Demant A/S (WDH1.F) Q3 FY2025 Earnings Call Transcript & Summary

Good afternoon, and welcome to our conference call following the release of our Q3 Interim Management Statement, which was sent out after market close yesterday evening. For today, we plan for the usual structure of the call. We'll start with the presentation, and then we'll proceed with Q&A. On a practical note, the presentation we'll be showing should now be on our website for you to find, and we plan for the call to last no more than 1 hour in total, including the Q&A session. In the room here at our head offices, we have our President and CEO, Søren Nielsen; our CFO, René Schneider; and the IR team with Gustav Hoegh and myself, Peter Pudselykke. That is it for the practical stuff. Over to you, Søren, for the presentation.

Thank you very much, Peter, and welcome, everybody. We'll go straight to the agenda for today is business highlights and key financial takeaways. A little bit of color and flavor and update to each of the three business areas, outlook for 2025, and then let's quickly get to the Q&A session. Business highlight for Q3 is a performance overall in the lower end of our expectations, driven by hearing aids, which due to a remaining softer than normal general market and a sequential slowdown in U.S. due to mix effects have seen a weaker ASP or you would say in the scenarios with a weaker ASP. We have, however, in the hearing aid business seen global market share gains and a good momentum in the business. So the -- to the softer side, organic growth in the Hearing Aids business is purely driven by unfavorable geography mix and a still overall soft hearing aid market. Hearing Care have delivered solid growth above the general market growth rate. The performance is broad-based despite also having strong comparable figures from last year. The Diagnostics business continues to be impacted by a general weak market, especially in the U.S., resulting in lower investments in equipment, the market or the general appetite on investments and expansions, et cetera, has put less incentive to do investments right now. We still see a good order book and still see orders coming in. So it's more a reflection of a postponement. In October, after the quarter, but still important to mention, we launched Oticon Zeal at the German Congress. We have also announced the signing of the agreement to divest Oticon Medical, found the new future owner, and we expect the closing of this part to take place no later than the end of the first quarter '26, and with that, knowing the final route to a full departure from the implant business area. Key financial takeaways from Q3, Group organic growth of 3%, which is an improvement from first half. It is fueled by improvements in both Hearing Aids and Hearing Care, so positive. However, as already stated, we see gross margin decline coming from the negative ASP effect in Hearing Aids and a continued increased share of rechargeable devices. Diagnostic also saw a drag on the gross margin. So a pure translation from the lower ASP into gross margin. Our OpEx saw a modest organic growth compared to last year, fully in line with expectations. Of course, acquisition contributes to further growth, and we remain very focused on managing costs carefully given the uncertain market. EBIT was in the lower end of our expectations, however, still within, driven by the gross margin contraction. Foreign exchange rate also had a negative effect in Q3, but in line with expected and already disclosed. The group continues to generate very solid cash flow, particularly -- partially supported by working capital development and a strong focus on that, of course. The outlook for the year 2025, maintain the 1% to 3% organic revenue growth and DKK 3.9 billion to DKK 4.3 billion, however, likely to be in the lower end of the range. As announced previously, share buybacks were stopped in June due to the announced acquisition of KIND, yet not closed. We have bought back shares worth of DKK 582 million in the year and will not buy further. Business area highlights review. Hearing aid market in total has grown to our best estimates and having statistics for 2/3, around 3%, which is more or less in line with expectations. However, a slight uptake in Europe, a sequential slowdown in U.S. commercial from 4% to 2%, which is not as expected. And VA, on the other hand, growing. It seems like some funds for restaffing have been released, which have made it pick up. Rest of the World, 4%. So we are still below the normal 4% to 6%. However, I think it's worth to highlight 3% is still a growing hearing aid market and our fight is then, of course, for share in that market. Growth in Europe is primarily driven by strong performance in France, which continued to show strong growth, however, primarily in the free-to-client category. In U.K., growth was driven by the private market and partly offset by a slightly negative growth in the National Health Service. In Germany, growth accelerated sequentially following a slow Q2. It is worth saying that Europe without France would more be in the 2% category level. So underlying Europe is also I would say, quite below normal, and that is, of course, also affecting our business. North America saw positive Q3 growth as announced, driven by a certain rebound in VA after a very long period with very low growth. So at some stage, again, would also have to work into the backlog, but still below normal levels. And again, U.S. commercial slowed down from Q2, while growth accelerated a bit in Canada. Rest of the World