Demant A/S

Good afternoon, everyone. Welcome to our conference call held in connection with the publication of our Interim Management Statement for Q1 2023, which we released this morning.

As I assume you're all aware, we pre-released Q1 growth rates and also updated our full-year financial outlook on 17th April. And we'll now go through presentation taking into these results and then followed by Q&A.

Presentation has been uploaded to our website, and we plan for this call to last no more than one hour, including the Q&A.

On the call today, as always, President, CEO, Soren Nielsen; CFO, Rene Schneider, and the IR team, Peter Pudselykke and myself, Mathias Holten Moller.

And I'll now hand it over to you, Soren.

Yes. Thank you very much, Mathias, and welcome, everybody.

The agenda today is key events and key financial takeaways from the first quarter, diving a bit more into Hearing Healthcare segment, then Communications, then speaking to the development in the discontinued operations, Oticon Medical, and then a few more words to the outlook and then on with Q&A.

Q1 has been eventful. So despite the key highlights, despite of continued macroeconomic uncertainty, we have, for the group, seen a very strong performance and we, therefore, raised our financial guidance as announced April 17.

We have seen exceptional high growth in hearing aids and it's a combination of some market recovery and strong market growth, but even more so due to strong momentum in the business, further fueled by a very successful product launch.

Communication has -- the market has remained negative and we have also, as expected, delivered negative organic growth. As announced on April 20, the divestment of Hearing Implants is no longer expected to close here in second quarter and we can currently not give an update on a timeline.

We simply do not have the necessary clarity on the solution that can be approved, but of course, working on that. We also last week announced that President, Arne Boye Nielsen, has left Demant, that CFO, Rene Schneider temporarily take over the leadership of the Diagnostic business, while I take the all responsibility for the Communication business.

Key financial takeaways for first quarter. Reported revenue growth of 20%, driven by outperformance in Hearing Healthcare.

Very, very strong organic growth for the group 14%, driven by Hearing Healthcare with 16%, and the Hearing Aid business delivering 26% organic growth in the quarter.

Communication organic growth of minus 15%, reflecting a continued weak market for gaming and enterprise. Our gross margin is slightly below expectations.

It is driven by a decline in gross margin in Communications, I will get back to that, and also FX development. OpEx is in line with our plans and those plans, as spoken to earlier, are cautious for the year as the uncertainty was high, so growing significantly less than the top line.

EBIT significantly above initial expectations for the quarter, driven by strong revenue growth and operating leverage in the Hearing Healthcare business. So based on that updated and adjusted upwards the guidance for the year, previously 3% to 7% organic growth, now 6% to 10%, and EBIT up to DKK3.8 billion to DKK4.2 billion from previously DKK3.6 billion to DKK4 billion.

Hearing Healthcare. And today, we put more flavor to the development in the Hearing Aid market globally in Q1 as we see it.

We have a data for around 2/3 of the market, and it's based on that and our own best estimates. On top of that, we see the total market growing around 7%.

We see Europe doing less with 4%, and that's primarily driven by, let's say, the full recovery and final getting back to full performance in NHS and then offset by negative growth in Germany, driven by uncertainty in France due to the expected, you could say, backdrop after the peak of the reform. So all-in-all 4%.

North America, very positive development. Both commercial and VA have grown 9% and we read that as an element of a bounce back after many users held back on upgrading their existing solutions during fall, and we saw a below normal market growth.

And we didn't -- this development, the only additional flavor to add is we continue to see managed care sector outgrow the general market.

Rest of the world has been very strong in China after the full reopening mid-January. We have seen a very significant boom.

We have seen pent-up demand being released and very busy markets. We don't have statistics, so it's our best estimate.

And Japan as well has delivered strong growth. We also see that as coming out of the last shadows of corona and also Australia and a number of emerging markets.

All in all, our estimate on the ASP is flattish. It would normally have been minus 1% to minus 2%.

