Earnings Transcript for DEMANT.CO - Q1 Fiscal Year 2024

Peter Pudselykke: Good afternoon, and welcome to our conference call following the release of our Interim Management Statement for Q1, which was published earlier today. The goal is a bit earlier than normal, but the plan and agenda is the same. We'll run through the presentation, and afterwards, we'll switch over to Q&A. Just on a practical note, the presentation should now be on our website. And as usual, we plan for this call to last no more than 1 hour in total, including the Q&A session.

On the call today, it's as always, Søren Nielsen, our President and CEO; and René Schneider, our CFO; as well as the IR team [indiscernible] and myself, Peter Pudselykke. And with that short intro, I'll turn the microphone to Søren for your initial remarks. :

Søren Nielsen: Thank you very much, Peter, and welcome everybody. We will head straight into key events for Q1 '24. And key highlights have, of course, been centered around the launch of new premium technology, and we have seen a strong initial reception, especially in the independent channel that have also been a prime focus for the introduction so far. So overall, good performance in Hearing Aids following a very strong '23. Our estimated quarter-over-quarter is that we have maintained market share in value and, yes, work from there.

Hearing Care, off to a slower start than expected, mainly due to France and China, both markets being softer than expected and, therefore, more challenging to drive traffic and leads, et cetera. However, the run rate for the business in total have improved during the period, and we expect growth to increase in the period following. :

Diagnostics saw solid performance. And we have delivered our -- yes, we work on our strategic review for the communication business, and it basically follows plans. And with that, the updated strategy for the group. Key financial takeaways for the first quarter. Organic growth for the group of 3%, driven by Diagnostic and Hearing Aids. The group's gross margin was better than expected, improved meaningfully compared to Q1 '23, and this is driven by improved product and channel mix that leads to a lifted ASP in Hearing Aids. OpEx, also as expected, due to very low comps last year in low double-digit growth level and primarily related to investment in R&D and, of course, the continued expansion of our distribution activities. :

EBIT before special items, in line with expectations, although slightly lower than in Q1, again due to the comp where we had very high sales and was cautious on the cost side last year, you get this slightly below last year effect, but something that will change during the year as we move forward. And based on this start of the year, which is basically in line with expectations, then we maintain our outlook of delivering organic revenue growth of 4% to 8% and EBIT now before special items of DKK 4.6 billion to DKK 5 billion, and special items positively a single line positive of around DKK 125 million. :

If we look at the different business areas, a little bit highlights of the hearing aid market here in Q1 '24. Overall, we estimate around 3% growth. As always, we cover around 2/3 of market with data and statistics. And this is a little soft, you could say, but also reflects a very diverse development in Europe, only growing 1% in units, where North America have grown 10% with 13% in the commercial market and minus 1%, slightly negative in VA, and the rest of the world also around 1%. So you could turn it around and say that outside North America, a soft market; and North America, on the other hand, very positive. So that's the big picture. :

We maintain our updated view that we also shared at the Capital Markets Day that, in general, we expect ASP to be flattish. But there in this period, due to geography and channel development, have probably been a slightly positive ASP development. Hearing Aids Q1 off to a good start based on a new introduction. Despite of the high comps, we have seen good initial reaction and uptake. It's not fully loaned across all channels. We just started in VA last week and also yet to introduce to a number of larger retailers. But off to a good start, growth entirely driven by ASP, where we have seen negative unit growth, which is partly due to lower sales to certain larger accounts. And if we go across the region, we have seen negative growth in France. :

This is primarily due to the timing of the launch, which led to a little bit towards the end of the quarter, a little bit holding back and then once launched, sales have picked up. Germany negatively impacted by exactly certain larger accounts, where we have seen unit sales go down, but to a lesser extent, revenue. Good performance in many medium-sized markets. North America, solid development, especially with the independent strong growth in VA despite negative growth in the channel, so a strong position that we expect to, of course, expand on and continued good momentum in the Canadian market. :

Asia negative growth in China, reflecting the very soft market dynamics. We actually think we are on a wholesale level play the game well and potentially gain share. But again, in a negative market, especially compared to Q1 last year, which was right after the reopening and, therefore, quite booming. Overall growth in Asia driven by -- is driven by the minor markets and strong growth in Australia and New Zealand. :

