Demant A/S (DEMANT) Earnings Call Transcript & Summary

Hello, everybody, and welcome to this 2024 Capital Markets Day. We are extremely excited to welcome all of you into our head office here Smørum, and it's truly a pleasure to see so many people in person for this event. We will also be live streaming, so to all of you that are sitting wherever you are, also a very warm welcome to you as well. Maybe just a quick word of introduction. My name is Peter Pudselykke, and I head up the Investor Relations activities here in Demant. And I will be the diligent guide of guiding you through the next hours of presentations that we have prepared for you today. So as you have seen this morning, and we just released an investor news where we highlighted the very key messages of today. And if we look kind of into the agenda and dig into that, the plan is to start with Søren giving the first kind of strategy set up for Demant, and he will talk to our strategy, our growth ambitions and how we think about hearing health care as a focused company. Following Søren's presentation, we'll do lunch, and I'll come back to the practicalities after his session. And after that, we will have a lineup of people from the Hearing Instruments Group, so our hearing aids business, going into how we fuel innovation and core technology development for hearing aids. Then we will have a shorter break, and then we'll do a couple of different setups where we start by talking about the innovation on the R&D, and then we'll talk about distribution, focusing specifically on the U.S. market, where our President of the Hearing Aids business in the U.S., Ty Lee, will be on stage. And Niels Wagner, the President of Hearing Care, will run through how we think about our Hearing Care business, how we aspire to grow that business, and how we think about that both from an organic perspective and from an acquisitive perspective. And then the plan is for the last session that René will be tying all the knots together to our medium- to long-term financial aspirations and how we think about delivering long-term shareholder value. As you can see, and it should be very clear from the agenda here, we do plan to have question-and-answer sessions along the way, and I will be monitoring the sessions as we go, and we'll also invite including speakers, Søren through Patrik on stage. It is only possible to ask questions here in person. And given the turnout today, I'm sure there will be plenty of good questions along the way. As a reminder, please, when you ask questions, for the other people that are in the room and the people that are online, please do state your name and affiliation, so we know where you're from. And then kind of as the very last part, and this should be no surprise to anyone as the sessions are being live streamed for GDPR purposes, I would just highlight that, that is the case. And we do plan to have the webcast or the live sessions online after the presentation. I think those were the various practical elements for the day. I think, just as a general comment, please reach out to either me or one of our colleagues that are here today if you have any questions or anything. Other than that, I will just open up the stage to Søren for the first presentation of today.

Thank you very much, Peter. And also from my side, welcome, everybody. I hope we can have a good interacting day. Again, have a good interacting day. We, of course, have prepared well to give an overview of, yes, a number of topics, as Peter has just presented, but I think it's equally more important or as important that we also use the time, Q&A sessions, et cetera, to make sure that you get the best possible picture of the event in an updated view and exactly the updated view. I think one of the key messages is that we are doing different changes to further focus the company on the core of our business, the Hearing Healthcare business. And that is, you could say, our arching theme for today and also how the topics have been selected. So I'm going to do a little bit broad company update of some of the key messages from today. I will talk a little bit more to the hearing aid dynamics. As you have already seen, I'm sure, we have digged and made a little more analysis of the past. Now that transparency from the players are higher and increased, we can also give a better and more updated look at how we see market dynamics. I will reiterate and go through our strategy heading into the future. And again, there has been decisions made and changes made to a more focused company, and then also speak to sustainability aspects of the Demant business and how we work on that, and then at the end, summarize. The core Demant is Hearing Healthcare. It is based on a deep-rooted philosophy of life-changing hearing health, meaning that what we do in all aspects of our business, whether it is on the diagnostic side, whether it is on the hearing aid side, whether it is on the hearing care side, we do all these things to make the best possible outcome for people that are hard of hearing. We are doing this to make a real change to people's life. The aging population is growing. We expect to live longer and longer. We would have to work longer and longer, and therefore, a true impact from people that receive our services is ultimately the outcome that makes the company a, you could say, part of making the world a more sustainable place where people have an opportunity to live the life the way they want and can with the right help. We are still firm in our belief that this is not a product solution industry, but an ultimate service and care industry, meaning that hearing care professionals are key in carrying out a true interaction and service to people that are hard of hearing. So health, well-being, understanding the core nature of the problem is still the key driver to our fundamental belief in how we best move our business forward. Key message for today is with the decision to divest the implant business, with the decision to take a similar review on communication, we are a more focused hearing healthcare company that can create significant outcome, financial outcomes, drive a continued agenda of market share gains, growth and expansion, and this way, continue to be a leading player, especially in terms of innovation, but also global distribution across wholesale and retail. We address the hearing healthcare market, which is a very stable market. I will go a bit more into that, that the underlying demographics, et cetera, have proven to and will continue to deliver a very stable growth in the market. We, however, today, upgrade a little bit the assumption on the ASP development on the wholesale side, where we, for a long period, have talked about a slightly negative development than we today can see for the past years, where we again now have better data and carrying into the future that it is more correct to talk about a flattish development. Does that mean that it's 0 every year? No, it can go a little bit up and down, but it will more go up and down around 0, then around minus 1% to minus 2% that we have previously spoken to. In that market, we expect to take share. We expect to grow beyond the underlying market growth. And based on that, we also expect in the future to be able to deliver incremental EBIT margin expansion based on the natural scale that exists in a number of areas in the business despite of, at the same time, have growing costs related to especially R&D. So that is, you could say, reality unchanged, but more focused. And the same focus goes to a continued strong cash flow generation. We have reinvested and will continue to reinvest substantial money into R&D and innovation as well as expanding our global distribution, but with that happening at the same time, we have in the past and will also in the future be able to do very significant positive cash flow that will be returned to shareholders in form and shape of a share buyback, but going up and down over time, as it has in the past, depending on the actual level of acquisitions year-over-year. But still that's also going forward a key message. The history, but it is a history back to the very root of the Demant family. Demant is fundamentally founded by the Demant family in 1904 based on hearing impairment in the family. In '57, the William Demant Foundation is created, at that time the Oticon Foundation, which is a typical shareholder arrangement in Denmark that continues to ensure the long-term focus and an obligation to remain the main shareholder of the company, which has, in combination with the later listing, I think, shown to be a very good ownership structure of the company. The journey of real industrialization and expansion starts basically in '95 with the acquisition of Bernafon, where we, to give scale, build scale and leverage on R&D, start expanding the wholesale business. With that, we also entered diagnostic. Shortly after expanding to diagnostic and also the real start to the hearing care business is back in 2000. So almost soon, 25 years of global but operating retail. And in the beginning, as you know, it was quite hidden under the umbrella of William Demant Holding. It was quite defensive. But in '15, with the acquisition of Audika in France, we really take the step into becoming a full-fledged global retailer with all the aspects and characteristics that comes to that, especially within lead generation, et cetera, as Niels is going to speak to globalizing a business model. In '09, '08, '10, we entered the implant market with the bone-anchored business. I will not spend more time on that, except concluding that we have now decided, as announced a few years back, to withdraw from this area, especially the CI part to be too big a mountain to climb, too difficult to change habits and patents in the clinics, as you basically have lifelong patient service. The pool of patients we are up against from our competition was too big that we could build a scalable business out of that. And we are still in the works of completing that. Then I think '16 is worth mentioning that where we really, you could say, change the fundamental of the hearing aid signal processing. You're going to hear much more about that today, what is the real difference back to what we see today with Oticon Intent. We have launched basically 4 very successful product platforms. And what is it underneath that, that continue to ensure our leading position in, you could say, the core treatment, the actual audiology of what we do. And then last 2, again, the decisions to review the implant business and the ownership of the Communications business. The group today, more than DKK 22 billion in revenue in '23, DKK 4.1 billion EBIT, approaching 22,000 employees in the world, and a market cap around DKK 80 billion. In '23, the growth in Hearing Aid business was higher than the other 2, therefore, a little bit tilting with slightly more wholesale business than retail business. Otherwise, these 2 have found what seems to be a good balance with more or less 50-50 between them. And then another 10% for the Diagnostic, and then you can say very small, still in here for Communication, but going forward, only the other 3. We are well balanced across the world, in line with the global hearing aid market, equally big in North America and Europe. And yes, that way well balanced around the world. The group have involved, since we met last in '21, on the hearing aid wholesale side, strong performance, driven by innovation, strong product development, significant market share across geographies and channels; however, as I'm going to speak to, the strongest position remains to be with the independent dispensers that still constitutes the biggest part of the market out there and also, when done rightfully, the highest potential for returns. And that is the driver behind a clear geological profile that speaks stronger into that segment than a number of the other segments that we address. Further acceleration of acquisitions in hearing care. We are fully committed to continue to expand that. We have added a number of important markets in the past period, where we were not yet present, Germany and China being the most prominent, and we continue both acquisitive and organically to expand the footprint to build scale also in that part of the business. And as Niels is going to speak to, there is still a number of markets where there is good upside for further scale as we grow. And the Diagnostics business has also, in the same period, significantly expanded, today a clear #1, both among the manufacturing element by further acquisitions, but also, and more significantly, by expanding the service calibration business, and also the step into balance in today's demonstrations out here. You can get a closer look at some of the equipment that goes into the balance business, which in many ways is quite different from the hearing related business, except it happens in many of the same locations and treatment centers at hospitals, et cetera. Due to the growth in Diagnostics, we have also significantly upgraded our production facilities in Diagnostics. A more focused Demant, I've already spoken to that. The '22 decision to exit implants. It turned out to be a complicated process. We knew it would be, but it was probably slightly more complicated than originally anticipated, but we are coming to an end of it. We do expect to finish it here in the first half. Similarly, the review on the Communications business is happening as we speak. And we also expect that we'll be able to conclude on that before the end of the first half. So positive implications of that. Obviously, 2 businesses that have been a profit drag that have had negative cash flows, and therefore, getting out of that will, of course, help on the financial results. And it was, of course, the expectation that it would also be bigger growth opportunities that we didn't leave behind us, but we think we have been in it long enough to conclude that in current market structures, et cetera, the chance that we would reasonably return, would be the best and most successful there was not sufficient to continue to invest. So then if we look a little more into the underlying hearing aid market and the volatility around the business, we have -- basically, today's numbers are either '13 to '23 -- or '18 to '23. And this is our development in '18 to '23, a revenue growth of 10% in average despite of a number of both internal headwinds as well as external, we have been through a major IT incident in '19. We saw Corona and close-down in '20. We saw a positive uptake in '21, release of pent-up demand, French reform. We saw '22 negatively impacted by the war in Europe and the quick change to the macroeconomic situation that led to a short-term hold back of renewal of purchase. And with that, I think, for the first time in many years had a significant impact on the global market for hearing aids, but also as we predicted, most likely a relatively short term, 6 to 8 months effect, where you would then get a catch-up effect on the other side, which we have seen in '23. I think we have a numerous times well documented how the market, on the other hand, then swung back quite effectively in '23. And we basically see how that market development is normalized. There is always some that are a little ahead of the curve and some that are a little behind, but big picture normalized. And in these dynamic years, again, we have managed to grow, on average, 10% organically and acquisitive together. The guidance in '24, this is just repetition, no changes, now '23, 12% organic growth. The results I have mentioned, organic growth in '24 4% to 8%, and that is, of course, on top of a very strong '23, but still implies an expectation to gain share on, not the least, the run rate basis, and then an EBIT for the Hearing Healthcare business as it now is of DKK 4.6 billion to DKK 5 billion and a continued strong share buyback program of more than DKK 2 billion. And this is broad-based and then, of course, supported by the launch of Oticon Intent, which is happening as we speak right now. Hearing aid market and dynamics. First of all, one of the most important things to predict in market going forward is the growth to the aging population. And if we look at plus 65, North America from now until 2030 will grow around 20%, Europe around 15%, China, almost up to 30%. If we look at the 70-plus, which to some extent could argue we should be doing, as that's the main group we are selling to, the growth will be slightly higher. We do start to see slightly smaller generations coming in, but still a nice underlying market growth. But this growth does not explain the 4% to 6% we have traditionally talked about and continue to talk about. There has to be an increase in penetration to make the math come together. We have looked through all the data from HIMA, the industry organization that executes what's called EuroTrak typically in every country every 3 years. And that's self-reported. If you think you have a hearing loss, if it has been tested, if you have chosen to get a hearing aid, we can see a quite significant increase in penetration in a number of countries. Again, this is not a measured number, this is self-reported, but it is the best data set we have. And it is the same way people have been asked, so we have to assume that it is reflecting that. And the quick takeaway is that the countries that have solid and robust reimbursement, where there typically is a free-to-client category, have the highest penetration; Scandinavia, France now, Switzerland, Holland, Australia, New Zealand, Germany, et cetera. You have also seen that in the countries that have upgraded these reimbursement schemes, you have seen the biggest change in the period here, and it's not the same period. All the time it depends a little bit on when the survey was done. It's not done in every country at the same year. It's kind of a rolling model where every 3 years most countries are being surveyed. Denmark, in 10 years, you have seen a nice improvement, still the highest penetration in the world. U.K., that's more the opportunity to go private to have your public hearing aid fitted for free. France, of course, the reform we know. Shortening of waiting list in Norway. Switzerland have reviewed their program, Holland, et cetera. Germany also in the period upped their program. And the rest, I can't speak to in the same details, but it is still, you could say, part of the future potential that we have a number of very big countries with very big aging population. At the lower end of the scale, most predominantly U.S., Japan and China, all top 5, 6 markets in the world, where we still see a significant lower penetration. So of course, continued relevant discussions on what kind of systems do support growing penetration. Japan and China is more kind of simply market maturity. U.S. is definitely discussions on topics like how a managed care program can further expand the market. Another one that definitely I think also behind the increasing penetration is the growing conclusion that there is a clinical relationship between a treated and untreated hearing loss and the likelihood of cognitive diseases, most predominantly dementia. There are many scientific articles, high-quality articles that describe the phenomenon that, yes, it might not directly be the hearing loss that caused it, but the lack of social stimulation. Potentially, also the lack of utilization of the brain's hearing center efficiently can actually lead to a degradation that can be part of cognitive declines and diseases. And therefore, you could say, hearing loss is not just treating the hearing loss and quality of life discussion, it is potentially a very, very important discussion back to reimbursement, back to support for being part of taking good care of the senior population and making sure they can take care of themselves. This is one of the latest that show inconsistent use of hearing aids versus consistent use of hearing aids and you see a higher prevalence of cognitive diseases among the inconsistent hearing aid users compared to consistent hearing aid users. All the articles are well referred. So this is, of course, a topic we look very much into. And back to the real quality of hearing aids, our mission on its ability really to support people in social gatherings, where more people are together in noise environment, where you do go out and meet a lot of other people in complicated listening situations, and there is nothing in nature that says that senior citizens cannot handle that if they hear well. Historical and future market growth. Based on these assumptions and based on the data we, of course, have carefully reviewed, well, it is a very resilient market we're in. This is '13 to '23, so 10 years, despite of changes to reimbursement systems, Corona, et cetera, we have basically seen a positive development of plus 6% per year in units. We have argued for the 4% to 6%. So I would say in the last 10 years, it is more the 6% than the 4%. And that's, again, I think the penetration expansion that had been slightly better than we have anticipated. And maybe in the later years, the growing understanding of potential comorbidities related to not having sufficient hearing treatment. Then one which is Vale's objective and it's also a long discussion on ASP development. You have a tendency to feel the headwind and forget the tailwind. And our conclusion to start with that is that now that we have 4 reporting companies and, therefore, very good, you could say, conclusion on the total, you can always say, can we really take the retail wholesale side apart, but reverse engineering, our conclusion is that in the past 5 years, 6 years, we have seen a flattish development to ASP at wholesale level. Even though there is headwinds coming from product -- country mix, meaning China, Asia, some of the emerging markets are growing at a higher pace than the more mature markets in Europe and North America. These markets have a lower ASP because they have a less good product mix. And therefore, channel mix is also an element, meaning growth to -- larger players have grown faster -- larger global players than the independent, but still not at a very high speed, but some speed. There has been consolidation which ignites, of course, some pricing dynamics, and then, of course, a competitive market. On the other side, products, innovation, connectivity, rechargeability, better performance have, in itself enabled some price increases, but it has also, I think, led to a better product mix, meaning more people choose a better solution than in the past. And very concretely, in the later years, rechargeability have led to, you could say, higher revenue per client. Even though you don't think of it as an increased price of the hearing aid, then the total solution, including charger and so on, has actually been landing, you could say, on the wholesale side instead of buying batteries at battery suppliers and is also, short term, a more expensive solution than disposable batteries. You could also add to the pricing levers, I think that you also continue to see a number of people that end up starting their own business. So there is also a nice inflow of still independent dispensers that can basically pick and choose day-to-day with whom they want to collaborate. And in that environment, innovation continues to drive share gain and also positive development of product mix and ASP. So big picture, the key takeaway, a change from previously minus 1% to minus 2% as an assumption to flattish. We carry that into the next coming period, because we don't see any of these things fundamentally change. There will still be more rechargeable coming in. We are not at the end of that road. There will still be an improved focus on getting the best solution to most people. So despite of you could repeat some of the headwinds, we think they are able to be balanced out by fundamentally innovation and better products in the equation. So growing markets. Fundamentally, nicely growing markets. Hearing Aids growing. Then as a conclusion on what I just went through, 4% to 6% per year. Hearing Care fundamentally the same. We think it ends basically out on the front end as well. And Diagnostic also our inclusion and a little bit notch up from what we have seen in the past or what we at least have communicated in the past, reviewing that, the conclusion is also that is fundamentally likely to follow the rest whenever Hearing Care is expanded. You also expand with ENT doctors and the GPs and so on. So it is basically one big ecosystem that tends to grow between 4% to 6% in value on an annual basis. And you can see the estimated market share from our side around 25% on Hearing Aids, much smaller on Hearing Care, because there is still a very fragmented distribution, and very strong more than half in Diagnostics. Strategy for Demant. Well, the overall ambition is to be a leading Hearing Healthcare company, making the biggest possible change, help as many people as possible. Our prioritization lies around continued expansion of distribution, which should be read broadly across all businesses, but of course, materializing clearest in Hearing Care, and then continued focus on innovation, both in Hearing Aids and Diagnostics. It is a commitment to create a world-class solution, best-in-class solution. It is a commitment to have a very engaged workforce. We are a people-based company. And based on that, with very attractive returns to investors. We have some focus in that around fueling innovation, driving consolidation, growing the business, including some adjacent businesses, like the balance business, we continue to expand and put focus on that Niels is going to speak a bit more to it, but building scale and leverage, it does help to consolidate operations, IT, finance, et cetera. And with that build scale, engaging people and then pursue, of course, a sustainable approach to the business. So summarized what I've just been through, the same here, a number of focus points. And of our enablers, we're going to get back to these during the day. Another theme for today is innovation. And I think we have set ourselves apart from competition back in '16, where we fundamentally changed our view on how you hear and listen, and based on that, have enabled a journey of a very fundamentally different way of enabling hearing-impaired people to benefit from wearing hearing aids when they are in the noisy environments with multiple speakers up to the day where we benefit from a deep neural network and century technology to really make sure we, in any given situation, make the best possible choice for how to present sound to the user and, compared to traditional directionality systems, a significant uplift in outcome. And again, after lunch, we will speak much more into this. So the game we play, what is the fundamental characteristics of the Hearing Healthcare market. We believe and we believe will continue to be like that, that fundamentally, we are still dealing with an audience that have limited, you could say, recognition of the issue, that will rather postpone it than do it tomorrow. And if they are to do something, they basically have no clue what is the right treatment and, therefore, seek counseling, seek advice, seek a hearing care professional. There is very little ability to reality impact the demand, which we have also seen for 10 years. So it is in all parts of our business to get the biggest possible market share and gain market share. And that doesn't matter whether that's in Diagnostics, Hearing Aids, or Hearing Care, how do we get the biggest market access and the biggest market share out there. It's also a fact that distribution continues to consolidate. It's not very rapid because of the nature of what is consolidated on the distribution side. It is a very fragmented distribution system, therefore, accumulating more and more stores is an ongoing effort and not something that can happen overnight. But when it happens, it implies bargaining power. While you can say that as a major wholesaler in a market where there is no or very little preference for products or understanding by the end user what is the best product, being part of the consolidation is, in our book, a key strategic choice that we will continue to expand on, and therefore, continue to leverage our strong position. Key priorities in wholesale is growing and expanding Diagnostics, its continued market share gains across channels with some prioritization necessary for Hearing Aids, innovation, superior customer experience, servicing independent customers in the best possible way, and a continued very strong supply chain set up where we're very close to markets have good opportunities to respond to the dynamics in the market. On the retail side, for Hearing Aids, meaning the Hearing Care business, new markets. Main focus is in -- the newer ones are China, Germany and Belgium. And bolt-on, you could in reality make a much longer list here, but we have highlighted some of those where we have and will expand the most. It's Canada, France and Poland, where we, in the other end, have very, very solid positions, you could say, market leading positions. And even there to continue to be able to capture bigger and bigger audience and follow the growth in the market, we continue to look for good acquisition opportunities, but it is, in reality, a total continuum from the one side to the other here. Niels is going to expand on that. So summing up our aspiration for the future. We have chosen to focus and fuel innovation, core technologies. You could say, is it further or in line with what we have done in the past. It's at least in line with what we have done in the past. We allow ourselves to reinvest a high amount every year back into innovation. We see good returns on that. We participate actively in consolidation, especially on the retail side and also in Diagnostics on the distribution side to make sure we take our strong position in the market there and deliver the best possible care. And we do that across geographies and channels and also look for adjacent businesses, again, Balance being the most prominent example. With that, we expect, and that is in the afternoon, closing off with expanding this in much more details. Our medium- to long-term outlook is 8% to 10% in local currencies, of which 6% to 8% is organic. Around 2% is acquisitive. It's reasonably in line with what we have actually done, but you could say it's a small upgrade from the 1% to 2% we have spoken to, and it's based on the assumption of around 5% market growth, that's the midpoint of the 4% to 6%. Everybody are free to speculate whether they believe more in the 6% than the 4%. You could argue I have just indicated that the 6% is the least what have happened. But going forward, we still find a span of the 4% to 6%. And with that, these assumptions are based on the midpoint. With that happening, if we succeed in that, we take share. Taking share builds scale. And with scale, incremental margin expansion. And again, unchanged policy, you could say, for allocation of free cash flow back into the business, servicing, of course, our debt, and then returning any excessive cash to shareholders through share buyback. No change to our guided -- leverage guidance. So that's also stable. Sustainability, an important topic. Demant is, by definition and in nature, a company that is making the world a better place with our services and our products, and these are just primary examples of '23 figures for more than 13 million ears of better life quality, 20 million newborn babies being screened, et cetera. Where we can do in addition to that is on 2 agendas, the climate impact, converting more and more to electricity, and where electricity use, to renewable electricity, reducing our waste, increased recycling, et cetera. And then on the other side, leadership, people agenda in an inclusive and diverse world, where we, of course, embrace a very inclusive leadership style and want to benefit for everybody and leaving everybody to be themselves and work in the best possible way for the company. We have improved our various ratings in the period. Here's a number of them, and continue to have a key focus, of course, from the IR team to make sure people fully understand how we are operating the business. So ending on the same slide as I started. Key summary, more focused Hearing Healthcare company, focusing on Diagnostics, Hearing Aid wholesale, and Hearing Care towards a leading position in all businesses, driven by innovation and continued expansion of distribution. We are in a very stable market that grows slightly faster in value than previously assumed, again, previously 2% to 4%, now 4% to 6%. And it is basically just a reflection of the past 5, 6 years' performance. We think there's no reason why we'll not continue. And again, gain share, build scale, deliver across our business margin expansion, incremental margin expansion. It will not be big and revolutionary, but it will be small steps as we see the scale come in and then a continued strong focus on cash flow generation and return to shareholders. I think that was it.