And this is driven by the development in geography, meaning North America growing faster than Europe, some channel mix changes as well. All in all, flattish, but it is an estimate and yes, our best judgment.

I think worth highlighting also, we still for the -- to judge this total size of the market still compare back to '19 and look at the compound -- the average growth rate and it is exactly 5%, meeting in the middle of the structural interval.

So, you could still have theories that something might be left in COVID, but there has been ups and downs in between. So, I think time will soon come to forget '19 and just look at it from here.

However, it confirms the stability of the sector. And I think that's -- the Q1 development of the market is also a testament to that, so no major change.

There is no indication that the US market development is driven by OTC or anything. This is a classical and ordinary hearing aids, driving the growth.

Going to Hearing Aids. Very strong performance, driven by a very broad-based momentum across geographies and channels, but also significantly fueled by the new and successful product launch of our broad portfolio but in particular, the Oticon, new flagship product, Oticon Real.

Very strong sell-in to the market, very positive feedback and a high number of customers that already now show repeating sales.

So clear market share gains in Q1, also sequentially to the fourth quarter in US, Germany and France and it is primarily a unit-driven growth. So, we truly expand, but does also have a positive element of ASP, which is due to product mix, channel mix, geography mix, et cetera, but also price increases implemented last year.

Hearing Care, strong momentum with performance above initial expectations. Hearing Care has a much stronger correlation to the direct market development.

We have the stores we have and they are fed by the market, of course, with a lot of activities, but there's not the same diversity of channels by definition. And therefore, there is also a tailwind element from the strong market performance in Q1, but also in addition to that, our own focus in optimizing network, processes, et cetera.

So, we have seen strong growth or good growth in all the mid-sized markets and a slight positive growth in both US and France, where in US due to the stepping out of a number of managed care contracts we have, you could say market headwind and also in France, market headwinds. So good performance also in those 2 big markets.

We see a strong contribution from acquisitions in line with our strategic priorities, especially China. And again, China has, since mid-January seen a very significant bounce back.

So, we are operating now in line with the expectations we had at the time of acquisition and we believe we can grow solidly from here. It is primarily also here unit-driven, with a slight tailwind from price increases.

The mix as such varies less in the Hearing Care channel, then it, of course, does in Hearing Aids when new products are introduced. Double-digit growth in Canada.

Slightly positive US. Strong growth in Poland due to healthcare reform.

Strong growth in UK, and positive in most other markets. Solid growth in Australia, et cetera.

Diagnostic, we have seen a solid demand but growth was impacted by shipments delays. We did move or consolidate, I would say, our operational locations in Poland into one big new factory set up for a much bigger business at the beginning of the year, and there were a number of smaller, yet important teething issues to the flow and getting goods out of inventory and so on that lowered the output a bit compared to our demand and therefore, we had a soft start to the year.

We are now running, as we should, in operation and have catched up, I would say, on the sales side. But we have to be a little soft on the expectations for the year.

We have had 3 very, very strong years in Diagnostic. And yes, we have to continue to work to expand the market.

But otherwise, you can easily not continue at that high level, but we will still see a good strong growth in the Diagnostic business, no doubt about that also going forward.

Growth in Q1 was primarily Asia and China, in particular, after reopening, solid growth from acquisitions in Europe and a slightly positive growth in North America. Growth generated back to market expansion, mainly in the balance equipment and service business.

The balance area is one where the treatment is not present in all countries or education level is not where it could be. So, we spend a lot of time and energy in growing that market, and we successfully, I would say, lead that market, both in terms of diagnostic and treatment and see very good results from that strategy.

Communication. Communication EPOS, the market continued to show weakness.

We estimate that the market growth rates for enterprise solutions and gaming was negative in Q1. Growth in gaming was negative and high inventories still in a number of sales channels put a drag on the growth.

Enterprise, we have seen kind of a postponement of people executing orders and some of the investments they were assumed to make, and therefore, also the enterprise market have shown some softness here in the beginning of the year. As I said earlier, we have had a bit of urgency in selling out inventory of some legacy products, co-branded with Sennheiser, where there is a final date for how long we can do that.

