Full Year 2024 Demant AS Earnings Call

Speaker Change: Good afternoon and welcome to our conference call following the release of our first integrated annual report for 2024 earlier today. For the call here it's business as usual and we have a plan to run through the presentation and then we'll do a Q&A.

Speaker Change: On the practical note, the presentation should now be on our website and per usual we plan for the call to last no more than one hour in total, including the Q&A session.

Speaker Change: In the room here today, it's the usual statement of representatives.

Peter Pusseløkke: We have Søren Nielsen, our President and CEO, Rene Schneider, our CFO, and then Gustav Høgh and myself, Peter Pusseløkke, from the IRT.

Søren Nielsen: That is it for the practical elements and over to you, Søren, for the presentation. Thank you very much, Peter, and welcome everybody. The agenda of today, also very usual, key events, financial takeaways and the addition of a little more sustainability advancements.

Søren Nielsen: business area review, Rene will do a group financial review, I will comment on the outlook and then we will get into Q&A.

Financial highlights for 2024, 4% reported growth.

two from organic growth and two from acquisitions.

and then all in all revenue up to 22.4 billion.

Søren Nielsen: An improvement of gross profit 5%, EBIT down 100 million, around almost 2%, but very strong cash flow from the group. Key events, very good momentum in hearing care, which has continued in...

Søren Nielsen: towards the end of the year. Strong organic growth rate in a high number of markets and above market growth rates, so super solid.

Søren Nielsen: Hearing aids growth was below our original expectation, impacted by, in general, a strong competitive environment, but more importantly, the choice of brand strategy in the U.S. that led to loss of significant market share back in the second quarter.

Søren Nielsen: Diagnostic growth was impacted by soft markets, but even in that light or in that light, we estimate that our organic growth rate was above the market growth rate.

Søren Nielsen: We have closed the divestment of the CI business in summer and we during the year also took the decision to divest the communication business, two very important steps.

to become a more focused healthcare company.

Søren Nielsen: And then we implemented restructuring in communication EPOS in the fall, which means that in Q4 we, as expected, saw a positive profit from both the communication business and

Søren Nielsen: The bone anchored hearing system business, so the two together, posted a positive result which was also in line with expectations.

Key financial takeaways for the second half.

Søren Nielsen: Organic growth in the second half was 2% as for the year, despite of a strong comparison base and again despite of the loss of the market share and the managed care channel in the US.

and in line with our most recent expectations.

Søren Nielsen: Despite a continued good ASP in hearing aids gross profit declined with 0.4 percentage points.

Søren Nielsen: This relates to exchange rate and more and more rechargeable hearing aids. Rene will comment more on that.

Rene: more of a temporary nature, and yeah, I will comment more on that. We did manage, as expected, to significantly lower the growth rate of OPEX in the second half down to 2%, significantly down from the first half.

Rene: acquisitions added additional 4 percentage points. EBIT before special items was 2.2336 billion, which is basically flat versus the second half of 2023, but an improvement from the first half.

Rene: Yeah, there was a negative impact from exchange rate and, of course, also lower operating leverage due to the softer top line. Very strong cash flow. Cash flow from operation was 2.5%.

Rene: 6 billion and the free cash flow was just north of 2.3 billion.

Rene: Revised outlook, which we will also come more on, 3-7% organic revenue growth, EBITDA before special items of 4.5-4.9 billion and share buyback above 1.5 billion dailies grown.

Rene: We deliver the first integrated report with financials and sustainability. The number one purpose of Daymond is to help more people here better. And part of the sustainability reporting is...

Rene: the number of improved lives and we are close to 11 million. This is a time accumulative number with some assumptions around expected lifetime for products in the field, etc.

Rene: Other kind of sectors in the report is the respect for planet, among that the reduction in scope 1 and 2 emissions and you can see a good nice trend downwards.

Rene: under caring for people, growing gender diversity in upper leadership team. This is also continuously nice development exceeding our goals a little bit ahead of time and therefore new ones.

so far, and will of course soon get to 100.

Rene: Business area review, the hearing aid market first in 2004. The fourth quarter grew globally to our estimate 5%.

Rene: which is spot on to the annual expectations that takes up the annual growth rate 2-4% from after third quarter more towards the 3%.

Rene: Europe has a below average growth primarily due to a slightly negative growth in the NHS whereas Germany showed a nice growth and also France.

Rene: had a positive growth making the full year end slightly positive.

Which is the first time since the reform in 21

Rene: The U.S. continues good strong momentum on the commercial side. Those should be mentioned, an easier comparison base. VA remains flat and also strong development in Canada. Emerging markets, rest of the world in general doing well in the second half and best in fourth quarter, again, all in all adding up to the 5%.

