China says Nvidia broke competition rules, extends probe; stock off lows
Demant A/S reported its second-quarter 2025 earnings, revealing a revenue shortfall that led to a 4.03% drop in its stock price during after-hours trading. The hearing aid company posted earnings per share (EPS) of 5.3, while revenue reached 5.63 billion USD, falling short of the anticipated 5.88 billion USD. This miss, coupled with a reduction in full-year EBIT guidance, has contributed to investor concerns, causing the stock to close at 243 USD, down from a pre-earnings price of 253.2 USD. According to InvestingPro data, the company maintains strong profitability with a 75.8% gross margin and healthy financial metrics, earning an overall "GOOD" Financial Health score.
Key Takeaways
- Demant’s Q2 revenue fell short of expectations by 4.25%, impacting stock performance.
- The company maintains a focus on AI-driven product innovation.
- Market volatility and macroeconomic uncertainty are affecting growth.
- Full-year EBIT guidance has been reduced to 3.9-4.3 billion DKK.
Company Performance
Demant’s performance in the second quarter of 2025 reflected challenges in the global market, with organic growth stagnating at 0% and acquisitive growth at 3%. Despite this, the company has maintained its leadership in most channels, although it faced challenges within the Costco channel due to increased competition.
Financial Highlights
- Revenue: 5.63 billion USD (missed forecast of 5.88 billion USD)
- EPS: 5.3 USD
- Gross profit: Slightly above 24 billion DKK
- EBIT before special items: 1,849 million DKK (11% decrease)
Earnings vs. Forecast
Demant’s actual revenue of 5.63 billion USD was below the forecasted 5.88 billion USD, resulting in a negative revenue surprise of 4.25%. This shortfall is significant in the context of the company’s historical performance and market expectations.
Market Reaction
The stock price fell by 4.03% in after-hours trading, closing at 243 USD. This decline places the stock closer to its 52-week low of 202.4 USD, reflecting investor concerns over the revenue miss and reduced guidance.
Outlook & Guidance
Demant has revised its full-year EBIT guidance to 3.9-4.3 billion DKK, citing continued market volatility and macroeconomic challenges. The company remains committed to launching new AI-driven products and expects market stabilization in the second half of the year.
Executive Commentary
CEO Thorn highlighted the significant impact of macroeconomic uncertainty, stating, "Macroeconomic uncertainty is far bigger [than COVID effects]." He emphasized the company’s strategic focus on innovation, saying, "Our strategy is to make sure it’s always doing a job in managing dynamic listening environments."
Risks and Challenges
- Macroeconomic pressures and market volatility
- Increased competition in key channels like Costco
- Geographic mix impacting profitability
- Potential delays in product launches due to economic conditions
Q&A
During the earnings call, analysts inquired about market uncertainty and its effects on sales, the geographic mix impact on profitability, and the company’s R&D investments. Executives addressed these concerns, emphasizing their ongoing commitment to innovation and market leadership.
Full transcript - Demant A/S (DEMANT) Q2 2025:
Gustaf Hoe, Investor Relations: Good afternoon, everyone, and welcome to our conference call following the release of our revised outlook for 2025 and interim report for H1 twenty twenty five after market closed yesterday. For the call today, we plan to run through a presentation followed by a Q and 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 and A session. So please limit yourself to no more than two questions at a time.
Thank you. On the call today, we have Nielsen, our President and CEO Reni Schneider, our CFO and myself, Gustaf Hoe from the IR team. That is all for the practical elements. And with that, over to you, Yes.
Thorn, President and CEO: Thank you very much, Gustaf, and welcome, everybody. Agenda today, business highlight, key financial takeaways and sustainability advancements. And then business area, a little more details and color on that before Rene will go through group financials. And I will finish off with the revised outlook and then we step into Q and A. Business highlight for dMAD in 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 element of macroeconomic uncertainty and turmoil in global trade, etcetera, 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 mix effects that led to a lower ASP. This is purely attributed to market share gains outside U. S.
And lower growth in U. S. That leads to a decline in our global ASP that outbalanced the growth coming from selling more units. Hair and Care grew in line with the market in first half with some growth deceleration from Q1 into Q2, partly driven by the current environment and consumer cautiousness. The effect was particularly in U.