And that has taken a, let's say, slightly more aggressive discounting than normal in order to move this inventory and, therefore, a pressure on gross margin.

Discontinued operation, Hearing Implants, as announced in April 27 in '22, we have decided to discontinue our hearing implant business. Nothing has changed with that.

Our intent is to divest the business to Cochlear. And the purpose of that is to make sure there is lifelong support for our patients.

You are dependent on continuous upgrade, et cetera. And this is still a primary goal for us.

On April 20 this year, we got the provisional conclusion from CMA, the competition authorities in UK that suggested that their conclusion will be that it will result in a substantial lessening of competition, which is what they are to watch out for. We don't agree to that, but that's their preliminary finding.

The final report is expected in June, but it is likely that the conclusion will be very much down the line of the provisionary finding. So we and Cochlear are both interacting in a constructive dialogue with CMA to find out what remedies can be done to best move forward with the transaction.

And this has to be done in the interest of patients, which the CMA also recognized.

Final report is expected in June and also a number of other competition authorities are looking at the case. So therefore, we have had to conclude that the transaction is no longer expected to close in this quarter.

We are currently unable to give an updated timeline. It doesn't mean it will run forever.

It just means that we cannot tell. And a further announcement will, of course, come as soon as we have a better outlook to what could be a solution that the competition authorities in UK would find a better solution.

We are committed too and it doesn't change the decision to discontinue Hearing Implant business in Demant. It doesn't change that we want to do this for a patient and existing users in a proper way.

And then to outlook assumptions. There are basically 2 changes.

They are highlighted in the presentation with bold, and they, of course, reflect the events in Q1. So the first one relates to the structural growth of the Hearing Aid market in '23.

We were before stating that we expected it to land just short of the historical interval of 4% to 6%. We now believe it will be within.

We started with 7%. We still think there will -- there is an element of catch-up and therefore, a slowdown expected.

But of course, this is still with a lot of uncertainty. Also, macroeconomic headwinds can impact the business again.

We cannot say the uncertainty is gone.

We still believe despite of a flattish start that, that ASP is likely to decline 1% to 2% due to various mix effects. This is, again, not rocket science, but our best estimate and how we look on things.

The other change is now that we cannot tell when the discontinued business, when we can close. We have made the outlook update to handle a case where it does not happen in '23, and it's important to state, it does not mean we believe it's not going to be in '23.

It's just updated to reflect a scenario where it does not happen in this year. We work hard to make sure it can happen before that.

So updated outlook. 6% to 10% organic growth for the group.

An acquisitive element of 3% based on the acquisition closed as of today, with the exchange rates as of today, minus headwind of 1%, minus 1%. And then EBIT from DKK3.8 billion to DKK4.2 billion.

Unchanged view on net financials around -- negative around DKK600 million. Effective tax rate of 25% to 26% as a consequence of the expected EBIT, and our -- not having a share buyback program.

We also now feel comfortable that we'll end the year inside the medium- to long-term target for gearing of 2 to 2.5. And yes, no share buyback and then the profit after tax from the discontinued business, negative between DKK100 million and DKK200 million.

So that was the update for now. And we'll open the floor for Q&A.

Yes. The first one, Soren, just relating to gross margin on Communications.

Could you tell us whether you're through with the inventory rundown on the Sennheiser-branded products? Or whether that's something that will also continue into the second quarter?

That's the first question.

And then the second question is on the Hearing Aid market. I understand there's a lot of uncertainty, yet we are expecting -- or at least we're going to face easier comparison base for the market in the second half of the year.

What is holding you back from expecting a better-than-historic market growth?

Yes. Thank you, Maja, for both.

No, we are not finished emptying the stock if I may be straight out. But, of course, whether that will then continue, it depends on the mix.

We also, for the full year, have a number of launches coming up, where we definitely expect the margin to be better. So the gross margin for the Communication business is upholding a certain uncertainty on where that exactly lands.

