Q2 2025 Demant A/S Earnings Call

Speaker #1: Good afternoon, everyone, and welcome to our conference call following the release of our revised outlook for 2025 and interim report for H1 2025, after market close yesterday.

René Schneider: Good afternoon, everyone, and welcome to our conference call following the release of our revised outlook for 2025 and interim report for H1 2025 after market closed yesterday. For the call today, we plan to run through a presentation followed by a Q&A session as per usual. The presentation should now be available on our website. We plan for the call to last no more than one hour in total, including this Q&A session, so please limit yourself to no more than two questions at a time. Thank you. On the call today, we have Søren Nielsen, our President and CEO, René Schneider, our CFO, and myself, Gustav Høe from the IR team. That is all for the practical element, and with that, over to you, Søren.

Speaker #1: For the call today, we plan to run through a presentation followed by a Q&A session, as per usual. The presentation should now be available on our website.

Speaker #1: We plan for the call to last no more than one hour in total, including this Q&A session. So please limit yourselves to no more than two questions at a time.

Speaker #1: Thank you. On the call today, we have Sren Nielsen, our President and CEO; Ren Schneider, our CFO; and myself, Gustav Heu, from the IR team.

Speaker #1: That is all for the practical element, and with that, over to you, Sren.

Speaker #3: Yeah, thank you very much, Gustav, , and welcome, everybody. At the end of today, business highlight, key financial takeaways, and sustainability advancements. And then business area, a little more details and call on that before René will go through a group financials, and I will finish off with the revised Outlook and then we step into Q&A.

Søren Nielsen: Thank you very much, Gustav, and welcome, everybody. The agenda today: business highlights, key financial takeaways, and sustainability advancements. Then business area, a little more details and call on that before René Schneider will go through group financials, and I will finish off with the revised outlook, and then we step into Q&A. Business highlights for Demant A/S in the first half of 2025. Number one headline is a global hearing aid market that grew below the normal 4% to 6% growth expectation. This is purely attributed to various elements of macroeconomic uncertainty and turmoil in global trade, etc., that have led to consumers being less hesitant to start wearing hearing aids or postponing their upgrades. In hearing aids, we saw good growth in unit sales, although growth was negatively impacted by mixed effects that led to a lower ASP.

Speaker #3: Business highlight for demand in the first half of 2025. Number one headline is a global hearing in Māori that grew below the normal four to six percent growth expectation.

Speaker #3: This is purely attributed to various elements of macroeconomic uncertainty and turmoil in global trade, et cetera. That have led to consumers being less hesitant to start wearing hearing aids or postponing their upgrades.

Speaker #3: In hearing aids, we saw good growth in unit sales, although growth was negatively impacted by mix effects that led to a lower ASP. This is purely attributed to market share gains outside the U.S. and lower growth in the U.S. that leads to a decline in our global ASP.

Søren Nielsen: This is purely attributed to market share gains outside the US and lower growth in the US that leads to a decline in our global ASP that outbalanced the growth coming from selling more units. Hearing care grew in line with the market in the first half, with some growth deceleration from Q1 into Q2, partly driven by the current environment and consumer cautiousness. The effect was particular in the US. I will, though, say that is be careful not to overinterpret it. There's always a little bit of timing on whether things close in March or April. So look at H1, I think most importantly. Diagnostics continue to be impacted by negative market developments, particularly in the US. Also, macroeconomic uncertainty, which has led to postponement of investments. Good order book, but lower execution than planned and expected than normal.

Speaker #3: That outbalanced the growth coming from selling more units. Hearing care grew in line with the market in the first half, with some growth deceleration from Q1 into Q2.

Speaker #3: Partly driven by the current environment and consumer cautiousness, the effect was particular in the US. I will though say there is be careful not to overinterpret it, there's always a little bit of timing on whether things close in March or April.

Speaker #3: So look at the H1 I think most importantly. Diagnostic continued to be impacted by negative market developments, particularly in the US, also macroeconomic uncertainty.

Speaker #3: Which has led to postponement of investments, good order book, but lower execution than planned and expected and normal. And we see, yeah, many reasons for these things being pushed a bit out in time.

Søren Nielsen: We see many reasons for these things being pushed a bit out in time. In June, as already announced, we agreed to acquire the KIN Group, one of the world's leading retailers of hearing aids with around 650 hearing clinics, primarily in Germany. Key financial takeaways from the first half, putting all this together: group organic growth of 0%, which is below expectations due to the lower-than-normal hearing healthcare market growth and lower sales to a large US retailer. Group gross margin declined 0.8 percentage points, which is slightly more than expected following the unfavorable geography and mixed changes, especially in hearing aids, which led to the already spoken-to lowering of our global average selling price. OPEX, very strong control and following the line from last year. We saw just 1% organic growth reflecting a lowering of the run rate into the year and tight focus.

Speaker #3: In June, as already announced, we agreed to acquire the Kin Group, one of the world's leading retailers of hearing aids with around 650 hearing clinics, primarily in Germany.

Speaker #3: Key financial takeaways from the first half, putting all this together, grew organic growth of zero percent, which is below expectations due to the lower than normal hearing healthcare market growth.

Speaker #3: And lower sales to a large US retailer. Group gross margin declined 0.8 percentage points. Which is slightly more than expected, following the unfavorable geography and mix geography mix changes, especially in hearing aids, which led to the already spoken to lowering of our global average selling price.

Speaker #3: OPEX very strong control and following the line from last year. So we saw just one percent organic growth, reflecting a lower than lowering of the run rate into the year and tight focus reported growth was four percent and that's primarily due to acquisitions.

Søren Nielsen: Reported growth was 4%, and that is primarily due to acquisitions. EBIT before special items, 1.849 billion. EBIT margin before special items contracted. Again, we had to sell more units to deliver the same revenue, and therefore a negative impact on profitability of the business. This comes again from unfavorable mixed changes in geographies, meaning in which countries we sell what, and therefore lower than planned operating leverage. Despite lower profitability, we have delivered very solid cash flow from operation of a little north of 1.5 billion and free cash flow of DKK 1.126 billion. The Outlook, we have adjusted the expectation for the global hearing aid market from previously 1% to 5% growth in value to now 1% to 3%. Our EBIT due to the development in geography mix adjusted downwards from previously 4.1% to 4.5% to now 3.9% to 4.3%.

Speaker #3: EBIT before special items 1.849 billion. EBIT margin before special items contracted again, we had to sell more units to deliver the same revenue. And therefore a negative impact on profitability of the business.

Speaker #3: And this comes again from unfavorable mix changes in geographies, meaning in which countries we sell a lot, and therefore lower than planned operating leverage.

Speaker #3: Despite lower profitability, we have delivered very solid cash flow of cash flow from operation of a little north of 1.5 billion. And free cash flow of 1.126 billion Danish kroner.

Speaker #3: The Outlook we have adjusted the expectation for the global hearing aid market from previously one to five percent growth in value to now one to three.

Speaker #3: And our EBIT due to the development in geography mix adjusted downwards from previously $4.1 to $4.5 to now $3.9 to $4.3. The share buyback, as announced in June, was paused following the agreement to acquire the Kin Group.

Søren Nielsen: Share buyback, as announced in June, paused following the agreement to acquire the KIN Group. Sustainability progress in the first half. We have helped more people hear better. The pool of people that wear a hearing aid from Demant have grown positive and reasonably in line with expectations. The Scope 1 and 2 market-based greenhouse gas emissions have decreased by 5% as we have managed to increase our share of renewable electricity by 5%, increase our share of renewable, reduce the emitting part. This is in line with our expectations. Number of highly exposed employees trained in Demant's code of conduct have reached 94%, and we will soon have the target of 100% achieved. Business area review, starting with the global hearing aid market in H1, illustrated in the table. We saw a Q1 of 2% with a very negative development in the U.S.

Speaker #3: Sustainability progress in the first half: we have helped more people hear better. The pool of people that wear a hearing aid from demand has grown.

Speaker #3: Positive and in line reasonably in line with expectations. The scope one and two market-based greenhouse gas emissions have decreased by five percent. As we have managed to increase our share of renewable electricity.

Speaker #3: By five percent, our increase our share of renewable reduced the emitting part. And this is in line with our expectations. Number of highly exposed employees trained in demand code of conduct have reached 94 percent.

Speaker #3: And we will soon have the target of 100 percent achieved. Business area review starting with the global hearing aid market in H1. Illustrated in the table, we saw a Q1 of two percent with a very negative development in the US commercial market of minus five.

Søren Nielsen: commercial market of minus 5% and VA minus 1%. North America in general going down 3% and Europe in the softer side of the normal range of 4% to 6%. Here in the second quarter, we have seen almost in line with expectations a somewhat normalization of the U.S. commercial market, still a soft VA channel, but a Europe that has not delivered the growth despite the strong growth in France. The rest of Europe has not lived up to expectations, and we see contraction in several markets, again attributed to consumer cautiousness driven by macroeconomic uncertainties. ASP development for the global market still assumed to be negative with 1% for the half year. In value, 2% growth for the first half year. In Europe, expected strong in France. In NHS, growth was negative due to very strong comps. Excluding France and NHS, growth decelerated.

Speaker #3: And VA minus one. So North American in general going down three. And Europe in the softer side of the normal range of four to six.

