GN Store Nord A/S (GN) Earnings Call Transcript & Summary

Hello. Welcome all to GN's Full Year 2021 Conference Call following our release this morning, Danish time. Thank you all for dialing in. It's great to have you on this call. Participating on the call is Gitte Aabo, CEO of GN Hearing; Rene Svendsen-Tune, CEO of GN Audio; Peter Gormsen, CFO of GN Store Nord; and myself, Henriette Wennicke, Head of IR and Treasury. Today's presentation is expected to last about 25 minutes, after which, we'll turn to the Q&A session. The agenda for the presentation itself is that Peter will start off with group highlights. Then Gitte will provide an update on GN Hearing, and Rene will provide an update on GN Audio, after which we'll go back to Peter for a financial update and financial guidance. After that, we hand over to Q&A with questions from the queue. And with that very brief introduction, I'm happy to hand over to Peter.

Thank you, Henriette. Good morning, everybody, and thanks for joining our call today. Today, we have released our 2021 annual report along with our corporate governance report, remuneration report and our sustainability report. All the reports are uploaded on our website, gn.com. Let's move to Slide 4 and a snapshot of the year. '21 was yet again an extraordinary year for GN with COVID-19 and supply chain challenges as some of the key topics. However, it was also a record year in terms of revenue where we delivered DKK 15.8 billion, equaling an organic revenue growth of 20%. We delivered EBITA of DKK 2.7 billion and earnings per share of DKK 13.9, up 43% compared to last year. Due to the solid financial numbers, leverage ended at 1.8x, which comes on top of the lively acquisition in late December, and significant shareholder distribution of DKK 1.4 billion through share buybacks and dividends. As you know, we closed the SteelSeries acquisition in the beginning of January, which naturally has increased our financial leverage significantly in early '22. {IUH'll come back to this later. But for now, I'm happy to hand over to Gitte for an update on GN Hearing.

Thank you, Peter. As Peter just mentioned, 2021 was indeed an extraordinary year. We would have preferred for GN Hearing to have gone stronger through 2021 than was the case. Challenges in several areas gave us a temporary setback and postponed of projected growth to some months. However, our fundamental innovation capabilities are intact and the Hearing products we have today, and those that are coming will allow us to regain above-market growth in 2022. Let me just stress that we are fully determined to return to growing revenue above the market and restore profitability in line with our midterm guidance. But let's start with looking at the '21 performance before I return to '22. Starting on Slide 6 and our financial highlights. GN Hearing delivered 16% organic revenue growth in the hearing aid market, which saw a solid recovery across regions during the year. Organic revenue growth for Q4 was 2% and around minus 12% compared to 2019, which was driven by the earlier announced delays in product launches. The gross margin improved to 63.8% in '21 but is still below historical levels. The EBITA margin gradually recovered to 12.1% for the full year and 15.3% in Q4 and driven by the revenue growth and continued prudent cost management. We delivered a free cash flow, excluding M&A of DKK 198 million for the year. Now let's move to Slide 7 and some more color on the regional developments. Beginning with North America, we delivered 17% organic revenue growth for the year driven by solid performance in the independent market but offset by the development in VA and Costco. Specifically for Costco, we continue to see strong performance of Jabra Enhance Pro in the branded part of Costco. However, we still see a headwind from the ASP development in the channel. Moving to Europe. We delivered an organic revenue growth of 7% for the year. We saw, among others, a strong performance in France and Spain and a more modest performance in Germany driven by market dynamics. In our Rest of World region, the organic revenue growth ended at 26% compared to 2020 with strong performance in, among others, China. Let's move to Slide 8 and the exciting acquisition we announced just before Christmas. Lively is a leader in online hearing care, and the acquisition fits perfectly into GN Hearing strategy of providing hearing care to even more people. The current customer group in Lively is on average around 10 years younger than customers in the traditional channel, demonstrating the potential to drive penetration and get users started on the hearing journey even earlier. As part of GN Hearing, Lively will be even more effective in driving sales than before. Around 2/3 of Lively's customer inquiries have not been assisted until now as they are either looking for a combination of an online and offline experience or have a severe-to-profound hearing loss. As part of GN, Lively can forward these customers to our network of Beltone and ReSound hearing care professionals. Lively has been on a fantastic growth journey in the last couple of years and delivered DKK 114 million in revenue in '21 with growing revenue quarter-by-quarter. We expect the online channel to grow around 30% annually in the years to come, and we expect Lively to continue to take market share. We want to build the preferred digital platform for independent hearing care professionals. To realize our growth ambitions, we will continue to invest in the platform. Going forward, we'll refer to these investments as investments in the emerging business. The EBITA loss was negative DKK 171 million in '21, but we expect the emerging business, including Lively to turn profitable in the midterm. With that, let's move to Slide 9 and the robust market outlook. I want to spend a little time explaining our assumptions for the hearing aid market for '22, which naturally provides the foundation for our financial guidance. Overall, we estimate the volume growth for '22 to be in the high-end of the historical 4% to 6% range, as further market recovery is expected following COVID-19. The global volumes in '21 ended above the level realized in '19 and with around 4% to 6% volume growth expected for '22 will be back to a normalized market. The negative ASP impact for '22 is also expected to be in the high-end of the traditional minus 1% to 2%. This is driven by high expected volume growth in low ASP countries like China and India, but also in channels like the NHS. These estimates naturally come with uncertainty. But let's move to Slide 10 and our key strategic priorities. Since we announced our strategy in February 2020, the world has, to a large extent, been turned upside down due to COVID, and that has clearly changed some of the drivers impacting our industry. While aging populations and low adoption rates of hearing aids still remain important trends for our industry, we're now seeing accelerated demand for digital solutions and a need for a more consumerized approach to hearing care. Our strategy and our 3 fundamental strategic pillars are fully intact. But as always, strategy evolves over time, and I would like to provide you with an update on our current focus areas. Let's move to Slide 11. Based on the technological acceleration during the pandemic, hearing care is now at an inflection point. We see an opportunity to modernize hearing care and reach more and younger people. We have prepared and adjusted our business model accordingly in line with our strategy, like with the acquisition of Lively and the launch of Jabra Enhance Plus. The ambition is clear. We want to modernize hearing care, we want to simplified to grow above the market, and we want to restore profitability in line with our midterm targets. We will unlock the next level of growth with a dedicated focus and investments in digitalizing the customer journey in the core hearing aid business and thereby delivering innovative and individualized customer experiences. We'll continue being the trusted partner to the hearing care professionals while growing the emerging business to expand the market. Moreover, we'll focus on digitizing and simplifying the way we work across our business and value chain. Our current profitability is below our historical levels and below our midterm guidance. This has to change. Therefore, we will have a dedicated focus to digitalize, simplify and automate our supply chain by building on the efficient and scalable setup in GN Audio. To drive this change, we'll focus and streamline all setup. And as a consequence, we expect nonrecurring items in the magnitude of minus DKK 150 million during '22. These will mainly cover severance costs and nonrecurring investments in the supply chain. As we incur the nonrecurring items, we'll give you more details on the nature of the costs, but for now, we need to keep it high level as our business needs to run smoothly. With this, we restore profitability in line with our midterm guidance. Now let's turn to Slide 12 and our progress on our R&D transformation. We have made significant progress in our R&D transformation, and the delayed product from '21 will be launched in Q1 and Q2 this year. I want to highlight 2 important milestones, which have been successfully delivered by the team. The FDA approval of the Jabra Enhance Plus, a combination of a hearing aid and an earbud and the announcement of ReSound ONE BTEs. Both products will be commercially available by the end of February. These 2 launches are important milestones, and I look forward to delivering more launches in the coming quarters. We plan to finalize our ReSound ONE product family with an exciting ITE product launch in Q2 before the launch of a new platform in Q3 '22. These planned launches, together with the expected market growth are essential to our financial guidance for '22, which leads me to Slide 13. We want to give you the opportunity to see the progress we are making across the GN Hearing, and therefore, we want to share even more details than in the past. In our core hearing aid business, we are guiding for an organic revenue growth between 5% to 10%, which should result in market share gains. The 2 new product introductions will have limited impact in Q1. And as a result, we expect to see low-single-digit growth in Q1. As our planned launches will hit the market during the course of '22, the growth will also follow. So we expect high-single-digit growth in the second half of the year. The EBITA margin for the core business, excluding nonrecurring items, is expected to be around 14% for '22 and as we continue to invest into future growth opportunities. We'll front-end load certain investments and together with the back-end loaded growth profile, this will impact our EBITA margin in Q1, which is expected to be low-single-digit. However, the EBITA margin for the last 3 quarters of the year is expected to gradually improve towards 20% by Q4 '22. As mentioned, nonrecurring items are expected to be around minus DKK 150 million, primarily related to investments in the supply chain. The EBITA in the emerging business, including Lively, is expected at around minus DKK 190 million, reflecting a strong top line growth, but significant investments are needed to drive future growth and scale. And with that, I'm happy to hand over to Rene.