Rene: We still estimate that due to channel mix and country mix etc we have seen a slightly positive ASP development in the market in the year and of course our own performance needs to be seen in that light.

Rene: Hearing aids in the fourth quarter, organic growth of minus one to external customers.

Rene: impacted by a strong comparison base and of course also the loss of share and managed care and a definitely intense competitive environment. However, I would say we have kept our market share in value on a sequential basis. We continue to see.

Rene: good strong development of our ASP for the second half explicitly minus one in units.

Rene: and a ASP in plus of 5% and this is of course both a channel and product mix.

good performance in many medium-sized market spots.

Rene: negative growth in France, Germany, UK, basically all two, though different.

lower sales to certain larger chains.

U.S. positive Q4 driven by also larger change.

Rene: and slightly negative in Canada, but only due to a very high comp we had in Q4 last year. Nothing looked at a runway basis. The Canadian business is still performing well.

Rene: Strong growth in Asia with positive growth in China, despite weak markets, also solid in Australia and South America.

Rene: and further expansion of product portfolio, we continue to benefit from a very power efficient fundamental platform.

operating a

Rene: fully integrated DNN that's part of lowering the power consumption. It's on all the time and it doesn't have any significant impact on the size of battery we can use, and therefore we have also succeeded to make it work on the smallest battery in the industry, what's called a 10A battery, which is used in the very smallest CIC-IRC styles, which is what we now release.

Rene: with the full benefit of the DNN running all day, so a super strong concept and a very high performing series of products to be introduced here this February.

Rene: In addition to that, we also expand our lower-priced offerings with mini-BTs, mini-rides, in-ear products, and for the first time also with elements of the DNN.

Rene: performance or technology in, so super strong concepts that should also drive growth in more lower priced price segments in markets where that's relevant.

Hearing care in false border, very strong performance.

Rene: continued strong and solid momentum in many mid-sized markets and in North America.

Still good contribution from acquisitions.

Rene: in the quarter, primarily in Denmark, Germany and Italy, in line with our strategy to build critical mass in selected markets and expand in Germany. Growth was primarily driven by unit.

Rene: fundamentals of more stores and a bigger network and a slight ASP tailwind coming from product and also geography mix in the period.

Positive growth in France, slightly positive growth in France.

Rene: strong growth in the UK, Poland and Germany, also good growth in the US despite of the exiting many managed care organizations.

programs and instead driving traffic ourselves has been successful.

Rene: Strong growth in Canada, negative in China where we still suffer from weak market conditions, but a strong development in Australia as well.

Diagnostic continued the headwind from soft markets.

Rene: Primary negative growth was in France, Germany, a lot to do with comps, but also in US where we saw some postponement of orders moving from 24 into 25. And with that, over to you, René.

Thank you, John

Rene: So, talking to revenue in the second half of the year.

Rene: The organic growth was 2%, predominantly driven by hearing care, whereas hearing aids and diagnostics delivered negative growth.

Rene: in part due to the strong comparative figures. Acquisitions contributed with 3 percentage points both in hearing aids and hearing care and we saw a minus 1 percentage point growth effect from FX.

Bye.

Rene: approximately 8.6 billion, the gross margin declined by 0.4 percentage point versus

Rene: second half year last year despite the ASP in hearing aids still being strong. This was predominantly an effect of both a negative exchange rate effect as well as a high share of rechargeable units.

Rene: But also, particularly in Q4, gross margin was negatively impacted by increased sales to a certain large account.

Thank you.

Rene: OPEX in the second half year we saw a very low organic growth of 2% just as expected and this is reflecting the strong focus we have had since mid-year.

Rene: on lowering organic growth of OPEX to be balanced with organic growth of sales.

Rene: we have managed that. Acquisitions added 4% on growth in line with our acquisition strategy and we saw no effect from FX.

Looking at operating profit for the group.

It was 2.336 million in the second half year.

Rene: which is essentially flat year-over-year development, meaning an EBIT margin of 20.6, which is

a contraction of 0.9 percentage point.

the EBIT margin was negatively impacted.

Rene: in second half year both from the before mentioned exchange rates and also lower operating leverage particularly in hearing aids

Rene: on the gross margin side. We also saw year-over-year dilution from M&A activities, which typically are also short-term in nature.

Thank you for watching.

Rene: increased 2% on last year due to significant improvements in networking capital.

Rene: CAPEX was approximately 3% of group revenue, which is slightly below our normal expectations of 4, so that also contributed. And net cash to acquisitions and divestments.

Rene: was minus 471 million in age 2, entirely related to hearing care.

Rene: Also, slightly higher than our normal guidance but in line with our most recent expectations. Share buyback in second half year of just above 1.1 billion bringing it to 2.3 for the full year.