Speaker #3: But here in the second quarter, we have seen, almost in line with expectations, a somewhat normalization of the U.S. commercial market. There is still a soft VA channel, but Europe has not delivered the growth despite the strong performance in France.

Speaker #3: Then the rest of Europe has not lived up to expectations, and we see contraction in several markets. Again, this is attributed to consumer cautiousness driven by macroeconomic uncertainties.

Speaker #3: ASP development for the global market still assumed to be negative. With one percent for the half year. So again, in value at two percent growth for the first half year.

Speaker #3: And in Europe, expected strong in France, in NHS, growth was negative due to very strong comps. Excluding France and NHS, growth decelerated. It was still slightly positive in Germany.

Søren Nielsen: It was still slightly positive in Germany, but downwards, and so for a number of other European markets. Growth in North America, as already said, accelerated, whereas in Canada, we saw a negative development in Q2, also driven by macroeconomic uncertainties. The rest of the world saw normal growth despite flattish growth in China and Japan. In Australia, growth was negative. We estimated several export markets saw good growth. For hearing aids, we saw again unit growth in Q2 being strong. We clearly took a global share in market share in units. However, with a continued unfortunate development in the mix of geographies, growing outside the U.S. in total and in markets with less strong ASP, whereas we saw negative growth in both U.S. or in U.S. and some of the European markets, Canada still delivered strong growth.

Speaker #3: But downwards and so for a number of other European markets. Growth in North America as already said, accelerated. Whereas in Canada, we saw a negative development in Q2, also driven by macroeconomic uncertainties.

Speaker #3: Rest of the world saw normal growth. Despite flattish growth in China and Japan, in Australia growth was negative. We estimated several export markets saw good growth.

Speaker #3: Hearing aids we saw again unit growth in Q2 being strong. We clearly took global share in market share in units. However, with a continued unfortunate development in the mix of geographies, growing outside US in total.

Speaker #3: And in markets with less strong ASP, whereas we saw negative growth in both the US and some of the European markets, Canada still delivered strong growth.

Speaker #3: Looking at the hearing care in second quarter, yes, a slower momentum, but again don't overinterpret it. It is also some timing of closing orders between the first and the second quarter.

Søren Nielsen: Looking at the hearing care in the second quarter, a slower momentum, but again, don't overinterpret it. It is also some timing of closing orders between the first and the second quarter. We still see some challenges in generating traffic from new users, and we attribute this to the continued macroeconomic uncertainty that impacts users and makes them more cautious and a little more than normal have chosen to postpone their first hearing aid further. Also some upgrades are being prolonged. Growth mainly in units, but we also saw a slight ASP uplift due to also geography mixes. We saw good growth in France, which accelerated due to the uptake in the market. We saw strong growth in Germany. We highlight here Sweden because of changes in local regulation. North America, negative growth in the U.S.

Speaker #3: We see still some challenges in generating traffic from new users. And we attribute this to the continued macroeconomic uncertainty. That impact users and make them more cautious.

Speaker #3: And a little more than normal have chosen to postpone their first hearing aid further. And also some upgrades are being prolonged. Growth mainly in units but we also saw a slight ASP uplift due to also geography mixes.

Speaker #3: We saw good growth in France, which accelerated due to the uptake in the market. We saw strong growth in Germany. We highlight here Sweden, because of changes in local regulation.

Speaker #3: North America experienced negative growth in the U.S. due to consumer cautiousness, but I would also attribute it to some timing of closing of orders. Additionally, there was negative growth in Canada due to adverse market development.

Søren Nielsen: due to consumer cautiousness, but also I would say some timing of closing of orders. Then negative in growth in Canada due to negative market development. Strong growth in China driven by ASP tailwind and slightly negative growth in Australia. Diagnostics in the second quarter continued the headwind from soft market developments, especially in the U.S. Growth decelerated from Q1 to Q2 in line with the market growth rate. Growth impacted by negative market development, particularly in the U.S., where macroeconomic uncertainties led to a lower level of investments in equipment. We simply see again orders being postponed and installed later than expected. Of course, we hope and assume this will pick up with some more clarity around the financial development in the U.S. In Europe, positive in France, some negative development in the U.K. Again, also NHS being a little tight on investment in new equipment.

Speaker #3: Strong growth in China driven by ASP tailwind. And slightly negative growth in Australia. Diagnostic in second quarter continued headwind from soft market developments, especially in US.

Speaker #3: So growth decelerated from Q1 to Q2 in line with the market growth rate. Growth impacted by negative market development, particularly in the US where macroeconomic uncertainties led to a lower level of investments in equipment.

Speaker #3: We simply see again orders being postponed and installed later than expected. Of course, we hope and assume this will pick up. If some more clarity around the financial development in US returns.

Speaker #3: Europe positive in France, some negative development in the UK, again also NHS being a little tight on investment in new equipment. Strong growth in several medium-sized markets in Europe.

Søren Nielsen: Strong growth in several medium-sized markets in Europe. Negative growth in the U.S., and this is by far the biggest factor together with Canada and North America in total. Again, Asia Pacific outside China doing fine, but in China still impacted by not a sufficient product range of made-in-China products to participate in all government tenders. With that, over to you, René.

Speaker #3: Negative growth in US and this is by far the biggest factor together with the Canada and North American total. And again, Asia Pacific outside China doing fine.

Speaker #3: But in China still impacted by not a sufficient product range of made in China products to participate in all government tenders. And with that, over to you, René.

Speaker #1: Thank you, Sren. Starting with the revenue in the first half of the year, we report an organic growth of 0%, which was below our expectations.

René Schneider: Thank you, Søren. Starting with the revenue in the first half year, we report an organic growth of 0%, which was below our expectations. In particular, it deviates from our latest expectations due to a lower-than-normal hearing healthcare market growth and also lower sales, in particular, to a large U.S. retailer. The acquisitive growth contributed by 3%, primarily related to hearing care, but we also saw a small positive contribution from hearing aids. We continue to see a headwind from foreign exchange rates with a minus 1% due to the adverse development in, again, particularly the U.S. dollar. Our gross profit in the first half year was just above 8.5 billion, which is flat versus the first half year of 2024. The gross margin declined by 0.8 percentage point versus last year.

Speaker #1: And where in particular it deviates from our latest expectations was a lower than normal hearing healthcare market growth. And also lower sales in particular to a large US retailer.

Speaker #1: The acquisitive growth contributed by three percent primarily related to hearing care. But we also saw small positive contribution from hearing aids. We continue to see headwind from foreign exchange rates with a minus one percent due to the adverse development in again particularly the US dollar.

Speaker #1: Our gross profit in the first half year was just above 8.5 billion, which is flat versus first half year of '24. The gross margin declined by 0.8 percentage point versus last year.

Speaker #1: While we did expect a decrease due to a particularly strong gross margin in the first half of last year, where we had a high-end hearing aid product launch.

René Schneider: While we did expect a decrease due to a particularly strong gross margin in the first half year of last year, where we had a high-end hearing aid product launch, this development was slightly worse than we had expected. The gross margin decline is primarily the result of ASP headwind in hearing aids, as already reviewed, and also a slight decrease in the gross margin in diagnostics. When it comes to FX, it also had a slightly negative impact on the gross margin. When we speak to our normal 76% to 77% gross margin range, you will see that we are in the very low end of that normal range. When we look into H2, we also expect to be towards the lower end of that range.

Speaker #1: This development was slightly worse than we had expected. The gross margin decline is primarily the result of ASP headwinds in hearing aids, as already reviewed.

Speaker #1: And also a slight decrease in the gross margin in diagnostics. When it comes to FX, it also had a slightly negative impact on the gross margin.

Speaker #1: So when we speak to our normal 70 six to 77 gross margin range, you will see that we are in the very low end of that.

Speaker #1: A normal range. And when we look into H2, we also expect to be towards the lower end of that range. On the operating expenses in the first half year, we have managed that tightly.

René Schneider: On the operating expenses in the first half year, we have managed that tightly, and we thus increased our group OPEX by 1% organically. Again, reflecting the low run rate going into the year following our cost-saving effort in the second half year of last year and also our continued focus on cost management. Acquisitions added 4% in line with our acquisition strategy. Also here we see a negative effect from FX. Maybe also here a comment on what the run rate into H2 is. We estimate for now that when we look at the actual reported operating expenses in total, it will be very much in line with what we saw actually reported in the first half year.

Speaker #1: And we thus increase our group OPEX by one percent organically, again reflecting the low run rate going into the year and following our cost-saving efforts in the second half-year.

Speaker #1: Of last year and also our continued focus on cost management. Acquisitions added four percent in line with our acquisition strategy. And also here we see a negative you can say effect from FX.

Speaker #1: Maybe also here a comment on what the run rate into H2 is. We estimate for now that when we look at the actual reported operating expenses in total, it will be very much in line with what we saw actually reported in the first half of the year.

Speaker #1: So sequentially no growth in the reported number on OPEX for the group. Which is a demonstration of our continued commitment to strong cost savings effort.

René Schneider: Sequentially, no growth in the reported number on OPEX for the group, which is a demonstration of our continued commitment to strong cost-savings effort. It is important to highlight that despite this, we continue to invest in future hearing aid introductions. That brings us to EBIT before special items. It was in the first half year $1.849 billion, which is a decrease of 11% compared to the same period of last year, and an EBIT margin contraction of 2.3 percentage points. The EBIT margin before special items was negatively impacted by lower-than-normal market growth, lower than planned operating leverage as a consequence of market growth, and as well as an unfavorable geographical mix. Exchange rates also significantly impact our group EBIT with around $50 million in the first half year, of which most relates to the second quarter.