Thank you, Gitte, and hello to all of you. So it's now my pleasure to take you through GN Audio's results for the financial year of 2021. Let's move to Slide 15. So 2021 was again a strong year but challenging year for GN Audio. We delivered 22% organic revenue growth on top of the 42% we delivered in 2020. The business is now anchored at a new and far higher level. In 2021, we continue to execute strongly across the business and the underlying demand for our products continue to be very strong. We would have preferred even stronger growth in the year. However, the global supply situation was unfortunately a constraint, and we are leading the year with a historically high order background. Gross margin ended at 50.6%. This was an improvement compared to 2020 despite the increased freight and production cost. Excluding transaction-related costs, the EBITA margin reached 21.2%. This reflects continuous leverage in the business, but also significant investments into future growth opportunities. Free cash flow came in at DKK 1.3 billion, which translates into a cash conversion rate of 60%. All in all, a year with strong execution for GN Audio despite the challenging environment created by the global supply crisis. So let's move to Slide 16 and the regional performance. So GN Audio's strong growth was broad-based across regions, thanks to our dedicated teams and partners and world-leading product portfolio. In North America, we delivered strong organic revenue growth of 27%, driven by both the enterprise and consumer segments. And we are there up 47% from 2019. In Europe, we continue to execute strongly. And despite very high comparison numbers, we delivered organic revenue growth of 16% for the year. This is driven by strong performance in, among other, Germany and U.K. and here we're up 88% from 2019. And finally, in the Rest of the World, organic revenue growth was 30% for 2021, and we are up 86% from 2019. So let's move to Slide 17. So shifting gears a bit. So on January 12, we received all necessary antitrust approvals, and we closed the SteelSeries transaction. SteelSeries has been on an impressive growth journey with solid profitability in recent years. The performance is driven by the attractive market, the strong innovation capabilities of SteelSeries and the strength and uniqueness of the SteelSeries brand. SteelSeries delivered a strong set of numbers again in 2021 with a total revenue of DKK 2.6 billion. In terms of profitability, SteelSeries delivered an EBITA margin of 13.6%. As such, it is clear that we are now welcoming a strong performing growth engine to the GN Group. And together, we are now ready to take the company to an even higher level and to drive synergies across the different businesses. We continue to expect annual run rate operational synergies of around DKK 150 million by the end of 2022. And as earlier communicated, SteelSeries will continue as an independent business unit within GN Audio. We do expect integration costs of around DKK 100 million in 2022, and this is largely driven by IT expenses. With the addition of gaming to our business, let's move to Slide 18 with an overview of our business segments. And thanks to GN Audio's growth focus over the last many years. We do today operate with a strong competitive position and a world-leading product portfolio in some very attractive market segments. On a consolidated basis, we continue to expect GN Audio's markets to grow at around 10% per year. Let's turn to Slide 19 and an update on our strategy. So building on our 2020 and beyond strategy and combined with the underlying -- strong underlying market trends, we feel confident that we can continue our growth journey. Several of the underlying trends we were expecting a few years back have been accelerated by the pandemic. We do see a significant shift in work patterns, not only in the traditional enterprise business, but increasingly also with collaboration tools for governments, education, health and what we call desk less workers at last. With these trends in mind, let's move to Slide 20 and an update on our focus areas. The key theme for GN Audio is simplify to grow. I'm a key believer in keeping things simple, making simple and intuitive products, but also driving simplicity in the way we operate. And we were trying to -- we will transform the business from an audio-mainly business to an audio, video and gaming business. Key priority will continuously be providing individualized customer experience, whether you are looking for best audio experience, video experience or gaming experience. We will focus on winning in the high-growth markets across office, collaboration and gaming and further broaden the scope of the office business unit beyond office headsets. M&A will continue to be an important enabler in the future to accelerate businesses, especially for the new segment of deskless workers. Here, we are targeting more than 2 billion workers spanning from teachers, doctors, retail staff, logistics personnel to first responders and many more key roles. All in all, the aim is simple in the next phase of our strategy. We will unleash the next growth rate for GN Audio. Turning to Slide 21 and some additional comments on the supply chain situation and the expected impact on the business in 2022. As we have previously stated, we do continue to see strong underlying market demand, and we are confident that we can continue to take market share across key categories. We have, as per February 1, taking price increases in the enterprise business to mitigate input cost. This will naturally be supported to our growth in 2022. However, the uncertainty of the supply chain situation is still significant and ever changing. We believe these challenges will continue in the first half of 2022, but the current assumption and expectation is that it will ease in the second half of the year. These considerations and building blocks have naturally laid the foundation for our financial guidance. And let's move to Slide 22. In 2022, given the supply situation, GN Audio expects to deliver an organic revenue growth of more than 5%. For SteelSeries, we expect an organic revenue growth of more than 10%, which will be treated as M&A growth when we do the reporting. With the current supply situation, we are looking into Q1 organic revenue growth of around minus 25% across GN Audio organic and SteelSeries. However, with the ongoing reengineering of products combined with an expected easing of the supply situation, we do expect to return to strong solid double-digit growth rates in the second half of the year. The EBITA margin for the combined business is expected to be around 20% in 2022 before nonrecurring items. In Q1, we expect the EBITA margin to be in the mid-teens due to expected top line development with a gradual improvement in the remaining quarters of this year. Nonrecurring items are expected around DKK 400 million, covering transaction and integration costs as well as noncash PPAs. The PPAs are related to customer inventory adjustments associated with the consolidation of SteelSeries. And with that, I'm happy to hand back to Peter.