Rene: Looking at key financials for the full year, we ended up with 2% organic growth on the back of very strong comparative base. And just as a reminder, we had 14% organic growth in 2023, so 16% over two years.

The Gross Margin Improved 0.6%

Rene: driven by a better than expected gross margin in H1, due to business mix effect and strong development in the ASP in hearing aids, stemming from, in particular, the intent launch that we did in the first quarter.

OPEX for the year increased organically by 4%.

Rene: significantly lower in H2 as we have just reviewed and we achieved thus a better balance between revenue and OPEX growth. Acquisitions added 4 percentage points to the overall growth of 8%.

Rene: This resulted in EBIT for the full year of 4.4 billion and an EBIT margin of 19.8 billion.

6%

Rene: which is slightly below last year, as a reflection of lower operating leverage, particularly in hearing aids, as well as a negative year-over-year effect of exchange rates, particularly in H2.

Rene: We saw strong cash flow for the full year from operations of just above 4 billion and approximately 3.5 in free cash flow for the full year and share buybacks as I mentioned before.

Rene: Lastly, on balance sheet items, the balance sheet increased by 6% primarily driven by acquisitions done throughout the year.

Rene: And that resulted in an increase in particularly in goodwill, whereas we have seen networking capital decline by 9% primarily though due to a reclassification of communication to assets held for sale.

Rene: Relative to mid-year, we did, however, see net working capital declined by 7% due to a strong focus on cash flow and resulting in a decrease in inventory and trade receivables.

Rene: For the full year or end of year we end with an interest bearing debt.

Rene: of $13.5 billion and a gearing multiple of $2.3 billion, which is well within our medium-to-long-term expectations.

So with that, we go to Outlook.

we expect and this is after, you know.

Rene: Looking more into the numbers, but also what we sense here in the beginning, we have come to the conclusion that we now expect the French market to grow high single digits in 2025.

Rene: For the group, the outlook, it is important to remind yourself of the...

Rene: comps in Q1 being particularly high due to the managed care as well as a

Rene: A strong product introduction last year, therefore likely that the Q1 organic growth rate will come in below the full year outlook. This is totally to be expected when that at some stage come out.

Rene: We expect the cash allocation to bolt on the acquisitions to be higher than normal due to a continued very good pipeline and good opportunities.

Rene: and we have not included any significant financial impact from potential terrorists related to the U.S. in our outlook, simply too difficult to predict, so it makes no sense to sit and guess. This continued operation.

Rene: We continue to have the communication and bone anchored as this continued business.

Rene: We expect a combined net profit after TAG for these businesses to be in the range of zero to 50 million plus.

Rene: And this is entirely related to operating profit and doesn't include any financial impact related to the intended divestment of these two businesses.

Rene: So, all in all, summing up, organic growth expected to be 3% to 7% and two of these come from market uncertainty, and the EBIT from 4.5 to 4.9 billion, as said, and a share buyback above 1.5 billion.

Acquisitive growth, this is just for modeling purposes.

Rene: It is expected to be 2% based on revenue from acquisitions already completed by today. As currencies stand today, we expect a 1% addition on the top line, including the impact of hedging. We expect the effective tax rate to be around 1%.

Rene: 23% and again profit from this continuous operation in the area of 0 to 50 million. Gearing ratio, no changes to what René also just mentioned, our median to long-term target of 2 to 2.5 times.

by the end of the year.

Yeah, over to Q&A.

Speaker Change: We will now begin the question-and-answer session. To ask a question, you may press star, then 1 on your touch-tone phone.

Rene: If you are using a speakerphone, please pick up your handset before pressing the key.

Rene: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2.

Speaker Change: The first question today comes from Richard Felton with GS. Please go ahead.

Richard Felton: Thank you, good afternoon. Just two questions for me please. My first one is on the US hearing aid business and specifically the trend you're seeing in the independent channel in that market. So part one, how did your market share develop through the course of the year in that channel? And then secondly, as you reflect on the shift in your US brand strategy, obviously managed care has been a headwind, but are you starting to see any of the benefits you expected from that strategic shift start to materialise?

Richard Felton: That's question one. Question two is on diagnostics business. I appreciate the overall market was soft in 2024, but are you able to give any colour on what was actually driving that market weakness and looking out into 2025, how should we think about those headwinds? Thank you.

Speaker Change: Yeah, thank you very much for your question. You know, we don't speak in a lot of detail, but let's take the big picture on the independent. We had a very strong launch in the first half which naturally kind of boost your market share because you tend to push a lot of products into the market.

Speaker Change: So, half year over half year, we saw some decline in market share.