Speaker #1: It's important to highlight that despite this, we continue to invest in future hearing aid introductions. That brings us to EBIT before special items. It was in the first half year 1.849 billion, which is a decrease of 11 percent compared to the same period of last year.

Speaker #1: And an EBIT margin contraction of two point three percentage points. The EBIT margin before special items was negatively impacted by lower than normal market growth.

Speaker #1: Lower than planned operating leverage. As a consequence of market growth, you can say. And as well as an unfavorable geographical mix exchange rates also significantly impact our group EBIT.

Speaker #1: With around $50 million in the first half of the year, of which most relates to the second quarter. This is, you can say, an FX impact that would also continue into H2 with a similar quarterly impact.

René Schneider: This is an FX impact that would also continue into H2 with a similar quarterly impact. We did not recognize any special items in the first half year. We continue on the cash flow side. It continues to be very strong. Actually, a slight positive growth in cash flow from operations of 1% due to strong network and capital management. We continue CapEx investment in line with our mid to long-term expectations of 4%. We had cash out related to acquisitions of just shy of $850 million related to bolt-on acquisitions in hearing care, so very much in line with our strategy. We did buy back shares amounting to $582 million until we suspended our share buyback program in connection with our agreement to acquire the KIN Group. On balance sheet items, it increased reportedly 1%, 2% from organic growth, 3% from acquisitions, and minus 4% from FX.

Speaker #1: We did not recognize any special items in the first half of the year. Then, lastly, sorry, not lastly, but we continue on the cash flow side.

Speaker #1: Continue to be very strong. Actually a slight positive growth in cash flow from operations of one percent. Due to strong networking capital management. We continue CapEx investment in line with our mid to long term expectations of four percent.

Speaker #1: We had cash out related to acquisitions of just shy of 850 million. Related to bolt-on acquisitions in hearing care. So very much in line with our strategy.

Speaker #1: We did buy back shares amounting to $582 million until we suspended our share buyback program in connection with our agreement to acquire the Kin Group.

Speaker #1: Then, on balance sheet items, quick notes: it increased reportedly 1% from organic growth, 3% from acquisitions, and decreased 4% from FX.

Speaker #1: The main swings are you can say other current assets, mainly due to unrealized gain on financial contracts from our hedging activities. The networking capital declined by three percent.

René Schneider: The main swings are other current assets, mainly due to unrealized gain on financial contracts from our hedging activities. The networking capital declined by 3%, and our gearing at the end of the period was 2.5, which is within our mid to long-term target of 2 to 2.5. With that, Søren Nielsen, I think you have got the outlook.

Speaker #1: And our gearing at the end of the period was two point five. Which is within our mid to long term target of two to two point five.

Speaker #1: With that, Søren, thank you at the Outlook.

Speaker #3: Yeah, thank you very much, René. And again, many things are unchanged, but of course we as already stated have had to downwards adjust our expectation for the full year market growth.

Søren Nielsen: Thank you very much, René. Many things are unchanged, but of course, we, as already stated, have had to downward adjust our expectation for the full-year market growth. Previously 2% to 4%, we take one more percentage off the units and therefore lower the expectations in value to 1% to 3% and maintain our view on the French market that still in units delivers high single digits or is on track to deliver high single digits unit growth for the full year. Capital allocated to acquisitions, as earlier announced, is higher than normal, and also the previously stated announced acquisition of KIN Group. Nothing else to that.

Speaker #3: Previously two to four, but we take one more percentage of the units and therefore lower the expectations in value to one to three percent.

Speaker #3: And maintain our view on the French market that still in units deliver high single digits in on the tracking to deliver high single digits unit growth for the full year.

Speaker #3: Catch allocated to acquisitions, as early announced, higher than normal. Also, in the previous statement, the acquisition of Kin was announced. And then, yeah, nothing else to that.

Speaker #3: And then again due to the unfavorable mix change in geography. And having to sell more units to get to the same revenue. We have had to lower our expectations for full year profitability from previously four point one to four point five billion Danish kroner to now three point nine to four point three.

Søren Nielsen: Due to the unfavorable mix change in geography and having to sell more units to get to the same revenue, we have had to lower our expectations for full-year profitability from previously DKK 4.1 billion to DKK 4.5 billion to now DKK 3.9 billion to DKK 4.3 billion. I think that is it for now. Let us go to the Q&A session.

Speaker #3: I think that's it for now. Let's go to the Q&A session.

Speaker #4: Ladies and gentlemen, at this time we'll begin the question and answer session. If you would like to join the question queue, you may press star and then one using a touchtone telephone.

Conference Operator: Ladies and gentlemen, at this time, we will begin the question and answer session. If you would like to join the question queue, you may press star, then one, using a touch-tone telephone. To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you pick up your handset prior to pressing these to ensure the best sound quality. Once again, that is star, then one, to join the question queue. We will pause momentarily to assemble the roster. Our first question today comes from Hassan Al-Wakil from Barclays. Please go ahead with your question.

Speaker #4: To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you speak into your handset prior to pressing keys to ensure the best sound quality.

Speaker #4: Once again, that is star and then one. To join the question queue. We'll pause momentarily to assemble the roster. And our first question today comes from Hassan Al-Wakil from Barclays.

Speaker #4: Please go ahead with your question.

Speaker #5: Good Good afternoon, thank you for taking my questions. I have two please. Firstly, just on Costco, when we spoke last René, you were not expecting material share changes in this channel.

Analyst (Multiple: Hassan Al-Wakil, Veronica Dulgova, Maya Stephanie Petaki, Graham Doyle, Oliver Metzger, Angela Bosanovic, Susanna Ludwig, Robert Davies): Good afternoon. Thank you for taking my questions. I have two, please. Firstly, just on Costco, when we spoke last, René, you were not expecting material share changes in this channel given Sonova's return and had baked in some uncertainty into the guide. Has the share change surprised and become more material, and do you think this has now stabilized? Secondly, could you elaborate on trends across key European markets? I know you haven't specifically called out a COVID anniversary effect, but do you think this is significant in some of the markets you operate in? Which markets do you believe you're gaining share in Europe? Thank you.

Speaker #5: Given Sonova's return, we had baked in some uncertainty into the guide. Has the share change surprised and become more material? And do you think this has now stabilized?

Speaker #5: And then secondly, could you elaborate on trends across key European markets? I know you haven't specifically called out a COVID anniversary effect, but do you think this is significant in some of the markets you operate in?

Speaker #5: And in which markets do you believe you're gaining share in Europe? Thank you.

Speaker #3: Yeah, maybe if I can allow to follow up on the question, even though it was semi-addressed to René. In the large retailer you mentioned, it was not our assumption that there would be a full addition of one more supplier in our assumption was if anything changed, it would have been a replacement of one.

Søren Nielsen: Maybe if I can allow to follow up on the question, even though it was semi-addressed to René Schneider. In the large retailer you mentioned, it was not our assumption that there would be a full addition of one more supplier. Our assumption was, if anything changed, it would have been a replacement of one. This didn't happen, and yes, that has changed both what we have seen during the Q2 and also our expectation for share in the second half in that channel. So it is the natural consequence of splitting sales out on more suppliers. Trends across Europe, it is very difficult to know exactly what is the root cause to the lower demand that we see and the increased effort we have to do in our hearing care business to generate enough traffic.

Speaker #3: This didn't happen, and yes, that has changed both what we have seen during Q2 and also our expectations for share in the second half in that channel.

Speaker #3: So it is the natural consequence of splitting sales out on more suppliers. Trends across Europe, it's very difficult to know exactly what is the root cause to the lower demand that we see.

Speaker #3: And the increased effort we have to do in our hearing care business to generate enough traffic. We attributed to general uncertainty and then you can have various speculations around things such as the renewal rate after COVID.

Søren Nielsen: We attribute it to general uncertainty, and then you can have various speculations around things such as the renewal rate after COVID. We are a little cautious on that because this normally spreads out for a relatively long period and also has to do with when you actually call on the group, and you can pull things a little bit forward and so on. So we don't attribute a lot to that, but that is, of course, always difficult to exactly point out. There has also been and continues to be a correlation to very hot summer in certain European countries and so on. Yes, if we zoom into specific regions or specific markets, yes, you can find some elements of that. On the other hand, these things have a tendency to catch up relatively quickly.

Speaker #3: We are a little cautious on that because this normally spreads out for a relatively long period and also has to do with when you actually call on the group. You can pull things a little bit forward and so on.

Speaker #3: So we don't attribute a lot to that, but that's of course always difficult to exactly point out. There's also been and continue to be correlation to very hot summer in certain European countries and so on.

Speaker #3: Yes, if we zoom into specific regions or specific markets, yes, you can find some elements of that. On the other hand, these things have a tendency to catch up relatively quickly.

Speaker #3: So if you look at it from a full first half year, then what we have seen also in Q2, we mainly attribute to user or consumer cautiousness and overall macroeconomic uncertainty.

Søren Nielsen: So if you look at it from a full H1, then what we have seen also in Q2, we mainly attribute to user or consumer cautiousness and overall macroeconomic uncertainty.

