Demant A/S

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

[Operator Instructions] In the room here today, it’s the usual team and representatives. We have Søren Nielsen, our President and CEO; René Schneider, our CFO; and then Gustav Høegh and myself, Peter Pudselykke from the IR team.

That is it for the practical elements and over to you Søren for the presentation.

Thank you very much, Peter, and welcome, everybody. The agenda today, also very usual key events, financial takeaways and the addition of a little more sustainability advancements business area review.

René will do a group financial review. I’ll comment on the outlook and then we will get into Q&A.

Financial highlights for 2024, 4% reported growth, 2% from organic growth and 2% from acquisitions, and then all in all, revenue up to DKK22.4 billion, an improvement of gross profit 5%, EBIT down DKK100 million, round numbers, 2%, but very strong cash flow from the group. Key events, very good momentum in HearingCare, which has continued towards the end of the year, strong organic growth rate in a high number of markets and above market growth rates, so super solid.

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

Diagnostic growth was impacted by soft markets, but even in deadlight or in deadlight we estimate that our organic growth rate was above the market growth rate. We have closed the divestment of the CI business in summer.

And we, during the year, also took the decision to divest the communication business, two very important steps to become a more focused hearing healthcare company and then we implemented restructuring in communication EPOS in the fall, which means that in Q4, we, as expected, saw a positive profit from both the communication business and the bone-anchored hearing system business. So, the two together posted a positive result, which was also in line with expectations.

Key financial takeaways for the second half, organic growth in the second half was 2% as for the year despite of a strong comparison base. And again, despite of the loss of the market share in the managed care channel in U.S.

and in line with our most recent expectations. Despite a continued good ASP in hearing aids, gross profit declined with 0.4 percentage points.

This relates to exchange rate and more and more over hearing aids, René will comment more on that. We see it as more of a temporary nature.

And yes, René will comment more on that. We did manage as expected to significantly lower the growth rate of OpEx in the second half down to 2%, significantly down from the first half acquisitions added additional 4 percentage points.

EBIT before special items was DKK2.236 billion, which is basically flat versus second half ‘23, but an improvement from first half. And yes, there was a negative impact from exchange rate, and of course, also lower operating leverage due to the softer top line.

Very strong cash flow. Cash flow from operations was DKK2.6 billion and the free cash flow was just north of DKK2.3 billion.

Revised outlook, which will also come more on 3% to 7% organic revenue growth, EBIT before special items of DKK4.5 billion to DKK4.9 billion and buyback above DKK1.5 billion. We delivered the first integrated report with financials and sustainability.

The number one purpose of Demant is to help more people hear better and part of this sustainability reporting is the number of improved lives and we are close to DKK11 million. This is a, you would say, over time, a cumulative number with some assumptions around expected lifetime for products in the field, etcetera.

And also, we started to report on the number of hearing tests performed in our own hearing clinics and we reached 1.5 billion of these. Other kind of sectors in the report is the respect for planet, among that, the reduction in Scope 1 and 2 emissions and you can see a good nice trend downwards under caring for people, growing gender diversity in our leadership team.

This is also continuously nice development. Exceeding our goal is a little bit ahead of time, and therefore, new ones and then performing with integrity, that’s a new measurement where we look at the number of people that are, you could say, above average exposed for elements in a good code of conduct and therefore have a more focused training and we have reached 76% of these people so far and we’ll, of course, soon get to 100.

Business area review, the hearing aid market first in ‘24, the fourth quarter grew globally to our estimate 5%, which is spot on to the annual expectations that takes up the annual growth rate to 4% from after third quarter more towards the tree. Europe has a below average growth primarily due to a slightly negative growth in the NHS, whereas Germany showed nice growth and also France had a positive growth, making the full year end slightly positive, which is the first time since the reform in ‘21.

U.S. continues good strong momentum on the commercial side.

Those should be mentioned an easier comparison base, VA remains flat and also strong development in Canada. Emerging markets, rest of the world, in general, doing well in the second half and best in fourth quarter, again, all in all, adding up to the 5%.

We still estimate that due to channel mix and country mix, etcetera, we have seen a slightly positive ASP development in market in the year. And of course, our own performance needs to be seen in deadlight.