Speaker Change: But during the second half, we have seen a stable development. Of course, when others then introduce, you have a little bit the reverse effect that in a given month, your market share can go down, but coming back up. And all in all, we have at least maintained our share during the second half in the independent channel. And whether or not our managed care strategy is part of building that defense to others'

Speaker Change: people that have benefited from the strategy, but of course, as I said earlier, it can never compensate for where...

Speaker Change: the change brand strategy ended, which was that we basically lost.

On the diagnostic business, again, China has the explanation with

we have.

Speaker Change: On the market side, seeing Europe being a little bit weak, but especially in the U.S. we have seen.

Speaker Change: investments being pushed from 24 into 25, in all markets we still see a good pipeline and therefore the starting point for the assumptions for 25 is a normal market development of around 5%.

Great. Thank you, Soren.

Speaker Change: The next question comes from Julianne Wadwar with Bank of America. Please go ahead.

Julianne Wadwar: Thank you very much for taking my question. So I have two as well. The first one, Soren, is we are now seeing more and more computers breaking into the DNN, an area that you purely had.

Julianne Wadwar: some years ago. I mean, do you think DNN is becoming a standard feature for hearing aids? And I want to know, how do you continue to differentiate yourself versus the peers? And also, if you could explore such a real-time AI technology, something similar to Sonova, just in order to further differentiate yourself in DNN versus the new entrants? That's the first question. The second one, just in your 2025 guidance, you assume the French market will

Julianne Wadwar: thanks to the reform anniversary. Could you just detail a little bit your assumption, especially in terms of percentage of customers which will replace their Class 1 devices? How many could potentially trade up also to Class 2? And any indication in terms of timing as well? Do you expect to see material benefits in Q2 already? Or is it even a bit more back and loaded? Thank you.

Speaker Change: Thank you very much for your questions. On the technology, I don't call DNN a feature. The feature is what you do with it, noise management, speech enhancement, whatever you use it for. That's a technology. I have no doubt, as I have said for quite a while now, that utilizing

Speaker Change: AI, deep neural networks, which for me is, you know, two names more or less for the same. That is the way hearing aids are going to be designed. The signal processing there is faster. It can cope with more dynamics. It can give a more fast response to what to adjust.

Speaker Change: Speech and noise can still be very different. How do you utilize the multiple microphones on the instrument? Do you still use them to zoom in on a Zoom speaker you want to listen to? Or do you listen all the way around? And that comes a little bit back to how we have done things.

We have prioritized to

to use it to enhance contrast between speech and noise.

non-speech, you know, sound environment.

Speaker Change: What is important is the philosophy of being able to listen to multiple speakers all the way around.

Speaker Change: So we have something that doesn't put any limits as we also now show in our new introduction to size of devices, classical batteries to be used.

if you start adding additional.

Speaker Change: Chips or boosters or you know DNN separately you will have some

overhang, at least so far, to

Speaker Change: your power consumption and it will put some limitations either to how much you can use it or how aggressive you can be or what size of battery you have. I still find that we are in a very good competitive situation.

Patient.

Speaker Change: benefit the patient performance is super strong and you know patients at the end don't really understand how you have applied AI or how it actually works they will always look at the outcome and so will well-trained audiologists. So I think we stand well.

And on your second one, on the French...

Speaker Change: Too early to say exactly. The eight, or not the eight, the high single digit is...

Speaker Change: Of course, in units we do expect some ASP decline, as we assume we will see more Class 1 devices coming in. So how that plays out is a little uncertain.

the rate by which we will see it.

Speaker Change: Of course, there are people that do something right away, there are people that do one, you know, year five, year six. We do expect some.

you know, 48-month cycle more than a given year.

Speaker Change: So, we should expect and we also, you know, first very early indication see that a good uptake in the traffic of existing users into the stores.

Speaker Change: We are, of course, in close contact because they are in our database, etc. So, all in all, a good indication for the year and I would also say compared to our

Speaker Change: hesitancy in the fall of being very explicit. This is a, I would say, a positive indication for what we have seen so far.

Speaker Change: I just have a quick follow-up on Richard's question about market share. I mean, you put in the slide that the U.S. commercial market was up 7%. I mean, probably Manaj K is like a couple of percentage headwind, but hearing it was declining this quarter. And you said that you maintain market share in U.S. independence. So just wanted to understand exactly the momentum here and how can you have a stable market share.

Speaker Change: Like, is it there where you saw, like, some decline? I mean, any color would be super helpful. Thank you.

Speaker Change: Yeah, but there is a big difference in channel mix and development

in the U.S. versus Europe.

Speaker Change: We, as I said, have lost sales to a number of larger accounts in Europe.

Speaker Change: And we have a stable market share with the independent in U.S. Again, it fluctuates a lot month by month as this is a sell-in measure and there has been significant introduction activities. So it is, of course, an estimate also in value, which, you know, again, our product mix continues to be very strong and solid.