Speaker #4: Very helpful. I'd like to just follow up on Costco. Has the share change stabilized, to your mind? And what are you baking into the guide for the second half in terms of incremental?

Analyst (Multiple: Hassan Al-Wakil, Veronica Dulgova, Maya Stephanie Petaki, Graham Doyle, Oliver Metzger, Angela Bosanovic, Susanna Ludwig, Robert Davies): Very helpful. If I could just follow up on Costco, has the share change stabilized to your mind? What are you baking into the guide for the second half in terms of increments?

Speaker #3: We look at it on a longer period. You have to do this is bulk shipment, so you know it can vary a lot. And you have no transparency to the total market or the total buying.

Søren Nielsen: Yeah, we look at it on a longer period. You have to do this is bulk shipment, so you know it can vary a lot. You have no transparency to the total market or the total buying. So you have certain assumptions for the consumption by the customer, and you over one to two months look at your own share, and it is too early to draw conclusions on whether it is stable or not. You would have to see trends over a little bit longer period. This is an updated view where we take out, I would say, material share in the second half. Otherwise, we would not mention it.

Speaker #3: So, you have certain assumptions for the consumption by the customer. Over one to two months, you look at your own share, and it's too early to draw conclusions on whether it's stable or not.

Speaker #3: You would have to see trends over a little bit longer period. But this is an updated view where we take out, I would say, material share in the second half; otherwise, we wouldn't mention it.

Speaker #4: Very helpful, thank you.

Analyst (Multiple: Hassan Al-Wakil, Veronica Dulgova, Maya Stephanie Petaki, Graham Doyle, Oliver Metzger, Angela Bosanovic, Susanna Ludwig, Robert Davies): Very helpful. Thank you. Our next question comes from Martin Parkhøi from SEB. Please go ahead with your question.

Speaker #3: Thank you.

Speaker #4: Our next question comes from Martin Ferkai from SEB. Please go ahead with your question.

Speaker #5: Martin Martin Perkai is probably more closer. But Martin Perkai, SEB, just follow up on Costco but more on the side of profitability. You cut your midpoint of your EBIT guidance by 200 million and I'm pretty sure the operational leverage are pretty high in Costco.

Analyst (Multiple: Martin Parkhøi, Carsten, Martin Brennwall, Niels Ganholm Leth): Martin Parkhøi, SEB, just follow up on Costco, but more on the side of profitability. You cut your midpoint of your EBIT guidance by 200 million, and I am pretty sure the operational leverage is pretty high in Costco. Can you maybe, I understand you will not say the full number, but if we look at the 200 million split, how much is explained by the weaker market and actually how much is explained by lost operational leverage in Costco? My second question, just on what you single out in the report, you mentioned impact from future product launches on production cost and OPEX in the second half. I have two questions on that. Has there been any changes to that cost assumption during 2025 since you put it out now? Is this higher than normal?

Speaker #5: So can you maybe understand you won't say the full number, but if we look at the 200 million split, how much is explained by the weaker market and actually how much is explained by loss operational leverage in Costco?

Speaker #5: And then second question, just on what you think are put out in the report that you mentioned: the impact from future product launches on production cost and OPEX in the second half.

Speaker #5: Two questions. On that, has there been any changes to that cost assumption during 2005 since you put it out now? And is this higher than normal?

Speaker #5: What should we read into that, and why do you actually put it out there?

Analyst (Multiple: Martin Parkhøi, Carsten, Martin Brennwall, Niels Ganholm Leth): What should we read into that and why do you actually put it out there?

Speaker #3: Yeah, thank you. I don't know, René, will you comment on the you know if it decomposed the midpoint of the profit adjustment. Basically, you could boil it down to two thirds being the market, one third being Costco.

Søren Nielsen: Yeah, thank you. I do not know, René, will you comment on the… If you decompose the midpoint of the profit adjustment, basically, you could boil it down to two-thirds being the market, one-third being Costco, and then partly offset by, you can say, even further focus on the OPEX side, which could counterbalance some of the effect. That brings it to 200.

Speaker #3: And then partly offset by you can say even further focus on the OPEX side, which would counterbalance some of the effect. That brings it to 200.

Speaker #4: Thanks.

Analyst (Multiple: Martin Parkhøi, Carsten, Martin Brennwall, Niels Ganholm Leth): Thanks.

Speaker #3: Yeah, and on the OPEX, you can say these are activities that we have planned throughout the year. Thus, it has not materially changed in the second half of the year compared to our original expectations.

Søren Nielsen: Yeah. On the OPEX, no, you can say these are activities that we have planned throughout the year. Thus, it has not materially, at least, changed in the second half year compared to our original expectation. It is just important to underline that despite the efforts we undertake on the cost side, it does not mean that we are not capable of funding and undertaking the activities related to future hearing aid introductions. It supports a difference between last year where such things did not take place and this year. So it is just meaningful in the year-over-year comparison.

Speaker #3: It's just important to underline that despite the efforts we undertake on the cost side, that it does not mean that we are not capable of funding and undertake the activities related to future hearing aid introductions.

Speaker #3: And it's, of course, a difference between last year, where such things did not take place, and this year. So it's just meaningful in the year-over-year comparison.

Speaker #4: Thank you. Our next question comes from Veronica Dubojova from City. Please go ahead with your question.

Analyst (Multiple: Martin Parkhøi, Carsten, Martin Brennwall, Niels Ganholm Leth): Thank you.

Conference Operator: Our next question comes from Veronica Dulgova from Citi. Please go ahead with your question.

Speaker #6: Hi guys, good afternoon, and thank you for taking my questions. I will keep it to two, please. One, could you maybe try to circle back on any comments you can give us on what you're seeing in the markets when you look at July and August?

Analyst (Multiple: Hassan Al-Wakil, Veronica Dulgova, Maya Stephanie Petaki, Graham Doyle, Oliver Metzger, Angela Bosanovic, Susanna Ludwig, Robert Davies): Hi, guys. Good afternoon, and thank you for taking my question. I will keep it to two, please. One, just maybe try to circle back on any comment you can give us on what you are seeing in the markets when you look at July and August. I am not asking for commentary on your performance, but obviously in the regions where you do have monthly data, I am curious if you could comment on whether July volumes are improving, staying stable, or deteriorating. In particular, I guess I am curious about the U.S., Germany, and France to the extent that you have seen those numbers. Then I will ask my follow-up after that, if that is okay. I will let you answer that first.

Speaker #6: I'm not asking for commentary on your performance, but obviously in the regions where you do have monthly data, I'm curious if you could comment on whether July volumes are improving, staying stable, or deteriorating. In particular, I guess I'm curious about the US, Germany, and France, to the extent that you see those numbers.

Speaker #6: And then I'll ask myself after that if that's okay. I'll let you answer that first.

Speaker #3: You know, be careful with single months, and we see no material difference than what we have just spoken to for the second half assumption.

Søren Nielsen: Be careful with single months. We see no material difference than what we have just spoken to for the second half assumption. Things seem to be in line with that.

Speaker #3: So things seem to be in line with that.

Speaker #6: Okay, that's helpful. And then maybe just on the product launch spend and I appreciate you don't want to tell us a lot, but if I kind of look at the normal run rate of OPEX sequentially first half to second half versus what you're guiding for for this year, it does imply you know a meaningful investment into product launches which is not normally typical in the industry unless we're seeing you know major product introductions, new platforms, et cetera.

Analyst (Multiple: Hassan Al-Wakil, Veronica Dulgova, Maya Stephanie Petaki, Graham Doyle, Oliver Metzger, Angela Bosanovic, Susanna Ludwig, Robert Davies): That's helpful. That's helpful. And then maybe just on the product launch spend, and I appreciate you don't want to tell us a lot, but if I kind of look at the normal run rate of OPEX sequentially, first half to second half versus what you're guiding for for this year, it does imply a meaningful investment into product launches, which is not normally typical in the industry unless we're seeing major product introductions, new platforms, etc. So can you maybe sort of talk through what are some of the expenditures that we should be anticipating in the second half and why you feel the need to invest so much at this point in time? Thank you.

Speaker #6: So can you maybe sort of talk through what are some of the expenditures that we should be anticipating in the second half and why you feel the need to invest so much at this point in time?

Speaker #6: Thank you.

Speaker #1: So So Veronica just get the assumptions you can say right for second half year. So what we talk about is no growth in OPEX sequentially.

Søren Nielsen: So, Veronica, just to get the assumptions right for the second half year. What we talk about is no growth in OPEX sequentially. What you see of actual reported OPEX in the first half year is ballpark what you should expect that we report in the second half year. So, flat growth sequentially. It will, of course, be growth year over year because we did a massive cost-saving effort in the second half year of last year. So, you will see organically a mid-single-digit growth year over year. But sequentially, we will not, as a group, spend more money in the second half year than we did in the first half year of this year, just to get that precise.

Speaker #1: So, what you see of actual reported OPEX in the first half year is ballpark what you should report or what you should expect that we report in the second half year.

Speaker #1: So flat growth sequentially. It will of course be growth year over year because we did eventually a massive cost saving effort in the second half year of last year.

Speaker #1: So you will see organically you know mid single digit growth year over year. But sequentially, we will not as a group spend more money in second half year than we did in first half year of this year.

Speaker #1: Just to get that. Precise.

Speaker #6: Okay, and can you talk about some of the activities that you expect to be undertaken to support the product launches you have in mind?

