GN Store Nord A/S Q3 2024 Earnings Call Transcript

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

Question: Martin Parkhoi - SEB - Analyst : From SEB. And two questions. Firstly, just, Peter, on the speakerphone category which you stated is approximately 10% of Enterprise, what are they facing? If we look into 2025, I know it's early, but have you seen a bigger deterioration in the second half than the first half of the sales? And then secondly, on the Hearing business, I think that -- at least I got the impression that you saw slightly lower growth towards the end of June, but now you're still delivering strong organic growth in Q3 as well. Has anything changed or picked up in Q3 versus Q2?

Question: Julien Ouaddour - Bank of America - Analyst : I ask two as well. I mean the first one is for Soren. So we learned yesterday that Trump won the US elections. And let's say, as you know, part of this program is to put in place tariffs with China and probably also elsewhere in Europe. You mentioned in your presentation that you have some production relocation. You mentioned the US. Have you, first of all, started to assess what would -- I mean, what could be the potential impact from the tariffs on your business? Because I think you and your third-party partners have also manufacturing footprint in China, and so roughly, would you say -- I mean could it be negative into next year? And the second question is that -- I mean, you seem to be encouraged by the stabilization in Enterprise for headset and video categories. I mean my perception is that it's very similar to what you told us over the past quarters. I mean, so far, we haven't still really proved that the market is really to get back to growth. So what's your real visibility in terms of when the headset market could really return to growth? And do you -- like do we expect -- I mean, when do you expect the market to return to roughly mid-single-digit growth at some point?

Question: Julien Ouaddour - Bank of America - Analyst : Maybe just a quick follow-up on the first question. I mean, can you maybe provide like the percentage of like Enterprise? What do you still produce in Asia and in like China in particularly? And for Gaming. I mean did you say that roughly most of it is still produced in Asia, and you're working basically to extend the footprint into maybe Europe or the US?

Question: Julien Ouaddour - Bank of America - Analyst : Perfect. Makes sense. You also mentioned a provision, if I'm correct, in Gaming. Have you talked about the amount, the exact amount and the impact on gross margin?

Question: Martin Brenoe - Nordea Bank - Analyst : Some of the questions have been answered. So I'll just ask into the solid profitability that you provided here in Q3, and maybe just help us understand a little bit how much of this is structural and how much of this is some temporary wins that you have. For example, in the G&A, I see that's been coming down quite a lot, both year-over-year and sequentially. It would be helpful to understand how we should model that going forward.

Question: Martin Brenoe - Nordea Bank - Analyst : And also congrats with the very strong cash flow. I think that's quite impressive. Some of that was driven by net working capital, and just have a quick follow-up on that. Historically, we've seen that Q4, the inventory level also typically goes down to more like 15% of 12 months trailing revenue. Do you also expect to see that in Q4? And also on net working capital, I've been hearing through some channel checks that you have been doing a program where you try to release a lot of cash in each individual divisions as part of your synergy plan. Should we expect receivables to be lower than the 25% that we saw last year in Q4 that rise up? Or is that sort of the cyclical trend that we'll see in Q4 as well?

Question: Martin Brenoe - Nordea Bank - Analyst : And just a very last question for me. The R&D capitalization was a bit lower in Q3. How should we expect that -- should we expect that to come back as you say here in Q4?

Question: Robert Davis - Morgan Stanley & Co LLC. - Analyst : Most of mine have been answered. I just had one. On the -- I think there was a comment in the release talking about a benefit to gross profit in Gaming from the release of earlier recognized provisions. Could you just quantify how big of a benefit that was in the quarter? Because it obviously pushed the numbers quite far ahead of consensus in that one division.

Question: Oliver Metzger - ODDO BHF AG - Analyst : I will limit myself to two questions. First, on Enterprise. Now your CMD is six months ago, and you can remember you mentioned various data points as indicators for a turn to a better, while (technical difficulty) was not a direct cross read. Now it would be good to know if also you look at which data points have proved misleading, and on which data points you rely currently. You just mentioned the sell-in, out which is basically a very, very short-term data point. But are there still any data points where you think, okay, they provide some visibility, or if not, basically, if you say eventually, we do not have a visibility, and I think that's also fair because that's the situation, how it currently looks from the outside. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 10:00AM, GN.CO - Q3 2024 GN Store Nord A/S Earnings Call Second question is on Gaming. So over last quarters, you basically also reported quite solid market share gains in an overall weak market. Now your comment suggests that basically the market was just declining slightly, but your minus 4% appears that, basically, you lost some market share. Can you comment about just these short-term dynamics? What has changed compared to previous quarters?