S. I will though say there is be careful not to overinterpret it. There’s always a little bit of timing and whether things close in March or April. So look at H1, I think, most importantly. Diagnostics continued to be impacted by negative market developments, particularly in The U.
S, also macroeconomic uncertainty, which has led to postponement of investments, good order book but lower execution than planned and expected and normal. And we see, yes, 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 six fifty 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 Health Care market growth and lower sales to a large U. S.
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, as we already spoken to, lowering of our global average selling price. OpEx, very strong control and following the line from last year. So we saw just 1% organic growth, reflecting a lowering of the run rate into the year and tight focus. Reported growth was 4%, and that’s primarily due to acquisitions.
EBIT before special items, 1,849,000,000. 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. And this comes again from unfavorable mix 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, cash flow from operation of a little north of 1,500,000,000.0 and free cash flow of DKK1.126 billion. The outlook.
We have adjusted the expectation for the global hearing aid market from previously one percent to 5% growth in value to now 1% to 3%. And our EBIT, due to the development in geography mix, adjusted downwards from previously 4.1 to CHF4.5 billion to now CHF3.9 billion to CHF4.3 billion. Share buyback, as announced in June, paused following the agreement to acquire the Kin Group. Sustainability progress in first half. We have helped more people hear better.
The pool of people that wear hearing aid from Diemen have grown positive and in line reasonably in line with expectations. The Scope one and two market based greenhouse gas emissions have decreased by 5% as we have managed to increase our share of renewable electricity by 5% or increase our share of renewable, reduce the emitting part, and this is in line with our expectations. Number of highly exposed employees trained in Diemen’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. Commercial market of minus 5% and VA minus 1%. So North America in general going down three and Europe in the softer side of the normal range of 4% to six But here in second quarter, we have seen almost in line with expectations, a somewhat normalization of The U. S. Commercial markets, still a soft VA channel, but Europe that have not delivered the growth despite of the strong growth in France, then rest of Europe have 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. So again, in value, a 2% growth for the first half year. 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 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. 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.
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 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. Looking at the Hearing Care in second quarter, yes, a slower momentum.
But again, don’t over interpret it. It is also some timing of closing orders between the first and the second quarter. 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 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. 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 U. S. Due to consumer cautiousness, but also, I would say, some timing of closing of orders.
And then negative growth in Canada due to negative market development, strong growth in China driven by ASP tailwind and slightly negative growth in Australia. Diagnostic in second quarter continued headwind from soft market development, especially in U. S. So 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 if some more clarity around the financial development in U. S. Returns.
Europe, positive in France. Some negative development in U. K, again also NHS being a little tight on investment in new equipment, strong growth in several medium sized markets in Europe, negative growth in U. S, and this is by far the biggest factor together with Canada and North America in total. And 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. And with that, over to you, Rene.
Rene, CFO: Thank you, Thorn. Starting with the revenue in the first half year. So we report an organic growth of 0%, which was below our expectations. 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 U. S.
Retailer. The acquisitive growth contributed by 3%, 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 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 billion, which is flat versus first half year of DKK24. The gross margin declined by 0.8 percentage point versus last year, 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.
So 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. 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 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. And also here we see a negative, you can say, effect from FX.
Maybe also here 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. 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. 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 1,849,000,000, which is a decrease of 11% compared to the same period of last year and an EBIT margin contraction of 2.3 percentage point. 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, you can say, and as well as an unfavorable geographical mix. Exchange rates also significantly impact our group EBIT with around million in the first half 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. We did not recognize any special items in the first half year.
Then lastly sorry, not lastly, but we continue on the cash flow side, continue to be very strong. Actually, a slight positive growth in cash flow from operations of one percent due to strong net working capital management. We continue CapEx investment in line with our mid- long term expectations of 4%. We had cash out related to acquisitions of just shy of DKK $850,000,000 related to bolt on acquisitions in Hearing Care, so very much in line with our strategy. We did buy back shares amounting to $582,000,000 until we suspended our share buyback program in connection with our agreement to acquire the Kind Group.
Then on balance sheet items. Quick note, it increased reportedly 1%, 2% from organic growth, three percent from acquisitions and minus 4% from FX. The main swings let’s say, other current assets mainly due to unrealized gain on financial contracts from our hedging activities. The net working 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, Soren, can you add the outlook?