Analyst (Multiple: Hassan Al-Wakil, Veronica Dulgova, Maya Stephanie Petaki, Graham Doyle, Oliver Metzger, Angela Bosanovic, Susanna Ludwig, Robert Davies): Okay. Can you talk about some of the activities that you expect to be undertaken to support the product launches you have in mind?

Speaker #3: Yeah, of course of the natural kind when you do a product launches as we always do. That's seeing customers, having sales and marketing activities, various launch costs.

Søren Nielsen: They are, of course, of the natural kind when you do product launches, as we always do. That is seeing customers having sales and marketing activities, various launch costs. Do not read into this that they are significantly different than you would normally see. But it is just a difference between, as René Schneider said, a very tight budget or spend second half last year and this year. That is just what we flag.

Speaker #3: Don't read into this that they are significantly different than you would normally see. But it is just a difference between as René said a very tight budget or spend second half last year and this year.

Speaker #3: And that's just what we flagged.

Speaker #6: Got it, thanks guys.

Analyst (Multiple: Hassan Al-Wakil, Veronica Dulgova, Maya Stephanie Petaki, Graham Doyle, Oliver Metzger, Angela Bosanovic, Susanna Ludwig, Robert Davies): Got it. Thanks, guys.

Speaker #4: And our next question comes from Maya Stephanie Pataki from Kepler Cerevo. Please go ahead with your question.

Conference Operator: Our next question comes from Maya Stephanie Petaki from Kepler Cheuvreux. Please go ahead with your question.

Speaker #7: Hi, good afternoon. Thanks for taking my questions. If we just take a step back and look at market growth, it has been somewhat volatile over the last few years.

Analyst (Multiple: Hassan Al-Wakil, Veronica Dulgova, Maya Stephanie Petaki, Graham Doyle, Oliver Metzger, Angela Bosanovic, Susanna Ludwig, Robert Davies): Hi. Good afternoon. Thanks for taking my questions. If we just take a step back and look at market growth, it has been somehow volatile over the last few years. Of course, uncertainty has been massive. It started with COVID. We had inflation. Now we have challenging political conditions with the U.S. tariffs, everything. This uncertainty that we have seen over the last couple of years, at least for now, we need to assume that it is permanent. How do you think about planning on a three-year basis? Do you believe that maybe because market growth is not straightforward 4% to 6%, very great differences across markets? Do you think you need to take a different approach in how you move in markets? Following up on that, how are you thinking on the cost side?

Speaker #7: And of course uncertainty has been massive. It started with COVID, we had inflation, you know now we have challenging political conditions, with the US tariffs, everything.

Speaker #7: So you know this uncertainty that we've seen over the last couple of years, at least for now we need to assume that it is permanent.

Speaker #7: How do you think about you know planning on a three-year basis? Do you believe that maybe because market growth is not you know straightforward four to six percent very great differences across markets, do you think it is you need to take a different approach in how you move in markets?

Speaker #7: And follow up on that, how are you thinking on the cost side? Because I mean if you look at your margin project trajectory over the last couple of years, I was not you know too exciting.

Analyst (Multiple: Hassan Al-Wakil, Veronica Dulgova, Maya Stephanie Petaki, Graham Doyle, Oliver Metzger, Angela Bosanovic, Susanna Ludwig, Robert Davies): If you look at your margin trajectory over the last couple of years, it was not too exciting. Do you think that maybe it is time for a more thorough restructuring process to get margins up?

Speaker #7: So, do you think that maybe it's time for a more thorough restructuring process to get margins up?

Speaker #3: Yeah, thank you very much, Maya. I definitely agree that the volatility quarter by quarter, half-year by half-year, has definitely increased compared to what we have seen in the past.

Søren Nielsen: Yeah, thank you very much, Maya. I definitely agree that the volatility quarter by quarter, half year by half year, has definitely increased compared to what we have seen in the past. Both ways, we have also seen half years and quarters with very high growth following quickly after the decline. So, it is also important you are still there and ready when the market starts growing again. We do not see the fundamentals being changed, but yes, the volatility and dynamics being more. But the absolute size of the market, we will see smaller swings around a relatively stable line. Your second part of your question, it does, of course, as always, call on constantly looking for cost efficiencies, which we do.

Speaker #3: But both ways we have also seen half years and quarters with very high growth following quickly after the decline. So it's also important you are still there and ready when the market starts growing again.

Speaker #3: So, we don't see the fundamentals being changed. But yes, the volatility and dynamics are more pronounced. However, the absolute size of the market will result in smaller swings around a relatively stable line.

Speaker #3: Your second part of your question, it does of course as always call on constantly looking for cost efficiencies, which we do when René just highlighted a modest one percent organic growth in a world full of inflation.

Søren Nielsen: When René Schneider just highlighted a modest 1% organic growth in a world full of inflation, it is because we take a slightly different approach and do more than maybe done in the past to mitigate these effects so we do not end up taking out what needs to be done on the sales side, on the R&D side, etc. But of course, look for scale effects and cost efficiencies wherever possible. Of course, you could also say looking into the future, we definitely also reflect on additional opportunities to build and regain back some of the lost margin. It is clearly still our ambition to run the business with a higher margin than you have seen here in the first half, where you have also seen a weaker than expected market.

Speaker #3: It is because we take a slightly different approach and do more than maybe done in the past to mitigate these effects. So we don't end up taking out what needs to be done on the sales side, on the R&D side, et cetera.

Speaker #3: But of course look for scale effects and cost efficiencies wherever possible. And of course you could also say looking into the future, we definitely also reflect on additional opportunities to build and regain back some of the lost margin.

Speaker #3: It is clearly still our ambition to run the business with a higher margin than you have seen here in the first half where you have also seen a weaker than expected market.

Speaker #7: Thank you very much.

Analyst (Multiple: Hassan Al-Wakil, Veronica Dulgova, Maya Stephanie Petaki, Graham Doyle, Oliver Metzger, Angela Bosanovic, Susanna Ludwig, Robert Davies): Thank you very much.

Speaker #4: Our next question comes from Graham Doyle from UVS. Please go ahead with your question.

Conference Operator: Our next question comes from Graham Doyle from UBS. Please go ahead with your question.

Speaker #5: Thanks guys. Yeah, two questions for me. Just firstly, in relation to those costs around future product developments. I think we discussed in the past around how you would typically have a product launch in H2.

Analyst (Multiple: Hassan Al-Wakil, Veronica Dulgova, Maya Stephanie Petaki, Graham Doyle, Oliver Metzger, Angela Bosanovic, Susanna Ludwig, Robert Davies): Thanks, guys. Two questions for me. Firstly, in relation to those costs around future product developments, I think we discussed in the past around how you would typically have a product launch in H2. Obviously, we haven't had anything as yet. It would be good to understand one thing, which is specifically when you think about the philosophy of launching a product, historically, the idea, particularly if it is a platform, is to do so with enough time to get into the VA. Could you just let me know if that has changed in terms of your approach to that, or would you still aim if you were launching some sort of platform to make sure you make the VA window?

Speaker #5: And obviously we haven't had anything as yet. So it'd be good to understand one thing which specifically when you think about the philosophy of launching a product, historically the idea, particularly if it's a platform, is to do so with enough time to get into the VA.

Speaker #5: So could you just let me know if that's changed in terms of your approach to that or would you still aim if you were launching some sort of platform to make sure you make the VA window?

Speaker #3: Oh, hello? Can you hear me? Oh, hello? Hello guys, just checking if you can hear me.

Søren Nielsen: Hello? Can you hear me? Oh, hello. Hi, guys. Just checking if you can hear me.

Speaker #4: And Graham, we can hear you fine. We seem to be having a technical issue with the speaker line. One moment while we reconnect.

Conference Operator: Graham, we can hear you fine. We seem to be having a technical issue with the speaker line. One moment while we reconnect.

Speaker #5: Thank you.

Søren Nielsen: Thank you.

Speaker #4: And everyone, this is the conference operator. We have the speaker connection re-established. So Mr. Doyle, you can proceed with your question.

Conference Operator: Everyone, this is the conference operator. We have the speaker connection reestablished. Mr. Doyle, you can proceed with your question.

Speaker #5: Awesome, thanks a lot, guys. Sorry, so what I was saying is you've described in the past how you would typically launch new products in the second half.

Analyst (Multiple: Hassan Al-Wakil, Veronica Dulgova, Maya Stephanie Petaki, Graham Doyle, Oliver Metzger, Angela Bosanovic, Susanna Ludwig, Robert Davies): Awesome. Thanks a lot, guys. What I was saying is you've described the past how you would typically launch new products in the second half. We're in the second half. You've talked in this document about increased costs in terms of investment around new products. I suppose the question I have is just your philosophy historically has been to put new products into the VA channel as it's an important channel. Is that still a reasonable assumption to make going forward? Then the second question—

Speaker #5: We're in the second half. You've talked in this document about increased costs in terms of investment around new products. And I suppose the question I have is just, your philosophy historically has been to put new products into the VA channel, as it's an important channel.

Speaker #5: Is that still a reasonable assumption to make going forward? And then the second question, oh yeah, perfect. Sorry, go ahead.

Søren Nielsen: Sorry, go ahead.

Speaker #3: Go ahead. Yeah, I'll repeat the answer and then we can take your second simpler version this time in respect of time. We are still committed to doing two launches a year.