Question: Oliver Metzger - ODDO BHF AG - Analyst : May I quick -- ask a very quick follow-up on my first question, because you mentioned inventory levels. Which visibility do you have on your customers' inventory levels? Because this seems to be a quite big black box.

Question: Mattias Haggblom - Handelsbanken Capital Markets AB - Analyst : I have two questions, please. So sticking to Enterprise, but a detail in the guidance I've been thinking about. So why is there no range for Enterprise, but minus 3% organic growth for '24, when there is a range for Hearing as well as Gaming & Consumer? Is visibility so much better for Q4 in Enterprise? And then secondly, on Hearing, you highlight strength with independents, and presumably, you anticipate this momentum will continue into Q4. So how do you think about visibility there, particularly in light of quite aggressive competitive launch ongoing?

Question: Niels Granholm-Leth - Carnegie Investment Bank AB - Analyst : First question on your Gaming business. It seems like your recurring gross margin for the Gaming business has been around 32% or so for this year. Is that the level we should assume even for the Gaming business going forward? Or are you aiming for additional margin improvements in that business? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 10:00AM, GN.CO - Q3 2024 GN Store Nord A/S Earnings Call And on the Gaming business, could you just tell us where we should expect the sales and marketing cost to be going forward? And then just finally, on your working capital, which seems to -- for the group, which seems to still be above the pre-pandemic levels, is there a chance that we will see your net working capital to sales returning to pre-pandemic levels?

Question: Carsten L°nborg Madsen - Danske Bank - Analyst : Two questions here. First of all, I notice that you have 7,281 full-time employees at the end of this quarter, which is actually the same as one year ago. So I was hoping that you can maybe talk a little bit more about where your synergies are actually coming from, because it doesn't seem to be from a reduced headcount, and also in light of the cost savings you book on general and admin, which I would have presumed would be highly related to headcount reductions. Secondly, the Hearing EBITA margin has come quickly to the 20%, it seems. What does this actually mean for the future? Are we now going to see that it's the other divisions that will contribute from here? Or do you think that could come more from Hearing also when taking into account that maybe, maybe not, we'll have to spend a little bit more on sales and marketing Nexia when a huge competitor is pushing very hard for a new hearing aid? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 10:00AM, GN.CO - Q3 2024 GN Store Nord A/S Earnings Call

Question: Carsten L°nborg Madsen - Danske Bank - Analyst : And in terms of spend on sales and marketing in Hearing considering the competitive environment going forward, do you feel you're at the right level? Or.

Question: Maja Stephanie Pataki - Kepler Cheuvreux - Analyst : I have a couple of questions around Hearing, please. First of all, if we look at your strong Hearing growth performance of 10% organic, would it be fair to assume that your traditional business has been growing in the high single digits? That would be cool if you could confirm that. The second question, since you have been highlighting your strong growth with the independents, could you give us an indication whether pricing

Question: Maja Stephanie Pataki - Kepler Cheuvreux - Analyst : And just to have a bit of a better understanding of the ASP impact, Peter. If we assume the market has been growing 3%, 4% in units, were you still growing above the market in unit terms? Or has -- have you been more in line with market?

Question: Shubhangi Gupta - HSBC Holdings plc - Analyst : I have a question on the Gaming business. So you have mentioned you're seeing slightly declined markets. So can you please elaborate? Is it specific to any geographies? And also with the medium term, how do you think about the ASP development in Gaming as well as for gross margin? Are you looking at improving it to mid-30s percentage as some peers already out there?

Question: Shubhangi Gupta - HSBC Holdings plc - Analyst : And on the gross margin medium-term development?

Question: Hugo Solvet - BNP Paribas Exane - Analyst : I have a few, please, clarification, and sorry if I missed the answer earlier. But on audio end markets, just wanted to get some clarification on how do you position against the risk of recovery in those end markets to come with potentially higher discounts and what the guidance can accommodate when we look Q4? Second, follow-up on Julien's question earlier on the fact that you're moving manufacturing outside of China for Gaming. Just wanted to clarify how long that is expected to last, and when will you be effectively outside or most of the production for Gaming will be outside of China? And lastly, on in Hearing, thanks for the earlier comment on competitive dynamics. Just when we zoom in into Europe wholesale, can you give us a bit more clarity on what you're seeing maybe by region? That would be helpful.

Question: Hugo Solvet - BNP Paribas Exane - Analyst : And on outside of China manufacturing for Gaming?