Hearing Care in Q1, we have seen overall a slow start to the year; however, important to stress that the run rate has improved and the slower start is, I would say, related to the timing of invoicing before and after and also in some European markets, a little bit timing of Easter negatively impacting March, but on the other hand, supporting a strong start to the second quarter. All in all, 0% organic growth, which is below our expectations, but also with a negative element from France and China. And the French market also is developing a little slower than anticipated. We assumed a full year flattish and we can just see here from the beginning of the year, at least on the retail level, our clear picture is that it's slightly negative compared to last year. :

Strong acquisitive element, acquisitive growth of 5%, driven by especially Germany and Belgium. So all in all, good speed on the business, but started a little slow. We have seen flat organic growth in North America for the period. Slight growth in Canada was offset by slightly negative growth in U.S., but again, all timing, and we have seen the run rate develop positively also in North America. Strong growth in Australia, driven by especially product mix. And in general, we also see a better and better effect in Hearing Care when introducing new strong products like Oticon Intent, we see an uptake to ASP. :

Diagnostics in Q1, solid performance, off to a good start of the year. Organic growth of 7%, a little lower comp. We, I'm sure you all remember, had a little bit slower start to the year last year, but still at least slightly better than expected. So all good on the Diagnostics side, I don't have much to add there. :

Outlook for '24, a few minor changes to the market. As we clearly explained on the Capital Market Day, when we review the past 5 to 10 years, we have to -- or the conclusion is that the development in the market on the ASP side has not been as we stipulated, not been minus 1% to minus 2%, but rather been flattish. That is also our assumption to going forward and as plans and budgets are made much more with the starting point in your own business, this doesn't impact the outlook. This is the updated assumption just reflecting everything we went through on the Capital Market Day. We expect cash allocated to bolt-on acquisitions in '24 to be higher than normal due to the acquisitions we have already made in '24 and a continued strong pipeline. And that's also a slight adjustment, you can say, to previous data. :

Discontinued business, we still expect to close the divestment of the CI business here in the first half, and we also expect to have conducted strategic review, not that things have been finalized, but the strategic review of the communication business by the end of the first half. So except for the special item of positive around DKK 125 million, no changes to the outlook. Organic growth of 4% to 8%. EBIT before special items, as this is a clear one-off effect for the year, the underlying EBIT guidance is unchanged, DKK 4.625 billion and a share buyback of more than DKK 2 billion, 2% of acquisitions and an FX of minus 1%, a little bit headwind there. And yes, other than that, no changes to -- in total, no change in total outlook, except the special item. :

So a quick update on the business. And with that, open up for Q&A. :

Operator: We will now begin the question-and-answer session. [Operator Instructions]

Our first question comes from Martin Parkhøi with SEB. :

Martin Parkhoi: Firstly, on the impact from managed care, where you, in the first quarter, say that it has been slightly negative. Since then, since your full year guidance release, we have seen your -- the class of, you call it, that in health care and the removal of Oticon products from formularies. Do you think that the development in managed care will become even worse for the remainder of the year [Technical Difficulty] first quarter? And is the situation with UnitedHealthcare a meaningful impact on your full year growth rates?

And then second question, we see a significant ASP impact in the first quarter where, I guess, it's due to U.S. growth and less sales to certain chains. How should we see -- what kind of impact have you baked into your guidance for the full year with respect to the ASP development? Are we seeing a similar effect in the remaining quarters? Or what should I assume there? :

Søren Nielsen: Thank you very much, Martin. We cannot comment in detail on the individual plans. But it is, of course, as you clearly say, things are dynamic and centered around our decision to try to position our brands in the U.S. market quite differently or a little bit differently and focus Oticon more on the independent segment, where we think our new innovations are supported and fully honored, and then getting Bernafon and still parts of the Oticon program a stronger position towards managed care. And these discussions and negotiations are in play.

I will not comment on the individual plans, but we definitely expect some progress. It is transitional. And how long it is, I cannot comment on. We, of course, also expect that we can benefit from this strategy on the independent side. So you have to see it in a totality. But for now and the way things look, this is exactly part of why there is a certain variants to the guidance for the year of the 4% to 8% organic growth and the corresponding EBIT. But we are within the guided uncertainty. :

And ASP, it has been strong here in first quarter. I don't think it will be as strong in the rest of the year. But if anything, a pointer towards the ASP instead of the units, but it depends so much on how you would say, Europe versus U.S. will develop, it is obviously a very different market. Growth rates we are looking into. If you see some of the European markets or a channel like NHS pick up significantly, it could change. It could also be our distributor business, which has a tendency to go a little bit up and down, it can quickly disturb the picture. But big picture, the way we position ourselves, the product mix, the channel mix, et cetera, underlying, I think you've seen for a period now that ASP is one of our growth drivers. But yes, in units over time, we would also like to see growth, of course. :

Operator: The next question comes from Maja Stephanie Pataki.

