GN Store Nord A/S Q2 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Marco Pires-Cox - Barclays - Analyst : Marco Pires-Cox on behalf of Hassan Al-Wakeel and I just had two. Firstly --

Question: Marco Pires-Cox - Barclays - Analyst : So firstly, just on hearing. If we look at the VA, clearly, next year has performed pretty well so far since your launch. One of your competitors talked about general market weakness in the channel driven by staff challenges and shortages as well as budget constraints. I wonder if you're seeing the same on your end and whether there's been any difficulty on your side for your sales rep to get face time with VA hospitals. So an update there would be great. Secondly, just on the enterprise and gaming businesses. So clearly, there's still some challenges remaining in enterprise, and you've now pushed out your assumptions for a recovery back to the later half of H2. I was just wondering within this, are you seeing this particularly driven by the size of certain customers? Is it more larger contracts that you're seeing more of a slowdown? And what is driving the differential between the recovery in the gaming market versus the slower recovery we're seeing on the enterprise side?

Question: Marco Pires-Cox - Barclays - Analyst : And maybe just a quick follow-up on enterprise. Maybe just on video. How did you perform in video in the quarter? Do you still think you're gaining share there or are you also seeing some of the weakness in the broader enterprise in the video segment?

Question: Martin Parkhoi - SEB - Analyst : Martin Parkhoi, SEB. Just to continue on the enterprise side because Peter, you say that was not a big deal. Now it's just towards the end of the year instead of during the second half, but doesn't it change anything on the longer-term growth targets that you described for enterprise in connection with your Capital Markets Day. The later rebound happens this year, does it make it less likely that you can go up to what such a level in 2025 on par with your long-term targets? And then on your hearing divisions. Just a question on there. Have you picked up any market share or expect to in the managed care part of the business following your Danish colleagues (inaudible) decision on -- not a decision, but it's the decision to change brand strategy with the conservations that you have. And then just a follow-up on the VA, can you talk a little bit about the VA negotiations right now? Do you think there will be a decision on the 1st of November as they normally are?

Question: Veronika Dubajova - Citi - Analyst : A couple of questions, please, if I can. The first one is just the market environment in hearing. And I guess there's two parts to this, Peter. I think when we reflect to what we heard from your customers and competitors, two things come up. The first one is that the market is maybe a little bit softer than people had been hoping? And I'd love to get your thoughts on what you're seeing and what you think is happening, I guess, in Europe in particular? And then the second thing that's been coming up a lot through your peers reporting is a high degree of competitive intensity, in particular on price. And just curious whether that is an observation that you would share? And to what extent that is driven, you think, by channels and exposure versus individual company behavior? And is this something that concerns you as you look into the back half of the year and into 2025? And then I guess related to that, if I look at the first half of the year, you've obviously done 12% growth rate. For you to come in at 12% for the full year, you'd have to maintain this momentum in spite of some new competitive launches. So just curious how realistic you think that is versus maybe the 10 for the full year guide. I'll leave it there. I have some enterprise questions as well, but maybe we can get hearing out of the way before we move on to that.

Question: Maja Pataki - Kepler Cheuvreux - Analyst : Yes. I would like to start with hearing as well on the question. First of all, circling back to Veronika's question about the second half of the year and holding up with good momentum. It would be interesting to see how you think about the market because we are entering tougher comparisons on the market growth rate, so that might be -- that might have a negative impact. And then you have mentioned that you've taken the entire environment into account when you were making your projections for the second half of the year. Does that also include the most recent product launch from one of your competitors? That's the first question. The second question, would it be possible for you to give us a bit of an indication of how your customer mix might have changed over the last two years, given that you've been outgrowing the market so much. It would be interesting to see whether the share of larger accounts has increased over the last two years or whether the success that you've had over the last two years has really been broad-based.

Question: Niels Granholm-Leth - Carnegie - Analyst : Could you talk about your divestment plans and whether you have additional divestments planned for the coming quarters or a couple of years? Secondly, could you talk about your expected release of net working capital for the second half?

Question: Niels Granholm-Leth - Carnegie - Analyst : But I would presume that the increase to net working capital in this quarter is mostly driven by the consumer part and the wind down, shouldn't we see a full recovery of receivables related to the consumer part in the second half of this year?