Speaker Change: And that's what makes us say that we believe we have maintained a share in U.S. independent excluding the managed care segment in the second half.

Perfect. Thank you very much.

Speaker Change: The next question comes from David Adlington with JPMorgan. Please go ahead.

Speaker Change: Any other questions? Maybe just first on managed care, I just wondered if you could...

It's how much your head winds.

Okay, got it, great.

2024.

I'm out.

Speaker Change: support managed care in your 2025 guidance, do assume that you'll get back into managed care later in the year.

Speaker Change: Your line was pretty bad there, David, but I think we got the question, René has a comment. Yes, so you can say the built-in men's care headwind that we are facing in the first quarter of 2025.

Speaker Change: is approximately 3% growth on hearing aids, which would constitute 1% on group rounded numbers.

Speaker Change: Are you assuming a return to managed care later in the year, in your guidance?

Speaker Change: I would say a growing managed care business is within the guidance and the reason for the...

Speaker Change: uncertainty around the organic growth, to what level it is, I think is way too early to comment on timing and if and how much and to whom and so on.

And then just your high single-digit growth for France.

Speaker Change: Oh, yeah. Does that mean you're expecting double-digit growth Q2 to Q4? There wasn't much growth in Q1, I expect.

Speaker Change: No, I think it could be equally distributed around the year. We, of course, try to build a strong pipeline from the beginning. I know the invoices is...

Speaker Change: a little delayed but not much that you will see a very significant difference.

Speaker Change: But again, you know, do you get it early, do you get it late? I think it's too early. Our assumption is it's relatively equally distributed across the year. It's still too early to be more detailed than the assumed 8% on the full year. No, sorry, not 8%, sorry, the assumed with single digits, sorry.

Speaker Change: And then the last one for me, I just wanted any updates on the new contract with the VA.

Speaker Change: The next question comes from Martin Bernal with Nordea. Please go ahead.

Martin Bernal: Hi John and Renee, thank you for taking my questions, I'll just have two if I may.

Martin Bernal: The first one would be on the guidance, I suppose your guidance assumes.

Martin Bernal: sort of high single-digit growth in H2 to end up in the high end of your guidance range. Can you maybe help?

Martin Bernal: me as an outsider, understand how you expect to reach that level, just, you know, what does it take from a market growth perspective, ASP, market share, managed care, maybe provide some building blocks towards that, that would be the first question. And then...

Martin Bernal: The second question is that I guess it's fair to assume that the EBIT in absolute terms and maybe also on the margin will be quite back and loaded here in 2025 with...

Martin Bernal: growth being lower here in H1 and then accelerating in H2, so I'm just trying to figure out how much profitability will actually be skewed towards H2. Should we expect that you are currently, for example, positioning yourself to an accelerated growth in H2, for example, from France, and you are currently investing in marketing and

Martin Bernal: of a return in H2 from that. Is that a fair way to look at how the EBIT will go?

Martin Bernal: No, I would actually turn it a little bit around and say it is the comps that is the biggest rationale behind the...

Martin Bernal: growth level that is therefore very uneven across the year. The EBIT side is, I would say, naturally distributed in a growth company. And the way we have done things, you have always found a certain unbalance between first and second half. And that's just how it is.

Martin Bernal: And I think this year we are not planning for anything out of the, I would say, ordinary, if you look back. It was rather 24, that was a little bit.

Martin Bernal: abnormal in terms of seasonality on the operating profit whereas 25 we don't see that as any particular seasonality which would indicate

Martin Bernal: Normally the second half year is just larger on EBIT than the first half year. So that's how we see it.

Martin Bernal: Okay, thank you. And then on how to reach sort of the high single-digit growth above the 7%? How do you expect to be able to deliver that? That, of course, is a positive market development. It's a good growth momentum during the year that can come from, you know, many channels. But, of course, we have...

you know, plan for the year of taking share.

So in that level, you know, strong market.

Martin Bernal: It could be France doing, you know, in the higher end of the high single digit, etc. So it is, you know, there is not a single factor. We already talked about the opportunity that remains in men's care. It's not there.

So...

Martin Bernal: So it's gaining share is in the upper end and then of course it's how much and in the very upper end also a market in the upper end of the 426.

Speaker Change: Okay. That's very clear. Thank you so much for taking my questions.

Speaker Change: The next question comes from Maya Pataki, Ruth Kepler. Please go ahead.