Hearing aids in fourth quarter, organic growth of minus 1% to external customers impacted by a strong comparison base, and of course, also the loss of share and managed care and, a, definite intense competitive environment. However, I would say, we have kept our market share in value on a sequential basis, we continue to see a good strong development of our ASP for the second half, explicitly minus 1% in units and ASP in plus 5%, this is, of course, both a channel and product mix.

Good performance in many medium-sized markets, but negative growth in France, Germany, UK, basically all to the larger change. U.S.

positive Q4, driven by also larger change and slightly negative in Canada, but only due to a very high comp we had in Q4 last year, nothing looked at a run-rate basis. The Canadian business is still performing well.

Strong growth in Asia, with positive growth in China despite weak markets, also solid in Australia and South America. And the further expansion of product portfolio, we continue to benefit from a very power efficient fundamental platform operating a fully integrated DNN that’s part of lowering the power consumption.

It’s on all the time and it doesn’t have any significant impact on size of battery we can use and therefore we have also succeeded to make it work on the smallest battery in the industry what’s called a 10A battery, which is used in the very small CIC, IIC styles, which is what we now release with the full benefit of the DNN running all day, so a super strong concept and a very high performing series of products to be introduced here this February. In addition to that, we also expand our lower-priced offerings with mini BTEs, mini rides, India products, and for the first time also with elements of the DNN performance or technology in super strong concepts that should also drive growth in more lower-priced price segments in markets where that’s relevant.

Hearing care in fourth quarter, very strong performance, continued strong and solid momentum in many mid-sized markets and in North America, still good contribution from acquisitions in the quarter, primarily in Denmark, Germany and Italy in line with our strategy to build critical mass in selected markets and expand in Germany. Growth was primarily driven by units.

The fundamentals of more stores and a bigger network and a slight ASP tailwind coming from product and also geography mix in the period. Positive growth in France, slightly positive growth in France, strong growth in UK, Poland and Germany, also good growth in U.S.

despite of the exiting managed care programs and instead driving traffic ourselves has been successful, strong growth in Canada, negative in China, where we still suffer from weak market conditions, but a strong development in Australia as well. Diagnostic continued headwind from soft markets in the diagnostic business and in addition, limited access to government market in a public market in China due to insufficient products that are living up to the made in China requirement, nice growth in service and consumables.

And outside China, I would say the primary negative growth within France, Germany, a lot to do with comps, but also in U.S. where we saw some postponement of orders moving from ‘24 into ‘25.

And with that, over to you, René.

Thank you, Søren. So, talking to revenue in second half year.

The organic growth was 2%, predominantly driven by hearing care, whereas hearing aids and diagnostics delivered negative growth in part due to the strong comparative figures. Acquisitions contributed with 3 percentage points, both in hearing aids and hearing care and we saw minus 1 percentage point growth effect from FX.

Looking at gross profit, the gross profit increased by 3% to approximately DKK8.6 billion. The gross margin declined by 0.4 percentage point versus second half year last year despite the ASP in hearing aid still being strong.

This was predominantly an effect of both an exchange rate effect, negative exchange rate effect as well as a high share of rechargeable units, but also particularly in Q4, gross margin was negatively impacted by increased sales to a certain large account. OpEx in the second half year, we saw a very low organic growth of 2% just as expected, and this is reflecting the strong focus we have had since midyear on lowering organic growth of OpEx to be balanced with organic growth of sales and we have managed that.

Acquisitions added 4% on growth, in line with our acquisition strategy and we saw no effect from FX. Looking at operating profit for the group, it was DKK2.36 million in the second half year, which is essentially flat year-over-year development, meaning an EBIT margin of DKK20.6 million, which is a contraction of 0.9 percentage point.

The EBIT margin was negatively impacted in second half year both from the aforementioned exchange rates and also lower operating leverage, particularly in hearing aids on the gross margin side. We also saw year-over-year dilution from M&A activities, which typically are also short-term in nature.

Cash flow statement for second half year, also a very solid – continued very solid cash flow generation. Cash flow from operations increased 2% on last year due to significant improvement in net working capital.