Maja Pataki: I would like to dig into Germany, where you highlighted that there were some soft volumes with some larger accounts. Could you maybe talk a bit about what the reasons were? Is it channel specific? Is it competition that is giving you a hard time, just to understand the dynamics. And then coming back to Martin's question on managed care. Maybe a bit of a challenging question. But Søren, what makes you confident that this is a transitional impact? I mean, everything in life is transitional. Next year, you wouldn't have impact, the comparison impact anymore. But when you say transitional, I think you probably expect growth to pick up again. What makes you confident that this can be achieved?

Søren Nielsen: Thank you, Maja. Germany is just an example where there are some big players, and that holds a lot of volume, but also Germany specifically have a tendency to have a big share of relatively low-priced basic products. And it is some of these segments where we have -- we don't have the same focus and attention. We focus on introduction of new innovations like we have seen with Real and now with Intent, and that has a tendency to drive more growth in the independent channel also in Germany, and we have on that account. And with that focus, lost out a bit to some of the bigger players.

I would say that's also within the expectations that this would happen. So this is just flagging why the numbers are like they are rather than flagging something that have not developed in live plans. And the Managed Care and U.S. transitional, why do I believe that? Well, managed care is a big channel in U.S. and we have successfully in basically all other markets in the world managed to use our brand portfolio better and broader to exactly be able to offer everybody high-quality, but also in line with different, let's say, pricing expectations. :

And I think there is a potential in our brand portfolio to better service all the various channels in the U.S., including the managed care channel. So yes, I expect that over time, we will see a more normalized market share in that channel for Demant. We were not too high in the first place. So this is part of the transition of actively come to a position where we can grow our market share and sales also in this channel. :

Maja Pataki: Okay. Understood. And Søren, just a quick follow-up. So would you talk about in Germany is just a continuation what you refer to with your full year results when you said that you're having this price discipline on what price you want to get and you're not going for any kind of volume?

Søren Nielsen: We are all making our own prioritization and our own best assessment. We like to engage with everybody and sell to everybody. But sometimes you can agree and sometimes you cannot agree, and then results follow.

Operator: And the next question comes from Solvet with BNP Exane.

Hugo Solvet: Søren, maybe to push you a bit on managed care, a follow-up to previous question. Can you maybe give us some indication on what the base is now and in terms of sales? And to my last question, do you expect to grow next year, when you will have lapsed all the comps or as soon as Q2 or Q3? And then on profitability, obviously, a soft start to the year. But we all have in mind that you upgraded your guidance last year in April. So can you maybe give us some indication on the phase in Q1 versus Q2? And then maybe also H1 versus H2, or you should think about that?

Søren Nielsen: Thank you. I can really not go into more details on the managed care in U.S. This is a channel that have grown, but have also put a certain pressure in the marketplace on the independent. And again, we try to service all channels, including managed care in the best possible way also to their benefits, and that's the way you see going on now, and I cannot go into more details and will not comment on our current share in that channel.

Profitability, there is a natural seasoning during the year. Q2 is bigger than Q1, and Q4 is bigger than Q3 and second half is bigger than first half. And you will see exactly the same type of phasing this year. It is especially in the hearing care business where there is different holiday elements and the timing can be a little bit different year-to-year. But in general, the momentum builds up during the 2 halves and is basically Q2 and Q4 are strong months in the retail business and, to some extent, also the Diagnostics business. So there will be a natural phasing you will see this year. :

Hugo Solvet: Okay. And just maybe a quick follow-up on retail. Can you maybe give us the exit growth rate that you saw in Q1, given your comment of improving trends throughout the quarter?

Søren Nielsen: Could you repeat the question, Hugo, I, simply, am not sure I got it right.

Hugo Solvet: The growth rates in hearing care in Q1, the exit growth rates for March.

Søren Nielsen: I cannot -- when I talk about a growing run rate, you simply have to normalize by working days. This is days where people can go through the front door and measuring per working day in the quarter, which is not comparable for the quarter. It's almost comparable to last year. But when you look towards the end of the quarter, March this year is a shorter month than last year due to the timing of Easter. But looking per day, we have seen a growing momentum during the quarter and ending the quarter above last year, store by store, where we started it below last year. So you can say we came out of '23 maybe with a little less business in the pipeline and have seen that pipeline being built up and, therefore, run rate exceeding last year now when looking by business day.