Question: Niels Granholm-Leth - Carnegie - Analyst : Great, just for the divestment of Dansk HoreCenter. How have you locked in shipments, wholesale shipments to Dansk HoreCenter?

Question: Martin Brenoe - Nordea - Analyst : I just have two, if I may. The first one would be on the enterprise market. Did I hear you correctly, Peter, when you were saying that the enterprise headset growth right now is trending flat for you? And does that mean that you are actually trending in a positive enterprise trajectory with the video on top of the headset sales that you're having today? That is the first question. The second question is on the margins. I guess that even if we do the adjustments on the special items today, you're trending around 12% EBITDA margin. How likely are you to reach the high end of the guidance, which I guess would take you about 15% EBITDA margin in the second half of the year? And is there also a risk that you might not reach the low end of your EBITDA margin given that you are still, as you say, seeing tougher comps in hearing and the enterprise being pushed out a little bit? That would be my questions.

Question: Martin Brenoe - Nordea - Analyst : Makes a ton of sense. And just, Peter, quickly, with a follow-up question. Have you -- you've got seven weeks of data now in Q3. Is there anything pointing towards enterprise should return to growth? I guess that you need some confidence from improving trends here in Q3 to say that you expect going from minus 3% to a positive trajectory. Can you maybe tell me a little bit about that?

Question: Julien Ouaddour - Bank of America - Analyst : I'm going to start just in hearing just about the technology here. So we have seen now three of your main competitors, I mean, going into the DNN network technology. I was just wondering, is it something that you could also, let's say, like consider in the future, can you do such investments? And basically, how long it would take you to catch up on like on this technology? Second question, still on hearing. In terms of margin for the core hearing, we see the target 18% to 20% for the full year. If we adjust for the pension in Q1, you delivered roughly 18% in H1. So can you remind us what are the key drivers to which the 20% for the full year to the upper end of this guide? And also, do you see channel mix being a headwind to reach the 20%? And my last question is on enterprise. So I'm just a bit surprised because in the past, you said that, I mean, PC shipments, I mean, we should see a one to two quarter max lag between the growth there and the growth with headset. So we're not seeing growth in headsets and now we expect it to come only at the end of the year. So why did it change basically -- so any -- like any color would be -- that would be helpful. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 22, 2024 / 9:00AM, GN.CO - Q2 2024 GN Store Nord A/S Earnings Call

Question: Julien Ouaddour - Bank of America - Analyst : And just maybe like if I may, to add a quick follow-up. I mean one of the competitor also suggests that, I mean, the share for it with Amplifon has changed, let's say, like recently. I mean did you see your shelf rate increasing with them? And the, let's say, like the next part of this question will be like a follow-up to my last question. Your mix with large chains and large customer has evolve, let's say, increase in the past couple of years. And these customers really put of pricing pressure, let's say, like over time, how do you see your core hearing margin evolving like in the midterm, given the mix change?

Question: Julien Ouaddour - Bank of America - Analyst : And just the question about Amplifon, like is it fair to think that you've gained a bit of shelf rate with them this quarter?

Question: Robert Davies - Morgan Stanley - Analyst : My first one was just on the gaming and consumer segment. I think in the release you called out the strength in the gaming segment. I was just wondering if you could provide us a bit more color in terms of the dynamics of what's going on there across the different regions. That was my first question. And then the second one was just on the development of operational expenses. So between your divisional profit and your EBITDA line, what are your expectations were there heading into the second half and how the comps in those different subsegments would change year-on-year?

Question: Mattias Haggblom - Handelsbanken - Analyst : Two questions, please. So firstly, with the wind down of consumer, I'm curious to hear how we should think about gross margin for gaming and consumer once that is accomplished, consensus appears to more than 30% for '25. Is that the right magnitude to think about? And then secondly, on enterprise coming back to the return to growth, which is somewhat delayed and now expected towards the end of the year. Would you say you're confident that you will return to growth is higher today compared with a quarter ago, which supports from some of the green shoots you're seeing? Or is it still mainly based on the expected correlation from PC shipments finally translating into growth for headsets?

Question: Veronika Dubajova - Citi - Analyst : Just a quick one on enterprise and the competitive environment that you're seeing. I know we've talked a lot about the market environment, but just curious if you're seeing any changes in particular when it comes to your largest competitor.

Question: Veronika Dubajova - Citi - Analyst : Excellent. Thanks, guys.