CapEx was approximately 3% of group revenue, which is slightly below our normal expectations of fall, so that also contributed. And net cash to acquisitions and divestments was minus DKK471 million in H2, entirely related to hearing care also slightly higher than our normal guidance, but in line with our most recent expectations.

Share buyback in second half year of just above DKK1.1 billion, bringing it to DKK2.3 billion for the full year. Looking at key financials for the full year, we ended up with 2% organic growth on the back of very strong comparative base.

And just as a reminder, we had 14% organic growth in ‘23, so 16% over 2 years. The gross margin improved 0.6 percentage points, driven by a better-than-expected gross margin in H1 due to business mix effect and strong development in the ASP in hearing aids stemming from, in particular, the intent launch that we did in the first quarter.

OpEx for the year increased organically by 4% significantly lower in H2 as we have just reviewed. And we achieved thus a better balance between revenue and OpEx growth.

Acquisitions added 4 percentage points to the overall growth of 8%. This resulted in EBIT for the full year of DKK4.4 billion and an EBIT margin of 19.6%, which is slightly below last year as a reflection of lower operating leverage, particularly in hearing aids as well as a negative year-over-year effect of exchange rates, particularly in H2.

We saw strong cash flow for the full year from operations of just above DKK4 billion and approximately DKK3.5 million in free cash flow for the full year and share buybacks, as I mentioned before. Lastly, on balance sheet items, the balance sheet increased by 6% primarily driven by acquisitions done throughout the year, and that resulted in an increase in particularly in goodwill, whereas we have seen net working capital decline by 9%, primarily though due to a reclassification of communication to assets held for sale.

Relative to midyear, we did however see net working capital declined by 7% due to a strong focus on cash flow and resulting in a decrease in inventory and trade receivables. For the full year or end of the year, we end with a net interest-bearing debt of DKK13.5 billion and a gearing multiple of DKK2.3 billion which is well within our medium to long-term expectations.

So with that, we go to outlook.

Yes. Thank you, René.

And just quickly on the market, we – the assumptions we have made before making the outlook is a normal 4% to 6% growth in units and a flattish ASP for the year, so also in value. We expect – and this is after looking more into the numbers, but also what we sense here in the beginning we have come to the conclusion that we now expect the French market to grow high single-digits in 2025.

For the group, the outlook, it is important to remind yourself of the comps in Q1 being particularly high due to the managed care as well as a strong product introduction last year, therefore, likely that the Q1 organic growth rate will come in below the full year outlook. This is totally to be expected when that, at some stage come out.

We expect the cash allocation to bolt-on acquisitions to be higher than normal due to a continued good pipeline and good opportunities. And we have not included any significant financial impact from potential tariffs related to U.S.

in our outlook simply too difficult to predict. So, it makes no sense to sit and guess.

Discontinued operation, we continue to have the communication and bone-anchored as discontinued business. We expect a combined net profit after tax for these businesses to be in the range of 0 to 50 million plus.

And this is entirely related to operating profit and doesn’t include any financial impact related to the intended divestment of these two businesses. So all in all, summing up, organic growth expected to be 3% to 7% and two of these come from market uncertainty and EBIT from DKK4.5 million to DKK4.9 billion as said and a share buyback above DKK1.5 billion.

Acquisitive growth, this is just for modeling purposes, is expected to be 2% based on revenue from acquisitions already completed by today. As currencies stand today, we expect 1% addition on the top line, including the impact of hedging.

We expect the effective tax rate to be around 23% and again, profit from discontinued operation in the area of 0 to 50 million, gearing ratio, no changes to what René also just mentioned, our medium to long-term target of 2x to 2.5x yes, by the full – by the end of the year. Yes, over to Q&A.

Thank you. Good afternoon.

Just two questions for me, please. My first one is on the U.S.

hearing aid business and specifically the trends you’re seeing in the independent channel in that market. So part one, how did your market share develop through the course of the year in that channel?

And then sort of secondly, as you reflect on the shift in your U.S. brand strategy, obviously, managed care has been a headwind, but are you starting to see any of the benefits you expected from that strategic shift start to materialize?

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

Thank you.