Operator: The next question comes from Robert Davies with Morgan Stanley.

Robert Davies: My first one was just on the hearing aid business. Can you give us a little more color in terms how the reception has been to your new product launch? Just looking at the growth rates that you've done in the first quarter against one of your peers, didn't seem to be quite as strong. I didn't know if that was just a sort of phased timing of the new platform or kind of just put a little color on how the new product launch is going? The second was just around the Diagnostics business. You've done a number of quarters now of, I guess, single-digit growth through last year and into this year relative to the sort of double-digit levels you were in 2022. What's changed in that business that's brought that growth rate down? And do you think that's going to improve through the back half?

Søren Nielsen: Yes. Thank you very much for your question. I think it's very important when you look at the hearing aid business really to look at different channels and segments. And as highlighted, to a certain large accounts, we have lost some business, which in revenue is, of course, visible and meaningful. But from a profitability point of view, as gross margin is very low, limited. ASP is low. We have gained share, I'm sure, in the independent segment and, therefore, ASP up. We have also had a weak NHS, where we are highly exposed in the period the pulling the other way.

And again, on a much-bigger base, we grew 26% in the hearing aid wholesale first quarter last year. So 2 years in a row, it's a 30% growth. So [ other ] 2 years in a row, adding the 2 years together. So I think it is a solid performance. And again, the 4% is on a much bigger base than the 12%. But you have to look at the composition of the channels, and you could say the health check on that. And our improved gross margin is really a testament to the increased profitability. And that is, of course, always a balance top line growth versus focus on profitability in the business. :

The Diagnostics, yes, we had an outstanding '22, also a little bit fueled by post COVID reopening, et cetera, but also where we saw a lot of momentum in the business. We have now achieved a plus 50% market share in a market that grew assumably 5%. So still being able to take share with 7%, 8%, 9% growth, we still find quite impressive. :

Robert Davies: And then maybe just one follow-up. Just on the profitability. I think there was a comment in the release saying that the profit in 1Q is lower year-on-year. Is that putting any sort of additional pressure on your sort of full year guidance at all? Or is it going to make this the mid- to upper end of the range more difficult? Is there anything sort of to highlight, I guess, within the sort of weighting of profitability, just given the comments on 1Q?

Søren Nielsen: No, not. And we are trying to a little bit hint to that for quite a while because you had this, I would say, surprisingly high growth also why we upgraded very early in the year last year, where we have had a tough second half '22 due to a reduction in demand coming from inflation and economic uncertainty. And therefore, we went into '23 with, as I said, the brakes pulled on expansion, capacity cost, very low growth and so on. And then during '23, we released these constraints as we saw the markets being strong, and we performed super well. And therefore, you see a full year effect where capacity costs have grown, not dramatically from fourth quarter into first quarter, but quarter-over-quarter, and then the sales is a little more soft. Therefore, in the quarter, we would see a pressure on the margin and on the absolute profitability. And this is totally as expected due to the phasing. This will improve during the year and is all within the guidance we put out.

Operator: And the next question comes from Niels Granholm-Leth with Carnegie.

Niels Granholm-Leth: Sorry for returning to the Managed Care situation. You mentioned earlier that the situation is floating. So would that mean that for those schemes that actually want to pay acceptable prices, that you would be willing to offer your newest technology to those schemes? Or would your brand strategy be cut and stone? And my second question would be on your OpEx spending, which you mentioned is double-digit in quarter 1. Would you expect a double-digit growth for the full year?

Søren Nielsen: Yes. Thank you, Niels. It's not floating. We have announced a strategy where we think this way, we best service the various channels in the U.S. market. There is no changes to that. We anticipate also in the future that managed care is an element of securing attractive pricing for the members and also using the purchasing power that lies in that. And therefore, we play our cards a little bit different. And yes, we believe we can grow share in the Managed Care channel over time by doing so. While at the same time, also continue to support the independent strongly with innovation, training, all the good things that need to be in place to actually also be successful with these new products.

So no changes to the plans and the strategy put forward. The OpEx, yes, we will see a more normalized level during the year and things where top line and capacity costs are better balanced from a growth point of view when we end the year. :

Operator: And the next question comes from Christian Ryom with Danske Bank.