Thank you, Rene. Moving to Slide 24, group financial highlights. On group level, GN delivered 20% organic revenue growth and the EBITA margin increased to 16.9% compared to 13% in 2020. We delivered a strong earnings per share of DKK 13.9 up 43% compared to last year when excluding transaction-related costs. Due to the acquisition of SteelSeries and the related significant step-up in yearly noncash amortizations, we have decided to introduce adjusted earnings per share. This metric will exclude gain and loss from nonrecurring items as well as amortization and impairment of acquired intangible assets. With the introduction, the aim is to give more transparency on the underlying development in the business. Let's move to Slide 25 and our cash flow for 2021. Overall, looking at the cash flow statements, let's remind ourselves that 2020 was a year of extraordinary cash flow protection. In '21, GN Hearing's operating cash flow was driven by prudent cost control and higher earnings, but with a negative impact from working capital and higher tax payments. In GN Audio, we saw a strong operating cash flow for the year but offset by a negative development in working capital and significant investments in future growth opportunities. Also remember that we, in 2020, received a gain from legal settlements and litigation of DKK 114 million. Let's move to Slide 26 and the capital structure. Despite distributing around DKK 1.4 billion back to our shareholders in '21 and the acquisition of Lively, financial leverage ended at 1.8x by the end of the year. In the beginning of January '22, we closed the DKK 8 billion acquisition of SteelSeries, a deal fully financed by cash and debt, which translates into a pro forma leverage ratio of around 4.4x by the beginning of '22. Due to the traditional cash flow seasonality as well as the nonrecurring items, the reported leverage ratio is expected to further increase during the coming months. This also includes the suggested dividend of DKK 1.55 per share in March '22, which were in line with prior years will propose at the Annual General Meeting. From Q2 and onwards, leverage is expected to decrease rapidly, and we are confident that we will be back within our target range of between 1x and 2x net interest-bearing debt-to-EBITDA within a couple of years as earlier communicated. At the Annual General Meeting, we will in line with prior years, proposed to cancel all treasury shares held today in excess of the shares needed to hedge future obligations related to the convertible bond and long-term incentive programs. Let's turn to Slide 27 and some comments on GN's efforts on the sustainability agenda. '21 was an exciting year where we set new ambitious 2025 goals, committed to setting science-based targets and where we continue to proactively work on each of GN sustainability goals. This included good progress in regards to future CO2 emission, more sustainable products and packaging. And last but not least, we continue to help even more hearing-impaired people. Making an impact is something that comes on top of our priorities every day, and we are all proud to be part of a company that builds the technology for the future in a sustainable way. Let's turn to Slide 28 and the financial guidance for '22. As both Gitte and Rene have commented on the guidance, let me briefly summarize. For Hearing, we expect organic revenue growth of between 5% and 10% and an EBITA margin for the core hearing aid business before nonrecurring items of around 14%. Nonrecurring items are expected to be around negative DKK 150 million in GN Hearing primarily related to investments in the supply chain. EBITA from the emerging business is expected to be around negative DKK 190 million. For Audio, we expect an organic revenue growth of more than 5%; and for SteelSeries, more than 10%. Nonrecurring items are expected to be around negative DKK 400 million in GN Audio related to effects of the acquisition of SteelSeries. No further recurring items associated with SteelSeries are expected beyond '22. The EBITA margin, excluding nonrecurring items, are expected to be around 20% in GN Audio. In Other, we expect EBITA of around negative DKK 190 million. Consequently, growth in adjusted earnings per share is expected to be more than 10% versus adjusted EPS for 2021. Let's move to Slide 29 and an overview of the key assumptions behind the financial guidance, which we found important to share with you this time around. Looking across the business, we expect a challenge in Q1 and but also assume a strong performance in especially the second half of '22. For Hearing, we expect low-single-digit organic revenue growth in Q1, while high-single-digit organic revenue growth is expected in second half of the year. As a result, the adjusted EBITA margin is expected to be low-single-digit in Q1, with a gradual improvement towards 20% by Q4 '22. For GN Audio and SteelSeries, we expect around minus 25% organic revenue growth in Q1 due to supply chain constraints. As the supply chain situation is expected to ease in the second half of the year, we assume to return to double-digit growth rates in the second half of the year. As a result, the adjusted EBITA margin is expected to be in the mid-teens in Q1 with a gradual improvement in the remaining quarters. Following the acquisition of Lively and SteelSeries, let me also briefly comment on our financial disclosure level going forward. We will continue to operate the business with 2 segments, GN Hearing and GN Audio. To provide transparency, we will be going forward share of revenue and EBITA for the core hearing aid business and the emerging business within the GN Hearing segment. Gross profit and OpEx will be reported on the consolidated segment of GN Hearing. For GN Audio, we will disclose the top line for the core business and for SteelSeries. As a consequence of the integration of SteelSeries into Audio, we will disclose EBITA for GN Audio consolidated. Finally, let's move to Slide 30 and our midterm guidance. Let me start by stressing that our ambitious midterm targets are intact, which now includes the impact from recent acquisitions. In the midterm, we expect to outgrow the market in both Hearing and Audio. For the hearing aid industry specifically, we expect the global hearing aid market to grow at around 4% to 6% in volume with an ASP decline of between 1% and 2% annually. In the midterm, we expect Audio market to continue to grow at around 10% annually. On a group level, this translates into an organic revenue growth and growth in earnings per share of more than 10%. And with this, I'm happy to hand back to Henriette.