delivered growth. It was primarily driven by solid growth in Japan, Australia, China delivered flattish to slightly negative growth, while we estimate that several of the emerging markets delivered good growth. We still estimate the ASP to be flat to slightly negative due to geography and channel mix changes. Of course, not the least, the unfavorable development between Europe and North America. Hearing Aids in Q3, organic growth improved from Q2 and continues to -- however, continues to be impacted by the softness in the global hearing aid market. Unit growth was positive and above the estimated 3% market unit growth. So we have taken share in third quarter. And however and in several countries, not just single callouts. Our ASP was negative due to geography and some channel mix changes. And in Europe, growth was, of course, fueled by France. And we have also positive growth in U.K. private market and a flattish growth year-over-year in Germany. I would both say in Germany, important to highlight a good strong sequential growth after some pushback after the announced acquisition of KIND, things seems to normalize. Strong performance in Canada. U.S. growth was positive due to VA and managed care, but year-over-year, negatively impacted by the effect of additional suppliers to large U.S. retailer, as spoken to previously. Strong growth in Japan, slightly negative growth in China and strong performance in Australia and Latin America. And again, not to talk in length about Oticon Zeal, just to highlight that we did introduce and present to the world a new very novel and innovative product concept, Oticon Zeal at the recent Congress in Germany. It is a new level of performance for in-ear hearing aids. It upholds our best and most advanced AI-driven signal processing, full connectivity, rechargeability in a so far unmet discrete design, I would say, for most invisible design and it got very good reception and feedback. And I'm sure this is even that we cannot make a very fast broad global rollout, definitely bring more attention to our business and enable a lot of good discussions with customers about the business in general. It is a new manufacturing process, totally new. And due to the ramp-up of that, it will be more gradual than normal, then we will also see a more gradual commercial rollout where we have selected a number of European markets to start here in the fourth quarter, but more broad-based global rollout will happen, I would say, in particular, during the first half of '26. Hearing Care in Q3, solid performance in a continuous soft market. We generated 9% growth in local currency, of which 4% was organic. So very good. And it's broad-based. Of course, also here, France do above average and also Poland, but we also have several medium-sized European markets doing well and delivering solid organic growth. In North America, we saw an improvement in performance in the U.S. and a slightly negative development in Canada. We saw solid organic growth in Asia and Pacific, mainly driven by China and Australia due to especially improved product mix, meaning, yes, more advanced solutions. Growth in Asia, particularly offset by weak performance or partly offset by weak performance in Japan. Diagnostics in the third quarter continues to face a headwind from soft market developments for instrumentation. Organic growth was slightly negative due to declines in key markets in Europe, but also area or part of Pacific and other regions. We did see growth in U.S., but not to normal and expected level, and that's driven by, again, macroeconomic uncertainty that leads to lower-than-normal investments in new equipment. We see good growth in our service and consumable business, but however, not enough to offset the negative growth in -- on the instrument side. France continued to do well and grow in the quarter, some negative growth in U.K. and Germany, but strong growth in several other European markets, slightly positive in U.S., good growth in Canada. And then positive organic growth in Asia and a number of other markets. Outlook. There are very little changes to the fundamental assumptions. I would only highlight the changes to our expectation in the discontinued business. We still are in the process of getting out of both communication and implants. We, as I said, announced that we have made an agreement to sell to a new owner, the Oticon Medical business. But as part of that, we also have recognized a need to increase the in year 2025 loss in the discontinued business. And this was already mentioned in the announcement, but this is why this has been updated. Other than that, no changes to tariff assumptions to -- exchange rate assumptions, et cetera, et cetera, no changes at all. And therefore, also on the outlook, relatively simple. The only change is that for both organic growth and EBIT, as I mentioned earlier, we now expect that we will most likely be in the lower end of the range for both organic growth and EBIT. But other than that, no changes. And let's, with that, go to the Q&A session.

[Operator Instructions] And our first question comes from [ Janguin ] from Citi.

Two questions from me, please. The first thing is on [Technical Difficulty] comment on the uptake of the product I appreciate [Technical Difficulty] anything you can comment on how it has been trending again [Technical Difficulty] that. And my second question is on the rest of P&L. Given pressure on gross margin [Technical Difficulty]how do you envision getting to the low EBIT guidance [Technical Difficulty] second half [Technical Difficulty]...