Christian Ryom: This is Christian Ryom from Danske Bank. A couple of questions from me as well. First, on Hearing Care and U.S. specific, Søren, can you help us with an estimate of what the, say, addressable market for your Hearing Care business, the retail business in the U.S. grew in the quarter. And this might just be the estimate for what the private pay market grew and how that, of course, compares to your own retail business being down, as far as I can understand year-on-year in the first quarter?

And then the second question is a fairly brief one. That's on this strategic review that you have on the communication business, how we should understand your expectation that you expect to complete this by end of first half. Does that mean that you will communicate a conclusion on this by, say, no later than 30th of June? Or should we expect you're first to communicate a conclusion on this externally in connection with the first half year results in August? That's my 2 questions. :

Søren Nielsen: Thank you, Christian. We don't have all the color and flavor on the channel development. We can see the total commercial market. We can see some of the channels within that, but we cannot zoom into our business exactly. This is a growth beyond, but that being said, I would say, with the growth we have had in the U.S., we have slightly underperformed in the market. And it is back to the slower start also in U.S. business during the quarter so in a much better place now than when we started the year. And then the strategic review, as soon as we conclude on it, meaning, what direction it will take, we will communicate. We will not sit on that information, of course, it will just go out. And yes, we expect to be able to do that before the end of the first half.

Christian Ryom: Okay. And if I may, just quickly, do you have an explanation for the underperformance in the U.S. market for the Hearing Care business? Anything specific you can point to whether it be Managed Care strategy for the retail business or something else?

Søren Nielsen: No, I think it is honestly a little bit, like I alluded to, a little to thinner pipeline. Maybe we got a little more out towards the end of last year and, therefore, a little less to do the very first days in the new year. That's some of the things we have seen around the world. But it's that kind of timing. We have again seen also in U.S., an improvement of the business by business day during the quarter.

Operator: And the next question comes from Oliver Metzger with ODDO BHF.

Oliver Metzger: Two questions I have. First, can you quantify the effect of lower sales to large account and whether you consider volatility apart from Managed Care more temporary, which means a recovery within a few quarters? Also potentially in this context, comment on your expectations for NHS for the next quarters. Second is on French Hearing Aid market. Can you provide an update, also your expectations for the next quarters have come down a bit?

Søren Nielsen: Yes, it's very difficult then to guide exactly by channel. We will not do that. But yes, I believe that the larger account will see some improvements during the rest of the year. The Managed Care, exactly how that's going to play out by quarter, I will not comment on. We expect to grow share in Managed Care from this point and onwards on a run rate basis. But exactly the timing of it, I would be a little cautious and of course, comps are different potentially for a period.

NHS, there has been some reduction of inventory. That's kind of a one-off effect, but there's also a little bit between the government system fitting at the hospitals in the private market, where we -- our main strength lies with the hospitals and a lesser extent with the private market. And it seems like a bigger share of patients these days are being fitted in private clinics, the NHS products being fitted by partners. So exactly where that's heading, I don't know. But in general, I expect the NHS to be up in capacity and see the Q1 things as an element of one-off. :

And then French market. At the end, we believe in flattish for the year, and there's no reason to change that. The beginning was slightly negative and that means that you could say our expectations towards the end of the year will be slightly positive. :

Operator: And the next question comes from Veronika Dubajova with Citi.

Veronika Dubajova: I have 3, please. One is just a clarification, Søren, on your comments around the EBIT phasing. I'm just going to ask the question plainly, if that's okay. Would you expect your first half EBIT to be flat, up or down at this stage? If you can help us think through that, that would be great. My second question is just your thoughts on the uptake of Intent versus Real, and if you can draw some perils or comparisons. Do you think Intent is tracking in line with Real behind or ahead? And my final question is just your updated thoughts on the competitive picture in Costco and whether you are seeing any signs whatsoever of a potential change there?

Søren Nielsen: Yes, thank you very much, Veronika. No, we don't guide on the half year profitability. We can say second half will be bigger than first half, and I think that's as far as we can take it. Intent have seen very nice from the very beginning uptake compared to Real. You should be totally transparent to say, we also have one more price point. But even when corrected for that, the uptake is good and solid.

And remembering the movement and challenge with the independent, we are really seeing a strong uptake and are very comfortable. We look at a good, strong success here, and we look forward to, after May, June, to see how it's also hopefully and assumably going to grow our share in the VA channel in Costco, no news. It's a stable business. :

Again, the only thing to comment is remember, when you look at the phasing of the year, midyear, last year, we gave a price reduction. So there is, of course, an ASP decline in the first half of the year. And we have also, during last year, nothing happened lately. But during last year, seen what I would call a little bit of normalization of the share between the players in Costco. We benefited strongly over the winter in what I would call fast out of the gate with -- when the Kirkland Signature was stopped and probably had a disproportionately high benefit in the beginning of that new period. And I think that's it what I can comment to Costco. :

Operator: And the next question comes from Falko Friedrichs with Deutsche Bank.