Thank you, Gitte, Rene and Peter, for updates. Just a few remarks on the upcoming Meet the Management event before we hand over to the Q&A. The event will take place on March 23rd in a hybrid format where you have the opportunity to join virtually or in person. We do, of course, hope to see many of you face to face and formal invitation will be sent out shortly. On the day, we will dig a bit deeper into our 2 businesses, and all will share some thoughts on the new digital opportunity in GN Hearing as well as our progress in video and the gaming opportunity. We strive for an informal session and time for the Q&A. With that, I'm handing over to the operator for Q&A. [Operator Instructions]. And as mentioned, we strike for a call to last around an hour.

[Operator Instructions] Our first question is from Martin Parkhøi of Danske Bank.

Martin Parkhøi of Danske Bank. A couple of questions for -- one for each business. Maybe Gitte, on your margin guidance for GN Hearing. Can you maybe make a bridge of how you get from the 14% margin that you delivered in -- you expect to deliver this year in the existing business and going up to the 20% and meaning bridge, that is, of course, organic -- driven by organic sales growth and cost savings? And on that context, on the margin, you have this significant loss expected on the so-called emerging business this year, which is predominantly Lively. But will this go down with Lively? Or should we expect that more emerging business arrives. So we actually should expect a continued dose in this part of the business and not going up when Lively improves? And then Rene, on the organic growth guidance on Audio. You must say that the SteelSeries did quite well in the second half of the year also held up better than your current business. And also a good guidance for more than 10% organic growth this year. Why is SteelSeries equally hit on the first quarter? I, of course, understand that they made 125% organic growth in the first quarter last year. But why are they equally hit by the 25% as we see in the existing business? And can you confirm if I use 25% in the first quarter decline, then you need to make 16% organic growth in the remaining 3 quarters to hit 5%. How do you have the visibility on that pickup? .

Thank you, Martin. So let me start. And maybe I'll start with the emerging business. That is for all practical purposes, Lively. And we expect in the midterm to see breakeven on Lively. And in terms of the margin guidance for the year, we guided around 14% for the full year. And as we have alluded to in the first quarter, we expect our margin to be in the low-single-digit. As we are launching new products here in February and throughout the year and a new platform in Q3, we will obviously see stronger sales growth, especially in the second half of the year, so a bigger top line. At the same time, we are taking measures, especially in our supply chain to further drive efficiency and streamline the setup. So we reduce our costs. That combined will allow us to see improvement in the EBITA margin over the quarters so that we end the year in Q4 with an EBITA margin coming close to our midterm guidance of 20%.

Yes. If I can just follow up to that before Rene answer his question. You always have a very strong fourth quarter. Historically, that has been up to 24%. So my question was rather related to what -- how do you expect to go from the 14% for the full year delivered here and then to deliver actually more than 20%. I don't know when is it '23 or is it 2024? And when are you actually expecting this to happen on a full year basis and not only in Q4, which always has been the strongest quarter on the margin?

So first off, we confirm our midterm guidance of being above 20% in the core business. And that is, again, a combination of returning to sales growth above the market and addressing efficiencies in our supply chain.

So Rene here. So on your 2 questions, thanks for those. On the -- you could say, on the Q1, of course, for both businesses, it's a matter of the comp and the available components. The entire market is supply sort of determined at this point of time. So here, we have a bit of, you can say, the volume effects, of course, are different in the 2 businesses, but percentage-wise, we land in plus/minus the same place. If you then look forward, then the reality is that or you can say, short-term, also the GN Audio core or organic is harder hit from a component perspective than SteelSeries as we speak. And that's your second because that leads to the second question, why do we believe in this pickup in the second half, and we have calculated the same percentage as you just did. From everything we hear from all the information we are collecting talking to our suppliers and so on and so forth, it is our view now that these things will ease in the second half of the year. That could easily be a question now, do I know if that's the case. No, I don't know. Nobody knows, but this is the best assumption we have, and we are guiding on that fact. Right now, the market growth is entirely driven by supply. As supply will release, it is our belief from everything we see that the market will return to double-digit growth or at least the 10% we have talked about for a long time. And with our portfolio, with the pull from the market, the setup and how we recompetition, we will beat the market when the market starts growing again. Like we have been doing also second half and when we were under -- especially in November, December on the high restrictions as regard to component supply. I just want to say at the end of -- in summary here, so we're all on the same page. It's not there are no components out there. We are operating at a way higher level than we did 2 years back as I just commented. So there's a lot of components, but there is not enough for the growth that we could deliver if we had it all. And that, of course, goes from my competitors as well. There's a lot of components, but not enough to drive the growth we're looking for. When that eases, we think the growth is there.

Our next question is from Maja Pataki of Kepler Cheuvreux.

Two questions for Gitte then for Rene, some follow-ups as well. Gitte, you are stating -- you are giving your view on how you expect the hearing aid market to grow with a 4% to 6% unit growth in 2022, which is arguably a bit more conservative than some of your competitors to still talk about pent-up demand release. This is now obviously bringing me to a question which might be a bit provocative. But is it only because this is where you feel comfortable that you can deliver growth? Or is it that there are different markets? I mean in any way, you should see more of a pent-up demand coming from Asia and the markets that were soft in 2021. Second, Martin actually asked you a very good question and you were dodging the answer a bit on that. The emerging business in Hearing, you said it's among Audio, Lively. What are we to expect going forward it will be parked in that emerging business so we can actually try to understand whether total Hearing margin will go back to above 20%. And if you don't want to give us exactly what it is, that's fine, but just please confirm whether we should see further investments in that emerging business that will keep the GN Hearing margin below the 20%. And then, Rene, on 2022, I mean it's arguably a really tough market to navigate. But can you please talk bit more about the price increases that you have put through in 2021? And how much of growth you would expect to see coming from pure price increases?