Your line is quite poor at least on our end. But I think we got your first question on uptake of Oticon Zeal. And then you were asking a bit on the development through the P&L with the gross margin development. So I'll let Søren answer that, and then you can revert with extra questions.

Yes. And thank you very much. Well, we presented the Oticon Zeal on the EUHA Congress. We, a few days later, made the official launch and released it after compliance to all quality systems and so on. So we are still very, very early days. We have -- we can sell what we can produce. That's why we have chosen to introduce in a selected number of countries. We have seen high interest, and we can deliver to that interest. We do not yet have any fitting feedbacks or anything that can confirm our own assumption of good and broad results. So it is too early to say anything beyond that, except very good market interest. I think I'll leave it to you, René, to comment a little bit on gross margin.

Yes. So with the caveat that we didn't get the full question, the pushes and pulls, of course, are that as a direct consequence of the changed geography and channel mix on the hearing aid business side, we see the impact on the ASP and then subsequently on the gross margin. And therefore, this is why we explicitly guide for a gross margin that is below our general expectations of 76% to 77%. The exact, you can say, precision on how much lower it will be depends, of course, on also the development in the rest of the year and the geography mix channel changes there. Yes, so I'll leave it at that, and please revert if there's further questions around that.

Sorry for the line. But how do you think about getting to the EBIT guidance with the pressure on gross margin? What kind of cost control can you do for the rest of the year?

So it's part of the equation, of course, that we do a cost control and you can say there are across all the items in the P&L, various scenarios. And there's, of course, also a scenario where operating expenses in H2 would be lower than in H1. That's also a scenario that's there. But all things equal, our guidance is that it's likely to be flattish half year over half year.

The same with the gross margin, of course, again, back to ASP, which is a very sensitive component in our business due to very different product mix in different channels and pricing. So I think it is much more the top line growth and the composition of that, that determines where in the range we will end.

Our next question comes from Niels Granholm-Leth from DNB Carnegie.

First question on France. You're talking about double-digit growth. One of your peers, Amplifon talked about 6%. Have you seen an inventory buildup in France during the quarter? And second question on the U.S. commercial channel. In your view, what's the reason for the sluggish growth in the U.S. commercial? Is it lost purchasing power among end users, geopolitical tension? So what's wrong there?

Yes. Thank you very much, Niels. Yes, I've also noted the slight difference in expressing. I think our competitor on the retail space maybe use another source, could be reimbursement numbers, statistics from the dispenser side. We always report at wholesale level. So what is to sell into the channel and these things sometimes have a delay. Yes, there can be stock building. There can be people that buy outside reimbursement schemes and other things. We see and have -- we are tracking well to the double digits. So I think it's more a reflection of different sources that it is of whether we are seeing a different world. And on the U.S. commercial, I think that the U.S. commercial is everything that's not VA. And we have seen, of course, one movement downwards consistently during the year that's been mostly in the managed care space. So that's, of course, one drag. They are less eligible and so on. But there is also what I think we all know have to contribute to consumer sentiment. So people are a little more uncertain rather than actually financial impact that it is easy to postpone your first hearing aid. It is easy to use the one you have a little longer. And the reason for believing is that also back to Europe that with out France is in 2%. We have several markets with significant reimbursement, if not free to client, and the effect is more or less the same. So we do attribute it to a lack of consumer confidence.

So following up on that. So the patients who stays away, are those first-time buyers? Or are they the recurring customers?

Yes. I would say it's both because it is also the response to calling in patients for a check and a follow-up and see new stuff. So it is in both sides, it is also the ability to attract new clients, but it's -- the exact split, I cannot say because the one is dragging a bit, you push a bit harder on the other, but it is definitely from both sources. So both extension and postponement.

Our next question comes from Julien Ouaddour from Bank of America.

So I have two, but I would like to ask the first one first. So I know a question has been asked many times. Let me just try again. Looking at the global hearing aid market in volume, I think we clearly see some slowdown versus the historical 4% to 6% level for quite some time now. Looking at some surveys out, we see that penetration may have slowed or even go backwards in some key markets, while it gets to a pretty high level in many countries, which could suggest less upside than in the past. Going forward, we have managed care, as you said, moving backwards on benefits, maybe new options for the patients with the hearing aid glasses. So my question is, what do you expect for penetration going forward? And another way of maybe asking the question is whether you could consider it revising down the midterm growth outlook for the hearing aids market. And just for the record, this is the main question we probably all receive from investors right now. So that's why I'm pushing on this.