Analyst (Multiple: Hassan Al-Wakil, Veronica Dulgova, Maya Stephanie Petaki, Graham Doyle, Oliver Metzger, Angela Bosanovic, Susanna Ludwig, Robert Davies): Go ahead.

Søren Nielsen: I will repeat the answer, and then we can take your second. Simpler version this time in respect of time. We are still committed to doing two launches a year, and we also will this year. We have a good, strong pipeline. Due to the risk of people holding back on existing orders, we tell new products when they are ready to be sold and ramped up sufficiently. That will also be the case this time around. It is, of course, always preferential to try to catch a window of like a VA. You cannot always do that, and I cannot comment further on shortcoming launches this time. Any second part of your question?

Speaker #3: And we also will this year. We have a good strong pipeline due to the risk of people holding back on existing orders. We tell new products when they are ready to be sold and ramped up sufficiently.

Speaker #3: And that will also be the case this time around. It is of course always preferential to try to catch a window of like a VA, you can't always do that.

Speaker #3: And I cannot comment further on you know shortcoming launches this time. Any second part of your question?

Speaker #4: And gentlemen, it appears Graham has removed himself from the Q&A. So we'll move on to our next bank. Please go ahead with your question.

Conference Operator: Gentlemen, it appears Graham has removed himself from the Q&A. We will move on to our next pocket bank. Please go ahead with your question.

Speaker #8: Maybe it was Carsten from Danske Bank. I don't know. I couldn't really hear it. Can you hear me?

Analyst (Multiple: Martin Parkhøi, Carsten, Martin Brennwall, Niels Ganholm Leth): Maybe it was Carsten from Danske Bank. I do not know. I could not really hear it. Can you hear me?

Speaker #3: We We hear you, Carsten. Just go ahead.

Søren Nielsen: We hear you, Carsten. Just go ahead.

Speaker #8: Then it was Carsten from Danske Bank. Thank you very much. I have just a question for the remaining part of the year. You delivered the zero percent organic growth here in in the first part of the year.

Analyst (Multiple: Martin Parkhøi, Carsten, Martin Brennwall, Niels Ganholm Leth): Then it was Carsten from Danske Bank. Thank you very much. I have just a question for the remaining part of the year. You delivered 0% organic growth here in the first part of the year. In terms of the mid-range of your guide of, let us say, 2% for the full year, you need quite a comeback here in the second part of the year. Which part of your divisions or franchises do you think will react first? Is it wholesale, diagnostics, retail, etc.? Can I also just get a confirmation or what should we call it, that diagnostics will be kind of challenged for the rest of the year, or what is your view on diagnostics? Thank you.

Speaker #8: And in terms of the mid-range of your guide, of let's say two percent for the full year, you need sort of quite a comeback here in the second part of the year.

Speaker #8: So which part of your divisions or franchises do you think will react first? Is it sort of wholesale, diagnostics, retail, et cetera? And can I also just get a sort of a confirmation of what should we call it, that diagnostics will be kind of challenged for the rest of the year or what is your view on diagnostics?

Speaker #8: Thank you.

Speaker #3: Yeah, thank you Carsten. Let me try to you know high level. It will of course be mainly simply due to the size of it driven by hearing aids and hearing care.

Søren Nielsen: Yeah, thank you, Carsten. Let me try to, you know, high level. It will, of course, be mainly simply due to the size of it, driven by hearing aids and hearing care. That is.

Speaker #3: And there is both something in the comps we again had the number of things in Q1, we have seen good share gain globally in second quarter.

Gustav Høe: Both something in the comps. We again had a number of things in Q1. We have seen a good share gain globally in the second quarter. We, of course, have the headwind in the US business driven by a large retailer. Other than that, generally good momentum in the business. That is the main reason together with a compared to first half some improvements in the market. Diagnostics is a little more uncertain and related to, you could say, an increased investment level in the US. The exact timing of that, we cannot really say. Not too specific on the individual outlook and growth expectation for the various businesses. It has to be driven and will be driven by hearing aids and hearing care.

Speaker #3: So we of course have the headwind in the US business driven by large retailer, but other than that, generally good momentum in the business.

Speaker #3: And that's the main reason to gather with a compared to first half some improvements in the market. Diagnostic is a little more uncertain and related to you could say an increased investment level in US.

Speaker #3: And they accept timing of that. We cannot really say so. So not too specific on the individual outlook and the growth expectation for the various business.

Speaker #3: But it has to be driven and will be driven by hearing aids and hearing care.

Speaker #8: Okay, thank you.

René Schneider: OK, thank you.

Conference Operator: Our next question comes from Niels Ganholm Leth from DNB Markets. Please go ahead with your question.

René Schneider: Thank you. On my first question, are you able to recognize any effect from this five-year COVID close down that Amplifon alluded to on their conference call? Secondly, could you talk about your expectations for your net financial items for the full year, given that you expect to close the KIN Group acquisition, say, around the beginning of Q4? Thank you.

Gustav Høe: Yeah, I will take the first. I think I actually commented a little bit on it earlier. I do not know if you got it. We, of course, can see that the exact month, some of them in Q2, the database had less prospects that were fitted there. People do not just like all come in in one go. When you look at the actual distribution, we do not attribute a lot to that effect. Maybe it is part of it, but we think macroeconomic uncertainty is far bigger. So, no, we do not attribute a lot to that. You can also do the in certain regions and smaller areas, you can definitely see some effect of weather and so on. It typically comes back quickly. Headline from us is macroeconomic uncertainty as the main driver for a less strong hearing aid market in the first half.

Søren Nielsen: On net financials, what we expect for the full year right now is slightly more negative than last year, driven by higher debt and also growth in our retail business, but partly offset by lower interest rates. We have not built in any expectations from KIN Group, neither in financials nor in EBITDA or sales, since we do not have clarity on the date of closing of the transaction. But once we do that, we will update our outlook accordingly.

The exact month, some of them in Q2 the database had less prospects that will fit in there. But people don't just like all come in in 1 go. So when you look at the actual distribution, we don't attribute a lot to that effect. Maybe it's part of it, but we think, uh, yeah, microeconomic itself is far bigger, so no, we don't attribute a lot to that. You can also do the in certain regions and smaller areas. Uh, you can definitely see some effect of weather and so on, but it's typically come back quickly. So headline from ours is macroeconomic uncertainty and as the main driver for, uh, a strong hearing aid Market, uh, in first half,

Yeah, on net financials, uh, Nils. Uh, what we expect for the full year. Uh, right now is a slightly more negative than uh, last year driven by a higher debt and also growth in our retail, uh, business. But partly offset by lower uh, interest rates. Uh, we have not built in, uh, any expectations, uh, on, or from Kint. Uh, neither in financials nor in in eidos or sales since we don't have Clarity on the date of closing of the transaction. Uh, but once we we do that, we will update uh, our

Outlook. Uh, accordingly.

René Schneider: Thank you.

Thank you.

Conference Operator: Our next question comes from Martin Brennwall from Nordea. Please go ahead with your question.

Our next question comes from Martin Breno from Nordea. Please go ahead with your question.

Søren Nielsen: Thank you very much for taking my questions. Martin Brennwall from Nordea. To understand it clearly, in the retail division in hearing care, you have been quite exposed to markets that are actually growing: France, Germany, also US being up. Can you elaborate a little bit whether the sluggish growth in Q2 is just purely phasing or if there is anything to call out? On that regard, you had some comments about the market slowing by the end of the quarter. Is that also what you are seeing in the beginning of Q3? That is the first question. I will wait with the second question.

Thank you very much, power. Take my questions Martin from Nadia, um, just to to understand it clearly in, in the, in the retail, uh, division in here and care, you have been quite exposed to markets that are actually growing. Um, France, Germany also us being up. Um, so can you maybe just elaborate a little bit, whether uh, the, the sluggish growth in in Q2 is just purely facing or if there is anything to uh to call out uh and on that, on that regard. Uh, you, you had some comments about uh the markets

Gustav Høe: Thank you, Martin. I think we actually have to take it a little bit market by market. France, good as expected uptake in the market. We follow it in our business. Germany was part of the declining growth and less than expected growth in Europe on the market side. We did well in that market, in Germany specifically. The US grew also as expected in the market. We did not capture as much of that as one could expect. In the US, I would attribute some of it to timing and opportunities and when you close and then the level of pipeline you carry into the next month and so on. For the US, yes, a less strong performance isolated in Q2. On the other hand, also a stronger than expected performance in Q1.

Blowing by the end of the quarter, is that also what you're seeing, uh, in in, in the beginning of Q3, that's the first question. And then, uh, I'll wait with the second question.

Thank you, Martin. I, I think we actually have to take it a little bit Market. France, a good as expected. Uptake in the market. We follow it, uh, in our business.

Uh, Germany uh, did was part of the declining growth and less than expected growth. In Europe, uh, on the market side, we did well in that market in Germany, specifically,

Gustav Høe: If you look at it in the first half year, still an improved US business compared to what we have seen in recent years. Nothing to call out and alarming. Sequentially between the two quarters, a little bit out of sync. For the half year, I would say on expectations.

