Slides
Page 1
1 Interim Management Statement for Q1 2025 7 May 2025 Søren Nielsen, President & CEO René Schneider, CFO Investor Relations
Page 2
2 Agenda Business highlights and key financial take-aways1 Business area review2 Outlook for 20253 Q&A4
Page 3
33 Business highlights in Q1 2025 Contrary to expectations, the hearing aid market saw flat value growth, as macroeconomic uncertainties negatively impacted the US market in particular 1 As expected, Hearing Aids was impacted by the strong comparative base, but was below expectations due to the soft market developments 2 Hearing Care continued to deliver solid organic growth, well above the market growth rate, and we continue to consolidate distribution in line with our strategy 3 The market for diagnostics instruments continues to be soft, impacting growth, although we estimate that we have maintained our market share 4
Page 4
44 Key financial take-aways for Q1 2025 Revised outlook for 2025: Organic revenue growth: 1-5% (prev. 3-7%) EBIT: DKK 4,100-4,500 million (prev. DKK 4,500-4,900 million) Share buy-backs: More than DKK 1,500 million (unchanged) Group organic growth of 0%, below expectations, due to lower- than-expected hearing aid market growth in Q1. Adjusted for the market slowdown, underlying performance within expectations 0% EBIT was below expectations due to the slowdown in the global hearing aid market. Foreign exchange rates also had a slightly negative impact on EBIT OPEX saw slight organic growth following our cost saving efforts in H2 2024, with acquisitions further contributing to growth in line with our acquisition strategy Continued solid CFFO and FCF, which were both higher than last year, supported by working capital developments Gross margin declined as expected due to strong performance last year, but slightly more than anticipated, as the negative US market caused geographic mix changes and thus ASP decline in Hearing Aids Revenue Growth Business area (DKK million) Q1 25 Q1 24 Org. Acq. LCY FX Rep. Hearing Aids, total revenue 3,148 3,107 -1% 2% 1% 1% 1% Hearing Aids, internal revenue -678 -599 9% 4% 12% 1% 13% Hearing Aids, external revenue 2,470 2,508 -4% 2% -2% 1% -2% Hearing Care 2,547 2,318 4% 5% 9% 1% 10% Diagnostics 603 597 0% 0% 0% 1% 1% Group 5,620 5,423 0% 3% 3% 1% 4%
Page 5
5 Business area review
Page 6
6 2024 2025 Unit growth1 Q1 Q2 Q3 Q4 FY Q1 Europe 1% 8% 1% 3% 3% 4% North America 10% 6% 4% 6% 6% -3% US (commercial) 13% 6% 5% 7% 7% -5% US (VA) -1% 1% -1% 0% -1% -1% Rest of world 1% 2% 4% 6% 3% 4% Global 3% 5% 3% 5% 4% 2% The hearing aid market in Q1 1Estimate based on available market statistics, covering approx. 2/3 of the market, and on own internal assumptions Estimated market growth: • We estimate that unit growth in Q1 was below the structural growth rate due to negative growth in the US commercial market • Excluding the US market, global unit growth was in the low end of the structural growth rate of 4-6% • Geographic and channel mix changes led to negative ASP development, and value growth was flat Geographical unit growth: • Europe: Strong growth in the NHS supported by easier comparative figures. In Germany, growth was solid. In France, growth was slightly positive in line with our assumptions, and we still expect growth acceleration in the coming quarters • North America: Contrary to expectations, macroeconomic uncertainties led to negative growth in the US commercial market across both private pay channels and managed care. Growth in the VA remains subdued. Solid growth in Canada • Rest of world: Slightly positive growth in Japan and China, despite the latter being impacted by challenging market dynamics. Good growth in several emerging markets We estimate that the ASP development was negative due to geographic and channel mix changes
Page 7