Perfect. Thank you, Søren. And even with a couple of mics to spare. Just as a reminder, we have a couple of colleagues with the microphone. So when we get to your question, please do state your name and affiliation and wait for them to come by your desk. We'll probably start down here in the front.

Oliver Metzger from ODDO BHF. Two questions I have. First is on the penetration rate. So for many, I would say, even decades, it was 1 quarter. So basically, it means 1 of 4 people use hearing aids. Now you become a little bit more optimistic, you see some positive trends. Can you talk about the dynamics? Is it more innovation, the access, or what do you see as a driver for this increased penetration? Second question is on Diagnostics. Also for many years, you had some higher value growth than volume growth. And where do we stand? Going forward, do you still see potential to upgrade the technology that also your customers are willing to pay more for the solution?

Yes. Thank you very much, Oliver. I think the penetration is a little bit -- sorry, all of the above. I think the most profound we have seen translating these data is the reimbursement system changes. Growing awareness, I would say, is the second of the issue and the issue around it. And then it's always what's chicken and egg. We have, of course, seen a continued expansion of distribution and also more different models getting into the market. I think way back, the Danish market is still the primary example. When it was purely public, it was around half the size that it became when there was an opening for private businesses. So very quickly, more than 300 small stores arrived in Denmark. And the markets grew very significantly very fast, because there was an unmet demand for people that either didn't know how to address it through the hospital system, or because they found the waiting list was too long, they never got it done, or distance, whatever it was. Something was missing. So a fragmented and diverse distribution system definitely also helps on growing penetration. And on the Diagnostics side, I think it's a very difficult one. We are very used to talk units and ASP on the Hearing Aid side, because it's all a Hearing Aid unit. Diagnostics is very different. Across channels and businesses, there is very different pricing, different expectations for qualities of products. So it is tricky to talk about volume versus ASP. We have added elements to the business that is more volume based, but we have definitely also added innovation in Interacoustics, which is still the primary biggest brand in the group, still again lead examples of new ways of measuring and so on. So I would say it's very well balanced both between value increase and volume. And then secondly, of course, the forward move in the distribution system have, per unit, significantly increased the ASP, because we are one step further in the value chain in a number of markets.

Good. I think we'll move down here to Parkhøi.

Martin Parkhøi, SEB. Just a general industry question. Because we now see, as you alluded to, that the market growth has been nice, which has been obvious for the past 5 to 6 years. But maybe you can share your views on the industry profitability, because we have had good pricing. But if you look at the -- now we have access to 4 players, as you said, how do you think the industry profitability actually have changed on average? And then I'm going to say maybe say why has it not changed positively, at least on average?

Yes. And I think, honestly, Martin, I have not done the reverse math of that, so I will not be too squared on that. But there's also no doubt that the industry have constantly tried to do the best possible job. So there is a significant reinvestment back in R&D, distribution, et cetera, from those that have excessive cash to do so, less from others that have also drifted apart and have another margin. Whether the increased margin on the larger players offset the lower margin at the smaller players, I cannot do -- I will not stand here and do it live, but it's a good follow-up to review. I'm sure you have done it.

And maybe Christian?

Christian Ryom from Danske Bank. A couple of questions on the ASP. So first question is on -- you mentioned basically 2 positive drivers for the wholesale ASP innovation and rechargeability penetration. Can you give us an update on where you see rechargeable penetration today? And what's your expectations, say, for the medium term there? And then second question also on ASPs, but on the retail side. So now that you're talking about flattish ASP development on the wholesale side, in part being driven by product mix trade-up, wouldn't the logical implication be that you then have maybe positive ASP development on the retail side?

Yes. Thank you. If I may take the last first. I think there, for business channel, some of them have, but there are also a number of channels that, obviously, in the same period have decreased the end-user price. So I would say the flattish is still our best assumption also at the retail level, because, you would say, the gap, to some extent, have expanded between various kind of people that offer services for lower price and have continued to try to lower price and others have expanded their services and increased the price in the same period. And on the first one, you could say rechargeability, well, that's also innovation. That's also for the end user much more easy and convenient to use. I think ultimately, it would end at 100%. If there were no limitations in capacity in the batteries, if there were no significant cost overhead, which there still is, if there were no limitations on the ability to drive very high power output for a full day, then ultimately, there is no, I think, end-user rationale except I think people go for a very long walk or something like that with no access to electricity. Otherwise, it's just more convenient. So I ultimately see it as an approach towards 100% due to price, due to some reimbursement systems not willing to pay for it, et cetera. It will not be 100% around the corner, also technical limitations. But we are around the 50% today, I would assume. And I see no reason why in the coming period it would not approach, yes, 70% to 75%. But the time will tell.

Maybe Julien?

Julien Ouaddour, BofA. I think, Søren, you mentioned 10% growth between 2018 and 2023, but it was also helped a lot by 2023. I think you've seen a strong one-off tailwinds at Costco and also weaker competition coming from your main peer. If we exclude it, we're probably at the bottom end of this range. So can you maybe explain us how you could move to the like 8% to 10%. Another question. I just want to make sure also your higher assumption on ASP, is it for the entire market? Or is it more only specific for you? I mean, could we see here a sign that you are reducing the share with large retailer or with big managed care, because we know that they are, let's say, trying to squeeze the manufacturers a bit on pricing?

Yes. You're right that '23 was a great year, and you could say isn't that a little high one. But we actually concluded '18 as equally much a good year. So they will come and go over the years. I think the numbers we put forward here very well represent the last period. Of course, we could have taken '19 to '23, and it will give another result of '18 to '22 and so on, but I think it's fair. The ASP assumption is our best assumption on the global market, because we have very good unit statistics, and we also think we have a relatively good -- it's not totally transparent, data points on the financial size of the wholesale business for basically everybody except Starkey, which gives a good picture of ASP. So it is our assumption on the market development. And again, we see no reason why we should not be able to repeat the same picture, as we have seen in the past period, in the coming period.

So really quickly, a quick follow-up. So I mean, have you changed the share of wallet, for example, with a bigger like big retail customer, or have you changed your strategy in managed care, who can also maybe help on pricing?

Maybe we can save a little of that for later. We are going to speak about the North American market. But fundamentally, we are still trying to address the global market. We're still trying to address all channels. But within that, you, of course, make your priorities. And there's no doubt that our commitment to people, you could say, with free choice that are willing to pay for innovation and where we see good, strong uptake when we also launch something new and great that we think will help people hear better. Well, that is our primary focus.

Maybe to Veronika.

Veronika Dubajova from Citi. Two questions. Søren, the first one is just your M&A ambition. And obviously, you have a history of being acquisitive, but as the business gets bigger, if you're still adding 2%, it becomes a bigger and bigger pie of the revenue. So just curious how you're thinking about it? What's the focus geographically, and by business, asset availability, and I guess, implications that this has on the group profitability as well, if you could talk through that? And then I'll ask my second question after that.

Then I will do it quite quickly, because also when we grow, we are in more markets. So it is literally a continued growth journey that if you have 100 stores, your ability to take in, let's say, 5 stores is as good as if you have 20 stores and take 1 in, that's the same. So we will grow in all geographies. We have a stronger focus to have it at a higher pace in some where we are low. Niels is going to address it more, but there is no fundamental change. If anything, a slight increase in our expectation, ambitions, and commitment to drive even more business in that way.

To do larger scale M&A at all?

We have no opinion on big or small. It's a buyer and a seller exercise all the time. And I think we have plenty of examples of bigger opportunities. Audika in France, ShengWang in China is 2 primary examples in the past period. And yes, we are also ready, again, if a good new strategic well-fit opportunities should come around.

Good. Then moving over to Niels here.

Niels Granholm-Leth from Carnegie Bank. Firstly, what would be your time frame of your new medium to long-term guidance? Is it fair to assume 3 to 5 years? Secondly, wouldn't have been fair for you to upgrade your organic growth target for this year to mirror your long-term guidance, 6% to 8%. Is it just because of Costco or what's the reason for not upgrading for this year?

Yes. Niels, you're correct. You could say, the guidance we make, if I start there, is based on the business we run. And whether our assumption on market growth is right or not, it's not really in that equation. That is a bottom-up process that leads to a certain ambition and it does reflect the risk and opportunities in the current year. So you have to disconnect that from the market assumption in general, which is a little more on average or a longer period? And how long is that period? Yes, 3% to 5%? Or is it 4% to 6%? Well, we are in that range. It's not a 10-year outlook we are coming with here.

Hugo.

Hugo Solvet from BNP Paribas Exane. And I have 2 follow-up on margin development. So can you help us understand the phasing for margin? Again, you're expecting flat this year. So should we expect it to like gradually improve, accelerate over this 4- to 6-year period? And then second, you mentioned that you start to see younger generation patients coming in as new customers. Can you maybe share with us your perception of the entry of large tech or eye care player into Hearing Aid space with either new form factors or improved products? And to what extent that could limit your penetration into those younger generation or put pressure on price?

Yes. Thank you. I think if I may, the whole margin, if we could take that as a follow-up, because René will come into more details. It is, as I said, continuously over years, smaller improvements rather than a big bump 1 year. It will come with scale. But let's get back to it towards the end of the day. I don't think I said younger generations. I said higher penetration. There's very little evidence that the average age of the first-time user actually decreases. But a bigger share of the people that have a hearing loss that would benefit from it choose to do something. So it's more that route than actual lowering of first-time user. There is very few things that have shown to do anything about that, because the problem needs to have a certain size. It seems back to the stability of the market growth before people in average choose to do something. And therefore, I don't think it has very much to do with form factors or another designer, so on. Yes, people would like hearing aids to be as invisible as possible, but people don't really have an idea before they come in and see it, and they are today cosmetically more attractive than ever. So yes, maybe that is also a reason why more people today choose to do something than they did 10 years ago. Maybe it's because it integrates to the cell phone. Maybe it's because I think, in general, it's awareness and availability and so on.

Good. That was the time we had for this Q&A session. Søren will be back on stage later also with René to conclude. So if there's any follow-ups on this, I'm sure he can cater them. And also be outside, because what we will be doing next is the lunch break, and there has to be a little bit of a practical exercise here because we are so many today. And we also have all of our colleagues here in Demant also lunching in these hours. So on either the back or the front of your cards, there will be either 1 or 2 colors, either red or yellow. So the ones that have red will start with lunch in the canteen and we'll have colleagues that will guide you there. For the ones that are with yellow, we'll start with product demos where, as Søren also highlighted in this presentation, we have a number of colleagues both from our Hearing Aids business, from our R&D business, and also from our Diagnostics business showcasing some of our products. And then the plan is after 30 minutes, we'll switch, and I hope everything will run smoothly. At least we'll try our best to do so. And we will reconvene at 1:00, where Ole will talk about how we fuel innovation, including a couple of our colleagues that work both in our research center and also on the R&D side. So that's the plan. Enjoy lunch. [Break]

All right. A very warm welcome back from lunch. I hope you enjoyed both the product demos and also the lunch that we had in the canteen. I can see the last people are still coming in, but we will just slowly get ready for the next session, which would be Ole Asboe actually, that will be moderating and guiding you through the next couple of presenters that we have for you today on how we are building innovation and core technology development in our hearing aids business. So with that, I will just very quickly leave the floor over to you to guide us through the next 1.5 hours.

Thank you very much, yes. Am I -- yes, okay good. I'm really delighted to be able to speak to you today and see -- [ I since ] trouble for me ahead, getting focused. So I'll have a question for you. Do you know what splanchnic is? Please raise your hand if you know the term splanchnic. Well, nobody does. You are analyzing Medtech and health care. You know what it is? It's a term for all the organs in the abdomen. And you know where all your blood is going right now? Right into that region, away from the head, away from the brain. So that's where we need to overcome here right now. So fueling innovation and core technology development and hearing aids in order to make a difference in the lives of people with hearing loss is the -- that's the order that we are trying to live up to. And if you're having that ambition, then you have to do better and better. And from a helicopter perspective, only two ways, you really work on that and they work in tandem. You can't work without the other, as Soren will explain to you just before. So you need to have better solutions and you need to have ever better hearing care, delivery of hearing care. So these two go together, so that you maybe dream of having technology doing the job on its own, is not how we see things, and that's why the two go together. And Niels will talk a lot more about what hearing care can do in order to do better and better in the future. So my job here is to talk to you about this and really dig into the -- one of the cornerstones of the strategy, the churn percentage here, fuel innovation and core technology development to ensure strong customer value generation. In other words, we need to make better solutions all the time. And this industry is one where the race is on. There's constant new innovations, constant launches of new products and that's what we work on in what I call the Hearing Instrument Group or we call the Hearing Instrument Group. So just wanted to introduce what I'm responsible for here in the company within hearing aids. You can say, we are looking at ourselves like a little bit of a value chain. The two first items up there, Research and Development, R&D, and Portfolio and Program Management that is really the interaction between those who define looks at the market, customers, trends and all that and try to define what R&D should be working on, along with R&D also working on innovations that can define product. So it's that interaction combination that you'll hear more about over the coming minutes. And what I didn't bring today, but I just wanted to say is that, obviously, the chain also involves what we call global marketing here, which is responsibility for our brands, Oticon, Philips, Bernafon, and then really a link between commercial operations, as we say, a link between central global headquarter and sales companies. And then, of course, we have quality assurance as part of our again the two. So that's just the lineup for the Hearing Instrument Group. But today, I just wanted to introduce first, the Head of Portfolio and Program Management, Patrik Hartvig. He will go through how we look at the market, the trends and turn it into solutions, requirements. And Kim Brusgaard Haldne. Well, he's the Head of R&D, and he will talk about how we innovate and not only just in general, but right now and into the future. And then we have, as part of a deep dive into research, we've also brought Dr. James Harte along because he's the head of Eriksholm Research Centre and actually one of the world's leading researchers within audiology and also leaders and this combination of being an excellent research and a strong leader within the field used to be everywhere. So Dr. Harte is a certain special person. And as he's not only heading the Eriksholm Research, but he's also leading actually a network of more than 40 PhDs and post docs around the world at universities. So we have one of the strongest networks of research within audiology in the world today. And then there's myself and I'll talk to you about Oticon intent at the end of this session. So with those words, I would like to hand it over to Patrik. Thank you, Patrik. If you'll join me up here.

Thank you very much. I go to this side. And I will continue to keep the momentum up as you presented the importance of the stomach and where the blood is right now. With that said, I'm here to talk about trends in hearing care and what we do and what we see when we're trying to project the future. And I will walk you through how we holistically approach this, really driving a collaboration together with R&D, identifying the big trends out there and how we then turn that into solutions that we would then later on talk to like Ole will talk to intent later on. So with that said, I will walk you through how we work all the way from megatrends 5 to 10 years out up to the recent days and how we then implement them. So starting with the megatrends. For us, it's really, really important to understand the world that we're living in and also how that impacts us. It's a lot of macro trends out there. I think the four big macro trends are impacting our daily life and how we interact with one another, everything from how consumers are impacted, how we see purchasing behavior and so on and so forth. But of course, we do that starting really, really wide, but then we'll start to filter down. And we do that by looking at industry trends. So what are the key industry trends that we see. And for us, it's really about delivering a set of opportunities for us. Since everything what we see in terms of the hearing care market, it could be, of course, really related to how we expand into new markets. It can be technology drivers like connectivity, AI, how does all of those new things impact the industry that we're working within. So it's really about setting that foundation for how we address the growing markets with a wide array of evolving needs. So that's kind of the defers to building steps. Then we're moving into the portfolio vision. Very important for us to reflect upon that, especially in terms of how we can deliver a very common direction for the [indiscernible] solution road map that you will see a few examples on in my short presentation. The portfolio vision is a summary of the opportunities that we see. So all filters down from, as I said, megatrends, industry trends and then later on to the portfolio vision. And with the portfolio vision, we are unfolding and we set the priorities together with R&D to really create and understand if we want to address explorative innovation projects or if you want to be more radical in terms of new ideas. It's really about fueling that based upon what we see in the marketplace. Another way of looking at it is, of course, setting up long-term direction. So just to give you a few examples of what we see. And some of them have already been talked to in terms -- from Soren of course, but we're looking into the demographic shift in the market. We see an aging population across the world. We also see that there is a significant increase, plus 65, I think in 2020, there is roughly -- or 2022 around 10%, moving into 16.5%, 2050. Based upon the feedback from UN and information from UN and the majority of that increase will come from China. So very important to, of course, reflect upon how that is impacting us. Another example would be the health and wellness. We are an aging population, of course. There's a strong focus on preventing care, which is a way for us to reduce, of course, long-term costs associated with chronic disease. So those are two examples from a megatrend perspective. And if we then would apply that into industry trends as well. If we look into, for instance, hearing loss demographics, we are actively looking into hearing loss demographics to understand, of course, where the adoption rates are potentially changing. And now that is also impacting the addressable market and any kind of geographical shifts within that space. Another key important -- importance in terms of industry trends is also how we should address stigma. And stigma, of course, is a lot of the research part that comes into play. You will hear some parts of this later on during the presentation. But what are the triggers of stigma? And what can we do in order to minimize this? How can we create attractive solutions to onboard users earlier in the hearing journey? So based upon this on the left side of your screen, we will also talk about a few selected market opportunities. So when it comes to the individualized user experience, intelligent devices, AI, you will hear that later on in this presentation from Kim and from James. But what I would like to talk about is a roadmap that delivers to these kind of industry trends that we see. So of course, the ease of doing business, the life-centric solutions, with equal important live longer and healthier underpinning all of the different levers or levers or enablers is, of course, our foundation when it comes to audiology. So that's core of our DNA, and that's also where we will keep investing in the future to come. So when it comes to the ease of doing business, of course, it's about building trust and loyalty with our customers, with our users through providing simple and very consistent products and efficient services. So that's very, very important for us, and we'll continue to invest and drive that through the years to come. And also when it comes to life centering solutions, here's really about how we can develop discreteness, continue to invest in ease of use. We talked about rechargeability before. That's also a very key element for us to continue to invest in as well. But also, of course, how we're addressing part of the stigma, which I talked to before. So everything comes down into the solutions that we're offering to market moving forward. And then the third example about living longer and healthier. So here, we talk about health care systems, providers, users, they're more focused on preventive care. And here, of course, the aging population trend comes here as well come to live. And I will say that it's also the access to health data through variable and different other tools or products that we are potentially using. That's very important to reflect upon and bring into and harness upon. We also see there is a pull from the market focusing on the overall well-being and quality of life, which is aiming to reduce the long-term cost associated with chronic disease, as I said before. There is an opportunity to address, of course, all of this from a more holistic health perspective, focusing on self-improvement and performance. So this is how we apply our strategic view on driving innovation from a very early on as I said, all the way from 5 to 10 years out into how we then apply innovation into our product roadmaps. And more to come on how we actually do that will be presented by the next speaker, Kim. So thank you, Kim, welcome.