Yes, thank you very much for your question. We don’t speak in a lot of details, but let’s take the big picture on the independent.

We had a very strong launch in the first half, which naturally kind of boost your market share, because you tend to push a lot of products into the market. So half year over half year we saw some decline in market share.

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

So now it is, of course, a little bit difficult to say. You can only look at the totality, but yes, I think that definitely good examples of people that have benefited from the strategy.

But of course, as I said earlier, it can never compensate for where the change brand strategy ended, which was that we basically lost a number of important contracts and we are still working to make sure we find a way back into a higher share in the managed care channel. We did not intend to land where we ended, so there is still important work to be done there.

On the diagnostic business, again, China has the explanation with lack of access. So you can, of course, say that’s not really a market weakness that’s access issues.

We have, on the market side, seen Europe being a little bit weak, but especially in U.S., we have seen investments being pushed from ‘24 into ‘25 in all markets we still see a good pipeline and therefore, the starting point for the assumptions for ‘25 is a normal market development of around 5%.

Great. Thank you, Søren.

Thank you very much for taking my questions. I have two as well.

The first one, Søren, is we are now seeing more and more competitors breaking into the DNN, an area that you had some years ago. I mean, do you think DNN is becoming a standard feature for hearing aids and I want to know how do you continue to differentiate yourself versus the peers?

And also if you could explore a real-time AI technology something similar to Sonova just in order to further differentiate yourself in DNN versus the new entrants? That’s the first question.

The second one, just in your 2025 guidance, you assumed the French market will grow in the high single-digit territory, thanks to the reform anniversary. Could you just detail a little bit your assumption, especially in terms of percentage of customers which will replace their Class 1 devices, how many could potentially trade up also to Class 2 and any indication in terms of timing as well?

Do you expect to see material benefits in Q2 already or is it even a bit more back-end loaded? Thank you.

Thank you very much for your questions. On the technology, I don’t call DNN a feature.

The feature is what you do with it, noise management, speech enhancement, whatever you use it for, that’s a technology. I have no doubt, as I have said for quite a while now that utilizing AI, deep neural networks, which for me is a two names more or less for the same that is the way hearing aids are going to be designed.

The signal processing there is faster. It can cope with more dynamics.

It can give a more fast response to what to adjust. The fundamental approach to speech and noise can still be very different.

How do you utilize the multiple microphones on the instrument? Do you still use them to zoom in on a zoom speaker you want to listen to or do you listen all the way around?

And that comes a little bit back to how we have done things. We have prioritized to use it to enhance contrast between speech and noise.

We fundamentally still believe people want to have ambience and understanding of also non-speech sound environment. What is important is the philosophy of being able to listen to multiple speakers all the way around.

So we have something that doesn’t put any limits as we also now show in our new introduction to size of devices, classical batteries to be used. If you start adding additional chips or boosters or DNN separately, you will have some overhang at least so far to your power consumption and it will put some limitations either to how much you can use it or how aggressive you can be or what size of battery you have.

I still find that we are in a very good competitive position. The patient benefit – the patient performance is super strong.

And patients at the end don’t really understand how you have applied AI or how it actually works. They will always look at the outcome and so we will train our geologies.

So I think we stand well. And on your second one on the French, too early to say exactly the 8 – or not the 8, the high single-digit is, of course, in units.

We do expect some ASP decline as we assume we will see more Class 1 devices coming in. So, how that plays out is a little uncertain.

The rate by which we will see it, of course, there are people that do something right away. There are people that do one, year 5, year 6.

We do expect some decent uptake here in the first half, because that’s also where a lot of people got in, in the first place, and there is a 48-month cycle more than a given year. So, we should expect and we also first very early indications see that a good uptake in the traffic of existing users into the stores.

We are of course in close contact because they are in our database, etcetera, so all-in-all, a good indication for the year. And I would also say compared to our hesitancy in the fall of being very explicit, this is a – I would say, a positive indication for what we have seen so far.

Thanks a lot Søren. I just have a quick follow-up on Richard’s question about market share.

I mean you put in the slide that the U.S. commercial market was up 7%.