Thank you, Maja. So in terms of our outlook for the overall market and when we talk about unit growth of 4% to 6%, we do expect that to be the high end of that range, so probably closer to the 5%, 6%. Now on the question of pent-up demand, we haven't really, at any time point, spoken specifically to pent-up demand because I don't think we've really seen that. If you look at the global market volumes in '21, I mean, they came in just above the '19 level. And therefore, we kind of assume that we are back to normal and grow from that. Should pent-up demand occur, then it's obviously still our ambition to take market share. So if that happens, it will also benefit our business. It's just that we haven't really seen it to a large extent yet. In terms of emerging business, sorry, if I was unclear. I mean, for all practical purposes, this is Lively. And we again, expect Lively to be profitable or reach breakeven in the midterm. And in longer term, we may consider expanding the D2C model beyond the U.S., but for now, this is where we focus.

Gitte, can I just have a follow-up question on that? You were talking about the 2/3 of customers or interested customers in Lively that can't be served today. Would you share with us what kind of ticket you would charge for a referral of people that would go and see one of your Beltone affiliates or anyone in your retail network? Shouldn't that be adding nicely to growth? And how can we calculate that?

Yes. I think -- I mean, the way to think about it is that the -- these customers will still buy their hearing aid through Lively. But what they are looking for is to get -- instead of getting the feeding service online, they would like to receive that in person. So we'll guide them to an audiologist where they then go and pay for the fitting to the audiologists. So I think the way to think about it is that Lively we'll still sell the hearing aid but they will pay a fitting fee to, for instance, an audiologist in the Beltone network or a ReSound provider.

What about the ones with the severe hearing loss that can't use a Lively hearing aid that needs something more -- somewhat stronger?

Yes, that is actually a very small fragment of these people. But in that case, we will have to guide them to an audiologist, and we are still contemplating how that will look like whether people will pay a fee for having their name on the Lively web page or how we figure that out, but there will be some sort of payment.

And Rene here back. So on the pricing, so we have launched price increases to the market by 1st of February up to 10% on the MSRP on the list price. This will not translate into a 10% effective price increase across the board because there are different contracts. We have global accounts and so on and so forth. But of course, we have not guided exactly where we think this will land, but I think mid-single-digit below 5% or better in that ballpark.

So that means that from a volume perspective, you really don't need to grow volume buys very much to comment about your guidance -- I mean, to hit your guidance?

Yes, I hear you.

Our next question is from Veronika Dubajova of Goldman Sachs.

I'll keep it to 2 for now. I'll -- one, just trying to understand, Rene, the Audio guidance for the first quarter and minus DKK 25 million. I appreciate you're operating in a quite a difficult environment. But clearly, it would imply a significantly lower revenues toward the excluding SteelSeries business than what you've been averaging at looking even at the last couple of quarters. Is this sort of a worst-case scenario? Is that how we should be thinking about it? Or is it indeed a situation that when you look at sort of the last couple of quarters versus where you are today from a supply chain perspective, things have gone still much worse that you will end up at sort of this DKK 2.2 billion of revenues as opposed to the DKK 2.5 billion to DKK 2.7 billion that you've been delivering. And if you can give us some insights into that, that would be helpful. And then Gitte, back to you on your gross margin dynamics. So I think the big difference between what's happened for you and your peers through the pandemic has really been on the gross margin development. And I think looking at where you are, you are still meaningfully below your pre-COVID gross margins, whereas I think most of your peers have moved to either back to those levels or above. I mean is the ambition of this $150 million restructuring to get you back into the 68%, 69% gross margin? And -- maybe can you give us a better, more detailed bridge for how you get there or what you think is a realistic gross margin for the business and maybe decompose that in terms of what comes through the top line and is dependent on the launches? Or as what is in your own control and will be driven by the actions that you're taking this year?

So Rene here. So thanks for that question. I mean the minus 25% that we are now guiding for Q1 is what we are looking into as we speak. And of course, we don't want to come in a situation where we give you a number and then to come back in May and tell that the world was any worse than that. But I mean the rest is that you can say November and December were poor from a supply -- component supply point of view and so has January and February been. So that's basically the situation we are in. It is -- we do see some improvements as we speak, but they have to come through first. So we should also just talk about the absolutes. If you talk about the DKK 2.1 million, DKK 2.2 billion that you just mentioned here, if you go back to 2019, we were DKK 1.3 billion right? So in Q1. So of course, we are still, despite this at a way higher level than where we came from. So the business is holding up, but against the Q1 of 2021, we are down.

So coming back to your question on the gross margin development and how to think about that. I think what we have -- or I've spoken about before is that we haven't had our sales come back at the 2019 levels, and yet we've kept the full capacity in our supply chain, meaning that we had, among others, fixed production costs that was sort of uncovered, which obviously has impacted the gross margin negatively. There's also effects from country mix and product mix, but if we were saying leave that out of the equation. My point is that part of the improvement we expect to see in our margins is driven by a bigger top line, and obviously driven by our ambition to outgrow the market, which is also reflected in our guidance on the top line. Now in addition to that, we are taking a look at our supply chain end to end from how the customers or how the audiologists place orders with us to they actually have the product in their hands. And there are a number of areas where we can further improve and become more efficient. And obviously, we also built very much on the experiences we have in audio in terms of driving efficiencies and scalability in the supply chain. And maybe just to give you a little bit more flavor. I think one of the things that we're looking at is how do we receive our orders. And today, in most of our markets, more than 80% of our orders come in either via phone or e-mail. And as I'm sure you can imagine that can be done more efficiently in a modern world and certainly also in a way that probably leads to less errors. So we have a number of areas to improve in our supply chain, and we are addressing that. So when we expect to see our EBITA margin return to 20% midterm, it is due to both a larger top line, but certainly also efficiencies driven out of measures we take, especially in the supply chain.

Okay. And so you say it's fair to assume, you would like to get that gross margin back to that high 60s number over. I mean, what's the realistic time frame that? Is it by 2023? Or do you think it will take longer than that?

Yes. Well, it's -- we are obviously looking at our EBITA margin, and it is our ambition to get back to the 20%, and we will get back to the 20%.

Are you guys willing to commit to a time frame for when you get to the 20%?

Well, I think in terms of the time frame, I can say that we expect to see Q4 coming close to 20% this year.

Our next question is from Christian Ryom of Nordea Markets.