Thorn, President and CEO: Yes. Thank you very much, Rene. 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 previously 2% to 4%, but we take one more percentage of 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 deliver high single digits in on the tracking to deliver high single digits unit growth for the full year. Catch allocated to acquisitions, as earlier announced, higher than normal.
And also the in previous statement announced acquisition of Kind. And then yes, nothing else to that. And then again, 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 expectation for full year profitability from previously DKK 4,100,000,000.0 to DKK 4,500,000,000.0 to now DKK 3,900,000,000.0 to DKK 4,300,000,000.0. And I think that’s it for now. Let’s go to the Q and A session.
Operator: Ladies and gentlemen, at this time, we’ll begin the question and answer session. You. And our first question today comes from Hassan Al Wakeel from Barclays. Please go ahead with your question.
Hassan Al Wakeel, Analyst, Barclays: Good afternoon. Thank you for taking my questions. I have two, please. Firstly, just on Costco. When we spoke last, Rene, you were not expecting material share changes in this channel given Sunnova’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? 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? And where which markets do you believe you’re gaining share in Europe?
Yes.
Thorn, President and CEO: Maybe if I can allow to follow-up on the question, even though it was semi addressed to Rene. In the large retailer you mentioned, it was not our assumption that there would be a full addition of one more supplier. And our assumption was if anything changed, it would have been a replacement of one. This didn’t happen. And yes, that have changed both what we have seen during second quarter and also our expectation for share in second half in that channel.
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 and the increased effort we have to do in our Hearing Care business to generate enough traffic. 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 have 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’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. Yes, if we’re zooming 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.
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 consumer cautiousness and overall macroeconomic uncertainty.
Hassan Al Wakeel, Analyst, Barclays: Very helpful. If I could just follow on Costco. Has the share change stabilized to your mind? And what are you baking into the guide for the second half? Yes.
Thorn, President and CEO: We look at it on a longer period you have to do. This is bulk shipment, so it can vary a lot. And 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’s too early to draw conclusions on whether it’s stable or not. You would have to see trends over a little bit longer period. But this is updated view where we take out, I would say, material share in second half. Otherwise, we wouldn’t mention it.
Hassan Al Wakeel, Analyst, Barclays: Very helpful. Thank you.
Operator: Our next question comes from Martin Pokhai from SEB. Please go ahead with your question.
Martin, Analyst: Martin
Martin Pokhai, Analyst, SEB: Pokhai, SEB. Just a follow-up on COSCO, but more on the side of profitability. You cut your midpoint of your EBIT guidance by €200,000,000 And I’m pretty sure the operational leverage are pretty high in COSCO. So can you maybe I understand you won’t say the full number, but if we look at the €200,000,000 split, how much is explained by the weaker market? And actually, how much is explained by loss of operational leverage in COSCO?
And then second question, just on the what you single put out in the report that you mentioned impact from future product launches on production cost and OpEx in the second half. 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? What should we read into that?
And why do you
Daniel Rothkarsten, Analyst, Danske Bank: actually put it out there?
Thorn, President and CEO: Yes. Thank you. I don’t know, Rene, will you comment
Rene, CFO: on On the the if you decompose the midpoint of the profit adjustment, Basically, could boil it down to twothree being the market, onethree being COSCO and then partly offset by, you can say, even further focus on the OpEx side, which would counterbalance some of the effect. That brings you to DKK200 million. Yes. And on the OpEx, no, you can say these are activities that we have planned with throughout the year. And thus, it has not materially at least changed in second half year compared to our original expectation.
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.
Thorn, President and CEO: 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.
Martin Pokhai, Analyst, SEB: Thank you.
Operator: Our next question comes from Veronika Dubajova from Citi. Please go ahead with your question.
Veronika Dubajova, Analyst, Citi: Hi, guys. Good afternoon and thank you for taking my questions. Will keep it to two, please. One, just maybe try to circle back on kind of any comment you can give us on what you’re seeing in the markets and when you look at July and August. 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? And in particular, I guess, I’m curious about U. S, Germany and France to the extent that you see that those numbers. And then I’ll ask my follow-up after that, if that’s okay. I’ll let you answer that first.