I mean probably managed care like a couple of percentage headwind, but hearing aids was declining this quarter. And you said that you maintain market share in U.S.

independent. So, I just wanted to understand exactly the momentum here and how can you have a stable market share, but also any comment about the market share in Europe maybe, like is it there where you saw like some decline?

I mean any color would be super helpful. Thank you.

Yes. I mean there is a big difference in channel mix and development in the U.S.

versus Europe. We, as I said, have lost sales to a number of larger accounts in Europe, and we have a stable market share with the independent in U.S.

Again, it fluctuates a lot months-by-months as this is a sell-in measure and there has been significant introduction activities. So, it is of course an estimate also in value, which again, our product mix continues to be very strong and solid.

And that’s what makes us say that we believe we have maintained share in U.S. independent excluding the Managed Care segment in the second half.

Perfect. Thank you very much.

Three questions. Maybe just first on managed care, I just wondered if you could how much of a headwind organic growth 2024 [Technical Difficulty] for managed care in your 2025 guidance to assume that you get back into managed care later in the year?

Your line was pretty bad, David, but I think we got the question. René has a comment.

Yes. So, the – you can say the build in managed care headwind that we are facing in first quarter of 25% is approximately 3 percentage points growth on hearing aids, which would constitute 1% on group around the numbers.

Are you assuming a return to managed care later in the year in your guidance?

I would say, a growing managed care business is within the guidance and the reason for the uncertainty around the organic growth, whether to what level it is, I think it’s way too early to comment on timing and if and how much and to whom and so on.

And then just your high-single digit growth for France full year, does that mean you are expecting double-digit growth Q2 to Q4 because there won’t be much growth in Q1, I expect.

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

I know the invoices is a little delayed, but not much that you will see a very significant difference in uptake. But again, do you get it early, do you get it late, I think it’s too early.

Our assumption is relatively equally distributed across the year. It’s still too early to be more detailed than the assumed 8% on the full year.

Sorry, 8%, sorry, the assumed mid-single digits, sorry.

And then last one for me. I just wanted to get any updates on the new contract with AI.

No.

Hi. Søren and René, thanks for taking my questions.

I will just have two, if I may. The first one would be on the guidance.

I suppose your guidance assumes sort of high-single digit growth in H2 to end up in the high end of your guidance range. Can you maybe help me as an outsider understand how you expect to reach that level?

Just what does it take from a market growth perspective, ASP market share, managed care maybe provide some building tax towards that. That would be the first question.

And then the second question is that, I guess it’s fair to assume that the EBIT in absolute terms and maybe also on the margin will be quite back-end loaded here in 2025 with growth being lower here in H1 and then accelerating in H2. So, I am just trying to figure out how much profitability will actually be skewed towards H2.

Should we expect that you are currently, for example, positioning yourself to an accelerated growth in H2, for example, from France and you are currently investing in marketing and being ready for that opportunity in Q1 or Q2 with sort of the expectation of a return in H2 from that? Is that a fair way to look at how the EBIT will go?

No, Martin. I would actually turn it a little bit around and say it is the comps that is the biggest rationale behind the growth level that is therefore very uneven across the year.

The EBIT side is, I would say, naturally distributed in a growth company. And the way we have done things you have always found a certain on balance between first half and second half.

And that’s just how it is. And I think this year, we are not planning for anything out of the, I would say, ordinary, if you look back.

It was rather ‘24, that was a little bit abnormal in terms of seasonality on the operating profit, whereas ‘25, we don’t see that as any particular seasonality which would indicate. Normally, that second half year is just larger on EBIT than first half year.

So, that’s how we see it.

Okay. Thank you.

And then on how to reach sort of the high-single digit growth above the 7%, how do you expect to be able to deliver that?

That of course is a positive market development. It’s a good growth momentum during the year that can come from many channels.

But of course, we have plans for the year of taking share. So, in that level, strong market, it could be France doing in the higher end of the high-single digit, etcetera.

So, it is – there is not a single factor.

Already talked about the opportunity that remains in managed care, that is not there.

So, it’s gaining share is in the upper end. And then of course, it’s how much and in the very upper end, also a market in the upper end of the 4% to 6%.

Okay. That’s very clear.

Thank you so much for taking my questions.