Speaker Change: Hi, good afternoon and thanks for taking my question. Saren, just a quick question. We've had a product announcement this week and

Speaker Change: also based on DNN but also a lot of working words around AI and I know you've been working with DNN for a long period of time however you know you've only now stepped up to wording around AI

Speaker Change: Do you think that there is a disadvantage for you now in the next six months until everyone tried the product and made up its mind so 2025 could be a bit more challenging for Mace finding the right product?

Speaker Change: Or do you think it really doesn't matter? So buzzwords are buzzwords, and audiologists can see through that. That's question number one. Question number two, can you provide us an update on communication? What is, you know, what is the timeline there, or what are the next steps that we should be expecting for you to take in communication?

Speaker Change: And lastly, Rene, just to double check, I believe you said that the headwind on growth for hearing wholesale would be 3% for managed care in Q1, so that's also probably the number that we have to look at for the last three quarters in 2024.

Speaker Change: Yes, sure, well you can say we have the headwind in Q1 for 25 but it is also similar in the last three quarters of 24.

Perfect. Thank you.

Speaker Change: And the other one, I think very quickly, you know, AI, I would say seen as a buzzword DNN is the technology. And I actually think I was recently in the U.S. and I asked a number of audiologists and whether it's called the one or the other, they don't really care. And it's not what they use for the end user.

Speaker Change: So they use the argument of what it does and how you can hear.

Speaker Change: So, we also, you know, throw in a little more AI than we did in the beginning, but the fundamental of the technology is it's a trained network and I think that's what actually our geologists understand and they have a bit of idea what it does.

Speaker Change: And I also see our competitors, once you get below the front page or behind the front page, that's also what's being explained.

Speaker Change: So there is a little bit of buzzword around AI that in the general audience is better understood but for some also a negative to, you know, to my station and something totally different than what actually happens when inside a product.

Speaker Change: So back to your question and the underlying question. No, I don't think we'll have six months of limbo. Of course, the new products that are being introduced, whether it's from us or somebody else, will be tried out. We are used to that and I think we stand well to communicate around the intent and also other new products and in general a strong portfolio that delivers a lot of end-user benefit.

Speaker Change: On communication process ongoing, we will say more as soon as we know more.

Okay, great. Thank you.

Firstly, on the new AI-powered

Søren Nielsen: in the year or IIC, can you tell me, Søren, you know, it's not, as I understand it, it's only a non-rechargeable version, so what is the big problem for you to actually do an ITE which are rechargeable?

Søren Nielsen: And how do you actually think this is an opportunity, commercial opportunity for you, now it is not, in regards to the version?

Søren Nielsen: And then the second question, maybe to René or Søren or whatever, we saw in the second half that the AP, of course, impact was less or maybe zero. In the fourth quarter, how should we see yourselves going into the quarter?

Søren Nielsen: development into 2025, you know, are you expecting to fight more for this low price maybe and then we will see less of an ASP impact?

Søren Nielsen: or maybe not even any. Of course, I know that France also speaks into the picture. And sorry if you already have that question, but I was also...

Good afternoon. All good. Back to the IIC-CIC.

Søren Nielsen: build a custom, totally invisible device. So that's due to the ambition of making it a true IRC.

Speaker Change: The rechargeable element in custom, still to my impression or what we do, comes with a significant sizing overhead.

And that's a limited number of markets and a limited...

Speaker Change: it would say total potential. So, you know, I would say that's under the bigger prioritization where cosmetics, design...

Speaker Change: Whether it's a ride or in-ear product, we focus on the most discreet devices and so far not a viable solution on rechargeable.

ASP question have not been there, so all good.

into 2025.

Speaker Change: everything else equal. We would expect a stronger unit growth. We have basically had a flat to slight negative last year and it is the ambition to grow in units.

Speaker Change: not to give up any of a good strong position in premium, in the good channels, but a more diverse channel mix.

Speaker Change: and also in some geographies a slightly different product mix by selling more of products at a lower price.

Speaker Change: not instead of, but in addition to, and therefore a natural potential consequence on the ASP more down than up and stronger unit growth. But again...

Speaker Change: Depending on how market development is, what market grows the most, you can very quickly have.

Speaker Change: regions, channels and so on that delivers actually both units and ASP. So it is super sensitive for many parameters as you know, but the general direction and trend would be stronger on the units and less on the ASP.

Thank you.

Angela Bozinovic: The next question comes from Angela Bozinovic with BNP. Please go ahead.

Angela Bozinovic: Hi, good afternoon. This is Angela from BNP. Two questions from my side please. Firstly, on the product, I understand that the new in-the-ear AI enabled form factor is based on the Oticon Intent platform.

Angela Bozinovic: Can you please update us on the overall Autocad Intent portfolio and what form factors are left for you to launch? And on top of it, do you see the need for any new platform launches in 2025?