Thorn, President and CEO: Be careful with single months, and we see no material difference than what we have just spoken to for the second half assumption. So things seems to be in line with them.
Veronika Dubajova, Analyst, Citi: 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 a meaningful investment into product launches, which is not normally typical in the industry unless we’re seeing major product introductions, new platforms, etcetera. 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 that we need to invest so much at this point in time? Thank you.
Rene, CFO: So Veronika, just to get the assumptions you can say right for second half year. So what we talk about is no growth in OpEx sequentially. 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 second half year. So flat growth sequentially. It will, of course, be growth year over year because we did, you can say, a massive cost saving effort in the second half year of last year.
So you’ll see organically a 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, just to get that precise.
Veronika Dubajova, Analyst, Citi: Okay. And can you talk about some of the activities that you expect to be undertaking to support the product launches you have in mind?
Thorn, President and CEO: I mean, they are, of course, of the natural kind when you do product launches, as we always do. That’s seeing customers having sales and marketing activities, various launch costs. Don’t read into this that they are significantly different than you would normally see. But it is just a difference between, as Lenny said, a very tight budget or spend second half last year and this year, and that’s just what we flagged.
Veronika Dubajova, Analyst, Citi: Got it. Thanks, guys.
Operator: And our next question comes from Maestephanie Pitake from Kepler Cheuvreux. Please go ahead with your question.
Meyer Stephane Pitake, Analyst, Kepler Cheuvreux: 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. And 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. So this uncertainty that we’ve 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? And follow-up on that, how are you thinking on the cost side? Because I mean, if you look at your margin trajectory over the last couple of years, it was not too exciting. So do you think that maybe it’s time for a more thorough restructuring process to get margins up?
Thorn, President and CEO: Yes. Thank you very much, Meyer. I definitely agree that the volatility quarter by quarter, half year by half year have definitely increased compared to what we have seen in the past. 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.
So we don’t 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 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 don’t end up taking out what needs to be done on the sales side, on the R and D side, etcetera, 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.
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.
Meyer Stephane Pitake, Analyst, Kepler Cheuvreux: Thank you very much.
Operator: Our next question comes from Graham Doyle from UBS. Please go ahead with your question.
Thorn, President and CEO0: Thanks, guys. 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. And obviously, we haven’t had anything as yet.
So 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’s a platform, is to do so with enough time to get into the VA. 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?
Thorn, President and CEO: We’ll speak in generic terms. And yes, we still plan to do two significant launches, whether they are platform or non platforms, a year. It is also our plan to do that this year. And the exact timing is always, of course, subject to the ambitions and the finalization and make sure things are truly ready and ramped up and so on. It is always good to try to hit the VA window.
It is not always possible. Our general principle is we will tell about new products when they are ready for sales because we want to prevent potential holdback in the existing business until we can actually reintroduce and deliver to customers. That’s also the case this half year. So yes, we are still committed launches two times a year. And yes, we have a good pipeline for both this year and the coming years.
Yeah. Operator, can you hear me? Hello, operator. Any are we coming through? Hello, operator.
Kobemeng here. Any contact? Okay. Operator, can you hear me? Son isn’t here in Copenhagen.
Operator: I can hear you. Can you hear me?
Thorn, President and CEO: Yes. We hear you.
Operator: Alright. Line back in. There is a little bit of an echo through that I can hear my voice coming back to me, but I now I now it seems better. Can you still hear me?
Thorn, President and CEO: Yeah. The echo, we hear a little bit humming, but that’s it.
Gustaf Hoe, Investor Relations: Operator, I think we are are live.
Operator: We’re actually pulled out of the call right now. Can you yes. So we’re speaking privately.
Thorn, President and CEO: We don’t think so. It doesn’t look like from our data. So yes, should we take the next please take the next question, operator.
Operator: All right. One moment. Let me join the line back in. You are now rejoining the main conference. The speaker connection reestablished.
So Mr. Doyle, you can proceed with your question.
Thorn, President and CEO0: 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, were in the second half. You’ve talked in this document about increased cost 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 VH channel as it’s an important channel.
And is that still a reasonable assumption to make going forward?
Thorn, President and CEO: Graham, I got your got your question.
Operator: Sorry, go ahead.
Thorn, President and CEO: Yes. I’ll repeat the answer and then we can take your second Simpler version this time in respect of time. We’re 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.