77 Hearing Aids in Q1 Growth below expectations due to a negative US commercial market • As expected, soft start to the year impacted by strong comparative base due to the launch of Oticon Intent in February last year and loss of market share with managed care in Q2 2024 • However, growth below expectations due to the negative US commercial market • In terms of external sales, unit growth was flattish, while negative market developments in the US resulted in negative development in the ASP due to geographic mix changes Revenue Growth (DKK million) Q1 25 Q1 24 Org. Acq. LCY FX Rep. Total revenue 3,148 3,107 -1% 2% 1% 1% 1% Internal revenue -678 -599 9% 4% 12% 1% 13% External revenue 2,470 2,508 -4% 2% -2% 1% -2% 2,478 2,508 2,470 1,000 1,500 2,000 2,500 3,000 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025 Comments Revenue and growth Revenue by quarterEurope North America Asia/Pacific/Other • Solid performance in Germany • Slightly positive growth in France • Negative growth in the UK below the market growth rate which was driven by volumes with AQP • Positive growth and market share gains in VA • Negative growth in US commercial due to a negative market and loss of share with managed care in Q2 2024 • Strong growth in Asia, with solid growth in China due to market share gains • Very strong growth in Japan • Solid growth in Australia
Page 8
88 Hearing Care in Q1 Continuously solid performance, outgrowing the market Revenue Growth (DKK million) Q1 25 Q1 24 Org. Acq. LCY FX Rep. Hearing Care 2,547 2,318 4% 5% 9% 1% 10% • Very strong performance in Canada, Germany, and several medium-sized markets • Solid performance in the US relative to the weak market • Continued contribution from acquisitions, primarily in Germany, Denmark and Italy • Growth mainly driven by units, with slight ASP tailwind from positive product and geographic mix changes 2,218 2,318 2,547 1,000 1,500 2,000 2,500 3,000 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025 Comments Revenue and growth Revenue by quarterEurope North America Asia/Pacific/Other • Strong performance in several medium- sized markets • Slightly positive growth in France in line with the market growth rate • Positive organic growth in the US well above the market growth rate • Strong growth in Canada • Negative growth in China, as overall market dynamics remain challenging • Slightly negative growth in Australia due to strong comparative figures
Page 9
99 Diagnostics in Q1 Continued headwinds from soft market developments for diagnostic instruments Comments Revenue and growth Revenue by quarter Revenue Growth (DKK million) Q1 25 Q1 24 Org. Acq. LCY FX Rep. Diagnostics 603 597 0% 0% 0% 1% 1% • The market for diagnostic instruments remains soft, and we estimate the market growth rate in Q1 was flat • We estimate that when looking at our global performance across product categories, we maintained our market share • Our services and consumables business continues to perform well 566 597 603 400 500 600 700 800 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025 Europe North America Asia/Pacific/Other • Strong growth in the UK • Strong growth in France • Positive growth in the US • Negative growth in Canada due to strong comparative figures • Negative growth in China, due to our limited access to public markets • Good growth in several smaller emerging markets
Page 10
10 Outlook
Page 11
1111 Hearing aid market expectations reduced Previous Revised Change Units 4-6% 3-5% -1pp ASP ~0% -1% -1pp Value 4-6% 2-4% -2pp We now expect 3-5% (previously 4-6%) unit growth for the full year, due to soft unit growth in Q1 and reduced expectations for the rest of the year The global hearing aid market saw 2% unit growth in Q1, in particular due to negative growth in the US, although growth was at the low end of the structural growth rate across regions. ASP developments were negative and thus value growth was flat Market growth outlookComments Market fundamentals remain intact, but the timing of a return to normal growth of 4-6% remains uncertain due to macroeconomic conditions Due to macroeconomic uncertainties, we expect unit growth slightly below the structural range to continue in the near term We expect ASP development of -1% (previously flattish) due to geographic and channel mix changes, in particular due to the negative growth in the US in Q1, resulting in value growth of 2- 4% for the full year Soft developments in Q1 and reduced expectations for the rest of the year