Hi. Good afternoon and thanks for taking my questions.

Søren, just a quick question. We have had a product announcement this week and also based on DNN, but also a lot of working words around AI and I know you have been working with DNN for a long period of time.

However, you have only now stepped up the wording around AI. Do you feel that based on the fact that the intent was launched 12 months ago, you were rather conservative or you were different in the way you were promoting the product in the market being, holding back with the AI wording and buzzwords, do you think that there is a disadvantage for you now in the next six months until everyone tried the products and made up its mind, so 2025 could be a bit more challenging from a finding the right product, or do you think it really doesn’t matter.

So, buzzwords and audiologists can see through that. That’s question number one.

Question number two, can you provide us an update on communication what is the timeline there, or what are the next steps that we should be expecting for you to take in communications? And lastly, René, just to double check, I believe you said that the headwind on growth for hearing wholesale would be 3% from managed care in Q1.

So, that’s also probably the number that we have to look at for the last three quarters in 2024?

Yes, sure. Well, you can say we have the headwind in Q1, right, for ‘24, but it’s also similar in the last three quarters of ‘24.

Perfect. Thank you.

And the other one, I think very quickly, AI, I would say, seen as a buzzword DNN is the technology. And I actually I think I was recently in the U.S., and asked a number of our audiologists.

And whether it’s called the one or the other day, don’t really care. And it’s not what they use for the end user.

So, it’s – they use the argument of what it does and how you can hear. So, we also throw in a little more AI than we did in the beginning, but the fundamental of the technology is, it’s a trained network.

And I think that’s what actually audiologists to understand and they have a bit of idea what it does. And I also see our competitors once you get below the front page or behind the front page, that’s also what’s being explained.

So, there is a little bit of buzzword around AI that in the general audience is better understood, but for some also negative to automizaiton and something totally different than what actually happens when inside the product. So, back to your question and the underlying question, no, I don’t think we will have six months of I believe [ph], of course, the new products that are being introduced, whether from us or somebody else will be tried out.

We are used to that. And I think we stand well to communicate around intent and also other new products and in general, a strong portfolio that delivers a lot of end-user benefit.

On communication, process ongoing. We will say more as soon as we know more.

Okay. Great.

Thank you.

Yes. Thank you very much and good afternoon.

Martin Parkhøi, SEB. Firstly, on the new AI-powered in the year or 2 years, can you tell me, Søren, it’s not – as I understand, it’s only a version.

So, what is the big problem for you to actually do an AI [indiscernible] and do you actually think this is an opportunity – commercial opportunity could you now it is not every chart of the version. And then second question, maybe to René or Søren, whatever.

We saw in the second half that of course, impact was less or maybe zero in the fourth quarter. How should we see your sales going into developing into 2025?

Are you expecting to fight more for these low price maybe and then we will see less of an ASP impact or maybe not even any. Of course, I know that France also speaks into the picture.

And sorry if you already have had the question, but I was also…

Hi Martin. I would.

Back to the IIC, CIC, for these very, very small products, re-chargeability, the way we do it here is fundamentally not an option. It takes too much extra electronics to build a custom totally invisible [ph] device.

So, that’s due to the ambition of making it to IIC. The rechargeable element in custom still to my impression or what we do comes with a significant sizing overhead.

And that’s a limited number of markets and a limited we say, total potential. So, I would say that’s under the bigger prioritization where cosmetics, design, where is a right in your product, we focus on the most discrete devices and so far, not a viable solution on rechargeable.

ASP question have not been there, so all good. Into 2025, everything else equal, we would expect stronger unit growth.

We have basically had a flat to slight negative last year, and it is the ambition to grow in units. Not to give up any of a good strong position in premium in the good channels, but a more diverse channel mix and also in some geographies a slightly different product mix by selling more of products at a lower price, not instead of but in addition to.

And therefore, a natural potential consequence on the ASP, more down than up and stronger unit growth. But again, depending on how market development is, what markets growth the most you can very quickly have regions, channels and so on that delivers actually both units and ASP.

So, it’s super sensitive for many parameters, as you know, but the general direction and trend would be stronger on the units and less on the ASP.

Thank you.