A couple of questions from me as well. So starting with Audio. Can you, Rene, I think in Q3, you called out that you would have had double-digit growth in the third quarter, had it not been for supply constraints. Can you sort of quantify the amount of the impact in Q4, the extent to which you've seen the order backlog increase? And related to that, you previously talked about that you're reengineering products to ease supply constraints on some product lines. When exactly will this come through? Is it something that we are seeing? Is that embedded in the minus 25% here for Q1? Or is it something that comes later in the year? And then for SteelSeries, can you briefly elaborate on what are your margin expectations for next year? Is it basically assuming a margin on par with the 13.5% you delivered in 2021? Or should we expect improvement in the margin for SteelSeries?

Thanks for that. I mean on the Q4 side, we have not disclosed the order backlog as such, and we are not going to do that. But it's clear we would have delivered double-digit growth that we've been able to supply in Q4. On the reengineering side, none of this is available in Q1. So we have a list and maybe also more products than we have talked about earlier through a reengineering path as we speak. They will start hitting the market in and late Q2 and sort of over summer in a sense, of course. And that gives 2 things, of course, reengineering in a direction where we think there's a better chance and we can get sort of a better visibility to components, but it also gives us 2 options basically. So we can build on more than 1 chipset when we get there. But it's -- you should see that as a support of second half more than first half. On SteelSeries, margins will go up. We are sort of as we speak, starting to do the back office and supply chain integration and so on. So you should expect sort of 14%, 15% level.

Our next question is from Patrick Wood of Bank of America.

Patrick. I'll keep it to 2, hopefully, quite quick ones. First one, interesting on the backlog side in Audio being so high. I'm just curious if you have any color around the composition there. What have you seen in terms of -- is it more on the enterprise side or call center? And how is the mix spin? Has it been slightly higher priced units or lower? Just any color around that would be really helpful. And the second question, please, on the hearing aid side. I appreciate commentary in the past, but it seems pretty clear like the latest product cycle has been I think probably fair to say, not a great one relative to peers. I guess the question is, when you're thinking of a new platform later in the year, how committed are you to things like the M&RIE fitting and that side of things. How much of a shakeup of the existing paradigm should we expect in the third quarter? Or is it more of a semi sort of mini chipset uptake rather than a full review? Just curious about that.

So Rene back here. So on the backlog, I think the reality here is that it's, you can say, it's a mix where several of the high runners are severely affected. I mean across the portfolio, we have certain products with the right price levels and the right, you can say, sweet spot hitting that are selling a simply very much higher numbers. And some of these are affected by this. You can say that has 2 elements. One is that the demand is very strong. The other one, of course, is that we cannot deliver on that. So it is in the core business that we see this problem. Maybe there is a question coming later because we had talked a lot about video earlier. We have seen late last year, a very sort of restricted amount of video products we could get out. We will have a meaningful but not nowhere close to the demand, supplier video products in Q1 going up in Q2. So now we're actually starting to get some -- at least some fulfillment of demand in that space. But it is unfortunately a sort of across the board but also affecting the high runners, as to speak. Maybe just one more comment on the backlog. And of course, we are talking about the backlog because it somehow indicates the pull from the market and so on. But you also should remember, we talked about this also last year that after a certain period of time, the backlog, the business restarts, meaning that if you have had to stop in backlog 4, 5, 6 months, it will vanish. People start again, they buy what is relevant for that time. So you can say, don't expect that we have a massive effect of the backlog in Q2 when we need to be back to or at least Q3 because we need to be back to the normal business. Maybe we build new backlog, but that's another story. But backlogs disappear. And I've just seen sort of in the market many talk about this now is this is the rescue it mainly speaks to the fact demand is very high.

So your question on our new platform, I'm sure you appreciate that it is really early for us to announce that we come out with a new product platform in Q3. So I hope you understand that I don't want to speak too much to what features it contains. Having said that, I just want to maybe make the point that I know we haven't had the success we would like to have with ReSound ONE and M&RIE in the VA. But apart from that, looking into the commercial market, we actually see ReSound ONE and M&RIE being well received and the benefits that M&RIE brings in terms of really supporting organic hearing or hearing aid nature intended is well perceived both by audiologists and users.

Our next question is from David Adlington of JPMorgan.

So firstly, on Audio. Again, sorry to labor the point. But on supply chain, visibility. I'm just wondering in terms of how quantify those, particularly that kind of second half rebound because certainly, 1 of your competitors has talked about their supply chain headwinds continuing through the calendar second half in the first part of next year. So be more comfortable, if your competitors continue to see headwinds through the second half, does that give you some opportunities to take some more share if you're able to supply more fully into the market? . And secondly, just on Hearing, just with respect to the emerging business, your thoughts in terms of the trends of the DKK 190 million is this year trade downwards for margin?

Sorry, David. We have a hard time hearing you. Can you repeat, especially on the emerging business again?

Business, the DKK 190 million, is that better?

So sorry, David, this is Henriette here. Can you repeat your question again because we have a hard time here in your on the emerging business?

Emerging business?

Yes. Can you pick up from there? We couldn't hear the question.

DKK 190 million of headwind, get a feel for how you see that scaling down. Emerging business always be more to actually get to core margins at some point in the future.

David, thanks for that. I think, as you're also speaking to the market is defined. You say the market growth is driven by supply as we speak. So in that sense, of course, whoever supplies more into have better supply opportunity will gain share. We think despite sort of our own frustration about the situation late last year, we actually did gain share in the market. When we speak about recovery in second half, this is based on all the input we have from our suppliers, from everything we can see in the market, an assessment that this is what we can believe in is supported by the fact that we have significant reengineering ongoing. If we are better shaped than competition in second half, yes, then we will take share. I think we have -- we are not concerned that you can say we will run out of demand. There's so much, you can say, going on out there in terms of hybrid work teams platforms are still undersupplied massively. There sort of big, big upside in terms of moving people from, you can say, consumer type or less professional quality headsets and speakers and cameras and so forth. So if we do our job well, we can create the demand we are looking for and can we supply more than competition, we'll take share.

So David, on your question on the emerging business, and I hope I understood it correctly. So for '22, we are guiding minus DKK 190 million. And in the midterm, we expect the emerging business to break even. Will it be sort of a linear improvement? I don't want to confirm that, but obviously, we do see a gradual improvement towards breakeven while we continue investing in capturing the growth that we see in the online market.

I don't know if you can still hear me, but if the -- do you expect to make further acquisitions in that emerging business that could further push back even?

Well, for now, we focus in on Lively and making that successful.

Operator, I think we can take the next question.

Our next question is from Julien Ouaddour of BNP Exane Paribas.