So, we cannot really guide more precisely on that, except we are not finished selling out inventory.

On the Hearing Aid market, you're right that the comparison figures and if you kind of take a run rate approach and you expect the run rate to continue and that's, of course, the question. But we are unsure how much of this is short-term pent-up demand from the second half popping out here in first quarter and how it looks on the other side, how is uncertainty.

At some states, we have released what was pent-up.

So Europe also still somewhat negative. Germany remains to not grow, which is the second biggest market.

And we also -- China is also a pent-up effect, maybe a little bit in Japan as well. So it's this judgment, whether it's a catch-up with the past or whether we have emptied and whether we -- it's empty or whether there's still a lot left in the pool.

Our touch with things right now is that it has come out relatively strongly in first quarter. We have been part of creating that ourselves with strong activities in the introduction of Oticon Real, and that's where it becomes a little bit difficult to separate market and your own activities with such a growth as we have.

We are obviously a big part of defining the size of the market in the quarter.

Maybe just a quick follow-up, if I may, Soren. What do you attribute your strong market share gains in Germany and the US private market to?

Because it seems like it's significant share gains. It's not just growing a bit above the market.

So what do you think are the 2 most important drivers for that?

Yes. I think it's a strong execution across the value chain, both to create the demand, deliver to it and then I must say a very successful launch that again have proven that audiologists know what challenges end users have.

And when things come out that even though we might on a distant not find it always too sexy, then for the professional environment, the attributes of Oticon Real are clear and understood. And they all know users that have these challenges, and it has been, what I hear an immediate reaction from the audience to come out and offer this new product to existing users.

Even the examples of the otherwise satisfied more users where some of these side effect issues have caused trouble, they immediately recognized the benefit and therefore, a very successful product concept.

Yes. Martin Parkhoi, SEB.

Just on the impact from product launches because normally with the [ losses ], we see quite strong growth maybe in the first couple of months or so and then you reach some kind of a level. Have sales on the launch [ supposed to ] -- have you started to find a stabilized level or still on an upward curve?

And then secondly, you also mentioned that you are seeing some increased incremental tailwind from change in US, I guess that is Costco in Q1 compared to Q4. Can you maybe elaborate a bit on why do you see that?

You're seeing even stronger? Is that also driven by higher market on Costco?

Or are you increasing your market share even further?

And then finally, just on the market development, you mentioned this flattish ASP both in Q1 and then negative for the full year. And you mentioned, country, I think that is product mix.

But what about price increases? All manufacturers, including yourself [ with output ] price increases sometime last year.

Should we see a positive -- how do you see the positive ASP effect from the market in the first quarter from price increases, as you mentioned, on your own business? And then also, should we also touch that at least in the first half of this year?

Yes, Martin. Thank you very much.

I tried to make a note of your questions. Well, we have not -- we are not yet at a place where we can sell the plateau of the launch.

It's also not finished. We had a strong start with Oticon Real in the private sector.

We have later introduced it in Philips and a relevant challenge there. Seen some positive effect from that back to your question.

We are still in the day 2 in introducing it VA, way too early to tell. So, there's still issues before we can conclude on the new level and the resistance also when competition pushed back, which they, of course, will.

On Costco, specifically, we have no insight to market share. But also, I would expect that, that channel has grown.

I would also say, but it's nothing. I have numbers on, that we at least have further strengthened our position in the channel.

Market development, flattish. And pricing, you're right, if everything was stable on channel mix, on product mix and everything else, we would see a value growth coming from pricing.

And there is also an element in that, in the ASP, net-net-net effect we see on -- when we say it's primarily units, but also some price increase on the wholesale and on the retail side, also an element. And there is a very little mix effect.

So, that's mainly attributed to that. And then in Diagnostic, for sure, we have seen continuous price adjustment.

And yes, they carry through. So in various ways across the business, but your question was in the Hearing Aid space.

Yes, there is a positive contribution in our opinion from price increases.