It's fine, Julien, and I fully understand. No, I don't see any fundamental changes. The 4% to 6% is a range because it goes up and down year-over-year. There is for isolated markets, nothing more powerful to penetration than reimbursement. We have just seen a brilliant example of that in France. So of course, you would technically see that if there is less support for managed care in U.S., you will see penetration go down a bit in U.S. But at a global level, nothing changed. The assumed willingness to pay, the assumed threshold for when you think your hearing loss is big enough to get started. The main tailwind we have over time is extended life expectancy, which is what drive up the pool. And again, once you have started with hearing aids, you're very unlikely not to continue. And that also, of course, you could say, protects the penetration. So no. To make a long story short, no, we don't have any changes to our expected mid- to long term. And most of the would say, additional new products around are all focused on trying to expand penetration for mild hearing losses. So that's, of course, a joker in it. Will it work or will it not? I don't see it as cannibalizing the existing market. So if anything, it will add to it. And therefore, enough up and downs to continue to believe in a 4% to 6% range. It is a little more than the prevalence and a little more than the simple number of people that have turned 65 or even 70. And therefore, there is, in this assumption, a continuous small uplift to penetration, which is typically driven by increased reimbursement over time, which does happen around the world.

Perfect. My second question is about 2026. I know it's still a little bit early to talk precisely about next year. But I mean, can you maybe talk about the -- let's say the key impact for next year? I'm looking at consensus, I think it has 5% to 6% organic growth, more than 100 basis points of margin improvement. The question is more, does this scenario need a normalized market growth for you to achieve it? Or maybe with new product share gains, is it realistic for you to, let's say, to get to this point?

Maybe I can start a bit and René can supplement, but thank you. No, we don't want to make this call a guidance for '26. That's for sure. But there is, of course, again, as always, a long list of things that works for us and against us. Market growth is, of course, a key one. What is the market growth going to be. And I don't think any of us have a crystal ball to predict that exactly. We don't expect an immediate change. But of course, over time, hope and anticipate we will get back to a more normalized growth rate. Then it is market share gains in the wholesale space. And definitely, I would consider '26 a good year compared to the year we have just been in with a Zeal launch coming out most market and also continued innovation. We have KIND coming in on top, which will also give scale and market share gains to the business. And with that, several improvements on leverage and gross margin, et cetera. So many good things. There's also currency is the other way and, of course, continued investment in the business. So there are many lines -- many line items and things that end up determining the year. I don't know, René, if you have anything to add?

No. Well, it would be a repetition to what are the moving parts to think about. Well, it's the market assumption. And of course, short term, we don't have a strong line of sight to improvement in the beginning of the year, at least. But apart from that, it is, you can say, anybody's guess. Likely you would have still a continued tailwind in France to some extent since there is some distribution of the reform that will also take place next year. As Søren mentioned Zeal, and I would also say other innovation, we will continuously launch. That's what we invest in. We will see a contribution from KIND the acquisition there, which we are very excited about continuously. FX, of course, when we go into next year will be a headwind. And lastly, of course, in a much smaller scale, tariffs in diagnostics, you will have a full year effect of that. So that's some of the moving parts. And of course, we will get back to it when we talk about formally '26 next year.

This is super helpful. You mentioned KIND -- I mean, can we be sure that there is no contribution into the '25 guidance, that's all for '26, right?

It's for '26, exactly.

Our next question comes from Martin Brenoe from Nordea.

First of all, maybe just piggybacking a bit on Niels question on the commercial U.S. Can you maybe elaborate a little bit what's going on, break it down, what's happening? And how much is driven by managed care, for example, and how much is driven by something else? And then that would be the first question to understand a little bit more what's going on in U.S. commercial and also if you have seen a continuation into this quarter. And then just on Zeal and investing into this product launch, how do you balance the fact that you have this exciting product launch, which seems to be quite a big marketing splash behind it and the fact that you are in a situation where you are at the very bottom of your guidance range in terms of EBIT. What's most important to you taking market shares or delivering on your EBIT guidance? That would be the second question.