Angela Bozinovic: And secondly, just on Costco, what are your thoughts on the competitive dynamics in Costco in 2025? It has been three months since the return from your competitor. I'm just curious to hear if you see any market share changes in those tools. Thank you.

Speaker Change: Thank you very much. Oticon Intent is a rechargeable mini-ride with a lot of different speakers that enables it to be used basically from a mild hearing loss to a more severe hearing loss. So really a wide application.

Speaker Change: MiniRise is the most popular in the market for the majority of users and in this...

India products which is

Speaker Change: for the premium product the second most important category because if you don't go for a ride

You typically want something even more discreet.

Speaker Change: not sitting behind the ear, but sitting in the ear. And again, we have managed to design it without any significant compromises, or without any compromises, just smaller.

Speaker Change: and therefore a really strong concept. We think our intent platform stands well, as I said before, against the competition. It has slightly different prioritization, but it has a number of unique benefits.

Speaker Change: again the ability to listen to speakers from multiple directions at the same time even in

Quite loud noise.

Speaker Change: It's low power consumption leading to unique small products like here and then that it's basically enabled all the time because of the low power consumption. We don't have to sit and restrict it.

Speaker Change: to certain situations and when you don't have to do that you avoid some of the long transitions in and out that others would have to do when the system kind of kicks in and kicks out again.

Speaker Change: So we think we stand well on Costco. We have a good solid position in Costco.

Speaker Change: definitely want to maintain or even if possible expand that. Yes, it's also a competitive environment and I'm sure our competitors try to or will launch new products etc. and drive activities. We plan to do the same.

Speaker Change: And just a quick follow-up on the project, so is the portfolio of Oticon Intent now full? So you don't need to launch anything else in the Oticon Intent platform? And I understand that you won't provide any color on the new platform, but do you see any need to launch a new platform in 2025, given that you've launched this form factor now? I mean, we have not launched all, in fact, this platform, you know, the reason why at

Speaker Change: the underlying platform will be used in many more styles to come. There are a number of form factors where we don't yet offer a full solution. So the platform is far from exhausted and more will come and follow. And again, the strength of the platform I find quite high also in current competitive environment.

Bye.

Thank you.

Speaker Change: The next question comes from Neal Granholmly with Carnegie. Please go ahead.

Neal Granholmly: Thank you. Two questions from my side. In the half-year report, you called out

Neal Granholmly: reduced activity with a few larger change as a negative. How would you see this?

Neal Granholmly: parameter playing out in 2025? And then secondly, could you just update us on your expectations for net financial items in 2025? Thank you.

Neal Granholmly: a focus and attention towards lost market share in some of these channels.

Neal Granholmly: And yes, therefore, I would say that's part of the ambition for 2025. Not everything is done yet, but that is to grow sales to some of these or alternative channels that could otherwise compensate.

Neal Granholmly: I think you, René, on the net financials? Slightly higher, meaning slightly more negative than for 2024, driven by, well, offsetting effects, slightly higher debt, but also on some loans, slightly lower interest rate.

Neal Granholmly: Just to understand, you expect a slightly higher net financial cost? Yes.

Thank you.

Speaker Change: The next question comes from Robert Davies with Morgan State. Please go ahead.

Robert Davies: Thanks for taking my questions. Most have been covered. Just a couple I had. One was just on the outlook for the VA channel. It was obviously been running quite weak.

Speaker Change: through 2024, where you have sort of mixed signals in terms of.

Speaker Change: expectations and growth and shortages of audiologists and all sorts of different reasons why that's been lackluster. Just be curious to get your sort of views as you head into the year, what you're seeing and hearing and how you expect that market in particular to pan out.

Speaker Change: And then I guess the second was just on your comments around sort of flattish ASP trends.

Speaker Change: I think if I look back over the last at least two to three years, your pricing trends have actually been sort of much better than they would have been historically. That sort of low single-digit deflationary number has actually been in sort of positive territory. I just wondered why you were steering to more of that sort of flattish ASP outlook.

Speaker Change: So, that was the second one. And then, just the third one, I guess, is around the obvious one, just around tariffs. Can you just remind us of your sort of production versus sales mix, where the sort of mismatch is sort of most acute across your business? Thank you.

Speaker Change: guidance, no doubt that the weak development in VA is a significant part of pulling down from

Speaker Change: In the lower end of the 4 to 6, could it happen again in 25? Yes. Can it normalize? Yes. I have no specific insight to that. And again, things can change over a year.

Speaker Change: The Flattish ASPE, I still think if you put in as well channel mix development globally as well as geography.

That's part of the basis for it, otherwise...

Speaker Change: You are right, we have increased prices due to inflation and also from more advanced technology, most importantly rechargeability. So our comment is that this...