Yes. Good afternoon. I hope that your stomach is not too occupied with lunch, as Ole said. My name is Kim Brusgaard Haldne. I've been in Demant for 12 years. Three stints I've been through. I started heading up Quality and Regulatory. And then after that, I was heading up Portfolio and Program Management. And today, I'm heading up R&D. I am extremely excited to get this opportunity to give you a little insight to what we actually are working with in R&D. I'll jump into this one. So first of all, our ambition in R&D is to deliver innovative and competitive hearing solutions that drive the preference for the hearing care professional and of course, our end users. And how do we then do that and what does it take? So first of all, the R&D organization consists of 900 employees. We have three major sites where all the employees are located. It's here where we are today. And then also two locations in Poland, it's Mierzyn Szczecin, which is very close to our production. And then we have a bigger group sitting in Warszawa. If we look at the competencies in R&D, more than 50% work within software and this has been an increasing amount over the years. And software is a generic term. So for us, software is firmware. It's embedded software. It is apps and it's fitting software. And then within hardware, we have around 35% of the employees working in there. And that's, of course, the electronics, the acoustics, the mechanics and also the chipset development. And the rest here are working within research, architectural tools, methods and of course, also management. What we deliver from R&D is a multi-brand portfolio. We deliver all the styles for all the different fitting levels. We deliver chargers, accessories, app and fitting software. And we do that for our three brands. We also have two private label, and then we have several strategic account portfolios that we also deliver. We have a dedicated research center in Snekkersten north of here. And James is heading on that one off and you will get a better insight to the research that we're doing in [ Eriksholm ] And then, of course, we also make sure that everything that we innovate, that we create the patents and we file the patents to protect our business going forward. This is a very simplified view of looking a bit into how we operate in R&D. So around 25% of our staff works within what we call innovation. And innovation, we divide that into the -- or geological research and then what we call explorative innovation. And of course, our research is the foundation for delivering hearing health care solution. And this explosive innovation, we use that for testing new technologies, new concepts, new ideas. And when you look at this time line, there's a reason why it goes all the way, so you have launch here. I should maybe use the laser. You have launched over here and goes all the way out to 10 and maybe more years is that the chipset development is what takes the longest time. A little shorter as our audiological concepts and also hardware concepts and what we can deliver the fastest from idea to launch is, of course, within fitting software and apps. Then we go into the biggest part of R&D. That is what we call product programs. And here, 65% of the staff in R&D, they're working within the product programs. Before we start a product program, we know exactly what we want to deliver and we also know if we have proof of all the concepts and the technology that this product is going to be building upon. And what happens in those two years is simply merging all these different technologies into the complete product. And then as any other product development company kind of we build and we test everything in a maturity stage gate process. And 9 months before we launched the product, we do the final clinical evaluation, improving, we do the portfolio viability and then we ramp up so that when we launched the product, we are able to ship the product immediately when we announce it. Then the last part, that's a growing amount, that's what we call in-market. And the reason why it's growing is that we have connected our hearing aid to the smartphones out there. And firmware updates, as you -- I guess you get all of those also, at least do. They come from Apple and Google all the time. They also come out with new products. And there are sometimes areas where we need to do some fine-tuning in our firmware for the installed base of hearing aid instruments out there. So we, of course, prepare that and we send it out. So there's no disruption for our users. Then, of course, we also spent time in in-market to optimize the supply chain, to optimize the product quality and optimize the product cost. This is a -- you've seen this graph before, but this is very important for me also to highlight because this is an overview how the efforts in R&D have developed over the years. There's no doubt that it has grown significantly, the efforts. Today's DNN-based audiology that predicts the user's intent is by far more complex than making what we did in the past, a directional audiology. The amount of coding, audiological coding, that we put into today's chipset is and have grown exponentially over the years. Today, when we launched a platform or a release, we do it in our three brands and for our private labels, and we also do it for our strategic accounts. And we do that in four price points. That creates hundreds of variants as we also need to cater for the individual hearing losses out there, and we need to also cater for the different comfort needs that any of our users have. Then also in 2016, we started to connect our hearing instruments to the smartphones. At that time, it was one-way streaming, it was the other way, one-way streaming from a handful of iPhones to the hearing instruments. Today, we are running up to 5 different Bluetooth low energy protocols, depending on which device the hearing instrument is talking to as we can stream in two or one way to more or less all the smartphones out there. Also, rechargeability have been an effort that we have seen, have been increasing for us over the years. We design products for both disposable batteries and also rechargeable batteries. And that actually requires different mechanics, different hardware and very different power management systems, and not to mention the charges also that we need for the rechargeable instruments. So all in all, it has grown significantly, this effort. And there's a reason why the yellow curve is also there because it's extremely high focus for me to keep the focus on scale in R&D so that we can follow our more constant spend curve in R&D even though the complexity growth is fast. So we are working a lot with tools, processes, agile ways of working and of course, generative AI to get that benefit out of our investment that we put into R&D. Now let's look into some of the technologies that we're working with. So this is not a complete list, but an illustration of some of the most relevant technologies out there, both in our domain and also in the consumer electronic domain. These are all relevant for us when we design new instruments. Some of the technologies, they are moving forth and back between these industries. And a good example is that LE Audio is something that has been developed in the hearing instrument industry and is now very fast being adopted in both the hearing instrument industry, but definitely also in the consumer electronic industry. And today, we also, in our industry, are working with technologies coming from the consumer electronic industry, like the sensors, rechargeability system and also the app to control the device. We could -- if we take this blue and brown part, so what's within our focus for making the world's best hearing aid, this is another way of viewing this. This is describing how we prioritize and how we focus. And there's no doubt whatsoever that audiology is the focus of everything that we do when we design new products. And to deliver on audiology, we, as you also saw in the break, we designed our own chipsets. And we need to design it. So it's fast enough to process the sound, but in a super, super fast exercise and at an extreme low power. We do this also so that we are able to pack this complexity I just talked about into the same or even smaller product going forward. On this illustration, the further you move out from the core, the less differentiation there is in our industry. We can -- yes, idea here is just to go and we don't have time to go through all of these technologies. So idea is now I'll just focus on some of the very key ones, and I will start from the middle. But I need to rewind a bit. And before we start with the audiology or this is the foundation for our audiology. So for us, hearing science starts with brain science. Our brains there, also for you right now being bombarded with millions of input. The challenge for human beings is that we are only able to focus on 50 things per second. And that's actually a fairly high amount, but compared to the input, it has some limitations. I will try and give you a normal daily life explanation or example of how this happens, at least in my home. So let's say, my wife says something to me. I hear the words, but then often I find myself saying, "Excuse me, could you please repeat that?" Then she challenges me, [indiscernible] and said, "didn't you hear what I said?" And then actually, what happens in my brain, I hope it does also in yours, I don't think I'm special. The words get repeated and then certainly, I understand actually what was being said to me. So in such case, I'm damn sure I was occupied with something else when I heard the word. So I actually heard the word, but the focus part was occupied with something else. And in 2010, and it's on purpose, I say, 2010, everybody in our industry were focused on directionality. So it was simply a matter of increasing the sound in front of the user. And when the sound environment became even more complex, we narrowed in. And here comes the challenge actually because if you end up pushing too much sound into an auditorial system that doesn't work as it should, your brain becomes overloaded. And then you will end up exactly as my little example at home. We actually heard the words, but I didn't understand what was being said to me. I did not understand the meaning of the words that my brain heard. So in 2010, based on our research, we decided to change our audiological intent, simply to focus much more on all the sound that makes sense to the brain from all kinds of different directions. We also, at that time, admitted that we needed something else. So because we couldn't build on what we had already. So we designed a dedicated, high-performing chipset to deliver on this intent, powerful enough to suppress any noise and enhance any speech 360-degree around the user. And in 2016, we launched Open, our first step on our brain hearing journey. And last month, we launched the fifth generation on this audiological intent. And I promise you, we have much more in the audiological pipeline. There's so much more that we can do to deliver more access to all the relevant sound for the hearing impaired in all kinds of different situations. It's my understanding, our understanding that our way of delivering meaningful sound to the hearing impaired's brain is what makes us a key -- or it differentiates us significantly from the consumer electronic manufacturers. To excel in this, you need two things. You need a lot of the stuff that James is working on to the brain and our geological research and then you need the supporting technologies. And here, the chipset is, for us, the most essential one. We believe we are the most advanced in the industry to design both digital, analog and radio chips, and we have been doing that for years, decades, I would rather say. And it's important for us when we design our chipset that we are able to do the processing fast and automatic. No changing of program. It just needs to happen when you're in that environment. And it needs to be able to process in the most extreme and complex environments. Further, we have a huge know-how in designing our chipsets in extreme low power. And we need to do that because we want to make or pack our products with more and more complexity into same size or maybe even smaller size going forward. It's extremely important that we strike this balance and need to find a laser that we always strike this balance between the audiological features, the power consumption and also the size of the chip that we're using and especially the speed of processing these specialized hearing aid features is extremely important for us and essential. We have made a little video where you get a chance to look into how we actually work with our chipset design. So I'll just roll that. And I heard I need... [Presentation]

Hi, and welcome to the Chipset Group. We create the hearing aid chipsets. A hearing aid chipset consists of two or more silicon computer chips designed specifically for using hearing aids. When creating a chipset, three key aspects shall be balanced; features, power consumption and size. The latest chips that we created has 154 million transistors split over three chips. The features of this chipset includes microphone inputs, [indiscernible] input, speaker output, a Bluetooth radio and a near come into hearing aid radio, power supply logic, charging logic, eight digital signal processors and three general purpose processes. The three chips and 21 other small components are packaged inside what we call a module. This is less than 30 cubic millimeters large, and this allows an easy implementation in different variations of hearing aids. The Chipset Group is approximately 65 people. The group consists of analog IC design engineers, digital IC design engineers, physical IC layout engineers and chipset test engineers.

Yes. Thank you [indiscernible]. So I need to click again. There you go. Okay. So when we address our innovation and technology this way, we are able to pack the higher complexity even into smaller products going forward. If you look at this up here, it's an illustration of our Oticon Real and our Oticon Intent. And luckily, the [ chrome-based ] 1 is our Oticon Intent. So we have packed it into a much smaller product. Besides that, we have also increased the battery capacity with up to 50% more. We have introduced a fast-charging concept. We have increased the bass now down to 80 hertz. And we have also implemented intelligent speakers. And these speakers have a much better retention and comfort for the user, but also for the hearing care professional is much easier to work with in the fitting process. Not the others had a challenge, but this is simply improving the speed for them when they fit new devices. Besides that, all of this stuff we have packed into our latest launch, we have also implemented LE Audio. Today, that exists around 3 billion Android smartphones out there. And last year, there was -- 1 billion Android smartphones were sold. So depending a bit on how fast the adoption will be of LE Audio in the lowest end of the Android smartphone domain, we predict that within 3 to 5 years from now, LE Audio will be fully adopted in the smartphone domain. Next, I want to go back to this slide. So just saying that we keep a close look at all these technologies and how they are moving to continue making the world's best instrument. And there are some technologies here that are moving faster than others. For instance, within wireless rechargeability and of course, also AI, these are some of the technologies that has a higher speed than some of the others. I will keep focus. We will keep focusing on creating better and better hearing instruments going forward that gives more access to all the relevant sounds out there in all kinds of situations. I want to thank you for your time, showing you a little on what we're working on in R&D. And then I think we should go into our core, our audiological research, which James will give an insight to.

Thank you, Kim. So artificial intelligence and the engineering tools that, that sort of represents, it's a very big broad umbrella term. I think we can all agree that, that is sort of creating innovation and accelerating innovation for pretty much every industry under the sun. And we have to ensure that we bring that into hearing health. So I am the head of what we call the Eriksholm Research Centre. I'm actually a former academic. I used to be based at the Technical University of Denmark, which is about 25 minutes drive from here, and I was in the Department of Electrical Engineering. But I've been in the Demant group now for about 10 years. Eriksholm, for those of you who don't know, it was established in 1977. We're located 45 minutes from here, and it is a dedicated Research facility. And we have a highly multidisciplinary team. So I have scientists working with me with backgrounds in engineering, computer science, psychology, neuroscience as well as a very, very strong clinical research team, so with a background in -- a strong background in audiology. The mission of Eriksholm is to conduct research where we essentially try to advance the understanding and treatment of hearing impairment. And what we do is technically what's known as translational research. So we try and position ourselves right in the middle between sort of Academia and the core business. So many of I saw most of my staff scientists are actually involved in international collaborations with universities all around the world. They published their work in academic journals. They present their work in conferences. And of course, they've patent their work to ensure that we bring value back into Demant. The idea is we try and take what's happening in Academia, we try and bring that to the point which is usable or adoptable by the hearing aid industry or specifically in Demant. We have four main research focus areas in Eriksholm. The first one of these, as we call personalized audiology. Essentially, what we're aiming to do is really try and understand the very, very specific hearing loss, that's our end users' experience and then try and give them exactly the right treatment. You can look at this another way, we actually try and identify what are the very, very specific hearing needs of our end users. Because each and every one of us has complex behaviors, we go to different sound environments, and we need to -- if we're hearing impaired, we need our hearing aids to basically support us in the best possible way in those individual spaces that we're in. Second area of research for us is an area we call intent decoding. The idea here is actually we're doing behavioral research into communication. So what we will do is we'll actually get essentially a couple of people, maybe a couple of hearing impaired people in a room. We would change the sound environment that they're in, and we will have them have a structured communication -- structured conversation. And then we'll observe them. We'll actually have cameras in the room. We'll put electrodes on them, so we'll measure their brain response. We'll look where their eyes are going. We'll look at their body movements. We're really trying to understand what happens then when we put a hearing aid in that situation? How does that behavior change? Can we bring them back to a more normal rather than a maladaptive communication behavior by doing these kinds of research? And of course, the whole point is we want to bring the human in the loop of the hearing aid to make the hearing aids more intuitive for the future. The third area of research for us is what we call cognitive hearing science. Now in Demant, we have this core philosophy of brain here. Essentially, we listen with the brain, we don't listen with the ears. Cognitive Hearing Science is actually just the academic discipline, which underlies this. And in essence, what we have is we all have a bunch of cognitive processes that we can bring to bear that helps us sort of solve complex behavioral tasks, things like communication and the types of cognitive processes are things like working memory and selected attention. You could direct your attention to where you want it to go. As we age, these impair. If you have a hearing impairment, you actually rely on these processes more than you would do if you were normal hearing. And so these processes are finite, they become fatigue, and we want to make sure that we can provide technology, which best supports the listening brain. So that's the purpose of that core area of research there. Now all of our scientists or many of our scientists have for many years been conducting research using artificial intelligence and machine learning and various different methods associated with that. But at the end of last year, we've actually decided to elevate this to be a strategic research focus area for us because we're seeing so much of explosion of academic activity at the moment, all of the universities around the world doing amazing things with AI. We're seeing a huge amount of patents being created and the industries adopting AI, we felt that this is -- the time is right for us to really invest in this and do core research, which we can bring back to the business. Just to be clear, when I talk about AI is just such an incredibly broad term, when I'm talking about this, I'm specifically talking about two things. First one of those is machine learning. So this is basically training machines or in our instance, hearing aids with real-world data to make those machines more intuitive to use or more sort of smooth in terms of the processes that they have. The main tool that we have for that is deep neural networks. On the other side of this, we also are constantly now collecting data in our hearing aids with various different data logging approaches. We have data being collected in our fitting software. We've got partnerships with a huge number of clinics all around the world. So in principle, we have access to anonymized clinical data. What we really want to do here is say how can we turn that into audiological insight that can actually help support hearing care professional and create a new range of products in that kind of domain. So the AI is not new to Demant. We're already now in the Oticon Intent on the second generation of deep neural network in our devices. That's a subsystem of our hearing aid that we have at the moment, which essentially helps suppress noise. But in reality, what it's doing is it's actually increasing the contrast of speech to noise and doing it in a way, and this is the important thing in a way which is completely natural sounding and doesn't introduce any sort of artifacts. The minute you introduce artifacts that causes problems for the listening brain and we increase listening effort and challenges associated with that. The way that we build these kinds of systems is we take millions upon millions of real-world recordings of sounds and noises. We embed speech in that. We then put that into some kind of untrained network. And then with the untrained network, it doesn't actually know what to do with it. So initially, it will elevate the wrong bits of the sound. It will decrease the speech and increase the noise and do things all incorrectly. We have to train it. We have to give it feedback to say, no, no, no. These are the bits that's relevant. These are the bits that retains the quality of speech and the naturalness of the sound. And then we do this millions upon millions of times until we get some kind of generalizable, very, very strong robust network, which we can use out there and deploying our devices. Now in R&D, we've actually got a fantastic team of engineers that are fully capable of building and deploying these kinds of systems already. So this is not what I'm here to talk about because I represent the research with the Capital branch for Demant. So we decided at the end of 2023 that we really needed to double down in this field. And we've been very, very lucky that the William Demant Foundation has actually decided to give us a significant donation to create industrial PhD and postdoctoral research positions. This allows us to connect with different universities here in Denmark and all around the world. But in addition to that, Demant have invested even -- made an even larger investment into this program of research, whereby we can create some sustained activity, we sustained research activity for many, many years in order to sort of get the benefits of doing this kind of academic engagement. So how is this going to work? The existing or historical areas of research focus areas for Eriksholm are very, very good at really understanding our end users, their particular hearing loss and their particular hearing needs, whether or not that's from an audiology point of view, or a communication dynamics point of view or even a listening brain perspective. So we're very good at identifying where you're particularly challenged, where you particularly need extra help. And then what we're doing now by creating this additional group is we're saying, okay, how can AI be employed to specifically target those communication challenges and difficulties that our end users experience. And the whole point is that becomes part of the R&D innovation pipeline. Okay. I'm just going to give you a little bit about concrete example. I'm going to play just some speech embedded in noise. [Presentation]