Yes. Thank you, Martin. I don't think I have much I didn't already say when speaking to the U.S. commercial market. Again, we are talking 4%, 2%, 3%. So you have to be careful. You don't overinterpret what causes what. I can only again high level highlight managed care contraction as well as general consumer sentiment. I simply don't have it more precise than that. We have no statistics yet from first month of Q4, so no comments to that. Zeal balance, it is, of course, so important for us as a company to deliver on our guidance and deliver good results. It's also an important part of that to sell some products. We are very conscious about not creating what you call marketing spares in markets that cannot sell anything. We do enough to create attention to the business, enough to get in dialogue with customers that might not otherwise have enough dialogue with us, and we do that to win share also this year. And this is, of course, a careful balance between share gain within this year, building expectations for next year, but we are very focused on that.

Our next question comes from Susannah Ludwig from Bernstein.

I have two, please. I guess maybe just focusing back again on the U.S. market. You guys talked about better performance in managed care and the VA and then the weakness in Costco. Could you clarify how your performance versus the market was in the independent channel? Do you think you're taking market share there as well? And then are you able to quantify the headwind on sort of wholesale from the return to more players in Costco? And I guess just on Zeal, could you talk about your decision to launch first in European markets rather than launching in the U.S. market? Have you chosen markets that have a higher share of ITE products? Or what was the rationale behind sort of the launch schedule?

Yes. Thank you very much. U.S., I think it's quite simple overall. It is a, you could say, structural change in Costco following the additional supplier. Given that, I think we do quite well in terms of share in the system after the change. When we mentioned VA, this is driven by product news and general performance and of course, growth in the channel. Managed care, yes, the general managed care market is soft, slightly down. It improved a little bit lately, but still negative. And of course, we are very little exposed in that. However, our current performance is gaining share in that channel after bottoming out in the spring and the fall of last year. And with the independent, we have, I would say, a very stable to slightly positive development, meaning that we take some share, but very sensitive, of course, month-to-month exactly where it lands. This is also in -- all of this is in units. And of course, there is also a pricing component to it. And there's no doubt there is a quite competitive situation in the general independent market, but we do well. I think compared to most people's expectations after the many new launches, I would say we definitely stand well with the independent in the U.S. market. Zeal Europe versus U.S., U.S. is simply too big. We don't want to start a launch in U.S. and have to run with allocation and selected customers and so on. So we have picked a number of European market where the size is at a level where we are sure we can supply to demand back to Martin's good question on efficiency and return on the investment in marketing. So we have to make sure we get a good return in the markets we launched it, meaning a significant volume compared to, you could say, the market share potential and get a good pickup. And that's how we have selected. And then, of course, Germany, what I would call a soft launch, but you cannot announce it in, not release it to customers in the country. But that's a little more select, not selective, but with a little more constraints on the volume. But on the other hand, Germany is not a big EMEA market. So well chosen and to make sure we can balance demand and production capacity.

Our next question comes from Martin Parkhoi from SEB.

You said it before because I was just on the normal call as well. So maybe I've missed it, but I'll try again in away, just on Zeal, Søren, can you tell -- talk a little bit about your ambition for which segments of the market you actually believe [Technical Difficulty] because I'm sure that you're not only going for the [ CSC ] market. I'm sure that you maybe also have ambitions outside the IT category, maybe the [Technical Difficulty] technology. So where do we actually see the possibility of the [Technical Difficulty] same content, if you just look at the IT [Technical Difficulty] you are more or less nonexistent in IT. Where do you see not a specific number, but are you significantly underrepresented globally in the IT market compared to your average global market share? And then second question, I understand that still, of course, as also said would be once we [Technical Difficulty] hit the market during next year in the bigger market. Launch events at the size of a typical new platform launch with a new right? And does such market launch events interfere with the timing of a new platform?