Speaker Change: so far at least, seems to have outbalanced one another, giving a flattish ASP for the market. We have then in that market

improved our product mix and channel mix.

Speaker Change: and therefore seen ASP growth higher than the market quite consistently over a period now.

Speaker Change: Of course, part of what I said earlier of trying to sell into some of the channels where we don't sell as much and have less share.

Speaker Change: It's not instead of, but it's in addition to, and we would of course like to...

Speaker Change: to have a good share across channels and geographies. So that's part of planning for a year to look for opportunities across a broader field.

Thank you.

Speaker Change: And the terrorists? We have no comments. This is incredibly unpredictable and unclear what and when and if and how. I can say that all our main production happens in Poland and Europe. With that, we have some in Denmark as well. And that's the basis. The rest of what we have around the world in many, many countries is.

typically operations of different sizes.

Speaker Change: sizes to support building in-ear instruments like the one we just launched, do service on hearing aids, building earmuffs and so on. We do some of that in US and we do part of it outside US.

Understood. Thank you very much.

Speaker Change: The next question comes from Karsten Lornberg-Madsen with Banksy Bank. Please go ahead.

Karsten Lornberg-Madsen: Thank you very much. I was hoping that you could talk a little bit more about your high end of the EBIT range of 4.9 billion.

Karsten Lornberg-Madsen: which would kind of require you to grow a bit by 11% while the...

Karsten Lornberg-Madsen: Organic growth is up to 7% and also taking into account that you're talking about more volume than ASP to drive growth in 2025, which I would assume has a negative effect on the gross margin, or at least not a positive effect on the gross margin.

Karsten Lornberg-Madsen: So, how should you get to this 11% growth on EBIT potentially? Is this something about acquisitions that could play in, or currencies, or will you hold back on op-eds in general?

Thank you.

Karsten Lornberg-Madsen: Well, well got it for the middle is just like you have seen the reverse effect this year scale effects across the business that A number of things are basically fixed in cost and therefore there is a scalability effect In it. I would say I don't know if you have anything. Yeah, so so agree if we are at 7%

Karsten Lornberg-Madsen: So, one thing is, how do you get to the 7%? It's of course, it is fundamentally gaining market share in a market that is healthy and growing well. That's that scenario. And that will translate significantly into operating profit because of scalability, also in operations, and also despite...

Karsten Lornberg-Madsen: despite a more normal unit ASP distribution, because it is not selling.

It is not selling incremental.

Karsten Lornberg-Madsen: Let's say more lower priced units instead of high priced units. It is in addition to That would drive growth. So when you have this you can say more marginal contribution from low priced hearing aids it's it's also

Karsten Lornberg-Madsen: not diluting the gross margin. So that's the effect that you have. You have one factory fundamentally. Right. And that's what you distribute your units on.

So it can also be very meaningful to

Karsten Lornberg-Madsen: to grow via, you can say, more low priced channels, if it comes in addition to what we already do on the more high priced side. And it typically don't drive any additional OPEX, so that's, you know, fundamental of the scale effect.

Karsten Lornberg-Madsen: Okay, and then one more question is in relation to your internal sales to hearing care, you are growing this by 18% this quarter, 18% last quarter, 12% the quarter before and sell out in retail is 7, 7, and 5, I know there are some facing effects, etc.

Karsten Lornberg-Madsen: Is it possible for you to explain what's driving this relatively big difference in what you're selling and what is being sold out of the stores over quite a long period of time? So that number will always be bigger, right? And it's because you have both the organic growth on the hearing care side

Karsten Lornberg-Madsen: Then you have the acquisition growth on the hearing aid side.

And then you have when we acquire businesses.

Karsten Lornberg-Madsen: the increased share of wallets, so we typically replace what was typically a, you can say, a third-party product with a demand product. So we will sell in additional from the hearing aid side.

Karsten Lornberg-Madsen: to our own clinics. So you will always need to add not just organic and acquired but also increased share of wallet.

Karsten Lornberg-Madsen: So that's the math of it and the principle that we have is that the, you can say, the ounce length price between wholesale and retail in this calculation is unchanged over time.

Karsten Lornberg-Madsen: So you can basically say, apart from geography mix, it is a unit measure.

Mmm. Mmm.

Yeah

And a quick question, Rene, you said that...

Speaker Change: Talk a little bit about the opportunity that remains in managed care Are we to interpret this that you are making progress in your discussions with the companies here Or is it more the same as the after Q3? No, it's it's the sheer reflection that that we lost significantly during 24 So there's there's just logically more to gain than to further lose And so that's the...

Excellent, thank you.

Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to the management for any closing remarks.

Speaker Change: Thank you, operator. I know there's still a couple of people in line, but please do reach out to us directly after the call and we will...

do our utmost to help you on the way.