I'll be very, very surprised if you can pick up a single word in that. We then process that through a trained neural network that should clean it up completely. [Presentation]

Okay. This is old technology. A graduate engineer coming out of the Technical University of Denmark right now can build a system that does this. But this is just to illustrate a point. What we can do and this was done in 2020. What we can do today is so much more powerful. Our interesting challenges is how do we then take these very, very large networks and deploy them on a very, very small device, and we see to try and realize the potential for our industry. So where we see opportunity then as you can think of 3 different scenarios. First one is very, very simple conditions. So 2 people having a conversation together. One of them might be hearing impaired or one of them is hearing impaired in this example. What we can do then is traditional hearing aids will have things like an amplification strategy to treat the hearing loss, of course, dynamic range compression and some kind of adaptive feedback cancellation. Now what we want to do is we can actually already just at this core of the technology, transform that using machine learning approaches. As years have gone by with traditional engineering approaches, we've sort of reached relatively limitations in what we can do. We can still gain a few more gains each and every generation of hearing aid as it comes. But with the new technology that we think is coming now, we're actually able to make significant inroads in making improvements in the core of what we call a hearing aid. Then you can go into more complicated situations when there's noise, reverberation maybe moving sound sources nearby, we now have to deal with noise, we have to deal with this challenge. And we're seeing a future where we believe that we can start taking our devices, connecting them with maybe a second hearing aid or maybe even an external device to do some processing of the device to really do some very, very aggressive noise reduction. But in reality, what we're doing, as I said, is we're trying to create that extremely increased contrast of speech without losing any quality and that's the sweet spot that we're trying to achieve. The very interesting opportunity in that middle section there is actually what I've labeled their active learning-based algorithms. This is going to be a game changer if we get this right. This is based -- at the moment, the DNNs that we create, you essentially train them, you fix them, you deploy them, and that's it. They will never be changed again unless you have a firmware update on that device. What we want is we want devices in the future to potentially adapt and change to the types of noise environments that use specifically as an individual go into. So it gets better and better at helping you in the types of environments that you go in. And I think that's where we think this technology is leading. Then the final example would be very, very complicated communication situation. So you can imagine that you're one of these 3 people in the middle here, so let me just do the one of these 3 people here. If you're not having a conversation with more than one person, you're going to naturally be switching your attention from one to another. Also, there could be other things happening in the room where you're going to naturally want to switch your attention to, the way to come through with something that's -- excuse me, way to come through. That's something that's interesting to you. And we need to have the device interpret and understand what your intention is. Now we're working with technology, looking at [ Eyegaze ], looking at voice dynamics, looking at body movements to see, can we do anything there to make that device much, much more intuitive for you to help support the communication needs that you have. Okay. So what we're basically saying then is we believe that AI can transform both the core of the device all the way through to some quite revolution in new innovations that we think are possible in the future. What do we need to do to make this happen? First of all, we need resources, we've established the resources. We've got that. We need to have a dedicated space to be able to focus and have a long-term vision and work on these kinds of projects. We have that. That's what Eriksholm is there for. And we also need Kim and his team to build core R&D technology, which can really support these types of new algorithms. The problem is what we're working with at the moment, you simply cannot deploy on a current generation hearing aid, possibly not even the second generation from now. This is a few years in the future. So what we need is we need a constant increase in the power of our devices, the memory on the devices. We need a constant increase -- a constant eye to power management. And we also need to make sure that we had extremely strong, very, very good next-generation connectivity if we ever want to realize the potential of creating sort of hearing aid systems where devices can interact with each other. So with that, that's me finished for now. That's a lot of information. I'm going to hand back over to Ole Asboe, President of the Hearing Instrument Group.

So I'll try to -- I don't know if you noticed, but you've been on a journey that's kind of a circle. And I'm trying not to close the circle a little bit and explain to you how all that innovation has -- and that approach to innovation has really been built into Oticon intent. And now this may sound like a broken record, but we're going back to 2016. And we didn't know at the time what we had. And I think we will gradually realize the benefit and the strength of some of the things we've done, the focus on the brain, the chipset development, et cetera, that has created something for us. So I'll explain that, and that's the reason why I go back in time. And see, I'm not an engineer, I'm not a doctor or audiology, I'm just a normal person. So I'll try to explain this in a way that makes sense for normal people, at least for my mother-in-law. And on the left-hand side and the right-hand side, you have the same picture. It's a dinner party. It's a noise environment. It's exactly that situation, everybody with a hearing loss talk about is a very big problem for them. And up to 2016, the way we handle that situation was the guy with a hearing loss is the guy with the beard speaking to the guy with a hair that looks a little bit like mine kind of white. And when there is such a difficult situation, hearing technology would at that time try to focus the microphones and the hearing aids into just you down there, I would be focusing in a conversation with you. The rest, if anybody's spoke up or just doing rattling sounds and speaking with others would be considered noise. And in order to create what is called a good signal-to-noise ratio, then the speech from you would be elevated and the rest would be subdued that is noise. So I think you can imagine that the shortcoming of this approach is obvious. How is it that you can make a movement of your head and participate in a multi-speaker conversation or actually try to understand what is going on. So at that point in time, we observed that even people with hearing aids were feeling that they couldn't cope in these difficult situations. So here comes we, along with what we call the Oticon Opn and the Opn sound paradigm at that point in time. And thanks to the audiological insight and that process that we introduced at that point in time. I don't know if you paid attention to it, but if you are into computer technology, you will have heard the term cause. If you have more than one signal processing core means that you can run multiple processes at the same time in parallel. So you heard the term or you saw 8 plus 3, it's like 11 core processing. So what I'm trying to tell you here is that we had the power all of a sudden and the audiological insight to create access to all the voices around you. And we had the capability to identify even the noise between all these voices and subdue it. That was what we considered a paradigm shift. And you can say, well, then we do up this slide here, not only for you, but for other people as well in the last couple of years. And to me, I've been 15 years in the industry. I've never seen anything not being copied very, very quickly. The pace of innovation is so fast in this industry. This hasn't been. And I think personally that it's this combination of audiological insight and the signal processing because if you are in a realm where you have prepared yourself for this, then speed is not necessary because if you are trying to move this cone or this directionality fast around, then you get crazy because you can't handle these so-called artifacts that comes from these moments. So these systems are not designed to be fast. They are designed to help you smoothly into a new situation. And over there, you are updated on the sound environment 500x per second, and then the help you need is adjusted in real time, 500x per second. It's faster than the brain can process actually. So that's why we're saying, well, we think we are long-term differentiated. We haven't seen anybody really moving into the open sound space yet or being capable of. And I just want to highlight maybe that in 2020, with the Oticon More, we actually upped a little bit the bar, as I would see it with the introduction of the deeper network in Oticon More. And what it enabled was that we could eliminate talking about noise. See if you have your -- we have a lot of test persons with hearing loss that use hearing aids. And as James said, we can remove all noise and only present the speech in front of even in a difficult environment. With the patients, as we call it in the U.S., like that, why do you think? No. They don't like it. They want context. They want the noise from that beam up there. They want the context whether some planking sounds or especially for people who are hearing related hearing loss. This is something that is ingrained in you in need context. So the more you can preserve context, the better it is. And with the deep neural network, we were actually able to say, well, we don't remove noise anymore. We just deconstruct the sound team and put it together in a manageable format. So you will say the noise is still there when you're using an Oticon More hearing aid, but it's related to the speech around you and the situation and your hearing loss. So it's there, it's not removed. And all these things has happened. And still, we've lifted the bar on speech understanding in noise. We've been the best, I think, personally, I'm biased on that score for a number of years now. So even talking to the most difficult thing, this signal to noise ratio, we're improving it, but we're making it difficult for ourselves because we need to access to all sound at all times. That's quite a trick to make. So now we go to the next step. And here we have another situation. I think you saw the picture before. On the left-hand side, you have the same picture is on the right-hand side is, again, a little bit of a reception, noisy environment, clicking and clinking and people having fun talking et cetera. And today, up till on Oticon Intent, a hearing aid would see this as a noisy environment. So that means that I think noise environment as a hearing aid, and I apply, should we say, that program. It's not a program but that's setting in order to provide help to the person with the hearing loss. Okay. So go to the right-hand side and say, well, let's look at it. So in this setting, there's actually at least 3 distinct different setting or use cases or intentions of a hearing aid user. First, you take James up there on the left-hand corner, James, you don't know that, but he just came into this party. He is scanning, the surrounding looking for friends, looking for interesting things to maybe observed go to. And we have Valentina, who is in a conversation with a couple of people. So attention is switching all along. James, I forgot to say, is trying to scan the whole environment. And then we have Dave in a very close dialogue with one person. So the classical hearing aid directionality situation. So imagine if we had a hearing aid that could actually get that level deeper and understand the intention in the situation where it's most difficult. That's what Oticon Intent does. So what we have combined into Oticon Intent is a number of inputs. It's the body movement, head movement, conversation activity, acoustic environment. And what James would tell you is that when you can combine these informations in real time, then you have a very, very clear picture of what it is that I'm trying to achieve my intention or intent. So if I've just explained a little bit with an example. When you have done research, you know that -- when you are in this situation there, you are -- in peer to peer direct conversation. Your head is moving a little bit. Your body is not moving, but you hold your head as you can see here in an ankle, something that people do with hearing or speaking. And so there's a lot of, you would say, movements that we can understand and thereby interpret what the intentions are. And if you add that to that conversation activity, not only mine but also in the surroundings and the acoustic environment kind of level of difficulty, et cetera, in the total environment, then the hearing aid starts to understand what I'm trying to achieve. And that's what we build into Oticon Intent. So does it work? Yes, it does. So we are one of the companies that are very committed to having independent research that is able to substantiate the claims we are making. So we have here a chart on the left-hand side, and Cerus is an internal code name for the Oticon Intent product. So if you compare this Oticon Intent hearing aid with the Oticon Real1, the best we've had up until Oticon Intent #1. Then just by adding the new deep neural network, you get a 12% increase in access to speech. And if you then add the sensors to it, then you jump significantly up to 35% more access to speech. And access to speech is a term that we use relative to brain hearing. You want to get to the level where Kim is not only hearing his wife, but he's actually processing and having time to engage with her. And even in a bigger environment, you have that ability not only to hear but also to participate. And this is a measure of your ability to go towards that situation in a very difficult environment. So -- and brain hearing is also measures that, well, it has to be comfortable. And you have to have the ability to feel that you can wear this for 18 hours a day. So these are some of the measures that indicate that you capture more nuances. And all these data here is related to the current best product we have, Oticon Real1. Okay. So here's another a little bit of information. I think sometimes I've heard the question asked, can we still innovate and lift the bar further? And as I said, I've been 15 years with the company. We have an internal target that serves 80% or more of our tested patients need to prefer the new product over the old one. So in this case -- this is also the case. So it beats ultradian hands down. It did that in the first run. So we're very proud of it. And from an R&D perspective, in terms of DB improvement, Oticon Intent is a bigger step forward since Oticon Opn bigger than More and bigger than some of the, for example, real. So we expect a lot. In the hearing aid, we have a new chipset which adds some of the new stuff that Kim has been talking about. And I've been talking about the 4D sensor technology. We have the new deep neural network that has been retrained. It's a new deep neural network. It's just not a 2.0, and we tweaked it a little bit. It's been built again from the ground up. We have expanded with frequency bandwidth down to 80 hertz. That's maybe not so fantastic, you think. But it actually adds a lot of quality to the sound, especially in the music experience, et cetera. And then LE audio, of course, is now also built in. Then a few details about the new product on top. We have it in 4 price points now, and we have a new design, which is smaller and new battery system. I don't know if he mentioned that we had -- it's not only a bigger battery that has a longer longevity, but we also have switched to contact charging, which means that we can fast charge and a lot of users now listen to all your books, et cetera. And even if you stream for a very, very long time during the day, you can get a charge within for 4 hours within 15 minutes of charging. So that's the reason for that. New intelligent speaker units so there's a little chip in the speaker now. And one of the things that we can do is we can transfer batch data for speakers into the fitting system and batch variation, there is a slight variation between batches. Now we can take that into account for a more precise and strong fitting. That was my story about Oticon Intent. Of course, we can talk more in the qualities or question session. I just want to let you know that we also introduced the portfolio across Philips and Bernafon. And I don't know if you are going to ask me that question about differentiation. I would say just that we are running on the same basic platform. The signal processing is different between the 3 brands. And the most advanced signal processes is processing is in the Oticon Intent. More details, if you want, and we can have that dialogue later on. So on that note, I would just like to play a video here at the end about Oticon Intent. [Presentation]

Okay. So back to Peter. And maybe may I ask the participants in the panel here maybe to come up. I guess you are running the show here, Peter.

I will run the Q&A. Thank you so much, Ole and the other speakers for giving a little bit of a deep dive and a tour through our future trends, R&D, et cetera. I'll try to moderate the Q&A session again. And please do limit your questions to one at a time that would be highly appreciate it. Maybe let's start down here in the front.

It's Niels Granholm-Leth from Carnegie Bank. Could you start by explaining why you decided not to launch Intent in a disposable battery version? Secondly, could you also talk about the number of external devices that you can connect Intent to simultaneously?

Please. Okay. So if you look at say the market for hearing aids in terms of styles, battery types, et cetera, the mini right style at large is at least -- around 80%, maybe a little more percent of the whole business. And again, if you then divide that into subsections like rechargeable and disposable batteries, then you say the part that is most valuable that drives the ASP first highest is now switched totally over to rechargeability where disposable batteries is more like for segments that have a special need, maybe a little bit more conservative approach to technology. And that those segments are just getting smaller, very, very fast. So our intention was to be first with rechargeability. And then, of course, we unfold our product portfolio over the next couple of years based on this platform here.

And on the connectivity side?

Thank you. On the connectivity side, so when we started off with connectivity, we more or less didn't limit to how many devices to connect to. So in an R&D environment, it works fluently. In a normal use case, I guess you also experienced that with whatever you have your smartphone connected to, it's not always working fluently. So what we have done is that you can connect to all the device you want to connect to, but the ones that is shifting automatically, we have limited, and it depends a bit on your smartphone device and the app setting and so on, how many. But it's normally, of course, our accessory -- your iPad, your iPhone or in the Android domain those devices. So I don't -- I hope I answered a little. So we went from an automatic connection and shifting to all devices to narrowing it a bit in, so we have a more stable connection.

We connect it to a multiple...

We can remain connected and automatically shift between multiple devices but not unlimited devices as it was before.

Maybe Veronika?

Veronika Dubajova from Citi. Two questions from me. I'll do them one at a time. The first one is just on the sensors that you've put in. Obviously, you are not the first company with sensors. And so I'd love to understand how you think you're differentiated versus the offerings that are on the market and what sets you apart? And then I'll have a second question after that.

Yes. See, I think what sets us apart is that we combine the information of movement. It means head, body, walking, speech activity and acoustic environment. All these things combined gives us an information. And I -- if I should just very roughly describe what I've seen elsewhere is that you would have motion sensors that are used to sense whether I'm working. And then the hearing instruments would be going into a, should we say, broad omni mode, which is the microphones are very wide. And if we then stop, they would be a little more narrow again. So just what I would consider a more crude application, I think we are much closer to understanding what the user's real intention is in those situations.

That's helpful. And then my second question is a little bit provocative, but I think it's a debate that the industry has had for a long time. You spend a lot of money developing your own chipset, so does Sonova, so does GN, so does WSA. Is there really value to individual chipset development? Or is there an argument to be made for the industry switching to a standardized chipset for the value that you guys are adding is more in the software, which anyhow is the majority of the time, what your R&D organization is focused on? And have you guys given that any thought? And then that's probably a question for you and Soren, if you want to throw your two cents on it as well.

I can start. It's a good question because I think you -- a few years ago, maybe your question would be met with the same answer. This time around, I think the world is changing a little bit. So something gets more commodity like radio chips, for example. Maybe that would be something that becomes more standardized. But the core of what we talked about here, the digital signal processing, as you can tell from our presentation here, it's kind of -- it's part of the secret source for us. And we're not seeing that going away with the commercial chipsets that are out there. There's still a number of compromises we would have to make that we don't want to make, and we can do better. We can create more performance with a more low power requirement if we do it also. So it's still valuable to us.

Yes. Maybe just adding, of course, it makes no sense if it's not a server purpose. It's not that in itself is a funny exercise and run the risk and spend the money. So it is -- of course, we constantly look. But you also have to remember, we don't design a core in a chip, you could say, we package generic elements for our purpose. And there is still a very significant benefit to size, power consumption, computing power, sound quality and so on that makes sense for us. And of course, we constantly monitor. You could say the only short-term alternative would be a generic hearing aid chip but that generic hearing aid chip is either disproportionately expensive or do not fully cater for the cutting-edge research that we do. So as long as we have that sweet spot, we will continue, and we definitely believe there is other drivers, which was what Kim tried to illustrate between our more dedicated purpose of separating speech and noise, the benefit of all the consumer electronics. They know what the source is and they know what the noise is, and that is a significantly easier job to be done to keep those 2 things apart than what we have, which is a very, I would say, mixed signals that then have to be filled enhanced figure out what it actually consists of. And so far, there's no indication that that's achievable by a [indiscernible].

Good. Maybe down here in the front.

It's Oliver Metzger from ODDO BHF. Two questions. So the first one is about, can you elaborate about the synergies in R&D. So some fundamental innovations were basically set with the launch of Opn device 6 years ago. The technological progress we received from there is there, but the fundamentals are still the same. So are there any synergies in this process from platform to platform? And the second question is basically linked as to my first one. So if you look for such a shift in paradigm from, let's say, this beam to the omnipresent. You mentioned between 2010 and were 6 years for developing this technology. Could you say if you now reach some limitation of the current approach, does it take again for you or somebody else, 6 years to build up such a complete new solution from scratch?

Maybe I understand the question of R&D.

I can try and answer. It's, of course, hard to predict what could be the next paradigm. I think it was fundamental for us in 2010 based on our research that we were not delivering the right solution for the hearing impaired. We weren't making it easier for them to understand the words that the brain was actually hearing. So that was a big change. And it's still the same audiological intent that we have. We are, by far, not there. I think also, James explained a lot of the different things that we're looking into, to make it even easier to access all the relevant sound and also remove the noise for the hearing impaired in all kinds of different situations. So there are a lot of stuff that we still can do. I cannot predict what the next paradigm will be. I think we are on the right path. I think James also alluded a bit to how we can take the whole processing via AI to something else right now. But it will take some time before we have a self-learning instrument simply due to the size and the power consumption constraints that we have.

There was another part to your question about synergies in R&D. And if I understand you correctly, they do -- is the perception that we are creating a chipset from the ground up every time we launch a new product. No, that's not correct. So you can say there is a -- in the industry, a basic architecture in chipsets that runs for a long time. It does with us. It does with all our competitors. So the chipset launched in 2016, some of the core architecture is the same. We just updated it and added to it over the years. And at a certain point, then it's end of life, then you can't do anything more. But -- so what I'm saying here is that you're not building a new digital sound processing from the ground up every time you launch your next platform that would definitely not be possible within a 2-year cycle. So there is synergy in utilizing the technology and the investment in it.

And maybe back to your first question, maybe you can comment a little bit on the James. I think one of the next opportunities, the AI algorithm today is still based on an average person and nobody is the average. So how do we get a feedback loop that actually tells something about the individual? And speaking about Century technology, we somehow need to know whether what we apply right now works effective for exactly this person. And brain load is one of them and still we haven't found the key to measure actual brain load, which is also likely to change during the day, whether you're fresh or tired and so we have plenty of data for that. So an example of a next paradigm would be to take the AI, the deep neural network from a standardized network fits everybody to an individualized, the ACT measurement that you see from interacoustic is a way of saying, James is a A, B and C, and therefore, we can at least do some adjustment to the hearing aid. But what if you could do it dynamically what if you could pick up the feedback loop from the individual, then we know AI would work much better. So are these paradigm shifts potentially ahead of us, but I don't know if there's a shot there.

I'm not sure I could add more to that. Okay. At least the room might go very quiet.

There's another question.