Hi. Good afternoon.

This is Andjela from BNP. Two questions from my side, please.

Firstly, on the product, I understand that the new in the year AI-enabled form factors based on the Oticon Intent platform, can you see some data from the logical intense portfolio. And what form factors allowed you to launch?

And on top of it, do you see the need for any new platform launches in 2025? And secondly, just on Costco, what are your thoughts on the competitive dynamics in Costco in 2025, it has been three months since the return from your competitor?

I am just curious to hear if you see any market share changes in those stores. Thank you.

Thank you very much. Oticon Intent is a rechargeable mini ride with a lot of different speakers that enables it to be basically from a mild hearing loss to a more severe hearing loss, so really, a wider application.

Mini rides [ph] is the most popular in the market for the majority of users. And in this price category re-chargeability, I would say, is the standard, so a flexible solution, super good.

And the addition we now do is the smallest in-ear products, which is for the premium product, the second most important category because if you don’t go for a right, you typically want something even more discrete, not sitting behind the ear, but sitting in the ear. And again, we have managed to design it without any significant compromises or without any compromises just smaller, and therefore, a really strong concept.

We think our Intent platform stands well, as I said before, against the competition. It has slightly different prioritization, but it has a number of unique benefits, again, the ability to listen to speakers for multiple directions at the same time even in a quite loud noise.

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

And when you don’t have to do that, you avoid some of the long transitions in and out that others would have to do when the system kind of kicks in and kicks out again. So, we think we stand well.

On Costco, we have a good solid position in Costco. We definitely want to maintain or even if possible expand that.

Yes, it’s also a competitive environment, and I am sure our competitors try to – will launch new products, etcetera, and drive activities, we plan to do the same.

And just a quick follow-up on the products, so it’s the portfolio of Oticon Intend now full, so you don’t need to launch anything else in the Oticon Intend platform. And I understand that you won’t provide any color on the new platform, but you need to launch a new platform in 2025, given that you have launched these form factors now.

We have not launched form factors platform. The reason why it’s now tangible [ph], we might not call it Intent, but the underlying platform will be used in many more styles to come.

There are a number of form factors where we don’t yet offer a full solution. So, the platform is far from exhausted and more will come and follow.

And again, the strength of the platform, I find quite high also in current competitive environment.

Thank you.

Thank you. Two questions from my side.

In the half year report, you called out a reduced activity with a few larger changes as a negative. How would you see this parameter playing out in 2025?

And then secondly, could you just update us on your expectations for net financial items in 2025? Thank you.

Yes. I would say that part of what I said before of growing units is a focus and an attention towards lost market share in some of these channels.

And yes, therefore I would say, that’s part of the ambition for ‘25. Not everything is done yet, but that is to grow sales to some of these or alternative channels that could otherwise compensate.

I think you, René, on the net financials.

Slightly higher, meaning slightly more negative than for ‘24, driven by offsetting effects, slightly higher debt, but also on term loans, slightly lower interest rate.

So, just to understand, you expect slightly net financial costs?

Yes.

Thank you.

Thanks for taking my questions. Most have been covered.

Just a couple and I had, one was just on the outlook for the VA channel. That was obviously been running quite weak, through 2024, where you have sort of mixed signals in terms of expectations and growth and shortages of audiologists and all sorts of different reasons why that’s been lackluster.

Just be curious at your sort of views as you head into the year, what you are seeing in hearing and how you expect that market in particular to pan out? And then I guess the second was just on your comments around sort of flattish ASP trends.

So, I think if I look back over the last at least 2 years to 3 years, your pricing trends have actually been sort of much better than you would have seen historically that sort of low-single digit deflation number has actually been sort of positive. I just wondered why you were steering to more of that sort of flattish ASP outlook.

That was the second one. And then just the third one, I guess is around the obvious one just around tariffs.

Can you just remind us of your sort of production versus sales mix where is sort of mismatch is sort of most acute across your business? Thank you.

Yes. Thank you very much for the questions.

We don’t have any particular strong insight to the VA, so it’s part of the 4% to 6% guidance. No doubt that the weak development in VA is a significant part of pulling down from – in the lower end of the 4% to 6%, could it happen again in ‘25, yes.