Martin, at our end, the line was not too good. So bear with me if I don't hit it exactly on the nail compared to your question, then I come back. What segments do we see Zeal in for sure, starting with the obvious is already small in-ear products, CICs, IICs. But I think it's one level up, why have right products grown a lot in the past 5 years? Well, the combination of the most advanced technology and given that many people like to have direct streaming from their phone and a rechargeable battery and so on, these products have offered much greater benefit than the average in-ear product have done. So we see this as the way to get all benefits back into the year. And exactly how that then plays out with the segments and so on, I think that's one of the things we want to learn and see and understand. There is a limitation in ear canal in size, not all ears can host an in-ear product. This is the smallest, I think, or one of the very smallest you can make. So it's not that it's worse than others, but there is just a limitation. Some people feel a level of occlusion, meaning like having an ear plug in. For some, it's others, it's not an issue, depend a little bit on how deep it is. So back to your question, I think, of course, in your products, we expect to capture significant share. Why go up in size if you can have it smaller. But there will also be some cannibalization from right products. There might also be people that choose to start earlier. Now there is a solution that actually meet their needs a little bit back to how important cosmetics and design is for maybe especially the still work active, 65-year old, et cetera, milder hearing loss struggling in certain situations. So yes, I think it's very broad. It's very important not just to look at and maybe that's a better answer what you should not just look at. Don't just look at a category for instant fit or CIC, IIC. That's, in my book, way too narrow a potential to look at. And our global share is low. We are strong in building rights. We actually made the first one. So it's also what's the footprint and what's the sand. We are part of the market. So there's no doubt that that's one of our competitive strengths. And you could also say the reason why we reinvent the way of doing it is because we have not managed to build success in conventional India products and we believe much more in this way of doing it going forward as it can offer all benefits. The second question was not too loud and clear. But if you ask for future introductions under these new platforms, as always, we don't disclose any details on that. But Zeal is a key focus now, but it does not prevent us from introducing other products in '26.

I just have a follow-up. It's actually another follow-up. It's actually a new question. It's just for René. We, of course, VA pricing, we, of course, most of us at least noted that you have a pretty low price on charters compared to your peers in VA. Can you confirm that if you should be lucky enough to get that sort of out and get a price on par with peers in the charter category that, that would be a potential contribution at the neighborhood of DKK 75 million to DKK 80 million on sales and EBIT on an annualized basis?

Yes. I think I will allow myself to answer. I think there is, of course, an upside of improved pricing. And you know the total market, you know the market share, you know the number of rechargeable, you know the price difference. So assuming that the price gap is narrowed significantly, then I think you can all make your math and come to a conclusion on what the upside of that is.

Our next question comes from Andjela Bozinovic from BNP Paribas.

The first one, maybe just on your wholesale business, you managed to increase market share despite having one of the oldest platforms available. Can you maybe just share any details where did you see the market share gains? And if you want to highlight any particular channel or region? And following up on this is you've now launched Oticon Zeal, but do you feel like you can still deliver market share gains with the current offering in 2026 as well? And the second question is just on your implied Q4 because if we put the low end of the guidance, we arrive at a slowdown in Q4. Can you give us any reasons why to assume so? And any moving parts that we should have in mind?

Yes. Thank you very much. I think our ability to grow share globally is a testament to the quality of our platform. if I may use Oticon Zeal as an illustration, this product is only possible because we have a super power-efficient platform that delivers very, very high audiological performance that have a very power-efficient system that even in a small form factor and a slightly smaller battery, you can still get a full day use and take good care of the battery in the life of the product. And we have a very strong power-efficient radio 2.4 gigahertz, Modern Bluetooth Low Energy radio. And these things together enable us to make an Oticon Zeal. It enables us to make very small new mini PC, very powerful one without compromising size. So I think it is actually a testament to the quality of the underlying platform and the stability of it, the quality of it, people's patient satisfaction ultimately. And this is why we have been able to year-over-year and also sequentially improve share. And there is not a single one to call out. There is one to call out on the negative side, which is the year-over-year effect in large U.S. retailer due to expanded portfolio of manufacturers. So you could say, excluding that, we definitely have done, I think, well compared to the number of competitive introductions that have been. So then adding Zeal and a powerful very small BT for more profound or severe to profound hearing losses and also a good launch schedule for next year, then yes, I feel comfortable about the ability to gain share in a global market. The reason why we are not performing at our best is primarily, of course, that loss of share in that particular channel in U.S., but then also the global market. Low-end slowdown, I think you should expect at least what we do that we see somewhat similar in the fourth quarter to the performance of the third quarter. The third quarter have performed in the lower end of expectations. And it's always many scenarios when we build an expectation and also why we have 1% to 3% organic growth and DKK 400 million in EBIT is because there is a lot of variables down the line. And yes, big picture is expect Q4 to also be, I would say, in the low end of our expectations, but somewhat similar to what we have seen from a growth point of view in the third quarter.