Page 12
1212 Adverse exchange rate developments Hedged USD -7% CAD -5% GBP -3% PLN 0% AUD -7% JPY +1% Significantly negative impact of around DKK 125 million for the full year, despite gains from hedging instruments Change in exchange rates vs previous outlookComments Negative exchange rate development expected to impact EBIT for the rest of the year Non-hedged (select) CNY -7% BRL -4% TRL -2% Hedged Non-hedged Total FY 2025 EBIT impact ~DKK -75 million ~DKK -50 million ~DKK -125 million Impact on EBIT vs original expectations Since the publication of our original outlook for 2025 on 6 Feb, there have been significant adverse developments in global exchange rates While the US dollar is a significant impact, we see headwind from a broad basket of currencies, and we now expect revenue growth from foreign exchange rates of -2% (previously +1%) for the full year
Page 13
1313 Change in outlook for 2025 Previous Revised Change Hearing aid market value growth 4-6% 2-4% -2pp Demant organic growth 3-7% 1-5% -2pp Demant relative to market -1% to +1% -1% to +1% Unchanged EBIT Revised outlook for 2025 due to lower market growth and exchange rate effects 3,000 3,500 4,000 4,500 5,000 5,500 DKK million Previous outlook -250 Reduced market growth assumptions -125 Exchange rate effects -25 Tariffs on Diagnostics Revised outlook 4,500 – 4,900 4,100 – 4,500 DKK -400 million Organic growth
Page 14
1414 Outlook assumptions • We expect the unit growth rate in the global hearing aid market in 2025 to be 3-5% (previously 4-6%). Due to geographic and channel mix changes, we expect the hearing aid market to see ASP development of around - 1% (previously flattish) for the full year, resulting in a value growth rate of 2-4% (previously 4-6%) in 2025 • We expect the French market to grow in the high single digits in units in 2025 Key outlook assumptions below1 Demant • We expect the cash allocated to bolt-on acquisitions in 2025 to be at a higher-than-normal level due to acquisitions already made in 2025 and a continuously good pipeline of attractive opportunities • We expect a negative impact on EBIT of around DKK 125 million compared to previous assumptions for the year due to adverse exchange rate developments. This includes the effects of both hedged and un-hedged currencies, with the majority of the impact expected to take effect in Q2-Q4 • We expect a limited impact of tariffs on the Group, but we now include a negative impact of around DKK 25 million of tariffs in 2025 on our Diagnostics business area based on the current tariff situation Market 1Changes vs. most recent outlook in bold Discontinued operations • Our Communications business and our business for bone anchored hearing systems are recognised as part of discontinued operations, and for the full year 2025, the combined net profit after tax in these businesses is expected to be DKK 0-50 million. This relates entirely to an expected operating profit for the businesses and does not include any financial impact related to our intended divestment of the businesses
Page 15
1515 Outlook for 2025 The outlook for 2025 is summarised below Organic growth 1-5% (previously 3-7%) EBIT DKK 4,100-4,500 million (DKK 4,500-4,900 million) Share buy-backs More than DKK 1,500 million OutlookMetric For modelling purposes, we provide further assumptions for 2025 below: Acquisitive growth 2% based on revenue from acquisitions completed as at 5 May 2025 FX growth -2% (previously +1%) based on exchange rates as at 5 May 2025 and including the impact of hedging Effective tax rate Around 23% Profit from discontinued operations DKK 0-50 million Gearing ratio Within our medium- to long-term target of 2.0-2.5x at the end of 2025
Page 16
16 Q&A
Page 17
17 IR contacts Roadshows and conferences: 08 May 08 May 16 May 27 May 11 Jun Copenhagen (Carnegie) Virtual (Morgan Stanley) Paris (Bank of America) Frankfurt (Deutsche Bank Conference) Copenhagen (Danske Bank Hearing Aid Seminar) Peter Pudselykke Head of Investor Relations Currently on parental leave Gustav Høegh Investor Relations Officer Email: gukh@demant.com Tel: +45 3917 7300 Mob: +45 5350 0114