Christian Ryom from Danske Bank. Listening to the presentation here, it sounds like you have a lot of opportunity -- or you see a lot of potential for innovation, particularly on the software side in the years ahead? And it seems that with all of these developments that we have in AI, that the pace of innovation might be even accelerating. And then listening to you all talking about, say, the long-running develop -- the long-running parameters that you set in terms of a hardware architecture. Doesn't this acceleration in software innovation lead to a requirement for more frequent updates to the hardware platform to accommodate these new innovations? And how do you manage that from a return on investment point of view when you consider your R&D budgets?

Kim talked about it. We spent quite a big effort on implementing, should say, more leaner processes and agile ways of working, et cetera. But having said all that, I think that that's really the trick in the game. What makes it maybe also very interesting is that hardware architecture, even if we can optimize and make it faster. It cannot be as fast as software. And therefore, you need to make some of the right choices, and that's why we tried to explain to you that we also have these, you would say, longer cycles of planning, where we're trying to look ahead because we need to hit it right with some of those things that runs slower on the hardware side. And as you could tell from the presentation, you are totally right, the hardware needs to support all the software. Otherwise, we are we're nowhere. So -- but it's just not as fast as software. And those cycles will not -- they will never be the same, I don't believe.

Maybe I can just add a little bit. I mean also the type of AI research that we plan to do is very, very domain-specific. We have a lot of understanding and knowledge of our hardware platforms and the whole point is we're developing technology that we know can be deployed at some point within the types of rhythm that we can see in hardware development. As opposed to you, you see many other industries out there working with machine learning and they just got these networks that just explode and explode and explode and they're ridiculous in terms of the size, you're never going to put ChatGPT on a hearing aid. I should never say you're never going to do that. Don't copy me on that. But the point being is, I mean, this is something which requires trillions upon trillions of weights and memory to get that to work. And we are focused on very, very small subsystems in order to try and get the absolute best we can get out of the technology that we have to support our customers.

Sure. And then I think we can do the last question in this session.

Martin Parkhoi from SEB. And maybe that's a question to Soren, on the brand strategy with 3 brands based on the same platform, but 3 quite different brands. In case the conservation should one day happen in the industry, how many brands can you actually think you can operate on the same platform without interfering with each other. Can you do 2 big brands targeting the same markets, the same customers on the same platform?

I think we will take that discussion when and if we have arrived at the point. Right now, we have 3 good brands, and we are very happy for having 3 high-quality brands that serve the market, and we'll see.

I think that was it for the R&D and hearing session. So thank you so much, gentlemen. And then we will have a little bit of a shorter break, 25 minutes. And I would then again encourage you to go out and see if you haven't had the time during the lunch break, some of our colleagues that are demonstrating our innovative solutions, both on the hearing edge side and the diagnostic side and we'll be back here at 2:45 -- 2:55 for the kind of a deep dive into the distribution of hearing aids. [Break]

Good. I think the last ones are still gathering into the room, but given that we're at the time, then let's proceed to the next part of the agenda. So Ole and team spoke a lot about how we think about innovation, fuel and go innovation for future products. And now we will turn to the other side of the equation, which is effectively the distribution of hearing aids and to really set the stage before we turn it over to Jay, who will focus on North America and to Niels, who will focus on how we manage our own hearing care or retail. We have Sam, who will very quickly fly into the session here. And after that, I hand over to Jai.

Thank you very much, Peter, and welcome back. I will do it very short. It's basically just to speak to distribution, broadly speaking, hearing aids in particular. And I think it's the fundamental of the hearing aid industry that it still consists of a very diverse and also fragmented distribution system and nobody can grow big and build scale without somehow finding a way to play in all channels. You would, at the end, lose scale. But they are, of course, different in their DNA. We fundamentally see 4 different main distribution channels in the hearing aid space. There is a number of markets that are either dominating or holding a significant government business, where there is a central buyer there is a tendering process going on. And the bigger ones are the BAA in U.S. It's the National Health Service in U.K. It is the Australian government system and then the Nordics, where there is centralized purchase centralized centering. They're very different in nature. Some of them are kind of a white listing exercise where they have chosen that in the given countries, you should have access to the best from everybody. And it's a process to find the right pricing point. Either -- others have said, the key is to offer effective -- cost-effective solutions. So a tendering process that narrows the number of manufacturers that are willing to somehow compromise sometimes for the latest and greatest but really focus on efficiency and the total costs and maybe a little less on the ultimate outcome. And then we have the majority channel, the independent dispensers, private business owners having 1 store, 2 store some of them up to 10, 15, 20 in a medium-sized chain. But they ultimately you would say, negotiate every day for pricing and terms. They have typically work with 2, 3 or 4 manufacturers they can fit anybody that walk in the door and build the majority of their own traffic and run independent businesses. And then we have the last change that over quite many years by consistent investments either in new openings, acquisition in another country, parts of the country, small bolt-on or building on the existing business models. The key examples are the opticians and the big box retailers that still -- that by their other business see a lot of senior citizens. They, of course, can build scale, purchasing power, but on the other hand, also do a big part of the business themselves. Some of them operate with central warehouses, single point of delivery, EDI, integration, et cetera. But of course, price, supply consistency, and so on are typically key. And they, of course, all see themselves as the main brand and don't attribute so much value, if any, to the brands of the suppliers. That's, of course, different across the various models. And then in parallel to that, over the past 20 years, a number of the manufacturers have chosen, including Demant to, you could say, participate in that trend of consolidation and professionalizing of marketing, et cetera, and building their own distribution channel. Our best estimate on unit split, you can see below, around 25% in government, half a little less in independent, 20s round numbers, percent in large chain, and then we are down to a 10 percentage round numbers for manufacturers retail. So in the next 2 sessions, Ty will try to explain how we play the game in a U.S. North American context. And Niels will, after that, explain in more details how we play in the own retail manufacturers on retail. Yes, Ty?

Very good. Let me just start here. Thank you for the time, it's a privilege. Breakdown of my session with you today is 30 minutes. I truly hope that I have the opportunity to deliver something of value of use to you and then 15 minutes of Q&A. Having been in this industry and at Demant for a little bit just at 3.5 years. I know some of you have been covering the hearing health care industry much longer than that. So I think during the Q&A, I'm sure I'll learn something. How's that? Okay. Breakdown is we'll cover the market. We'll cover multi-brands and we'll cover multichannels. That really is the breakdown of this conversation. There are themes here. And then before I jump into this, let me just talk about how we operate at least from North America and the U.S., which is consistent globally, but I want to put a sharp point on this because these are 3 themes that will run through my entire presentation. In the U.S. and North America, we believe in the vision and mission of the Demant purpose of advancing hearing health care. That's number one. We believe in that vision and mission that aspiration and ambition. And accordingly, if you really think about the 3 -- or the slides I'm going to present, there's 3 themes. One is innovation. It is woven throughout this presentation. The second is service, and as mentioned earlier, service, service, service, it is service how do we become best partners, best provide best service, best experience to all of our customers. And then importantly, the third theme that you will hear is all about commercial excellence. That is a theme that I'll have a framework for. We'll refer to it I'm sure when we get to the Q&A, I'm going to actually -- my answers are either going to revolve around innovation, service or commercial excellence. That is the theme that is what you're going to see. Yes, let me jump into it. For today, I just talked about aspiration ambition, vision mission of advancing hearing health care. We're going to do a drill down. North America is a large geography. We're going to drill into specifically hearing aids, which is, as you can see, 60% of the North America revenue. And then importantly, as I mentioned, multibrand is critically important, and then we're going to do the channel deep dive, okay? The North American leadership team, just very, very quick specific responsibilities from a direct responsibilities for hearing aids, as Soren mentioned, indirect responsibilities for retail -- North America retail U.S. diagnostics and then importantly, enterprise IT and enterprise legal. That is -- those are systems, if you will. What is key on this slide is synergies and scale. What's important is beyond strategy, it's really important that we actually establish a firm and strong culture around collaboration, trust, teamwork, a can-do attitude, how we deliberate as a team and how we're deliberate in what we do. That is -- those are the expectations we have as we actually run the U.S. business from North America, but we're going to do a drill down in the U.S. today, yes? Hearing Aids wholesale approach. I already shortcut this for everybody because you're going to actually see it woven on this one. It is all about innovation. I've been in this space for only 3.5 years at Demant for 3.5 years. I've worked in Medtech for my 30-year career. That being said, it is a privilege and honor to be bestowed and be a steward and a shepherd of the innovation that we have to work with in region. It is an honor or privilege. If you really look at the audiology and you really look at the independent assessments, it is amazing, whether it's Oticon audiology, Philips audiology, Bernafon audiology, it is all great. And so we are stewards in shepherds of making sure we maximize these opportunities in the commercial region. What you'll actually see is we believe in the medical model, we believe in the professional. I'm sure some of you might have questions about that as we actually get in to Q&A. The professional is paramount to making sure that care is best delivered that we cannot underemphasize. The last slide that we have is the comment about OTC. Some of you are probably wondering, OTC, what's going on? We believe in professional care because hearing health care is a personalized individual journey. That is the reality. And then finally, beyond partner of choice and making sure we're always about service for customers is commercial excellence, and we'll get into a framework, not to be too academic about it, but we'll get into a framework of how we think about it today. We certainly aren't going to tip the hand too much and actually share exactly how we're doing everything, but you'll get a glimpse of just the thought process and philosophy. Yes. This is a calibration slide. This is simply highlighting that we have an underlying foundation of consistent growth. Similar to the global view, the U.S. market is -- has been consistently 4% to 6%. You can see the volume on the top graph. I'm sorry for the very, very detailed slide. The top graph is 5.2 million units. You can see the trend breakdown is commercial and breakdown is VA, 83%, 17%. And just how it is, we'll get into another slide with a little bit of a double click a little bit of a deeper dive. The simple takeaway is the underlying fundamentals of units in hearing aid users entering into the U.S. category is stable and consistent. The second bullet you'll see on the slide is really important. I don't know if everybody knows the term of baby boomer generation. Baby boom generation in the U.S. means the babies that are born after World War II, 1946 to 1964. The average age of a person acquiring hearing aids in the U.S. is 69 years old. And what does that mean? They were born in 1955. Smack dab in the middle of the baby boom generation, which pains through 2030 and beyond, it is a stable growth environment from people entering in the category. There's other, I'll call it, tailwinds boosting that. We'll talk about that in a moment, but that's the takeaway, consistent. Another view is we had an incredible category from a hearing aid unit standpoint in 2023, 10%. You'll see the breakdown here. It's similar to the numbers on the previous slide, VA is 17%, 900,000 units. You'll actually see from a, I'll call it, where managed care actually plays independent, large chains, manufacturer-owned retail. We had one question earlier specific to one of the largest chains in the U.S., but we'll see if we get to that in Q&A. This is simply just a breakdown. It's a snapshot we'll take whatever questions you have in Q&A if you got any. This is very straightforward. I think everybody knows this one, yes. Let's actually get into the U.S. hearing aid wholesale, I shortcut this for everybody already, innovation, service, commercial excellence. But I can't underemphasize in a commercial region, the role responsibility of being -- of honoring innovation is to wake up every morning being in day better, making sure we're super sharp and just everything that we're pursuing, priorities execution. It is an execution game, daily metrics and the commercial regions in a market. Sales and marketing, that's the name of the game.The service, service, service, customer excellence, commercial excellence, et cetera. Some history. This actually spans what is this -- the last decade, 2013 to 2023, 0.9 basis points per annum over that duration. Certainly, over the last few years, you can actually see some movement. I would say that our aspiration is always to outpace market growth. And so that is our aspiration. Just philosophically, how I grew up relative to how it was trained in my career. Top line has got to grow faster than the bottom line, and that is how a business is run. And so it is about being super sharp about innovation, customer experience, service excellence, commercial excellence, et cetera. Yes. We'll see if we have any questions about that one. This is the academic slide. I didn't -- look, I forward you a little bit. So this is from one of the large strategy consulting firms. There's three of them. You can pick one. They're all very, very similar. The purpose of showing this slide is there is a methodology of how you run a commercial region, how you run a country. I'm not saying that this is what we do because this is illustrative because if we actually shared everything, it's just out in the world to -- for everybody to know. But the highlights of this is over the past 3 years, specifically, segmentation and targeting is a -- has been a primary focus for us. Left to right, you can actually see segmentation targeting how we resource our opportunities, how we [indiscernible] and prioritize what we actually focus on what we go after. Certainly, across the top, it's priorities, priorities, priorities fewer, bigger. Let me just pause there. It can't be everything. We can't be everything to everyone. Fewer, bigger, those big opportunities and certainly, how we hire, how we build teams, et cetera. Middle pillar over to the right, you'll see pricing strategy and models as well as, I'll call it, contract management. From a pricing perspective, I'll simply say this, Ole and team talked about innovation to honor that innovation, certainly, what do high-quality innovative brands do? They have price discipline. They leverage multibrands, they leverage multichannels. That is just what high-quality companies and innovation. That's what we do. And importantly, from a customer care standpoint, how we respond to customers and their questions, both consumers as well as big box customers and the individual independent really, really important. Illustrative, a model, how we think about it. Finally, multi-brand slide. Every brand has a place, Oticon, we love Oticon, but again, Demant is a steward and shepherd of all things from a great audiology, great innovation perspective. We're very, very proud of Oticon. We're very proud of the Philips brand. And then we are launching Bernafon into the U.S. market this upcoming Q2 through the rest of the year as well as in 2025. Bernafon, what I'll talk about is exclusive for our independent channel managed care TPAs for Medicare Advantage. That's where our -- I'll call it, our market announcements have been made. I'm sure some of you might have questions about that. Bernafon is an amazing platform, and we're proud of it. Deep dives. Independence of 4 -- 3, 4 slides on independents. We have a focus on the independent channel, both from an innovation, business growth, but importantly, from a segmentation and strategy perspective. I will drill down. There's a couple of slides in here that get a little bit, I won't say complex, but there are maps. And so I'm going to talk a little bit slower, you'll see in a couple of them. That being said, a double click on segmentation consistent with commercial excellence, commercial execution. Importantly, from a segmentation and targeting standpoint, this is not rocket science. For those of you who've been around the industry, there are consulting firms that actually sell analytics, they sell sales force effectiveness metrics. They sell their wares, they sell their work. It's all about segmentation. This happens to be a 2x2 on potential in terms of revenue and share of wallet. We have finite resources with which we actually allocate to going to market. We just want to make sure that we're serving our existing customers in the best way possible, from a retention standpoint and then have a fair balance on competitive acquisition. That is the balance of independent execution in that independent private cash pay channel. It is about talent development, focusing on making sure we're super sharp every day. That is what we strive for. Let me get into 2 breakdowns, actually, 3 slides on independent channels. The first is a setup slide. This is the cash pay private business model. The one word I'm going to use across all 3 slides is every stakeholder you see on this slide and the next slide has a choice. It is all about choices. You can choose. I'll let that land a little bit. In this case, when given the time best care can be provided by the independent audiologists and audiologist or hearing specialists when afforded the time to provide the counseling the, I'll call it, return office visit appointment, you can do the math, you can do the stats, you can do the questions, you can fill the surveys. How many times does a consumer go back to the audiologists or hearing instrument specialists to actually dial in that individual care. It's usually around 2 to 3 and then long-term follow-up services. So in this case, the provider, you'll actually see it illustrated and I just want you to anchor to the icons because the next one you're going to -- I'm going to click and you're going to say, what is that? Well, what is that? But I'll take the time to orient into the slide also. Oticon has a great relationship with the -- in the U.S. market, you can look it up. It is over 13,000 audiologists in the U.S. market and over 10,000 hearing instrument specialists in the U.S. market. And they're always moving around in their stores and there's places to call and there's movement in that space, which is why segmentation targeting on the previous slide is always an evolution. But for this one, the hearing instrument specialists or audiologist professional will provide services, as you can actually see, and then the private cash pay transacts. I'm only doing this because we're going to go to this next slide, and then hence, you say, what just happened? Everything shifted a little bit. Yes, I see some smiles. Everything shifted a little bit. At the highest level, this is a choice. The consumer has a choice if they access cash pay or if they go down the Medicare Advantage managed care path, you could spend 2, 3 days, there are people that spend their entire career studying U.S. government insurance. It is a fragmented hodge-podge, I'm not trying to disparage my country and my citizenry, but it is just -- it is 10 gig complex. In this model, a U.S. person or citizen over 65 years of old years of age can choose regular traditional Medicare, which has its pros and cons or they can choose managed care Medicare Advantage. And the real difference between the 2 is for Medicare Advantage, you actually have all the Medicare services bundled into one. I'm just going to -- it's called Part C but it actually has Part A, Part B, Part D bundled into it, which is hospital, doctor, prescription, drugs and a bunch of other stuff. But Medicare Advantage is really just Part C. And then if you choose Medicare, you have to click down on the cafeteria menu just making sure you pick and pay. Everything is payment. There is no universal health insurance, as you know, in the U.S. There's none. And so you got to pay for anything that you actually enter into. There is an advent of managed care TPA companies that have entered in, that are benefits administrators to actually take the paperwork burden off of administrating they work with insurance companies to actually process this Medicare Advantage managed care insurance. And then hence, there's a different contracting process, there's a different payment process. But really, I'll call it, the demand generation has shifted into the arms of managed care, Medicare Advantage. They actually have the lives, they actually provide the formulary, they actually provide the promotion. They say, go get your hearing aids, here's what's on formulary. They actually go into those providers that actually choose to dispense Medicare Advantage. I'm being very careful on this one. I'll give some more commentary about Medicare Advantage on the next slide. We'll probably come back to that one. This one is a similar but different view. At a macro level, we actually have the aspiration, as I mentioned earlier, from a multi-brand strategy to provide Bernafon as an exclusive product into managed care TPAs. That's new. That's new for us. And so that's just launching, and that's rolling out. And then some of you actually know managed care, Medicare Advantage TPA volume continues to grow. Now the question that you probably have is -- when does it growth stop? Where does growth go? How does this trend in the future? That is not our place to say other than to think about it at a -- I'll call it a -- call it macro level. Big picture level from a managed care, Medicare advantage standpoint, I really think it's great for the hearing health care category. I think it's great because it drives awareness. it drives destigmatizes the sort of reputation of hearing health care in the U.S. And it actually feeds consumers that otherwise might not be interested in hearing aids into the channel. That being said, there is a counter-prevailing phenomenon going on with Medicare Advantage, which is in Medicare, while it's a little bit more complex to choose what you need off of it, you have full access to whatever hospital and whatever doctor you want. In managed care, Medicare Advantage, think about those words, managed care means the care is managed meaning the money is managed. Which means if you're a Medicare patient, you have access to 100 doctors in Medicare Advantage in general, depending on what state you have access to about 47 of those doctors because 53 of those doctors don't want to service Medicare Advantage patients. Simple insight to that is Medicare Advantage because it managed, the money is managed, a lot of Medicare Advantage companies actually delay or deny care or payment. And so a lot of doctors and hospitals really struggle with that downstream. Consumers love Medicare Advantage because it's all bundled, the provider network is mixed. That's all I'll say. Again, big pro is awareness. Medicare Advantage has its pros and cons. We'll leave it at that, okay. Welcome for any questions after. That is the independent channel. We will shift into the VA. The VA, 2 slides on the VA. One is we are entering into another 5-year cycle for contracting. So no surprise to anybody here. The solicitation RFP cycle really is in Q2. We expect to actually receive that RFP in May. We plan to submit our bid and final decisions are made in late Q3, September plus or minus a month. That is the process for the next 5-year cycle. That being said, the VA believes in and rewards best technology for the U.S. military veterans. It's a wonderful thing. It is a consistent channel that continues to grow and 1,400 audiologists, over 500 sites and audiologists are empowered to choose for the veteran and work with the veteran. That last bullet is the setup for the next slide, meaning that the audiologists chooses and selects, that means everybody makes their own decision. And so from a segmentation targeting commercial excellence perspective, it's not a commercial view. I don't -- we don't want to actually be disrespectful from that standpoint. This really is a -- how do we understand what those large sites of care are. We know how many per practice audiologists -- how audiologists are staffed we actually staff our resources accordingly to make sure we provide best service. The VA is about service, service, service. That is the VA. We have to be perfect in the VA. It is a high-efficiency throughput machine, and we actually know our place, we actually want to service the VA with the best services mindset. That is really, really important. It is -- I don't want to say it's less commercial, but it is actually one of service and servitude, relative to making sure we honor the vision and mission of the audiologists that work for the military events. Yes? And large retail chains, there's a beautiful picture of the Philips HearLink 9050 product. We actually -- this is more of a global slide from how we approach it. Certainly, it is all about great innovation. In this case in the U.S. We maximize our Philips platform. We have a consistent focus if the VA is about service, service, service, then Costco is about best partner, best partner, best partner because of the question came up earlier. How do we actually just make sure we're the best partner for the largest chains in place? And then how do we develop collaborative demand growth strategies? Okay. And then finally, from an over-the-counter hearing aid penetration standpoint, this is just a sort of core to the, I'll call it, the American psyche because hearing health care in the U.S. is individualized. There is a stigma. There is an analog that we sometimes talk about that we wish people would put on their Christmas list or their holiday list. I wish we can get a pair, I wish I could get a pair of hearing aids, but that's not quite -- we're not quite there at that cultural moment yet. Just there is that stigma, if you will, that exists. And the reality is at least in the U.S., I can't comment beyond that. Care is desired a level of services desired. That's what it is. And so there's been minimal penetration and takeoff for OTC. I won't comment more on that other than the U.S. has its own dynamics relative to how care is sought after and received. It is an individualized practice and process. Yes. Full circle, and then we can get to Q&A. I actually went a little fast. So I apologize for that. This philosophy of hearing aid wholesale is all that innovation, is all about service. It is all about the experience is being perfect waking up every day and making sure that we pursue that. And importantly, it's all about commercial excellence and what we lean into and how we grow the business. Our aspiration is certainly to grow the business in terms of unit volume, in terms of sales, in terms of market share in both the value and volume terms as well as profitability. So with that, we are at Q&A.