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 and I cannot comment further on shortcoming launches this time. Any second part of your question?
Operator: And gentlemen, it appears Graham has removed himself from the Q and A.
Thorn, President and CEO1: So we’ll move on to our next
Operator: from Deutsche Bank. Please go ahead with your question.
Daniel Rothkarsten, Analyst, Danske Bank: Maybe it was Karsten from Danske Bank. I don’t know.
Thorn, President and CEO1: I couldn’t really hear it. Hear
Thorn, President and CEO: you, Karsten. Just go ahead.
Daniel Rothkarsten, Analyst, Danske Bank: Daniel Rothkarsten from Danske Bank. 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. And in terms of the midrange of your guide, let’s say, 2% for the full year, you need sort of quite a comeback here in the same part of the year. So which part of your divisions or franchises do you think will react first?
Is this sort of wholesale diagnostics? Also just get a sort of 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? Yes.
Thorn, President and CEO: Thank you, Carsten. Let me try to high level. It will, of course, be mainly simply due to the size of the business. There is both something in the comp and business is driven by large in the business. And that’s the main reason together with a improvement level in U.
S. We cannot really say so, so not too
Daniel Rothkarsten, Analyst, Danske Bank: Okay. Thank you.
Operator: Our next question comes from Niels Ganholm Leth from DNB Carnegie. Please go ahead with
Thorn, President and CEO2: On my first question, are you able to recognize any effect from this five year COVID close down on that conference call given that you expect to close the Kinder acquisition, say, around the ’4?
Operator: Yes, I’ll
Thorn, President and CEO: take the first. I think I actually commented a little bit on it earlier. I don’t 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. But people don’t just like all come in, in one 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, yes, macroeconomic uncertainty is far bigger. So no, we don’t 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, but it typically comes back quickly.
So, a headline from us is macroeconomic uncertainty as the main driver for a less strong hearing aid market in first half.
Rene, CFO: Yes. On net financials, Nils, what we expect for the full year right now is slightly more negative than last year, driven by higher debt and also growth interest rates. We have not built in any expectations on or from Kind, neither in financial since we don’t have carriage.
Operator: But once
Rene, CFO: we do that, we will update our outlook accordingly.
Thorn, President and CEO3: Thank you.
Operator: Our next question comes from Martin Breinhwach from Nordea. Please go ahead.
Martin, Analyst: Thank you very much for taking my questions. Martin Breinhwach from Nordea. Just 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 U. S. Being up.
So can you maybe just elaborate a little bit whether the sluggish growth in Q2 is just purely phasing or if there is anything to call out? And 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’s the first question. And then I’ll wait with the second question.
Thorn, President and CEO: 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 did 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. U. S. Grew also as expected in the market. We did not capture as much of that as one could expect.
And in The U. S, I would attribute some of it to timing of activities and when you close. And for U. S, yes, 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 U.
S. Business compared to what we have seen in recent years. And nothing to call out and alarming, but sequentially between of the
Thorn, President and CEO1: And and sales
Martin, Analyst: Gerald that everybody and their mother are speculating whether you’ll launch a product sooner rather than later. Do you think that you back a little bit on the anticipation of new products coming?
Thorn, President and CEO: No, I think the rumors are
Operator: you. Thank
Thorn, President and CEO1: Yes. Good afternoon. Afternoon. Thanks for taking my questions. I have two questions.
The first is on the overall weakness of the hearing aid market. So Maya asked also in this direction. But
Thorn, President and CEO0: if I
Thorn, President and CEO1: remember a station almost three years ago, that was about the repurchases where we see some postponement. Now I remember you talked also about the first time users where you saw some hesitancy. So can you first classify between the decline between the first time users and the repurchases? And also in a more bigger context in this context, it seems that overall, here, market has become more volatile for decades. You talked about very high stability than was COVID, than was inflation a few years ago.
Operator: There is a
Thorn, President and CEO1: change in the market fundamentals that some external factors play even bigger role than they did in the past. And the other one is very quick on China, the ASP tailwind you reported in Hearing Care, more background on
Thorn, President and CEO: Thank you very much. At first time user and upgrades because what was the effort effort to generate the business. Stage, have to get back to lack of market growth more harder. But in reality, I would say both to postpone when reached out to for a factor here in the first half. Second quarter then in the first quarter.
