Demant A/S Q4 2024 Earnings Call Transcript

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

Question: Richard Felton - Goldman Sachs - Analyst : Thank you. Good afternoon. Just two questions for me, please. My first one is on the US 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 US 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.

Question: Richard Felton - Goldman Sachs - Analyst : Great. Thank you, Soren.

Question: Julian Ouaddour - Bank of America - Analyst : Thank you very much for taking my questions. I have two as well. The first one, Soren, 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.

Question: Julian Ouaddour - Bank of America - Analyst : Thanks a lot, Soren. I just have a quick follow-up on Richard's question about market share. I mean you put in the slide that the US 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 US 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.

Question: Julian Ouaddour - Bank of America - Analyst : Perfect. Thank you very much.

Question: David Adlington - JPMorgan - Analyst : Three questions. Maybe just first on managed care, I just wondered if you could how much of a headwind organic growth 2024 -- for managed care in your 2025 guidance to assume that you get back into managed care later in the year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 05, 2025 / 1:00PM, DEMANT.CO - Q4 2024 Demant A/S Earnings Call

Question: David Adlington - JPMorgan - Analyst : Are you assuming a return to managed care later in the year in your guidance?

Question: David Adlington - JPMorgan - Analyst : 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.

Question: David Adlington - JPMorgan - Analyst : And then the last one for me, I just wanted to get any updates on the new contract with the AI.

Question: Martin Brenoe - Nordea - Analyst : Hi. Soren and Rene, 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?

Question: Martin Brenoe - Nordea - Analyst : 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?

Question: Martin Brenoe - Nordea - Analyst : Okay. That's very clear. Thank you so much for taking my questions.

Question: Maja Pataki - Kepler - Analyst : Hi. Good afternoon and thanks for taking my questions. Soren, 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, Rene, 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?

Question: Maja Pataki - Kepler - Analyst : Perfect. Thank you.

Question: Maja Pataki - Kepler - Analyst : Okay, great. Thank you.

Question: Martin Parkhoi - SEB - Analyst : Yes. Thank you very much and good afternoon. Martin Parkhoi, SEB. Firstly, on the new AI-powered in the year or two years, can you tell me, Soren, it's not -- as I understand, it's only a version. So, what is the big problem for you to actually do an AI (inaudible) 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 Rene or Soren, 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 --?

Question: Martin Parkhoi - SEB - Analyst : Thank you.

Question: Andjela Bozinovic - BNP - Analyst : 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.

Question: Andjela Bozinovic - BNP - Analyst : 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. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 05, 2025 / 1:00PM, DEMANT.CO - Q4 2024 Demant A/S Earnings Call

Question: Niels Granholm-Leth - Carnegie - Analyst : 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.

Question: Niels Granholm-Leth - Carnegie - Analyst : So, just to understand, you expect slightly net financial costs?

Question: Robert Davies - Morgan Stanley - Analyst : 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 two years to three 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. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 05, 2025 / 1:00PM, DEMANT.CO - Q4 2024 Demant A/S Earnings Call 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.

Question: Robert Davies - Morgan Stanley - Analyst : Thank you. On the tariff?

Question: Robert Davies - Morgan Stanley - Analyst : Understood. Thank you very much.

Question: Carsten Lonborg Madsen - Danske Bank - Analyst : Yes. Thank you very much. And Soren, 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? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 05, 2025 / 1:00PM, DEMANT.CO - Q4 2024 Demant A/S Earnings Call

Question: Carsten Lonborg Madsen - Danske Bank - Analyst : 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, et cetera, 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.

Question: Carsten Lonborg Madsen - Danske Bank - Analyst : Yes. And I have a quick question, Rene 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?

Question: Carsten Lonborg Madsen - Danske Bank - Analyst : Excellent. Thank you.