Thank you so much, Ty. We'll also have Søren on stage. And yes, as you said, that went a little bit faster, but then we have a little bit more room for Q&A. I am just looking to see if we have a colleague in the room with a microphone. And I think we'll start with Hugo here in the front --

Hugo Solvet, BNP Paribas. I have two questions for you, please. First, can you come back on the importance of having one brand exclusively for one for the managed care. I'm not sure I totally grasped the advantages of that. So if you could come back. And second, thank you for the useful chart on the VA clinics by number of audiologists. If you were to give more details on your market share. Would you say that you're probably stronger with larger clinics with smaller ones? Or has it evolved in the past?

Second one first, if that's okay. We strive to serve all audiologists in the best way possible. And so just -- look, we have strengths in small clinics. We have strengths in big clinics. Again, I can only emphasize and over and emphasize that VA audiologists are one by one by one. Even if they're in a big clinic, you still got to influence that one single VA audiologist. And so it's -- I don't mean it's a big clinic, small clinic thing. It really is a one-to-one conversation that is unique to the market. Getting to your first question for Bernafon and -- at the end of February, we announced that Bernafon would be launched in the U.S. market exclusively for managed care, Medicare Advantage TPAs. And not launched anywhere else, meaning we're not launching the independent private cash. We're not launching it in the VA. We're not launching it in large chains. We're not launching it in other formats. It is exclusively for managed care, Medicare Advantage TPA contracts. I hope that helps.

Maybe just to supplement. Don't get it wrong. It's not that Oticon is not available in managed care. We have just said that -- the latest technology will not be introduced there. So it's not that they are not Oticon products on formula. So this is a multi-brand approach that we also apply to managed care. But we have felt we need a broader choice. We need more opportunities to make sure we can also support that channel, which is also not a consistent and homogeneous customer group. They have different expectations for level of service, level of pricing, et cetera. And therefore, we had to expand on our opportunities to address all the different segments there. Our mission is still to service and gain share also in that channel.

And then Veronika here?

I got past the microphone. If I skipped ahead of you. Veronika Dubajova from Citi. 3 questions, actually, if I can. The first one is just on the VA contract. What are your expectations for the RFP in terms of pricing? Do you expect OTC players to be included? And then just maybe discuss your ambition for where you think the VA market share should go when we fast forward, especially once you launch intent?

Q&A first for whether OTC will make it on the VA contracts? We don't believe so because the VA actually only chooses the best and they believe in the audiologists and care and follow-up and long-term care their military veterans -- and so just -- we don't believe OTC has a place there, but that's up to the VA side, the solicitation process. We won't see the final until September plus or minus a month, but there early signals are they just simply want the best. And the best is premium technology from said manufacturer.

Pricing for the new RFP.

Yes, I purposely avoided that question. I actually just pretended I didn't hear it. There'll be more to follow that I believe is public information after the dust settles. We are working that out. That being said, I'll talk about commercial excellence in that framework when it was pricing and pricing discipline. We will price appropriately for the VA channel. How is that?

And then can I ask the question on managed care. Obviously, it has become a huge part of the market. Can you maybe talk about whether your market share, your over-indexing or under-indexing to the channel? And then I guess, I completely appreciate your decision to just launch Bernafon and not make intent available. But obviously, you will have some fitters who know Oticon but don't know Bernafon yet. So how are you thinking about navigating that transition? And obviously, there are some rumors large managed care provider who might not be happy with you at the moment. So I don't know if you can comment on that as well, that would be helpful.

Thank you for the question. It's consistent with what Soren said. It goes to the question of why Bernafon? I actually was a little bit veiled in Oticon intent. The same day, we announced Bernafon exclusive for the TPAs to actually put some color commentary. On your question is we actually announced Oticon intent would not be available for managed care TPAs, meaning we actually said latest innovations would be only available for the independent provider. That's what we said. And your second part of the question is we actually highly respect United Healthcare, United Healthcare and their hearing TPA, more to follow on that. We just actually try to be the best partner from a service and partnership standpoint. That being said, if you think about without saying too much, if you think about the commercial excellence slide I had, and the 2 words I used is we do deliberate, meaning we actually talk very rigorously. Just like a family dinner table conversation, we actually have -- we don't throw food at each other, but we actually do hash things out. We deliberate. And when we go to market, we're very deliberate. And again, we actually truly respect United Healthcare and we look to work with them as a partner for the future. And as Soren said, Oticon wheel, Oticon More, Oticon is still on contract, accessible, et cetera. It is just the latest innovation that we've made certain decisions around it.

Maybe if I can just supplement the 2 seconds. It's a little special in U.S. that we have not had all our 3 brands in play. We have many examples around the world where the latest technology is available across all channels, but a little different from brand to brand. And it is, you would say, to some extent, the normalization of our strategy in U.S. that for many years have, to some extent, been centered around Oticon and Philips. And now we also want to bring the great innovations we have in Bernafon into the marketplace. And yes, there seems to be good opportunities, generally speaking. -- in meeting the expectations of TPAs for quality, price, service and that's how we differentiate our services. Don't just look at this as a product element. This is really the complete package. You illustrate the difference between VA independent and also TPAs, that's much transactional, compliance, et cetera. and we feel we serve the customer in a better way by offering our Bernafon services to that channel. And that has been successful in a number of other markets in focusing on that channel, special needs. I think all of it is about really understanding what is it that drives the business for that particular channel and then set up a team, set up a portfolio that address that.

All right. Maybe just -- we'll take the VA part just to allow others -- people to ask questions. I think we haven't run right over here for the sake of time. Over there.

Martin from Nordea. Maybe actually just a follow-up to the managed care question, I would just like to hear, first of all, the thank you for the market share slide in general, very impressive. I guess in managed care, you have seen the opposite market share direction. And now you make this move in managed care, taking some technology out for them in favor of independence. How do you see the end game here for Demant? Is it -- will it be that you will always just like 1 platform, the latest platform in the technology. Is that sort of how we should think about it? And yes.

Yes. And again, I would almost repeat myself. We don't hold back technology from anybody in the marketplace. That's not a good strategy. but we play our multi-brand strategy that we invest in developing both from an R&D point of view, a sales and marketing point of view because we feel it's the best way to make sure we offer the best services to all customers. And they are very different in nature. What drives their business and their business model. And having one do everything has turned out never to be the best solution. So it is not a known to anybody. It is at holding back things. it is tailoring our services, our product portfolio to best fit the needs of each individual channel. And that, I think, is a compelling strategy going forward. And I'm sure we proper dialogue and back to your question on training. Yes, right now, that brand is not known. But I also know being a long time in this industry that we have seen a number of providers taking aboard a new brand in a very short time and very quickly become very efficient. So I definitely think we can do the proper training, the proper introduction needed to successfully sell all our brands in the U.S. market, which we today have basically not done. We have only offered Philips and Oticon and now we will also introduce the Bernafon brand.

Just one quick follow-up maybe. You have -- if we do a quick math on the volume slide that you have, managed care is around 20% of the North American and the U.S. market, I think. How is that for demand in terms of -- in [ comparison ] is it similar? Or is it significantly smaller than the 20% of volumes?

No. We are under-indexed, and we would like to grow in that channel. There is one element, which is a little special in the channel that is that one of our competitors own a major TPA. So I'm frankly speaking, not naive, I don't think we would ever be the biggest in that business because there is -- it's another way of operating that somehow limits the access. So I think there are good explanations why we are slightly under indexed.

And then we'll move down here. [Operator Instructions]

Sorry, Peter, just one complement is if you really take a setback and look at the Bernafon portfolio that we're launching, and this goes to the transition training question also, the Bernafon Encanta 300, 200 platform is absolutely amazing. It is best-in-class technology that we'll launch in the U.S. market. It is a brand I'd be pleased if my mother was on, it'd be a brand that I'd please if -- be pleased if your mother was on. Bernafon Encanta is an amazing platform. And when I started with earlier when I said, we're all about innovation service and customer excellence, commercial excellence, I wasn't kidding. The underlying tone to that answer was Bernafon and everything we do from a Demant standpoint in audiology, Oticon is great, Bernafon is great, Philips is great. And so from that transition standpoint of how independent practices pick up and do training, we've had hundreds of independent professionals sign up for training on Bernafon because we will have a virtual launch. And from a segmentation standpoint, you can imagine we will call on those practices where we actually want and need the adoption and pick up to make sure that it's, I'll call it, on time.

Down here?

Martin Parkhøi, SEB. It's back to the managed care again and maybe indirectly independent because you're quite open -- openness about not including who's going to intend in managed care. Is that also for strategic reasons? Because I guess -- my understanding is also that there's a lot of independents which are sick and tired of TPAs also taking a big part of that business. So are there something strategic in this also to Sweden, the independent a bit saying that we are doing this special view, and we know you are not that happy about the TPAs. And maybe into that, at the same time, where we also see 2 of your competitors we have quality issues with the independent supplier to the independents. So you're basically now going for the kill.

I think you are slightly exaggerating a little bit the competitive situation in the U.S. market, Martin. But thank you for the color. We are trying to service all channels in the best possible way. And we don't determine how the channels develop and grow. What we try to do is apply our multi-brand strategy as we have done all around the world in the best possible way, of course, to -- in the best possible we satisfy the need of all the customers. We only do good and great products. We try to service all the customers in line with their needs and that I hope will lead to the best outcome for Demant as well as our customers.

Down here?

It's Oliver Metzger from ODDO BHF. So from a U.S. market share perspective, you've described over the last 10 years, every year, 90 basis points market share gain. There are no really low-hanging fruits, but if you want to become the #1 in the U.S. over say, multiple years, where do you see the strongest group basically contributing to this objective.

You could say where things are most disaligned between the different competitors is obviously in the VA channel. So it is an example of a channel that has a lot of focus from us to hopefully get in a better balance and closer to, I would say, the rest of the market, market share for Demant. So that's an example.

I think we have time for one more question. Niels in the front.

Niels Granholm-Leth from Carnegie Bank. How do you see the TPA industry developing going forward a few years ago, some of our -- [indiscernible] business to United arguing that the insurance industry would eventually take over the TPA business. Do you foresee this happening in the years to come?

I would answer that question with the word I used of choice. Meaning that providers have a choice -- that goes to Martin Parkhoi's comment, the same phenomenon with independent audiologists and hearing specialists is playing out with U.S. hospitals and U.S. physicians, et cetera. Medicare Advantage is a challenge because of the denial or delay of care or payment. That is not specific to hearing healthcare, that's all over healthcare because managed care means managing the money. That's that. How we actually think about working with the TPAs is we just try to be the best partner, offer the best technology, best partner, best service, and we actually go from there.

You have no plans to take over any of the TPAs. I know you have a small footprint in that market, but you don't foresee to make further inroads into the TPA industry.

We have a small TPA and just -- not much to say there. Except for, we're being strategic and disciplined about it.

Good. Thank you so much Ty, Søren.

Thank you.

Thank you.

And I will just very swiftly run up to the slide we were at before. I think I am here. And then I hope the agenda will pop up, which it does, and we will go from the hearing aid wholesale side over to Niels Wagner, who is the President of our Hearing Care business of our own retailing, and I will just leave the floor to you. So please join me on stage for the next presentation.