Can it normalize, yes, I have no specific insight to that. And again, things can change over a year.

The flattish ASP, I still think if you put in as well channel mix development globally as well as geography, that’s part of the basis for it. Otherwise, you are right, we have increased prices due to inflation and also from more advanced technology, most importantly, re-chargeability.

So, our comment is that this – so far, these seems to have outbalance one another, giving a flattish ASP for the market. We have been in that market, improved our product mix and channel mix and therefore, seen a clear growth higher than the market quite consistently over a period now.

Of course, part of what I said earlier of just trying to sell into some of the channels where don’t sell as much and have less share. It’s not instead of, but it’s an addition to when we would of course like to have a good share across channels and geographies.

So, that’s part of our planning for the year to look for opportunities across a broader field.

Thank you. On the tariff?

Yes. And the tariff, we have no comments.

This is incredibly unpredictable and unclear what and when and if and how I can say that all our main production happens in Poland and Europe. With that, we have some in Denmark as well.

And that’s the basis, best of what we have around the world in many, many countries is typically operation of different sizes to support building in-ear instruments like the one we just launched, do service on the hearing aids, building, ear molds and so on. We do some of that in U.S., and we do part of it outside U.S.

Understood. Thank you very much.

Yes. Thank you very much.

And Søren, can you talk a little bit more about your high end of the EBIT range of DKK4.9 billion, which would kind of require you to grow EBIT by 11% while the organic growth guidance up to 7%. And also taking into account that you are talking about more volume than ASP to drive growth in 2025, which I will assume has a negative effect on the gross margin, at least not a positive effect on the gross margin.

So, how should you get to this 11% growth on EBIT potentially is this something about the acquisitions that could play in currencies, or will you hold back on OpEx in general?

We will [Technical Difficulty] is just like you have seen the reverse effect this year, scale effects across the business that a number of things are basically fixed in cost and therefore there is scalability effect in it, I would say. I don’t know if you have anything to add to that.

Yes. So, are at 7%.

So, one thing is how do you get to the 7%, it’s of course, it is fundamentally gaining market share in a market that is healthy and growing well. That’s that scenario.

And that will translate significantly into operating profit because scalability also in operations and also despite a more normal unit ASP distribution because it is not selling incremental, let’s say, more lower-priced units instead of high-priced units. It is in addition to that would drive growth.

So, when you have this, you can say, more marginal contribution from low-priced hearing aids. It’s also not diluting the gross margin.

So, that’s the effect that you have. You have one factory fundamentally right and that’s what distribute units on.

So, it can also be very meaningful to grow via you can say, more low-priced channels if it comes in addition to what we already do on the more high price side.

And it typically don’t drive any additional OpEx, so that’s fundamental of the scale effect.

Okay. And then one more question is in relation to your internal sales to hearing care, you are growing this by 18% this quarter, 18% last quarter, 12% the quarter before.

And sellout in retail is 7, 7 and 5. I know there are some phasing effects, etcetera, but is it possible to what’s driving this relatively big difference in what you are selling in and more has been sold out of the stores or quite a long time, I will say.

Yes. So, that number will always be bigger, right.

And it’s because you have both the organic growth on the hearing care side. Then you have the acquisition growth on the hearing aid side.

And then you have when we acquire businesses, the increased share of wallet, so we typically replaced what was typically a third-party product with the Demant product. So, we will sell in additional from the hearing aid side to our own clinics.

So, you would always need to add not just organic and acquired, but also increased share of wallet. So, that’s the math of it and the principle that we have is that the – you can say, the arm strength price between wholesale and retail in this calculation is unchanged over time.

So, you can basically say, apart from geography mix, it’s a unit measure.

Yes. And I have a quick question, René you said that – about the opportunity that remains in managed care, and are we to interpret this that you are making progress in your discussions with the companies here, or is it more the same as they are after Q3?

No, it’s the sheer reflection that we lost significantly during ‘24. So, there is just logically more to gain than to further lose, right, so that’s there.

Excellent. Thank you.

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Thank you so much for joining us and we look very much forward to seeing you on the road in the coming weeks. Have a very good rest of the day.