Could expect. And in the US I would attribute some of it to timing and our activities and when you close and then the level of pipeline you carry into the next month and so on. So for us yes. Uh a less strong performance isolated in Q2 but on the other hand also a stronger than expected performance in q1. And if you look at it in the first half year still an improved us business compared to what we have seen in recent years and nothing uh to call out an alarming, but sequentially between the 2 quarters, a little bit uh out of sync. But for the half year, I would say on expectations

Søren Nielsen: OK, that is very clear. Then, just as a follow-up question, I guess that you have also noticed on this call in general that everybody and their mother are speculating whether you will launch a product sooner rather than later. Do you think that you have also seen some retailers holding back a little bit on the anticipation of new products coming?

Gustav Høe: No, I think the rumors are very weak in the market. They are particularly much stronger among the investment community.

Okay, that's very clear. And then just a, as a follow up, uh, question. Um, I guess that you have also noticed on this call and general that everybody and their mother, uh, speculating. Whether you launch a product, uh, uh, sooner rather than later. Uh, do you think that you have also seen some retailers uh, holding back a little bit? Uh, on the anticipate anticipation of uh, of of new products coming?

No, I think the rumors are very weak, uh, in the market. They are particular a much stronger among the investment community.

Søren Nielsen: OK, that's very clear. Thank you very much for taking my questions.

Okay, that's very clear. Thank you very much for taking my questions.

Conference Operator: Our next question comes from Oliver Metzger from Oddo BHF. Please have your question.

René Schneider: Yeah, good afternoon. Thanks a lot for taking my two questions. The first is on the overall weakness of the hearing aid market. Maya asked also in this direction. If I remember a station almost three years ago, that was about repurchases where we see some postponement. I remember you talked also about the first-time users where you saw some hesitancy. Can you first classify the decline between the first-time users and the repurchases? Also in a more bigger context, in this context, it seems that the overall hearing aid market has become more volatile. For decades, we talked about very high stability when it was COVID, when it was inflation a few years ago. Now it's clearly more of a consumer confidence.

Our next question comes from Oliver mezzer from Auto bhf. Please go ahead with your question.

Yeah, good afternoon. Thanks for taking my 2 questions. The first is on the overall weakness of a hearing aid market. So Maya asked also in this direction. But, uh, if I remember the station, almost 3 years ago, that was about a reputation where we see some postponement now. Um, I remember you talked also about the first time users where you saw some, um, hesitancy. So can you first classify between

René Schneider: It would be great to hear what has changed in the market fundamentals that some external factors play even a bigger role than they did in the past. The other one is very quick on China by ASP Tailwind. You reported in hearing care, more background on that and how long it is expected to last. Thank you.

The decline. What between the first time users and the rep purchases? And also in the more bigger context in this context, uh, it it, it seems that the overall Hearing in the market has become more volatile. This is 4 decades. We talked about very high stability. When was Co when was inflation few years ago, and now, it's clearly more of a consumer confidence. So it would be great to hear. What? What has

Gustav Høe: Thank you very much. It is very difficult to make sure you compare apples to apples when you look at first-time user and upgrades because what was the effort you put behind it? What we can see is it takes more effort to generate sufficient traffic of new first-time users to the business. It is always more costly to do that than it is to call on your database. At some stage, even though you can get a little bit extra out of the database, you have to get back to the first-time users. You feel the lack of market growth more coming from lack of new users because it is harder. In reality, I would say both effects are in there and it is difficult to take them apart.

Change the market fundamentals, that some external factors play even bigger role than they did in the past. And the other 1 is very quick on, uh, China, ASP Talent. EU reported in Hearing Care More background on that and how long it is expected to last. Thank you.

You're very much. Um,

Gustav Høe: We clearly sense that it is very easy to postpone your first interaction and contact when reached out to for your first hearing aid. That is a clear factor here in the first half that we have seen. In Europe, stronger here in the second quarter than in the first quarter. To the volatility, I do not think the fundamentals have changed. I really do not. I just think the number of events that could cause it have been much more frequent. We typically talked about the financial crisis 10 years ago or five years ago, and then it took another five and 10 years until something really material happened. We also know it has to be something that somehow impacts our key audience, senior citizens. It is not unemployment rates. It is not the annual salary development and stuff like that. It is typically in U.S. share price development.

People to make sure you compare apples to apples. When you you know look at first time you saw an upgrades because what was the Air Force you put behind it. So what we can see is it takes more effort to generate sufficient traffic of new first-time users to the business. It's always more costly to do that than it is to, uh, you know, uh, uh, call on your database. But at some stage, even though you can get a little bit extra out of the database, you have to get back to the first time users. So you feel the, uh, uh, lack of market growth more coming from lack of new users, because it's harder. But in reality, I would say both effects are in there and it's difficult to take them apart. But we clearly sense that, you know, is very easy to postpone, your first interaction and contact when when reached out to for

For your first hearing aid. And that is a clear uh, Factor here in the in the first half uh, that we have seen and in Europe, stronger here in the second quarter than in the first quarter. And to the volatility, I don't think the fundamentals have changed. Uh, really? Don't I just think the number of events that could cause it have been much more frequent. We typically talked about the financial crisis in, you know, 10 years ago or 5 years ago and then it took another 5 and 10 years until something really material happened. We also know, it has to be something that somehow impact our

Gustav Høe: We can also see this time that it followed that pretty closely. In Europe, as there is more reimbursement, it comes a little later. It kind of sinks in more from a psychological point of view than it actually is financial, that things are a little uncertain and there is a war going on. Now there is also a conflict in the Middle East and so on. That just somehow sets in. In some countries, tight government budgets can also sometimes lead to increased waiting lists, stuff like that. I do not think any of the fundamentals have changed. The frequency of these events are just higher. China and ASP, it comes from China is a country with no professional education. The more we invest in training and education, the better performance we get in selling better quality devices to people.

Sinks in, you know, more from a psychological point of view than it actually is financials. That things are a little uncertain and there's a, you know, war going on. And now there's also a conflict in the Middle East and so on and that just somehow sets in, uh, and then in some

countries tied government budgets. Can also sometimes, uh, lead to, you know, uh, increased waiting list stuff like that. But I don't think any of the fundamentals have changed. The frequency of these events are just higher.

Gustav Høe: That is an effort we have, something we put a lot of effort into and see results from. It stems from selling higher and higher quality to people in China that drives the ASP. That is not temporary. That is definitely something that I assume we will continuously see a little bit up and down, but for quite a number of years because the product mix in China and the education level in China of hearing care professionals is lower than we see in most other mature markets around the world.

And then China, and ASP it comes from. You know, China is, uh, a country with no, professional education and the more we invest in training and education, the better performance, we get in, selling better quality devices to people and that's an effort we have uh, you know something we put a lot of effort into and see results from. So it steams from uh selling uh higher and higher quality to people in China, that drives DSP, and that's not temporary. That's definitely something that I assume will continue to see a little bit up and down but for quite a number of years because the product makes in China and the education level in China of here and Care Professionals is lower.

We see in most other mature markets around the world.

René Schneider: OK, great. Thank you.

Okay, great. Thank you. Great, thank you.

Conference Operator: Our next question comes from Angela Bosanovic from BNP Paribas. Please go ahead with your question.

Our next question comes from Angela bosan know from BMP parabol, please go ahead with your question.

Conference Operator: Hi, good afternoon. I hope you can hear me well. My first question is on the US market. If you can comment on specifically Medicare, how are you evolving with the market share in the channel and specifically with UnitedHealth? The second part of the question is again on Costco. If I remember well, you were the leader in the channel before we had Sinovac back. Is this still the case, or are you seeing a greater market share loss? Thank you.

Gustav Høe: Thank you for your two questions. As it has been published, we have changed our offering and product offering specifically to UnitedHealth. Other than that, we do not go into the details of individual plans and accounts. All is positive. We have seen growing share during the second quarter. It is also part of the share gain outside large retail in the US that we have seen from Q1 into Q2, and is part of the momentum we carry into the second half. Specifically on larger retailer, we believe, we do not know, but we believe we are the largest player. We still believe we are that. I am just saying when there is four instead of three, you will see everybody losing some share. I cannot tell that any have lost more than others.

Hi, good afternoon. I hope you can hear me. Well. Um, my first question is on the US market and if you can comment on specifically, managed care, how are you? Evolving with the market share in the channel and specifically with, uh, United Health? And the second question, uh, the second part of the question is, uh, again, in Costco, if I remember, well, you were the leader in the channel, uh, before we have had some over back. So is this still the case or um, you are, uh, saying that great market share loss. Thank you.

Yeah, thank you for your 2 questions. And as uh, as it has been published, we have changed, uh, our offering and product offering, uh, uh, specifically yes to United. Other than that, we don't go into the details of individual, uh, plans and accounts on but all yes, positive, we have seen growing share during the second quarter. And uh, it's also part of uh you could say the uh uh share again outside large retail in us, that we have seen from first quarter into second quarter. And is part of the momentum we carry into uh the second half.

Gustav Høe: We still have a good, strong business, but it is lower than it was a year ago.

Specifically on larger retailer. Uh, we uh, believe we don't know but we believe we are uh, the largest player. Uh, we still believe we are that. I'm just saying when there is four, instead of 3, you will see everybody losing some share. And I, I'm not, I can't tell that any have lost more than others. We still have a good strong business, but it is lower than it was uh, a year ago.

Conference Operator: Perfect. Thank you.

Perfect. Thank you. Thank you.

Conference Operator: Our next question comes from Susanna Ludwig from Bernstein. Please go ahead with your question.

Our next question comes from Suzanne Ludwig from Bernstein, please. Go ahead with your question.