Thank you. Yes, hello, everyone. I'll share with you how we are continuing our Hearing Care growth journey. And I can see and remember, a number of you from 3 years ago and I can then say that there will be new elements. We'll talk about China, we'll talk about Germany, but there will also be a lot of elements, which you can recognize from 3 years ago. And therefore, also the theme is continuing our growth journey into Hearing Care. So we'll talk about that journey, and we'll talk about the progress we have made over especially in the last 3 years and particularly also how we approach, of course, the market. What is our strategy in this space? Why do we believe we can win in this space? And why are we also confident that, that will lead to continued high growth over the coming years. And therefore, also specifically at the end, putting some direction on what you can expect in the coming years. So it is today, 42% of group revenues. So that is a bit more than it was 3 years ago. We have consolidated, as you know, the business is very much built on acquisitions as well as greenfield organic growth, but a lot of acquisitions have happened also over the last 3 years. However, we are now consolidated with one brand identity in basically all markets, maybe except for China. And I'll come back to details about China and why we are still sort of safe guarding so to speak, our presence in China and looking at that slightly different than in the other markets. But altogether, a really consolidated business today with a global organization, with a global leadership as well as strong market positions. And this has been the growth journey. So as we heard in the beginning, it started initially in year 2000, but it was not until late '07, '08, '09 that consolidation really picked up in the industry that especially AudioNova and Amplifon was acquiring a lot of good Oticon customers. They were asking for either significant price concessions to us or they were simply excluding us from their product portfolios, resulting in our Oticon customers not being able to be serviced, supported, upgrading to new technologies in some of the locations they used to frequent, right. So that was the reason that in around 2010, we decided to have a more decisive consolidation strategy rather than seeing our good customers being sold to competitors or large chains, we would rather consolidate ourself and expand and build our own Hearing Care network. So that's the journey we've been on. And today, this is the map, right. So we are present today basically in all major hearing care markets around the world. So it's -- as you know, it's North America, it's Europe and then Asia Pacific, specifically, China and Japan, Australia, New Zealand. This map basically covers also, you could say, the 25 largest hearing care -- market hearing aids markets around the world, at least from a value perspective. And we are covering that with our presence, 11,000 employees based on a lot of acquisitions, as I said. So what is our strategy? Now based on this strong market position around the world. The strategy is very much formed around 3 key characteristics for our industry. The very famous pyramid of hearing loss, right, where you have for mild to moderate to profound and sort of age-related hearing loss is the focus of our businesses, is the predominant hearing loss we see around the world. And it comes with aging that you're hearing loss deteriorates and therefore, you can sort of say that with age, you move from mild to moderate and to profound. And as you can see, the penetration, as we talked about earlier, increases as you age as the hearing loss deteriorates. But due to this, when you have a mild hearing loss because you are in denial, because hearing loss is age related, it is associated with getting older. Therefore, also when the hearing loss is only mild, you have a lot of skepticism. You have a lot of excuses. You have a lot of reasons for not doing something today, but postponing until tomorrow. And that's why we see in this industry quite a wide sales model that narrows in a lot until people accept and decide to wear hearing aids. So a lot of efforts in the industry is centered around creating demand, then capturing that demand and getting hold of people's names, telephones, emails, and then converting that demand firstly into a visit to a hearing clinic, but having a hearing test and finally, converting that into a hearing aid purchase and adapting to a happy hearing aid user. And the real core of that whole process is the physical location. It's the Hearing Care clinic with the professional audiologist, which have often 5 years qualification as well as a front office coordinator. And when you look at the cost structure in our industry, this is by far, the biggest cost component in the whole industry. So the audiologist salary, most importantly, but also the coordinator handling the front office in the clinics. That also means that is the scarce resource. It's both the scarce resource because there's only so many qualified in every market, but also because it's a big cost component. So it's the component we need to make sure we get the most out of in order to help as many people as possible. So if we then dive deep into, so what does this mean for our business. Then we have made a little example for you here, which has a lot of data on it. So you can go back with the slide. But what it's supposed to illustrate is the complexity of dealing with an individual who is often -- most often in denial and a product that also takes a certain level of handling and service to be happy with, right? So what I have to the far left here is how many Facebook exposures does it take at the right hand to create one sale to a customer, right? Facebook being one of the most prevalent marketing channels in our industry today is extremely useful because you know quite a bit about the consumer, you know a little bit about the age, their behaviors, their preferences, and therefore, you can actually target your marketing quite well using Facebook. So what it takes in our industry based on real data here is 50,000 Facebook exposures in order to get 500 people who actually click and are interested in an advertisement for Oticon Intent for example. Then out of those 500 who click, then only 8 of them will typically, on average, actually be willing to submit a form as we say, where you fill out phone number, e-mail address and name. We will then get in contact with them more or less immediately, and then typically, as you can see up here, some of them, 5%, 10% are not ready to book an appointment, but most of them are actually willing at that point to book an appointment, but it drops down to 7 individuals, right? And then also time goes because that appointment may be 3, 4, 5, 6 days out. And before then, you will have regrets, you will have second thoughts. You will realize that maybe it's still too early to admit. I'm getting older, right? So it will drop to 5 people actually showing up in the clinic. Out of those, you will be able to convince 4 of them to have a hearing test. Some of them will not have a hearing loss above that certain limit where you would typically be able to successfully feed hearing aids that can help them. So a drop off there also down to 3 and then only typically 1 out of 3, 1.3 out of 3 will be willing to trial hearing aids at home and at the end, purchase hearing aid. So this kind of tells you what is involved. This kind of tells you the complexity of the business. It also confirms why it is still not that easy for OTC to compete in this space because you still need to do the promotion to attract the consumer for a product that they're not particularly motivated to start using. And it also shows why there are significant costs involved in successfully helping people with better hearing. So what is it consumers are looking for when they then finally decide where to go to be fitted with hearing aids. So we've done a survey across a large number of our markets. And the value stick here kind of shows you up to the top, what is the most important priority for a consumer. And at the bottom, what is less important, right? And the 3 key elements that we hear across the world, very uniform response actually is they are looking -- when they finally took the decision, they're looking for the most professional and skilled staff. They are looking for personal care with individual counseling, and they are looking for a place where they can be assured that whenever they have issues, problems, questions, they can come back for service and support. This is the general picture from most hearing-impaired people around the world. So therefore, the position of us in Hearing Care is also very much centered around expertise. Your hearing is -- our expertise is our payoff to the consumer, and we are sort of centering our offering and our position in the market about being the experts, delivering state-of-the-art solutions, most importantly, from Oticon, delivering personalized, individualized care and having an extensive level of support and after care. So you can also sort of recognize where this might actually also allow us to differentiate against some of the competitors out there, of course, very clearly differentiating against OTC, right, but also some other maybe more price competitive players out there. You can also see that there's probably a number of players that have chosen that kind of position where you are really competing for quality rather than price. This is also where most of the hearing impaired users are present. So our strategy, as I said, very much based on 2 key elements. The role of a professional, we strongly believe the professional is the key to unlock the denial and successfully fit people with a personalized hearing solution and then a growth ambition because also presence, awareness drives growth and penetration in the industry. So we want to also build our business based on growing our network and presence. And then within those 2 assumptions, it's all about the people, it's all about the audiologist, the training, the expertise and their skills in supporting the hearing impaired. And then it's, of course, about attracting the hearing impaired person to our clinics. So it's about the brand recognition, the experience they give, the referrals they give to others so that we become the preferred choice and the place you recommend others to go to. And then as we are a very transactional business, we are a retailer. It is consumers coming in every hour then operational excellence, the diligence, the discipline around managing your schedule, filling your schedule, always looking for gaps and openings where you can have even more people seen and helped is a key element in our strategy. But really, these 3 elements and then, of course, supported by our hearing healthcare assets. And we have some very operational measures, revenue growth being the ultimate and then, of course, a number of other sub elements to that, but then also on a more strategic avenue, looking into how are we growing the attraction towards our consumers as well as how are we making sure we are the most attractive place to work, especially for audiologists but in general. And on that line, I wanted to share just a few elements even though on the one hand, it also becomes, of course, very company-specific and at the other end, also becomes very market-specific. So here, I've just shared some of the elements we are looking at in order to make sure we are attractive for consumers today and in the long term. It all starts with brand awareness. So it all starts with being known brand once the consumer decides to do something. When they decide to do something, it's not enough to be known, you also need to be a place that they have good feelings about, so brand consideration is key. And then, of course, finally, making sure that when they come in, they have a great experience, that can be referred to others. So what I wanted to illustrate here is where are we on this journey? The place we are as a fairly new business 15 years old or so is that we have a very good brand satisfaction, we have a very high customer satisfaction measured typically by an NPS score. We have a fairly high, I would say medium here, a fairly high customer consideration, brand consideration. So people are looking on us and based on what they hear and see and experience as a place they would like to go to once they decide and where we still have opportunities to grow is our brand awareness because we are a fairly new brand, we have not been around for 10, 20 years in a lot of markets. And as I said, this is then an average of average, right? So if a deep dive on France, we actually have an 80% brand awareness because the business have been around for so many years there. Whereas in the U.S. market, where we are both somewhat smaller, and a lot more new in the market. We have a brand awareness around 8. So significant differences between the markets. But overall, this is where our big potential is in the group. And then to the employees who needs to deliver that brand experience. So here, I can also say that we actually have a very strong position in attracting especially audiologists to our group. So we are an employer based on the way we lead people, based on the values of our business, based on also being a hearing healthcare company, I believe, we are a place that audiologists likes to work. We are measuring also when they work here. So to what degree are they motivated, engaged, really to do their best every day on the job. And here, I've listed it as medium. I think there's still potential for having an even more energized and engaged organization. And that should hopefully also result in retention. It is an industry where we are all competing for the same audiologists. We're also, of course, competing with other industries for other positions and therefore, it's key focus for us to continue to make sure that we are a very attractive place to work. There's a number of opportunities also here for improving, but we've actually seen the last 2 years, a nice improvement in employee retention within our group. So third part of the presentation here, going to sort of the way forward. So the way we operate our group, it is a B2C business. So we need to be close to the consumer. We need to be able to react. We have different regulations, reimbursement systems, even marketing law is different in different markets. So we have fairly significant organizations locally with high level of empowerment. However, at the same time, of course, also we have become a global player, 1 of the 3 leading players in the space. So there is a number of best practices that have been developed, that can be replicated across markets. Most importantly, of course, is also clear we can only operate and we only want to operate on one IT system. We also want to make sure that the data points we are collecting, the management reporting and the KPIs, et cetera, a share around the world, so we can benchmark, compare and also, of course, lead the business by that. And then increasingly also, we are seeing scale benefits in producing global content, having harmonized processes, best practices in terms of marketing, sales and HR around the world. So increasingly becoming global muscle while at the same time, retaining the local flexibility. And if we then look at the market, it's still a portfolio of different businesses we hold. We have expanded at different speeds in different markets. As I said, we are present now in the -- around 20 to 25 key markets around the world, but our route into each of these markets have been different. So in some, like in France, we were able to acquire one of the leading players. In others, it has been more like a roll-up of many smaller players like in the U.S. and then in yet others our entry have been fairly recent. So as you can see here, and we mentioned in the beginning, right, China, Germany, and Belgium are for us, new markets that sort of completes our global market presence. And what the map up here is supposed to illustrate is that there is a fairly good correlation between being a market leader, #1 or #2 in the market and the profit margins, the profitability that you can actually derive from the business. As you get scale and size, you get brand awareness. You also typically can improve your services, you can improve the attractiveness towards audiologist, et cetera, and you become also one of the more profitable players in the space. So this map sort of also indicates our opportunities going forward. So we have Germany as a new market, I'll get back to. But also in Spain, if you recognize the picture from a few years ago, we were a bit further to the left and further down, but we are building our position by a number of greenfield openings, a few acquisitions, and we are thereby actually growing our profit margins also in Spain and to the sort of more right top corner, it's more about leveraging our strong positions by continuing to grow and, therefore, add some scale in the operation. So just a summary on some of the opportunities. There was a question about a little earlier, right? So France and Canada is clearly a market where we have a very strong position. We probably also have a fairly good scale in things, but we can now leverage the scale by adding locations. And U.S., Australia, U.K. is one where we still think there are significant expansion potential for market share. And then China, we'll get back to. Belgium, actually, we've also taken a nice leap forward, consolidating our market space by an acquisition. And if it's not acquisitions, it's organic growth, driven by basically 3 core elements. So the number of hearing care professionals you have employed, the number of hearing test appointments that each of them can see on any given day or month. And then, of course, your productivity as a Hearing Care professional impacted by conversion rates, et cetera, is key to organic growth. And and we balance both, and we see growth opportunities in both. And by having both avenues, we think we can sustain a higher total growth. So quickly over to 2 specific market focus. So China, firstly. So we entered into China a little less than 2 years ago, but the acquisition of Sheng Wang. It was very new. It's 2 years apart, a lot have happened in China. We have learned a lot more about our business. But I would say that we are, in general, very pleased with that acquisition. It confirms that it was the right thing to do. I'll go back to some of the elements that we have learned that confirms this position. It is very clear for us that a strong platform with also a business model that has originated out of the Chinese market is the strongest platform for growth in China. And Sheng Wang is a leading player in China. They are the exclusive distributor of Philips in China, which also is an important element of our growth plans. So some of the things we have learned is that China is different. So of course, most importantly, we all know that most technologies are different in China especially on also marketing channels, media channels, et cetera, are different. So in China, it is Baidu and not Amazon. In China, it's WeChat, and not Facebook or WhatsApp. So most of the technologies and the challenge we are communicating with customers in China are very different than in Europe. Also the way of communicating in China is very different. And most importantly, the way you attract new customers are different in China. So most of the digital channels in China are very e-commerce oriented. So not so much marketing oriented. So while we actually have a significant presence in these channels, most of the people you get in contact with are looking for online purchases. They have a significantly lower price point expectation than a typical hearing care professional can sell for. So not so much the professional hearing care and more OTC style. And that's the reason that why that you see here on the graph that most of our business in China comes from what we call outreach, walk-ins, referrals from other customers. So while up here, it even shows that 30% is coming from digital channels, actually, that 30% converts into less than 30% of sales because the price point, expectation of the consumer is different in these kind of channels. So significantly different than the marketing challenge that we know in rest of the world where we have this mix of TV, print, direct mail, et cetera, et cetera. So that's a very important difference in China. Then also there's not the same culture of booking an appointment. So it's very much a walk by nature of business. You don't book an appointment for dentists, hair dressers, even hospitals in many cases in China, at least that's sort of the general picture. The difference, of course. And also, in our business, most of the customers we see are coming by. Of course, after careful consideration, knowing the business in the area, the physical location, where it is, et cetera. And then there's this filial piety sort of culture in China where because the hearing-impaired people were born and raised in a culture where China was not as developed as today. There's not the same tradition of spending on health care. So most of our customers, hearing services are paid by their children. So the son or the daughter they are also most often coming for the hearing care appointments, which also, of course, makes the business model somewhat different in China. The demographics, we already spoke to, it's the numbers of hearing impaired are 70 plus in the coming years in China. That's a very high number. So if we can just drive a little bit of penetration, then there's a strong potential. And then finally, here on Germany. So we entered Germany also 18 months back and have done a number of acquisitions. So now operating around 200 stores in Germany. But as you see on the picture here, number 1, 2 and 3 are significantly larger than us. So one, we have a task ahead of us. The opportunity is clearly there. Germany is probably the most fragmented hearing care market in Europe. So around 2/3 are still controlled by independents where on average, it's more like 40% to 50% in other European markets, right? So strong opportunity. And we're pleased to report that we have actually had a very good success with the businesses we have acquired, with applying our strategies into to a new German business setup. So fairly confident on the future here that we believe we can drive strong, organic as well as acquisitive growth in the space and that we have a number of key strategic initiatives that can support sort of driving future customer engagement and the important growth in attracting new customers as well as driving further employee engagement to make sure we have the most attractive place to work, especially for hearing care professionals. So that's very much our plan going forward. So look forward to hearing your questions.

Very nice. Thank you so much, Niels. Maybe I can take the other one and we'll move to Q&A for the specific hearing care session. Maybe we'll start with Julien over here. And pleased to try your best to limit yourself to one question.

Okay, I will. Julien Ouaddour, Bank of America. So my only question would be, can you maybe comment about the margin profile you have in retail? I think you probably around half the size of the global market leader in retail, how far or how close are you from this [ construct ]. And a quick follow-up on that -- still on the same topic. But China, you have 600 stores at the moment. You're -- I mean like a leader in this market, as we have seen on the chart but it's -- I mean, highly dilutive to margin, how many stores do you need to get closer to that sort of average margin of the retail business?

Yes. So you're right. We're around half the size, I think you said, of the #1 player and about similar to #2, right? And I'd say, on a margin basis, we know #1, and we can say that it gets a little bit complicated when you are a manufacturer-owned retailer. But based on different assumptions that we can do, we are on par with the leading player in terms of profitability. So we have the size required to deliver sort of best-in-class margin.

And China?

Yes. Yes. And China, I'd say, I don't know -- we don't know very much about what other players' margin is in China. I would assume we are kind of best-in-class based on the size of our business, right? And I'm not sure that it is scale that is required to sort of build margin. I think it's more sort of maturing of the Chinese market, where it's still significantly lower ASP than in Europe, is still a significant different profile of consumers, which sort of impacts also some of the conversion ratios, the productivity of your hearing care professionals. I think it's more of those internal elements that will actually drive margin improvements going forward.

Good. We'll go down to David here in the middle.

David Adlington, JPMorgan. Maybe just ask about private equity participation in the retail space. How are you seeing that in terms of their interest in participating in further deals and further transactions as a competitor, but also given the financing environment, how they're feeling about selling on those assets new, potentially interested.

Yes, I think -- so over the last couple of years, I think there is fair to say there is declining interest from private equity in operating hearing care retail. There has been a number of ventures over the past 10 to 15 years. Right now, I actually don't -- I cannot recognize remember anything...

You would always find in a given market, smaller private equity that go in, build a little bit, but it's not big scale. I think it's considered slightly risky and too complicated fundamentally.

Yes. And I think what you know, One of the challenges is that it is a very hands-on business. It is one where you need to be down in the business, operational excellence, et cetera. And at least some of the attempts that we have seen that has not been the nature of the investments that they were strong, and therefore, they have also exited. So that's not a large number.

I'll go down to Niels here.

Niels Granholm-Leth from Carnegie Bank. What is the customer retention rate across the Audika store network loyalty rate, if you will. So what proportion of your first-time purchases even purchased their second and third hearing aid in your stores?

Yes. I think that rate is fairly universal, right? Because, of course, we also have 25 different operations, and there's a lot of similarity across the 25. So I believe the kind of metrics are similar across a number of businesses. I can say one measure that we use is repurchase rate. So what proportion of the people you sold to 7 years ago are now purchasing again. And the surprising number at first side is that it is less than 50% -- between 40% and 50%. The reason is, of course, that a lot of the customers are 70% or 75% when they purchase the first time. So there's simply a number of people who are not buying a second time. And I think when you do the total math on average, a user is buying 2 to 3 pairs of hearing aids.

I guess you must have statistics or insight into how many of your first-time buyers who actually does.

The loyalty in general is quite high. If you had a good experience, you tend to go back.

Good. Maybe we'll just pass it on to Christian Ryom.

Christian Ryom from Danske Bank. Niels, jumped on my question on the return purchase rate. I'll ask another one. Søren in his prepared remarks or introductory remarks talked about sort of this growing body of evidence for cognitive health benefits of hearing aid use. Is that something that you are actively say, promoting or leveraging in the hearing care business today and what opportunities might be around that whole domain.

Yes. We are -- we have, of course, tried different approaches in that space, I'd say. One of the learnings we have made is that it is not particularly good for persuading people to come in because actually, you scare them away by these kind of messages, right? So on the marketing, sort of the pure lead generation, it's not particularly good. I'm sure it helps sort of build underlying awareness and sort of desire to do something. But as a direct response mechanism, it's not particularly strong. Then you could say, it is, of course, part of the consultation that you're making sure it's a fully informed consumer that is aware of the hearing loss, the positive consequences, I would say we spend more time on rather than the negative consequences, right? But it goes into the counseling, of course.

It's, of course, also something you have to treat with, I would say, a lot of respect back to what I said is, it's most likely more the derivative of your ability to continue to be socially included. And I think that's our key message. We should be very careful. We don't exaggerate the prevention element outside in general, of holding a healthy and active lifestyle.

And I mean, the best tool for convincing somebody to wear hearing aids is to put them on the ears of a hearing impaired person and make sure that there is a good first fit, and that gives typically a wow effect.

Martin Parkhøi, SEB. It's actually related because my experience from also covering pharma stocks is that you normally don't -- patients don't really care about these things where they don't see a benefit in the short term. So it's more a pricing, reimbursement, access thing to show these long-term outcome studies because the society could potentially earn, save money based on this. So is this something that you can use in the longer term to increase reimbursement levels on a government level.

I don't know if we use it for increasing the reimbursement level because no, I actually think that's also something you have to handle carefully. There's also evidence that free of charge hearing aid. That's not spend enough time on whether it's not really a buy-in from the client is -- have a bigger risk of ending in the drawer. None of us are happy for that. So we won successful hearing aid purchase and an element of copayment actually give a stronger commitment. So but it is part of, of course, trying to say hearing aids belong in the preventive basket instead of just treating a defect. So looking at quality, looking at outcome, looking at things that really makes a difference is important. I also think it's an important part of the background for a more healthy lifestyle. We know that senior citizens are very concerned with cognitive diseases. So when there are more generic articles out on the theme from various platforms that offer generic information as we do on our global portal under the industry organization. It's one of the themes that are most with. So there is an interest, there is, I'm sure, an awareness building, but it's as Niels said, not an immediate call for action, that's much more, the dinner that didn't go very well last week or again, your children's, spouse, family say that, that reacts and say we should do something. Can we actually work on the current problem and that's much more the trigger for driving traffic short term.

Veronika?

Can you talk about asset availability in Germany, clearly, a big opportunity for you in terms of growing. Is this mostly about buying small networks or chains 1, 3, 5 shops? Or do you foresee any possibility to do larger-scale deals. And then I don't think you're the only people who want to grow in Germany, everyone sees the same opportunity. So maybe just a word on valuations and competition over assets.

Yes. So as I said, it is a fairly fragmented market, right? There's the 3 large players are fairly well known. And then there's a significant drop to the next level. So therefore, it is a matter of acquiring smaller, smaller businesses. It can be 3, 5 shops, but it can also be 20, 30, and then also 40 to 60 shop changes around. So -- but that's kind of the space and the opportunity we're looking at, right? And yes, in Germany, just like anywhere else in the world, there's often times pre-interested parties. And therefore, it's a combination of price and match and culture and not the least, of course, previous relationships. And if you if you have something else that the others don't, right, so in Germany, we are definitely benefiting from a very strong position on the wholesale side. So we are I think, a leader on the wholesale side, which we can truly benefit from when talking to prospects.

I think we can squeeze one last question then from Martin Brenoe.

Martin Brenoe from Nordea. Yes, very interesting to see the places where you already are and where it can continue to grow. I think that they're still missing a few continents on the slides here. So just curious whether you are seeing any obvious countries that you could break into from a retail perspective. I'm thinking about the Latin America or anything like that, that you could see an opportunity in the near term to go into.

Yes. No. I'd say as I alluded to, we basically think we are covering the markets we need to cover because we are in sort of 20 to 25 largest hearing care markets from a value perspective. So there's not any new market. So it is more the model of bolt-on acquisitions in most markets and should a large opportunity arise and -- could of course change.

I also think, yes, there will -- something will happen over time with demographics. But I also think just like under wholesale side, we also want a certain stability and predictability in a market before we put our own companies in place and the whole regulation and political environment and so on. And therefore, there is a one-to-one overlap between wholesale companies and hearing care with the exception of a very small group that are very small. South Africa is an example where we have local presence where we have no current plans of entering in the retail side.

And I can share our presence in Brazil is rather limited on the retail side.

Good. Gentlemen, thank you so much. Thanks, Niels for a good presentation. And we'll have just a very, very short break before Rene will talk about how we drive scale benefits to deliver long term shareholder value. So please stay within reach because it's only 10 minutes. [Break]

I think we are ready to kick off the last session where Rene will [ tie ] all of the ties from the previous presentations together into the financial aspirations and targets. And you already joined me on stage, so I will just get to the first slide and let you run the show.

