The last question comes from Hashan De Silva from CLSA.
If I can get 2 in really quickly. The first one is any commentary on the recovery of the cochlear implant business by geography? And also, has the recall of the CI units been completed? And how is the manufacturing process going to restock that channel? And any feedback from key opinion leaders on the replacement process?
Hashan, thank you. So recovery by geo, China, ahead of last year as a market. We're also doing well there. I think Europe significantly better on its recovery than the U.S. I think it really hangs very much together with the sensitivity on the, let's say, capacity issues in the hospitals with regard to surgery suites and emergency departments and the U.S. is really in a more difficult position there. I think from a, let's say, dealing with the voluntary field corrective action we put in place, we have approval for the new device in pretty much all relevant markets today. From a manufacturing, we can serve the demand. We shared, end of April, that we had 90%-plus of the key customers indicating they would buy or have already bought the new device, and we continued to do our work to convince the remaining ones. So I think we're in a good position with regard to getting back to the table and being implanted. So I think so far, so good. To some degree, COVID has helped a little bit because the hospitals were busy also with other things. And so I think as much as we had 2 headwinds here, I think it's probably more 1.5.
Yes. Perfect. Just -- if I had to put a number on the recovery overall, would you say it's 50% of last year or 25% of last year?
It's closer to the 50% than the 20%. It's somewhat muted relative to our average fleet, which is all hearing instruments.
Yes. No, that's perfect. That's great color. And just one final one, if I could sneak it in. You mentioned earlier that you needed a certain baseline sales before you launch a new product. Does that also apply in the CI business unit?
I think directionally, yes. Would it be exactly the same percentage? I don't know. But in principle, I think you want to have sufficient market volume in order to take advantage. And not just the volume but the mental, let's say, engagement of your customers right now with the category, right? So probably a couple of months out here, if you would have something where I would kind of put the time line to.
Okay. Operator, thank you very much. Thank you, everybody, for taking the time to listen in. If you have any further questions, feel free to contact me directly. And I wish you all a nice day.
Thanks, everyone.
Thanks.
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