I'm going to be quick. So the first one on Hearing. I'm just a little bit, I would be surprised by the guidance for Q1 2022. As we expect low-single-digit organic growth and also low-single-digit EBITA margin. It seems just a bit conservative given, let's say, easy comps and current mid-teens margin. So could you just give us a bit more color about the -- like the sequential decline expected for Q1 detail, please? And next one in Audio. So my understanding is that unlike previous years, you see now be willing to accelerate on bolt-on M&A, like you know Joe expand, let's say, proposition towards what you call nonoffice workers. Just could you let us know a bit more about it and how big M&A contribution could be going forward?

Yes. So let me try to do that. First, probably I want to state that our innovation capabilities are intact, and I'm really pleased that we, this week, have announced 2 new products that we are putting into the market end of February. Having said that, we are in Q1 still impacted from the fact that we have a delay in our product launches because we were supposed to put new products into the market in the second half of '21. And obviously, that will still be benefiting our business now here in January and February and so on. So -- and in addition to that, we also see somewhat softness in the market. We've seen that in the U.S., I guess, due to Omicron, we see COVID restrictions reapplied in Japan; VA, not allowing visits and so on. So it's still somewhat soft market that we are operating in.

If I may, just a quick follow-up. I mean, I understand that you see some softness and you have new product launches, I mean, in Q1. But if we look back like in history, I mean, last time that you had mid-single-digit like EBITA margin was probably in Q1 2020. Early in Q1 2021, you were at 8%. So I mean I just don't get it why, let's say, EBITA margin will be so low eventually you have some, let's say, softening of the market. I think your peers say that, let's say, the market conditions are a bit improving since January. So just any color on it would be super helpful.

Well, I guess, in addition to the factors I've already mentioned, we are launching 2 new products here in Q1. And obviously, we are supporting those with the relevant investments as well.

So Rene here, I think I mean thanks for the question on the frontline workers, or deskless workers of what we decide to call them. I think this is a strategy statement. We are looking into this opportunity together with platform owners like Microsoft, where you can say the UC, unified communication technologies will extend into this space. I mean, today, you have private mobile radios for certain sectors where you somehow have pushed to talk and so on. So there's a lot of opportunity coming there that we think we can address with the technologies that we bring is also, you can say, these are our customers already. So we have the channel access to that space to a large extent. So the opportunity is out there. When we talk about M&A, I think we have had very good success and experience actually buying ourselves into a certain segment and then using the GN Audio machinery to scale that. We've done that in the transport sector in North America with the whole transportation segment, logistics segment. We've done it with video where we have some fantastic products in the market. We just done it in the gaming space. And we think this model actually helps us accelerate getting to the growth point and then it's our job to scale it with the machinery that we have already. So this is not a stated intent that we are going to go and buy 5 companies in the next 2 quarters. But we think the model as such is very attractive for us to drive growth faster. So look at it that way. We don't have any M&A activity to announce. And of course, we just did a significant one. So we are absorbing that 1 as we speak. But this is a strategic statement actually.

Our next question is from Oliver Metzger of ODDO BHF.

The first one is also about your targeted price increases. So could you give a comment about the impact on margins on this, say, year-on-year comparison? Should we think about covering higher input costs, and therefore, keeping your margins eventually stable towards the 2019 or '20 level on a like-for-like base? Or do you see also some more differentiated approach to improve your revenue price mix? Also in this context, do you think that also price increases in the consumer space are realistic? That's basically part number one. Number 2 is at GN Hearing. You mentioned clearly to focus to accelerate some M&A and partnership activities. So could you give us some comments about your M&A strategy and whether it relates only to, I would say, expensive often loss-making emerging technologies going forward? Or whether you might also look to warmer this traditional, let's say, retail opportunities to a strong extent than before in future?

So Rene here, a good question, of course, on the price increase and margins. I think for now, assume that this is to -- this will find off new costs. I mean, of course, we already have transportation costs, very significant ones in the comparison. So if this doesn't move, then of course, there is an upside there. We don't really know what the market will say about component cost in the next phase but -- and we haven't seen yet a massive increase, but somehow, we have to assume that something will happen here. So I assume that this is to cover for cost coming in. So we are margin neutral here. On the consumer side -- let's say, on the enterprise side, we are the leader. We somehow have market power, so we can lead price increases and competition will follow. On the consumer side, we are not the market leader. So we have to somehow see what the big boys do. And then we will follow through.

So thank you for that. I mean it is a part of our strategy to accelerate M&A and partnerships, as you point out. We already have very important partnerships such as our research collaboration with Cochlear. We also have partnerships with Apple and so on. So it can have different expressions. I do want to make it clear, though, that when we write that statement, it is not because we have an ambition to go and buy retail. We don't -- that is still a clear part of our strategy not to do so. But we are obviously looking for if there are further attractive opportunities to supplement our business, we are looking for that as well.

Our next question is from Lisa Clive of Bernstein.

I had two questions. Could you just remind us when does the next -- when does the Kirkland Signature next come up for renewal? And is that a contract you'd be interested in given you've already launched the sort of ReSound ONE under the Jabra brand there. And on Tuesday, we saw a press release on the Jabra Enhance Pro or Jabra Enhance Plus, but the link seems to have disappeared from the website. I think you mentioned the launch in the end of February and sort of how it was flat in with the OTC category. So just commentary on plan to that product and what we should expect as OTC approaches in the second half of the year?

Yes, I'm happy to speak to that. So on the KS, I believe the contract is renewed every 18 months, so it will be coming up in the second half of '22. And obviously, I think that's quite a competitive process in relation to Costco. So maybe I don't want to comment too much on that. Except maybe just underlining that, I am actually quite pleased with our performance in the branded segment and obviously, having put Jabra Enhance Pro into Costco has made us regain a strong position in the branded segment. And that is maybe a good segue also to speaking about Jabra Enhance Plus. As you allude to on the first instance, it's approved under the hearing aid regulation and as such, can be distributed to the traditional audiologist channels, and we will do so. And we expect also that to be highly relevant. But once the OTC regulation comes into force, we certainly also expect Jabra Enhance Plus to fit under that regulation, and we see there a strong opportunity to expand into even more channels. And I actually think that is one of the areas where we in GN have a unique strength because those new channels that opens up, I mean, they are new to Hearing, but they are not new to Audio. So this is really a great example of where we can benefit from having Audio and Hearing under the same roof.

Our next question is from Mattias Häggblom of Handelsbanken.