One, Soren, just if you could comment on the pricing contribution to that 26% [indiscernible]

Veronika, could you please repeat the question? The line is really bad.

I couldn't get you.

Yes. Of course.

Let's try this again. Is it better?

Now, you're gone.

Okay. I'll let this work.

So I was just wondering, what was the price and mix contribution to the 26% wholesale growth rate that you reported in Q1, if you could help us with that?

My second question is market growth in April. Whether the strong momentum you had seen in Q1, especially in the US has continued as far as you can see?

And then my third question is, if you are unable to dispose off the implants business, what would be the running cost of supporting the installed base as you move into 2024?

So, Veronika, on the first question, I'll just cover that. So the growth was predominantly volume driven, obviously, whereas the ASP element was around mid-single-digit contribution to growth.

Which also has a mix, of course and also price. So it's in there.

We cannot, I think, single out the price element. It's simply impossible.

You also have introductions offers and what have you. So it's really difficult to single out.

And then momentum in US market, we don't have the market statistics for April. So that's to come.

Our business is still continuing, but it's a different length of the month and no introduction and so on. So, we are cautious in giving any flavor to that on this stage.

The implant business, when we are out, we will not have a running cost for the implant business. That's exactly the -- of course, we'll have a few people with some kind of support effort, but the point is to get to 0 cost on our side.

Can you please comment on the gross margin, especially in light of a tougher [indiscernible] base? Are you still seeing the tailwinds at Communications business [indiscernible] and expected to breakeven?

And also are you seeing any wage inflation?

It's really, really tough call. My take is comment on gross margin and the Communication business and wage inflation, if it was other than that, please help me out.

I'm not sure what it is you want me to comment on other than what we have already said on the gross margin that there are 2 key elements to it. The first is the lower gross margin in Communication.

And again, that's driven by lower sales prices on legacy products that carry both the EPOS and the Sennheiser brand. We had a co-branding period.

And you can say we're a little overstocked that we have to get sold before the agreement we have with Sennheiser from the demerger in '19 runs out.

So, we sell with high discount to sell the inventory. And the other is currencies, meaning that when we build the products we sell today, at least some of them, they were built in the fall where FX was -- US dollar was much higher.

And therefore, they were more expensive to produce than the currency effect we have on the top line right now. These are the 2 main effects on the gross margin softness we have seen.

And wage inflation, yes, we do see growing wages. They are in line with what we have expected.

They come very different depending on where we are in the world and what kind of, I would say, education level we talk about. So it's in line with expectation, but yes, we see it.

The first one is a conceptual one on the gaming business. You opted to enter the business some years ago, and your expansion plans were impacted first by the pandemic, second by the weaker consumer environment.

At Hearing Implants, you've revised your exposure, basically also following [ the CapEx ] and your margin aspirations will be able to fulfill in the foreseeable time. How should we think about gaming?

Is it -- obviously, you're laying the ideal plan. You still regard the prospects as sort of attractive in long term that even the current headwinds are electable.

Second question is on your new guidance range for the top line. It's still comparatively wide.

So it implies there are some even elevated uncertainties potentially on a higher level. But then if you can just give us your view what drives -- what makes opportunities more attractive [indiscernible] for CapEx?

Is it just a potential return of Sonova to Costco or other meaningful [indiscernible]?

Yes. Oliver, I think I will offer good headsets for the investor environment.

We really have difficulties with the line today, sorry. But I think I got your questions, Oliver.

Gaming business is totally different in nature than the implant business. The implant is -- we have had our challenges, but it's the long-term drive to gain a solid, robust position that have turned out to be much more challenging than we thought.

Gaming is volatile. It boomed in COVID.

A lot of headsets were sold. We have the decline on the back-burn of that.

We have no doubt that for both gaming and enterprise, there will be more online gamers in the world tomorrow, more virtual, all kind of things. There will be more people at work that will work from home, that will travel less, where we'll do Teams meetings more and more.