I don’t think the fundamentals have changed, really don’t. I just think the number of we typically talked about the financial crisis happened. We also know it has to be something that some key audience is development. And we can all And then in Europe, as there is more reimbursement, it comes a little later, but it’s kind of logical point of view. And that just sometimes lead to, you know, the fundamentals have changed.
The frequency China, a country with no professional education. And the more we invest
Operator: devices
Thorn, President and CEO: high 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 mix in China and the education level in China of hair and care professionals is lower than we see in most other mature markets around the world.
Thorn, President and CEO1: Okay, great. Thank you.
Operator: Our next question comes from Angela Bozanovic from BNP Paribas. Please go ahead with your question.
Thorn, President and CEO4: Hi, good afternoon.
Veronika Dubajova, Analyst, Citi: I hope you can hear
Thorn, President and CEO4: me well. My first question is on The U. S. Market. And if you can comment on specifically managed care, how are you evolving with the market share in the channel and specifically with UnitedHealth?
And the second part of the question is, again, on Costco. If I remember well, you were the leader in the channel before we have had Sunnova back. So is this still the case? Or you are seeing a greater market share loss? Thank you.
Thorn, President and CEO: Yes. Thank you for your two questions. And as it has been published, we have changed our offering and product offering, specifically, yes, to United. Other than that, we don’t go into the details of individual plans and accounts on. But all, yes, positive.
We have seen growing share during the second quarter. And it’s also part of, you could say, the share gain outside large retail order and is part of the momentum we carry into the second half. Specifically on larger retailer, we believe we don’t know, but we believe we are the largest player. We still believe we are that. I’m just saying when there is four instead of three, you will see everybody losing some share.
And 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 a year ago.
Thorn, President and CEO5: Perfect. Thank you. Great. Thanks for taking my questions. I have two, please.
I guess, Q2, both sequentially and year over year, this has primarily been in lower ASP geographies because it looks like it’s still negative for
Meyer Stephane Pitake, Analyst, Kepler Cheuvreux: markets? Or was there also sort
Thorn, President and CEO5: of an ASP negative impact, making your unit growth closer
Meyer Stephane Pitake, Analyst, Kepler Cheuvreux: then second
Thorn, President and CEO: Of course, the European markets, if that’s 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 wholesale level than the premium products. So the ASP in 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 putting it all together, yes, unit growth above market growth in Q2, ASP down due to geography mix, that’s spot on.
U. S. Outside Large Retail is a good story going from Q1 into Q2. We have seen you just the question was just raised to Managed Care. That’s an example of share gain.
We have also seen a good share gain 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 trialed out. That is how it works. Positive on in Q2. We still see a little bit of year over year loss, but a strong development from Q1 into the second half. And then last channel in U.
S. Is VA. Some growth up until the introduction of there. We don’t know how is. But also there, we have seen and do see some of the account or locations that have tried new stuff to return to it still do a very good job in you can only attribute the lack of performance, if you say so.
Thorn, President and CEO5: And is there any ASP impact in Q2 in The U. S? Or is it really, like, in, say, the independent channel? Or is or ASP flat? Or is there any negative ASP impact in any of those channels?
Thorn, President and CEO: All that is very stable. It is also within US a mix change. So you on large retailer or USA there are so many, you know, channel geography and effects that in DSP. So it’s a relatively dynamic also within a market depending on your actual
Operator: from Morgan Stanley.
Gustaf Hoe, Investor Relations: To I just wanted ask couple I
Operator: ready to accelerate through the year?
Thorn, President and CEO3: And then the other one was just around the success of, I guess,
Operator: whether it’s
Thorn, President and CEO3: gone well or not well or sort of things you think you could still add in terms of new product introduction or you could bring to market? Just be kind of curious how you think that
Operator: the audiologist has gone through?
Thorn, President and CEO: Yes. On France, it’s a gradual uptake during the first half and also during the second quarter. So just by that, the growth in the second half will be above the first half. And there is 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 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’s 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 audio content based on the AI algorithms we
Gustaf Hoe, Investor Relations: 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. Any follow-up questions, please reach out to us in the IR team directly after the call, and we’ll, of course, do our best to help you out. Have a good day.
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