Thank you, Peter. So only me between drinks and dinner. So fortunately, I will speak a language that you all understand and that you can put into your Excel spreadsheet and that is numbers. I know you have been visiting them all day. So here they are. But I will leave you with some key messages here or takeaways. And I hope that will transpire through the presentation is that we are truly a focused hearing health care company with a strong discipline around capital allocation. You would see the capital allocation towards, as you've seen previously today, strong innovation on the hearing aid side, technology development, but also which we didn't cover today on the diagnostics side, similarly. And then also capital allocation towards building distribution. You [ also ] saw Niels presentation. And these two, you can say, capital allocation principles, combined also have a synergistic effect that will enable us to not only outgrow the market, but also increase margins despite the fact that on a structural basis, we see hearing care with a low margin. So I will cover all of that in my presentation. Here is the agenda. So just getting back to our strategic choices and commitment to shareholders. We will update the view on the medium- to long-term outlook and look at our own performance in that light and also zooming in on the continuing business of hearing health care and also look at how have we done in that part of the business. Our principles to capital allocation, as I just shared, and then our future aspirations. So our ambition is clear. It's a strong view to creating shareholder value. drive attractive growth, meaning above the market that we are in and financial returns, so industry-leading margins and strong cash flow generation in a business that is very resilient. That is what we strive to do. Again, our financial you can say, capital allocation principles, starts with strategy. And the strategic choices that we have made in terms of focusing on being an innovative company and fueling innovation. We also do that from a capital allocation standpoint. And we also invest in the second part of our strategic choices, meaning participate in the consolidation of distribution. And those two elements together or individually are, of course, extremely important, but there's also a scalable effect in combining a strong wholesale position with a strong distribution position. And I will elaborate on that. And I will elaborate on what does it mean to be in the game of both wholesale and retail versus not being there. But before we go into that, so just out of [indiscernible] housekeeping, let's just review how have we done against our previous mid- to long-term outlook. And the last Capital Markets Day, we announced an ambition to grow 7% to 10% in local currencies with an organic contribution of 6% to 8% and acquisitive growth from 1% to 2%. If we look at the group numbers, which you have here in the middle, we have delivered a 10% growth in local currencies, with rounded 6% organic and 3% acquired. And this includes our previous definition of [ Demant ] continuing business, meaning including communication and medical. If we only look at what we now consider continuing operations, meaning our Hearing Healthcare business, Hearing Aids, Diagnostics and Hearing Care in this particular period '18 to '23. That business has grown also 10% in local currency, but 8% organically and 2% from acquisitions. So both scenarios in line with our mid- to long-term outlook, but the one scenario in the low end and the other scenario in the high end. Also looking at operating margins, our previous view on margins was very much a view to improved EBIT margin on a business area by business area perspective. And looking at this last period, we have seen significant market expansion in Hearing Aids and Diagnostics. We have seen a flat margin in Hearing Care, but basically reflecting a higher margin and in the more mature part of Hearing Care, whilst we have expanded into new geographies with lower margin. So all in all, a very satisfactory underlying development and also an underlying margin expansion in Hearing Care but blending in new geographies and acquire growth. And as is well aware to this audience, in particular, evaluating the margin development in both hearing implants and communication has in this period been negative. If you look again, just zooming in on what we now consider continuing operations in its totality, we are actually seeing '18 to '23 a significant margin expansion of 1.6 percentage points despite a higher growth in Hearing Care. We have done significant investments in R&D. We have done significant investments in distribution. But still in this period, and also, I would say, even despite corona pandemic, we have been able to return around DKK 1.5 billion in cash to shareholders per year through share buybacks. In graphical terms, it looks like this despite again communications headwind on revenue development, we have seen for the group a strong growth, 10% CAGR over this period. Whereas if you look on the lower side, the EBIT development has grown slightly less and it is back to the shortfall on the margin on both implants, but particularly also on communication. Well known, but of course, is the backdrop also for our decision to be a more focused Demant. We already reviewed, you can say, the backdrop of why we have taken this decisions. The important part is it's a more focused business. We can allocate capital. We can allocate management attention. And overall, you can say, have a more clean and clear purpose of Demant. And we believe that there is ample of opportunity within the new definition of Hearing Healthcare to invest in growth. And this will allow us to do that even more. So what will this derive in terms of growth ambition? We have it here. This is our updated medium- to long-term outlook. For the Hearing Healthcare market, we believe that the value growth in that market slightly updated to now 4% to 6% in value, so midpoint 5%. We believe in that market that we will grow in local currency, 8% to 10% through a combination of organic growth 6% to 8%, and acquisitive growth around 2%. If you look at what we have done actually in the last years here, whether they are representative or not, what you can see that from '18 to '23, we have seen a Hearing Healthcare market growth of around 6% in value. So actually in the high end of this mid- to long-term outlook, you have seen us delivering a 10% growth in local currency, 8% organically and 2% acquisitive. So there is, you can say, at least a February presentation, over the last 5 to 6 years in light of what we put forward as an ambition going forward. So definitely a realistic growth ambition on our side, we believe, but also an ambitious outlook to beat whatever the market growth will be. So let's dive a little bit into what it means to be a focused Hearing Healthcare company and how has that looked if we imagine we had only been a focused Hearing Healthcare company for the last decade. Previously, I looked from '18 to '23. So here is a full decade. The numbers don't change much. It's on the decimals. So again, it's a fairly robust, predictable and stable business performance that we have had. But here, you have it on the right-hand side, you can see our Hearing Healthcare business also over a decade has delivered a 10% growth in local currencies. What you can see on the lower part of the graph is actually that you have structurally lifted our operating margin for the group by being a focused Hearing Healthcare business. So you will actually see that we recognize that we have had a period as a company, and I would say as an industry here in '19 to '22, where things from a margin perspective, have been volatile. We all know the explanations for that. But it is a global pandemic. It takes to basically take this, you can say, solid margin out of balance. It is a very predictable and very high margin. And with our, let's say, newly focused ambition we also believe with a slight arrow upwards going forward. We are also a very cash-generative company. So not only do we grow a lot and we have a high operating margin without any [ funding ] adjustments. And we also actually convert that into real money that we can take to the bank at the end of the day. So you see here a strong cash conversion here as one measure of cash conversion. What is our cash flow from operation to EBIT. It is strong, and we have seen a 13% CAGR in cash generation over the same decade. This is in nature, a little bit more volatile. Anyhow, also on free cash flow, excluding M&A, we have seen a 16% growth in the same period. So yes, we're coming from -- if you clean it up, we're coming from a track record of a decade of strong growth, strong profitability and strong cash flow generation. So how are we allocating that capital that this business generates. And that's where you can say the focus and the discipline comes in because we have a very strict capital allocation policy and discipline, we can see, and we believe that, that's the case also going forward that if you can invest in the right way in innovation and technology and makes a tremendous difference in the market and there's great return on that investment. So that is what we're going to fuel, and we're going to fuel the infrastructure to support that business. So I wouldn't say it's priority #1, but it is one of the two main priorities when it comes to capital allocation. And then there is a positive effect of continuing to build our distribution network. It's through acquisitions, predominantly in hearing care. But again, we have seen the same on the diagnostic side, and we will continue to do that in the right tempo, where, again, the return on investment is high and meaningful. And once we have done these things to get this positive cycle growing of growth above market, high-margin cash generation that we invest back in the business. We still have excess cash and that cash, we give back to shareholders via share buyback. So that is the logic. We have the capabilities to continue to invest in R&D. And we don't have R&D in Hearing Care. So we look at this from a Hearing Aids and Diagnostics perspective. And we intend to continue to invest in line with the top line growth of that business. And that's what we have done over the past years with a little bit of fluctuation. You can see here, 10%, 11%, 9%, 8% recently because of high growth but it is the intention to continue to fuel that innovation because the ideas are plenty and the differentiation we believe it can do in the market is also still definitely there. This is also -- you can see an illustration of scale in R&D. Here's one perspective on it. So we have tried to say, okay, what is our absolute R&D spend. But let's look at what is supported R&D, meaning, let's say, portfolio project management, quality organizations, supporting organizations just like finance, IT, HR that is enabling R&D and what is really invested into the direct team that you saw on stage earlier today. So if you look at this, we have actually been able to fuel more into the true innovation and delivering the infrastructure at a lower cost. So also here, not just within this, we are trying to build scale advantages, but also on a more, let's say, consolidated level. So very, very, again, here, important, and we are going to continue to do that going forward. Again, just a key takeaway here, in line with the top line, but this will enable us to get more out per dollar that we put in. That is really the aim. If you look at our continued investments in infrastructure, we are running a global business. We are acquiring businesses, we are consolidating. We're doing a lot to make sure that we can have a healthy growth and that we can also continue to grow the business for the next decade. So you have seen that we have consistently invested for between 3% and 5% basically of our revenue into CapEx, we are going to continue to be along that line, but it is both in greenfield on Hearing Care. It is on clinic refurbishments when you run 3,500 clinics globally. That's actually a big part of it on digitalization of our business. But also, and I would say highly important, optimizing manufacturing, optimizing supply chain. And just in this period, at least the ones who have followed us for a long time would know that we have consolidated global hearing aid manufacturing moved out of Denmark into Poland, consolidated a lot from Europe into Poland. We have opened up manufacturing Hearing Aids side in Mexico. And we have inaugurated a new Diagnostics manufacturing sites and also consolidated on manufacturing in Poland. So we do a lot under this heading to ensure that we have a scalable and efficient business, and we will continue to do that. On acquisitions, we are up, we can say, on the margin, our financial guidance on bolt-on acquisitions from previously 1% to 2% to now 2%. I would say this is a reflection of how we have actually done and what our business track record is, and our ambition is more than we have fundamentally changed anything. So I would say it's more of the same. And we believe the bolt-on acquisitions will derive 2% growth. But once in a while, but of course, much more binary in nature, we will also see the larger more strategic acquisitions in nature, whether it's in Audika or Sheng Wang, they are still out there, but of course, they are much fewer in numbers and will be far apart. This is an important piece. So we are investing in Hearing Care. And I think a couple of the questions earlier also circulated around this isn't it dilutive to invest in distribution. And the answer to that is no, it is not. It's actually slightly accretive. And let's start to look effects for Demant first. If you actually take a decade perspective for Demant, you would see that if you go back to '13, Hearing Care constituted 34% of total group revenue. For Hearing Healthcare, today, it constitutes 42% percent. So you would say, well, that must be hugely dilutive. The fact is that in '23, for Hearing Healthcare, we had 19.7% operating margin, in '23, we had 20.9%. If you do the exercise of saying, well, what would this 19.7% margin have been in '23 if we just fixed margins with a different business mix, right, you have a dilutive effect here of 2.6 percentage points on the margin. So we would -- and all things being equal, we would have diluted the margin here to 17.1%. But the reality is we have had operational efficiencies and scale benefits of 3.7 margin percentage points, bringing us back to 20.9%. And what is it that is happening when we acquire distribution? And why is it strategically important to also participate in consolidation of distribution. So here is a simple example of what is happening. If you look at the independent audiologist on the left-hand side, who run an independent business and you look at the average of those for illustrative pivots here, you would see that we have a 25% share of wallet with that independent distributors and competition would have 75% share of wallet. So this independent audiologist, they still represent around 45% of the global value market. But it is a trend, it's not a dramatic trend, but it is definitely a trend over time that these are being consolidated. And what are the outcomes for these independents? Well, the first scenario is that this independent audiologist is acquired by a chain. So what is the outcome for Demant, you have it down here. Well, the outcome for Demant, if it's acquired by chain is most likely that if we want to maintain our 25% share, we will need to give a price concession. Larger chains, more bargaining power, lower prices. Maybe we will remain with 25% share, we might not. There's a different outcome for the independent audiologist. One is that he or she is acquired by another manufacturer. So what is then the impact on Demant? Well, our share of volume will drop to 1%. We will lose out on revenue and we will lose out on volume period. On the other hand, if the independent audiologist is acquired by Demant, what we will do is that we will obviously, over time, convert that, you can say, distribution channel into our own products, meaning we will have a 95% share of wallet, we will increase revenue. We will increase volume. But most importantly -- equally important, scale benefit we get there is the fact that we will replace a brought-in competitor product at a wholesale price at a wholesale margin, and we will face that from a group perspective with, for example, an [indiscernible] at a cost price, manufacturing cost price out of our factory. So all of a sudden, the structural EBIT margin of, let's say, best in class the [ 15 ], the cost of goods sold that is in that equation suddenly becomes much lower because it's no longer the wholesale price you pay, it is the cost out of the factory. And that's why you can convert a, you can say, on a group level, a Hearing Care business to being actually margin accretive on a group level. Yes. So just housekeeping last excess free cash flow return to shareholders. You have seen the journey that we have been on when it comes to allocating capital. We still aim at a gearing multiple of 2% to 2.5%. That's what we feel comfortable with at the current interest rate environment, but which you can say is a mid-single-digit interest rate. We still believe that we can get a higher return on reinvesting in our own business rather than reducing debt, at least at current level. We're going to continue the share buyback. Here is the -- again, the last decade of numbers. We have bought back shares accumulated [ 12.5 billion ] over the last decade, and we have been able to reduce number of shares outstanding by 2% per year. So all this comes together in our aspirations for the future. I think I've said it many times, but I'll say it again, we're going to invest in innovation and core technology. We're going to participate in the consolidation of distribution, and we're going to grow across geographies and channels and adjacent businesses. This is very much a Diagnostics, you can say, a theme. And what's the outcome of that will be is an attractive growth rate above our beliefs for the markets, which is also very healthy, but 8% to 10% in local currency, 6% to 8% organically around 2% from acquisitions. We believe in EBIT margin expansion despite the inherent dilution from acquiring in Hearing Care. It's not a dramatic market expansion, but from -- for the reasons that I reviewed before, this will be the case. And then a strong view on capital allocation, as I've also reviewed. Yes. So I think there's a lot of questions I would assume. So let's move on to that. There's already some hands.

Perfect. And I'll also just invite us [indiscernible] up to the stage, I guess, we'll start in the middle here since you [indiscernible] materials with David Adlington.

David Adlington, JPMorgan. Just a very quick one really. In terms of you're talking about incremental margin expansion, should be sort of 10 to 20 basis points you've done over the last decade? Could that be the kind of thing we should be penciling in.

Yes, it's more in that range than it is 50 basis points per year. It is -- again, that's why we used the term incremental some years, it will be very small increments and some years, a little bit more, but I think the last 10 years could be, you can say, a decent reflection of that.

Maybe just a quick follow-up. Just in terms of capital allocation. You've got some cash coming out from a couple of acquisitions. Should we expect that to be some excess cash return to shareholders?

All things being equal, yes, that's the assumption. So it will go into the cash pool, and we -- it's not like we're going to redeploy that to any particular other venture.

Thank you, Martin Parker, SEB. Just to the margin, well over the past 10 years, we have also seen some larger restructuring programs at least, not at least '16 to '18, where you also did some one-offs. Do you see any large restructuring possibilities, opportunities to anything you see over the next 10 years, which can support the margin development that you have seen in the past that also continue in the future.

No, not similar to when we closed down, for example, operations in Denmark and so on. We don't have sight to, let's say, any major surgeries around that. But definitely, we still have opportunities to consolidate even more in operations from a smaller scale. So that's one element of it. I'd say it's much more the, you can say, focus on productivity on the sites that we have and get more throughput of what we already have, that's going to deliver scale advantages.

Christian Ryom from Danske Bank. A couple of questions. You've seen a bit of a downward trajectory in the gross margin over the last couple of years. what's your expectations for the medium term for that? And then the second question is on tax rate. Where do you see that heading should basically expect it to remain around the 24% we're seeing this year.

Yes. So to the last question, yes, I think that's a fair assumption. No. But on the -- I think the market expansion needs to come from the gross margin, and we see the arrow up west from here. I think we needed to get ahead, around the cost of rechargeability and that has come -- it still comes with an additional cost, but we have gotten our head around maturing that technology and getting, from a manufacturing standpoint, a cheaper solution. So that has been one of the major headwinds recently. So we think from operational efficiency in Hearing Aids that the arrow is slightly upwards and then also the business mix, if you look over mid- to long term, that having more Hearing Care in there, on average, will also increase the scalability and gross margin. You should not expect to see significant leverage on the R&D side, but on sales and distribution and admin, that's the other element to it.

Julien Ouaddour. So I have one. Obviously, VA and Costco are like accretive to margin. And I guess your like outlook about margin improvement comes on the -- like on the fact that at least you're going to increase the market share in VA. What happens if you struggle to do it? Or is market share decrease and I mean same at Costco, do you have any levers maybe to offset that and to deliver on your margin expectations?

Yes, I think you can pick out individual customers, of course, and you pick out two that are maybe the only ones who in themselves can change something. But the important part is that we are on an overall basis, you can say, gain market share and grow above market, then we will have scale advantages. Whether it's been one channel or the other, as long as it's a representative of where we focus, meaning, you can say, customers who are willing to pay for innovation and so on. Then you can say it doesn't matter where we gain it. But of course, if you want to be #1, long term, we also need to improve our position in VA where we do have market share below our global average, and I think that's also the ambition.

Good. And down to Veronika, do you still have a question?

Yes, sorry. And I probably missed that your tax rate comment, is that stable at these levels?

Yes. That's our best guess for now I would say.

And then if I can push my lack a little bit on the three segments within hearing, if you can just maybe give us a little bit of flavor for the delta in profitability in terms of diagnostics versus wholesale versus retail. I mean if we say 21% is the average, I venture a guess that two of the businesses are above and one is below, but what's [indiscernible] that if you can give us a little bit more flavor, so we can model that mix better going forward.

Yes. And as you're well aware, we can shift profitability as we see fit between the Hearing Aids wholesale and our Hearing Care business and to what Niels answered before. So if we allow ourselves to do it at kind of an arm's length basis and say, okay, our Hearing Care business can buy hearing aids at a very competitive, let's say, large retail chain price then our Hearing Care business would operate at an industry-leading margin similar to our good friends in Italy, meaning, let's say, 15% EBIT margin rounded. You will see Diagnostics just above our group margin. And then Hearing Aids, depending on the year, a 25% to 30% EBIT margin business. But again, this is when we allocate profit as we see fit between our businesses. It is -- again, we run it as one hearing health care business.

Good. And then switching over to go [indiscernible].

Just one quick follow-up on growth, should pricing be more of a headwind this year would you be keen to do more M&A to compensate that and continue to grow at the pace you've indicated?

No, we're not going to -- sorry, the discussion around, you can say, growth, we're not going to acquire businesses to deliver top line growth if another part of the business is not delivering. That's not how it works. We are going to invest in distribution very classically towards, we have a pipeline of opportunities that we work with and review and some are attractive and some are not and some materialize and some are in competition. And we are working with that funnel all the time, and we're not going to, let's say, increase or decrease depending on sort of how in this particular quarter, another part of the business is doing.

I think that way, you can actually compare the continuous commitment to R&D with the continuous commitment to acquire. [ stop and go ] is not good in any of the two processes. It is really a continuum because you see the mid- to long-term return on things so you don't also sit and fine-tune calculate is the last engineer, the last acquisition really the right one. It needs to be a continuous flow, of course, sometimes you hold back a little bit if pricing gets too heated, and look another geographies, but you can kind of healthily integrate a certain amount of stores successfully in and so on. So it is really, you could say, a dimensioning of the ability to execute successfully rather than. Yes. [indiscernible] is not healthy for anything. It is a continued development of the business.

Then we have Niels first, I think, and then we'll move over to [indiscernible].

Rene, you didn't touch upon net working capital. How would you expect that to develop? Because it's still a little bit above your historical trend line?

Yes. And it is extremely difficult when you get some of these balance sheet date, what is net working capital on that day? Because are you building up to a launch and are you -- there are many peculiarities around that throughout a year. I would say our net working capital right now is normal within the normal range, and it will develop in line with the business going forward with, hopefully, a little bit of room to optimize on, I would say, inventories. We do have a lot of inventories, maybe we have an opportunity to manage that better. And then we do also have a very strong focus on cash collection. And I think also there, we can maybe on the margin, do a little bit better than what we do today. But dramatically, changes in net working capital compared to today, I don't foresee.

On your cap structure, [ 2 to 2.5 ], you spent more than [ 800 million ] on net financial cost, pretty high amount for a business of your size. At the same time, you have the second highest gearing in your industry, which basically excludes you from making bigger acquisitions. Do you run a risk of not being able to make bigger acquisitions with your current capital structure?

No. I would say, if you look at what we have done. And we did Sheng Wang, whatever we have you to, we can -- I wouldn't say easily do, but we can do that. And when we -- for a certain period, exceed our gearing ratio, we will stop share buyback. And since we are so cash generative, we can bring it down very fast. So we are comfortable, and we don't see that we miss out on opportunities at this gearing level. We have plenty of access to capital.

Oliver Metzger from ODDO BHF. One question on retail purchase multiples. So you have your key three countries where you basically your strongest external growth ambitions. So can you comment how retail markets have changed over the years, in particular also in Germany where basically many players want to acquire? And in this context, what's the trade-off between the greenfield openings and the acquisition of retail?

Yes. Actually, Niels, should answer that. But I will give it a go still. No. So it's -- so greenfield openings, you need to do, in particular, where distribution doesn't exist. So China is a good example where the industry is to do significant greenfield expansion. But that comes at a, you can say, with a big investment in a couple of years of building the business and the database and the patients and the local community needs to know that you are actually around. So that's the margin-dilutive effort that sometimes you need to do to continue to build growth. And then when we do acquisitions, we also we say, typically acquire businesses that are a little bit that needs to take a little bit of an investment to bring into to Demant's Hearing Care business. So when we're acquiring, they are, on average, lower margin. Take Germany , take China as examples that we blend things in that are a little bit lower margin. But what we see is that we have an ability to, over time, bring our businesses up in margin through, professionalization tools, good, strong marketing, et cetera. And that's the dynamic that we continue to fuel.

But do you see prices go up? Also, say, the interest rate environment has changed over the years.

For acquisitions?

Yes.

It's very market specific. And it's also very, you can say, size-specific. So you have a certain price tag for large chains where you can see, okay, here's a competitive process and generically speaking, three buyers out there. So there, you would see high multiples, but we haven't seen them change specifically, whereas in other markets, the assess competition and they are smaller, and that's a completely different multiples. So no, I wouldn't say we have seen multiples change significantly. You can pick examples from each market, and you can find where okay here multiple stop, but you can also find the opposite.

Good. I think we can fit in one last question if there is any? It does not seem to be the case right now. So super clear. And I guess if something really pops up, we can take it out outside of the room when we are wrapped up. So I will just very shortly and briefly conclude on today, I think and hope on behalf of the IR team and speakers that you have had an insightful day and learn more of all of the things that we have done, where we as a company stand now and where we expect to work towards in the future. I think just as a reminder, and I said that in the beginning, the webcast or at least [indiscernible] will be available online during some times this week. And if you have any further questions after the session here today, please do not hesitate to reach out. We are happy to help. And then I think I will just, I guess, open the bar out here outside of the room, and just let people know that we have a dinner a little bit later in the city. And the bus departs from this venue at 6:00. So we'll do our best to get everyone on board, but do keep notice of the time. Thank you so much for spending the day with us and we look forward to the rest of the day. Thank you so much.

Thank you.