And therefore, the mid- to long-term trend for both of these segments are fundamentally positive. And that's what our business rationale responds.

We currently do a lot to make sure we resize the business to the size it has right now. It has obviously been longer than we anticipated the market weakness.

And we, therefore, in several rounds have done what we can to reduce the cost base, which will come in also in second half and help us. So, we adjust and aligned to the market, but we are still positive on the long-term trend.

The medical is a discussion we've been through. This was not [ really ] in a foreseeable time and a reasonable amount of money that we could see build a leading position and therefore, not building the scale and still not penetrating enough when it comes to new implantations and it comes with a much, much higher cost on R&D, et cetera.

Top line is still wide. Yes, it reflects continued uncertainty.

There is no doubt that competition will try to hold the strong growth we have one way or the other. I'm not naive on that account.

We have uncertainty in the market growth. Again, what is pent-up demand quickly released.

China is booming right now. How long will that be the case?

US, is that a short-term effect? Could we again get into a more, let's say, depressed consumer mindset.

It came very quickly. It disappears a little faster in US than in Europe, but it also means that it could come back very quickly.

So all these things into consideration, we have done our best estimate on the outlook for the full-year growth.

I'm sorry to ask, but lines have been bad. Maybe first on implant.

It might be difficult, but I just wondered what potential remedies you're looking at? Are you still looking at completing maybe a smaller deal with cochlear or i.e., alternative potential acquirers?

And then secondly, on the market, in terms of the pickup in volume, I just wondered if qualitatively you could see -- are you seeing a rebound in those second and third time users who were deferring last year? Or is it more coming from first-time users?

Yes. Thank you very much, David.

No, we cannot discuss concrete remedies. We are in dialogue with CMA on that account, and that's simply premature.

And there are still many, many different ones you could imagine. So that would be too speculative to comment on.

And the pick-up, it is slightly anecdotical, I will say, outside our own retail. But yes, I hear that a lot of upgrade campaigns are being done and they are successful, meaning that it is the hold bag we saw in the fall from people that, to some extent, can keep the instrument they have because it still works.

They have challenges and problems, but they have -- they postponed or declined or didn't respond as well to the upgrade marketing. I hear from customers that, that have changed.

First, on market growth. And sorry, the line was very bad before, so sorry if you have to repeat.

But could you please give us more detail on what's driving your expectation for market growth above 6%, while some of your competitors have indicated they are continuing to expect slightly below that? Is it just a question of like the type of channel or anything here that we're making here that is really a different view?

And in your prepared remarks, Soren -- that's the second question. You mentioned for the wholesale primarily driven by unit and insisted on the strong sell for Oticon Real.

Just wondering if you have any views on the sell-outs and the dynamic here? Are there any booking effects?

Yes. Thank you very much, Hugo.

There will be a certain repetition on the market growth. It is, of course, as always, an estimate and a mixed bag.

And again, the uncertainty comes to how much of pent-up demand, whether it's in China, from COVID or Europe, US, North America from consumer sentiment going down last year and now being slightly more positive, whether it's extra effort by customers or hearing care professionals centered around a new product, that is difficult for us to tell.

So when we put all that together, we say we are slightly more positive than we were in February, where we said we would be slightly below the historical interval of 4% to 6%. Now we say we are within.

We have no idea whether it's the 4% or the 6%. It can definitely go both ways.

But we feel comfortable that we will be within the historical level of 4% to 6% unit growth.

And then, yes, of course, so far, we primarily know the sell-in. We can see the number of customers that do a repeated buying.

And we see that. We were also, let's say, a little less aggressive on high-volume sell-in than you sometimes are to make sure.

We didn't just stuff the channel. So, there is a good run rate.

So the uncertainty more relies to -- when you do a heavy upgrade campaigns, at some stage, your database simply don't yield as well anymore and exactly how that is with the way the market developed last year is a little difficult to tell on, basically, way too early. So, we cannot really speak to the expected run rate in the long run.