Two questions, please. Sort of a similar question asked earlier on the call for Audio, but here specifically for SteelSeries. So what's needed for the remainder of the year SteelSeries to meet more than 10% for the year, we start with a 25% drop in Q1. I don't have in front of me how large Q1 was as a percent of 2021. I'm sorry that if you can help me with that proportion, so I can calculate myself or since you most likely have done the exercise, remind me what growth is required for the 3 remaining quarters to meet 10% plus for the year and what comfort you have in that trajectory? And then secondly, sort of along the same lines as earlier questions here on the call but following a series of early missteps in guidance revisions. I'm trying to understand if there is a new element of conservatism to the guidance that have now been put in place or if the process or how you set your guidance is unchanged?

So Rene back here on the SteelSeries, I don't think we disclosed that number. We are at 15% to 20%. I think you should think about it like that.

Yes. And maybe just as information materials than we have in the appendix of the slide deck, we have the quarterly numbers for SteelSeries for 2021, just so you have a original base.

Fantastic. For the guidance.

What was the question?

Sorry I think we are unclear of the question. Can you just repeat?

Yes, I'm just curious to hear if the process of how you set your guidance is unchanged from before or given that given some of the missteps, both from internal hiccups in product development but also external factors. If the process for how you set your guidance is unchanged or if it's been, to some extent, perhaps more conservative?

Maybe I'll take this one. This is Peter. So no, we have not changed our guidance. We do it the same way as we have done. And of course, as it was the case last year, it's still uncertainty is higher, visibility is lower. So of course, that makes it difficult. But fundamentally, we have not changed the approach we used for coming out with the guidance. It's the same.

Our next question is from Kate Kalashnikova of Citi.

It's Kate Kalashnikova from Citi. A few of my questions have already been answered, but perhaps moving up on Lisa's question. I was surprised that the price point for Jabra Enhance Plus, if they will pose sound control. Yet your product is more discrete, it looks much more like an earbud as in the traditional hearing aid is the challengeable and can also stream music and calls unlike sound control. But always anything input costs have gone up compared to when both launched sound control. Can you explain why you decided to price it lower? And can you also give us any color on what side of sales opportunity do you see for Jabra Enhance Plus? What sales contribution would you be satisfied with?

Well, for that question. Well, obviously, we have done quite significant consumer research and also looked at price levels on hearing aids, price levels on true wireless earbuds when setting the price for Jabra Enhance Plus. I really like your comments on the product because I, too, believe that we really have something unique here that it is stylish, it's elegant and it's discrete. So we are now launching into a new category. We are building a new market here. And in order to do that, it's been important for us to go in with a price point. That is obviously high enough to make it attractive from a financial perspective and profitable, but also at a point where we can read a broader -- reach a broader audience. So those have been the trade-offs that we have considered.

And on the size of sales opportunity here, what would be success in your view?

Well, as I'm sure you understand, we don't guide on a specific product. And also, we are launching into a new category here. So clearly, it's going to be a very exciting year also in that regard.

Can you talk about your expectations for the category may be more broader. Obviously, once OTC is implemented from the second half?

Well, I think in order to think about the OTC category, I think one have to think about that in the longer perspective. I think in the long run, and I think that's the whole idea with the OTC regulation is to expand the market and make hearing aids accessible for more people in the U.S. with the speed that will happen with, I think we will all have to watch that and see how fast that progresses.

Our next question is from Carsten Lønborg of SEB.

I just have to come back to this EBITA margin guidance, the midterm of 20%. It sounds like supply chain cost is a major lever in our view to get back towards these levels. But how much of your cost base is supply chain cost these days. And also, I mean, when you talk about Q4 this year and getting close to 20% coming back all the way back to Martin's comments, but normally in Q4, you had maybe 25% on average in '17, '18 and '19. So there's still 5 percentage points to go even from Q4 this year where we must assume that markets are maybe more or less back to normal, so normal course of business? And then second question is, in Q4 here, you take a rather large amortization of intangible write-down of something? Can you try to maybe explain what is that you're writing down?

Yes. So in terms of the costs related to our supply chain. So obviously, the majority of those costs are showing up under our cost of goods. So you can see if we run with an EBITA -- or a gross margin around 64%, it will be close to 40% of our costs sitting in the supply chain. So that's obviously a significant part. I think also if you look closer into our OpEx, you will see that we have during the last couple of years, reduced our sales and marketing costs and kind of reset the base here. We have invested heavily in R&D and IT, and we'll continue to do so. I think that's important for us to be competitive in the future. So where we see opportunity to further improve is in supply chain and obviously also a few other areas, but especially in the supply chain. Now part of that improvement also comes with a bigger top line to cover more of the fixed production overheads. So it is a combination of that.

Carsten, this is Peter. So maybe I'll take the question related to the amortization increase. This is primarily related to the write-down in some of our channel investments that we do in GN Hearing. So -- and that was the right thing to do in Q4 of '21.

All right. Just trying to understand was the 40% of your cost that was related to supply chain costs?

No, sorry, then I misspoke. I mean 40% of our total costs in GN is related to supply chain. So I mean, when we operate with a gross margin of 64%. I mean, that is -- then you have 36% going to cost of goods sold, and that is mainly supply chain costs.

Our last question will be from Niels Leth of Carnegie.

So first question would be for GN Hearing and your geographical exposure since you have such a high exposure to emerging markets and Japan. Could you just talk about some of your expectations, well, mostly for Japan for this year, which is an important market for you? And my second question would be on SteelSeries. Now you mentioned earlier that you would expect the margin to go up to 14%, 15% this year, but the EBITA margin that you're showing is an adjusted EBITA margin. So I guess we would want to see the reported EBITA margin is? Would you also expect that to be 14% to 15%, of course, excluding those one-off items that you have already called out in your report?

So let me start talking to Japan. I mean, as you point out, Japan is our second largest market. So obviously, a very important market for us. We unfortunately, continue right now to see lockdowns in Japan or restrictions following COVID. We do, however, expect that to ease up. And I think one of maybe the important thing to think about in relation to Japan is that the ITE form factor is quite attractive in Japanese context. And therefore, I look forward to bringing our new ReSound ONE ITE into Japan later this year. I think that will be really helpful.

Rene here, yes. Sorry, I was not precise to have these. The EBITA margin, we expect 14% to 15%. We understand the translation, of course.

And when comparing with 2021, we should not adjust for any cost items, which have been below adjusted EBITA margin.

Peter?

No is the answer. We should not.

There will be no further questions at this time. So I'll hand back over to our speakers.

Thank you very much, operator, and thank you, everybody, on the call for the very good questions. So with that, we appreciate your time today, and we will see you on the road. Thank you very much.