Perfect. And if I can squeeze in just a quick one on France. I know you commented that it's probably statistic that is making the difference between you and Amplifon. But can you just comment on your market share in the country since the start of the...

Where we measure. So it, of course, both come from good performance in our retail activities as well as wholesale activities.

Our next question comes from [ Martinia Nula ] from Jefferies...

I hope that you can hear me okay. And apologies in advance if the question has already been addressed, but the line was really bad on my end. So I would ask two, if that's okay for you. The first one revolving around managed care. I'd be curious to hear your thoughts on your share recovery in the channel and any potential contribution that could or could not be baked into the 2025 guide? And how should we think about any potential tailwind going into next year? I'll give you some time to answer that -- this question to before asking the second one, if that's okay for you.

Thank you, you are loud and clear. We are still, as [indiscernible] you would say, underrepresented in managed care for, I would say, structural reasons. One of the biggest administrators is owned by one of our competitors. It would be naive to believe we could get a very high share in their channel. So we will always be sub average in that channel. We also do it slightly -- with a slightly different strategy between our wholesale business and our retail business. In our U.S. retail business, we have come to the conclusion that we are better off trying to build our own traffic and therefore, do less to little managed care compared to the market. And that's working good for the U.S. retail business. On the wholesale side, we are reestablishing I would say, business relationships with a broader array of the players after the loss of share last year and into the beginning of this year, and we see continued sequential improvements. All in all, for the group performance, it's not that big and therefore, not a big weight in the total equation, but we are gaining share in the channel to confirm.

Okay. That's perfect. And my second question would be around the economics around the Zeal products. I would love to hear your thoughts on the potential margin impact that this could have not right now because I understood that you are not ready from a manufacturing capacity standpoint and so on at the moment. But just circling back on one comment that you've made around the improvements in terms of robustness and reliability stemming from the encapsulation of the body of the device. So I was wondering if this product could start to be a tailwind on the margin because I get the point that the product is more reliable, but having only one big piece for the shell of the device could also imply that the device could be less sustainable, i.e., so more difficult to repair. So any comments around that would be super helpful.

Yes. There's a lot of moving parts in that equation, and I think it's a little too early to give a precise guidance. I would still repeat what I said that from a cost of goods point of view, then a Zeal is less expensive than a custom-made in-ear product, but it is at least at current production maturity and efficiency, et cetera, more expensive than a right product. Is it then more or less reliable. It fundamentally has been built to be more reliable because you obviously can't repair to the same extent. So you can say the call frequency or service frequency hopefully go down. On the other hand, those where we can't solve the problem with replacing a wax filter or a dome or the filter around the microphone on the antenna would be more expensive. So it's simply too early to call out exactly how that total cost equation through life looks like. So we will have to have a bit more experience until we can finalize any more specific guidance on that.

And our final question this morning comes from Niels Granholm-Leth from DNB Carnegie as a follow-up.

Again, this summer Amplifon called out this 5-year replacement cycles. So in your view, what proportion of units sold in the global hearing aid market would take place in markets where there is a pretty accurate 5-year replacement cycle?

Yes. Thank you, Niels. I think it is relatively inconsistent. If you just take the biggest markets in the world, U.S. is primarily commercial and therefore, more in the 4-year range because that's actually what people tend to do if they pay without reimbursement. Then we have France, which is 4 years, so a relatively short cycle. And then you have Germany in the other end with -- for some insurance companies up to beyond 6 years. So I think the global average of 5 years is a very fair assumption, but it distributes. So when you have -- whether it's 4, 5 or 6 years, not everybody shows up day 1 when the reimbursement is -- when you're eligible again, it's actually an important part of our building traffic to remind people that at least they are now eligible for new reimbursement and therefore, maybe it's worth making a visit.

Great. And then just finally, do you still expect to announce integration costs related to KIND at the time of the closing?

Yes, that's still the plan, Niels.

Ladies and gentlemen, with that, we'll be ending today's question-and-answer session. I'd like to turn the floor over to management for any closing remarks.

Thank you, operator, and thank you so much to everybody for joining our call here today. As always, if you have further questions that we can help you with, please do reach out to us directly. Our contacts can be found online, as always. And we, of course, always look forward to seeing you on the road in the coming weeks ahead. Have a good rest of the day. Thank you.