Conference Operator: Great. Thanks for taking my questions. I have two, please. I guess you talked about gaining unit market share in Q2, both sequentially and year over year. However, is it fair to assume that this has primarily been in lower ASP geographies? Because it looks like external growth in the U.S. and Europe was still negative versus unit growth in those markets. Or was there also an ASP negative impact within these geographies that is making your unit growth closer to the market there? Second, could you just give a little bit more clarity on the negative wholesale performance in the U.S. despite the rebound in the U.S. market to plus 4% in the quarter? I guess, how much of that was the headwind from Costco? What were the other factors driving the underperformance versus what we see as U.S. commercial market growth?

Uh, great, thanks for taking my questions. I have two, please. Um, I guess you talked about gaining units and market share in Q2 both sequentially and year-over-year. However, is it fair to assume that this has primarily been in lower ASP geographies? Because it looks like external growth in the US and Europe, but still negative versus unit growth in those markets. Or was there also sort of an ASP negative impact within these geographies that is sort of making your unit growth closer to the market there? Um, and then second, could you just give a little bit more clarity on the sort of negative wholesale performance in the US, despite the rebound in the US market to plus 4% in the quarter? I guess, you know, how much of that was the headwind from Costco and what were the other?

Factors driving sort of the underperformance versus uh what we see as sort of us commercial market growth.

Gustav Høe: Yes, thank you very much. You are absolutely right. It is geographies with lower than average global ASP where we have seen most growth and therefore our ASP go down. There are big differences across the European markets, if that is how I got your question. We are doing well in France as an example. But the product mix in France is also going down. As many of the people that come in for renewal have a free-to-client category of hearing aids, they are significantly less priced on the wholesale level than the premium products. So the ASP in the French market goes down. It does not mean that less people get in absolute terms a premium product. But the market growth predominantly happens in the free-to-client category.

Gustav Høe: So putting it all together, yes, unit growth above market growth in Q2, ASP down due to geography mix, that is spot on. U.S. outside large retail is a good story going from Q1 into Q2. We have seen, the question was just raised, too many scale. That is an example of share gain. We have also seen a good share gain from sequentially Q1 into Q2 with the independent. We see that as a testament to the strength of our product range after numerous introductions from competitors that have been trialed out. That is how it works, that many customers try out the new stuff and then you see the reaction. We are positive on the rebound we have seen in Q2. We still see a little bit of year-over-year loss, but a strong development from Q1 into Q2.

Across the European markets. If that's how I got your question. Uh, we are we are doing well in France as an example, but the product makes in France is also going down as many of the people that come in for Renewal have a free to client category of hearing aids. They are significantly, uh, less priced on wholesale level than the premium products. So the ASP and the French Market go down. It doesn't mean that less people get in absolute terms, a premium product, but the market growth predominantly happens in the free to client category. So you know, putting it all together. Yes, a unit. Growth above market growth.

Q2.

ASP down due to Geographics, that's spot on.

We have seen you just uh, the question was just raised to managed care. That's an example of share. Again, we have also seen a a good share again from sequentially q1 into Q2 with the independent. And we see that as a testament to the strength of our product range. After numerous introductions from competitors that have been tried out, that is how it works that, that the many customers try out the new stuff and then you see the reaction. We are positive on the rebound. We have seen in Q2, we still see a little bit of year over year loss.

Gustav Høe: Again, also a momentum we carry with us into the second half. The last channel in U.S. is VA, where we have seen some growth year over year in share up until the introduction of new products from competition. Then you see a natural also trial there. We do not know how it pans out after things have kind of settled. But also there, we have seen and do see some of the account or locations that have tried new stuff to return to Oikon Intent specifically, which still do a very good job in VA and among the independent dispensers. You can only attribute the lack of performance, if you say so, in the second quarter in U.S. to large retail.

But a strong, uh, uh, development from q1 into Q2. So again, also a momentum we carry with us in to, uh, the second half and then last channel in ussba, where we have seen a, uh, some growth a year over year in share up until the introduction of new products from competition. Then you see a natural also trial there, we don't know, uh, you know, how it, it it, pans out, um, after things have kind of settled, but also, there we have seen and do see some of the account or, or, or locations that have tried new stuff to return to, uh, all the content. Specifically, which still do a very good job in VA and among the independent, uh, uh, dispenser. So so you can only attribute the, you know, the lack of performance if you say so in the second quarter and you has to largely

Detail.

Conference Operator: Is there any ASP impact in Q2 in the U.S.? Or is it really like in, say, the independent channel? Or is ASP flat? Or is there any negative ASP impact in any of those channels?

Gustav Høe: All that is very stable. It is also within U.S. a mix change. You could actually say when we grow relative to Q1 with the independent and lose a bit on large retail, our U.S. ASP goes up. There are so many channel geography and ending up being a product mix effect that is what ends up constituting the ASP. It is a relatively dynamic also within a market parameter depending on the actual mix of sales.

And is there any aspect in Q2 in the U.S.? Or is it really, uh, like in say the independent channel, or is it an ASP file? Or is there any negative aspect in any of those channels?

So all that is very stable, it is also within us, a mix change. So you could actually say when we grow, uh, relative to q1 with the independent and lose a bit on large retailer or us. ASP goes up. So, there are so many, you know, channels geography and ending up being a product mix effect. That is what end up constituting, the SP. So it's a relatively Dynamic also within a market parameter.

Depending on the actual mix of sales.

Conference Operator: Our next question comes from Robert Davies from Morgan Stanley. Please go ahead with your question.

René Schneider: Yeah, thanks. We've only got two left. One was just on France, your comment on 2025 doing high single digit in terms of units. Are you already at that run rate to get there, or are you baking in sort of further acceleration through Q3 and Q4? That was my first question. The other one was just around the success of, I guess, your peers in their AI-driven hearing aids. What are you kind of hearing in terms of feedback of the sort of main features that have gone well or not well, or sort of things you think you could still add in terms of new product introductions? You know, it's been speculated already in terms of what you could bring to market.

Our next question comes from Robert. Davies from Morgan Stanley, please, go ahead with your question.

René Schneider: Just be kind of curious how you think that sort of excitement level between the audiologists has gone and their appetite to sort of take another potentially AI-driven hearing aid in the market. Thank you.

Yeah, thanks. So very good. What what was just on France? Your comment on 2025 doing High single digit. In terms of units? Are you already at that? Run rate to get there? Or are you baking in sort of further acceleration through 3 q and 4 q? That was my first question and then the other 1 was just around the success of I guess your peers in their AI enabled hearing aid, what do you kind of hearing in terms of feedback of the sort of main features that have gone well or not well or sort of things you think you could still add? Um in terms of new product introductions, you know it's been speculated already in terms of what you could bring to Market, you would just be kind of curious how how you think that sort of excitement level between the audiologist has gone and their appetite to sort of take another potentially.

Gustav Høe: Yes, on France, it is a gradual uptake during the first half and also during the second quarter. Just by that, the growth in the second half will be above the first half. We are still not fully at the run rate expected. On AI, I would like to highlight that we launched the first AI-driven technology in the industry and still see ourselves as among the absolute leaders in that. There is a very strong correlation between what kind of signal processing you do and what kind of battery you carry and whether things are on all the time or it is something you can use a little bit in special situations. Our strategy and approach is to make sure it is always doing it up in making sure you manage the dynamic listening environments you are in. The user does not have to switch anything on or off.

AI enabled hearing aid in the market. Thank you.

Uh, yes, uh, on France. You know, it's a gradual uptake uh, uh, during the first half and also during the second quarter. So, uh, just by that the growth in the second half, will be above, uh, the first half and there is, uh, you know, we're still not fully at the Run rate expected.

Gustav Høe: It does not compromise the size of the devices. That is clearly the echo we hear from customers that the performance when it comes to end user satisfaction, solving hearing and noise, solving everyday life, our Oikon Intent based on the AI algorithms we have do a fantastic job.

What kind of signal processing you do, and what kind of battery you carry and whether things are on all the time or something you can use a little bit in special situations, our strategy and approach, is to make sure it's always doing a job in making sure you manage the dynamic listening environments. You're in the user. Don't have to switch anything on and off and it does not compromise size of the devices. And that clearly the echo we hear from customers that the performance, when it comes to end user satisfaction solving hearing a noise solving everyday life. Uh, our audio content based on the AI algorithms, we have to a fantastic job.

René Schneider: Great. Thank you.

That's great. Thank you.

Conference Operator: Ladies and gentlemen, with that, we will be ending today's question and answer session. I would like to turn the conference call back over to Gustav for any closing remarks.

Søren Nielsen: Thank you, operator. Thank you all for joining us on the call this afternoon. We look very much forward to seeing many of you on the road in the coming weeks. If you do have any follow-up questions, please reach out to us in the IR team directly after the call. We will, of course, do our best to help you out. Have a good day.

And ladies and gentlemen, with that, we'll be ending today's question-and-answer session. I'd like to turn the conference call back over to Gustav for any closing remarks.

Thank you, operator, and thank you all for joining us on the call this afternoon.

We look very much forward to seeing many of you on the road in the coming weeks. And if you do have any follow-up questions, please reach out to us in the IR team directly after the call, and we will, of course, do our best to help you out. Have a good day.

Conference Operator: Ladies and gentlemen, that does conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.

Ladies and gentlemen, that does conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.