But it's not reflecting a very strong sell-in and inventory build-up in Q1. That wouldn't be right to say.

I have a couple. The first one, Soren, on prices.

So would you reserve the right to implement new price increases in both, wholesale and retail Hearing Aid businesses this year? Or just do you think this would probably impact demand, given you already increased quite a lot last year?

Second question on the Hearing Aids wholesale business. So basically, what would prevent you to have another very strong quarter in Q2?

I mean, you mentioned [ Thompson ] trying to take back some market share. Do you have any specific players or products in mind?

Or is it only a question about sustainable market growth and less/no pent-up demand?

Yes. Thank you very much, Julien.

On price increases, well, we did -- first of all, I think I've said this very clearly before, last summer was a kind of no discussion, all do the same around the world. Whereas this year, the beginning of the year, we were a little more sensitive country-by-country depending on the development on inflation, the competitive environment and so on.

And therefore, we have done a number of different things. Some did something in connection with the launch of a new product.

Somebody did an upfront price increase across all list prices, et cetera. So, there has also this year been some level of price increase to the business, but much more diverse than we saw last year.

So what that exactly leads to, well, that's part of the result you have seen for the first quarter.

The wholesale business, I did not -- I try not to comment on Q2 alone, which would be way too uncertain. So, I commented on the full year when I spoke to competition, when I spoke to the market development and so on.

Q2, of course, we come in with a good momentum, but there is also a launch effect and how long is it? And do you see a dip on the other side and so on?

So, we cannot tell and start guiding on Q2.

Okay. And just a quick follow-up on prices.

So just -- would you be able to implement even further price increases on top of the one that you implemented in January and with Oticon Real launch? Or that's just -- do you think it's sort of maximum that customers can take?

Pricing is always a dynamic size. One thing is your list pricing and other is your negotiated discount.

Wholesale business is deal-making all the time. So therefore, you cannot say whether it can go up or go down.

If we see a material impact on several of our input costs, we would, of course, also again have to consider broad-based price increases. Other than that, I think it will follow the normal pattern that you always see.

If you have new and exciting stuff, you can give less discount. If you don't and field under pressure, you have to release a little bit of discount level or a little more discount.

That's just the nature of a wholesale business that repeats itself each and every day. Some channels have long contracts, and there's no chance for price increases.

They can be government tenders. They can be large retailers where you even have multi-year contracts.

So also that is, of course, part of the limitations you work on them.

I'm not sure if I understood your comments about German market correctly. You said, I think, something.

The line was very bad. Sorry.

Was without growth. Did you talk about the German market or your own?

I think you have made retail in Germany.

Yes. The communication was meant to be quite clear, but I agree the line has not been too good.

We have seen a slight market decline, negative growth in the markets in Germany in the first quarter. We have gained share in that market, meaning we have grown in the quarter in Germany.

It's also correct that we also, during the quarter, have acquired further businesses in Germany and expanded our retail presence. Part of that is also the opportunity, of course, to grow share of wallet.

That's also a growth driver, but it's not the primary growth driver. The primary growth driver is market share gains on the wholesale side.

That answered your questions?

Yes. Great.

And the second question is regarding the US retail. You mentioned it was growing relatively modest because of the managed care and some divestment and some store closures.

Would you agree that, let's say, adjusted for that, your Hearing Care, your retail was growing in line with the stronger North American market?

We are not that specific. But of course, we grew more if you look at same-store growth and exclude the hearing or the managed care element, but that's just difficult because that's such a big part of the market and one of the big growth drivers.

So, that's a little bit artificial to say everything else equal, yes, we see a strong growth in private sales, but again, also losing still revenue on the managed care side. And the closure of stores, well, net-net, we had an organic growth.

It was positive, but it was below the group's average growth rate, the Hearing Care average growth rate.

Yes. Thank you.

I think that was it for today. Thanks very much for joining us on the call, and let us know if you think of any further questions.

We'll be going on the road over the next couple of weeks. So happy to speak with you then.

Have a great day. Thanks.