Falko Friedrichs: Firstly, on the U.S. consumer, how would you characterize the situation there right now? We've seen a little bit of weakness in other med tech subsegments in the U.S. So what gives you confidence that the U.S. consumer will continue to show robust demand throughout the year? And in that regard, can you remind us briefly what your growth expectation was for the U.S. market this year? And then my second question on China. Just whether there's -- whether you notice any green shoots there, whether sort of certain pockets of the market are getting a little bit better or whether that's something that we shouldn't really expect this year?

Søren Nielsen: Yes. Thank you very much. In general, I think maybe just from traveling in the U.S., I must say, generally speaking, I find the consumer to be in good shape in U.S., and we have not seen any negative impact. I'm not sure what you refer to on health care in general. Maybe it's more the actual spend and support from government that have made some constraints. When you see VA growing less, we definitely hear that there is constraints on rehiring and so on also broadly across the VA system, also impacting fitting of veterans with hearing aids negatively. There's simply a number of open positions that they are not allowed to fill. So much more on that side than general.

And therefore, expectations for VA, we don't comment on the years individually by market. But in general, we anticipate U.S. will have a normal development, which would normally mean 5%, 6%. But yes, they have had a very good start and we'll see how that phases during the year. It's not that Q1 last year was particularly weak on the contrary. So the U.S. market is in good shape and maybe we are finally seeing things catch up after COVID, I don't know. But for sure, growth is good. :

China, very difficult. We don't have any statistics by region or anything that can tell us whether there are some areas that open up or not. And again, remember, China is a very immature emerging market, where hearing is basically all private pay and, therefore, it is quite sensitive to job situation, et cetera. So yes, it will always be more volatile. :

Operator: And the next question comes from David Adlington with JPMorgan.

David Adlington: Maybe just on France. You mentioned the slower market, but also a slower conversion rate. Maybe just give us some extra color in terms of what's happening on the conversion rates and how you plan to address that?

Søren Nielsen: I think it's quite simple, actually. When a market contract a little bit, you just push harder to try to generate traffic. And if you generate it, it is seen before that then you also end up attracting people that fundamentally don't have a hearing loss. And that's not an abnormal trend that when you push a little harder, you also get a little less quality in, and that's basically what this reflects. So it's just words around the soft start and that this is, in our opinion, primarily market-driven and not to do with our performance in particular.

Operator: And the next question comes from Martin Parkhøi with SEB.

Martin Parkhoi: Yes, just one follow-up question for Søren. Søren, you've mentioned in the report that you believe you gained market share in the independent channel sequentially. So I guess that then you also have a view on how much the independent channel are growing. So what kind of growth rates do you see specifically independent channel now and you can choose quarter-on-quarter or year-on-year, whatever you like?

Søren Nielsen: Yes, I think the only comment I have to that is that to our best insight in the U.S., you have seen an equal development in U.S. across channel between managed care and cash pay. And I think that tells that there is some maturity and some growth as well in the independent channel, cash pay element of it. Of course, in the rest of the world, you could say, U.K., wherein it is down, then the private market assumably have also grown. But for the rest of the market, I don't see any particular channel shifts. So other than those 2, I wouldn't highlight any that really moves between the channels. So the independents have grown from a market point of view, in line with the market growth rates.

Operator: And the next question comes from Martin Brenoe with Nordea.

Martin Brenoe: I have 2 questions, if I may, and I'll take them one by one, please. The first question would be the implicit guidance, and maybe you can correct me if I'm not doing the math correctly here. But in the high end of the guidance, you are basically guiding for around 10% organic growth, so double-digit organic growth. Can you maybe help me understand how you get that confidence? Is there anything that you see in the current trading? Or is there any other building blocks that I should understand? That would be my first question.

Søren Nielsen: Yes. I think you should look at channels where our new products have not yet been introduced as one. VA, Costco also not yet introduced. That's definitely part of if that goes very well, then we will be in the high end. It's the timing of, you could say, growing share in Managed Care, is obviously also a significant element. The continued development with some of the larger accounts, how that's playing out. And then, of course, underlying market growth, I would say, particularly in Europe, how that's going, that can quickly lift and boost the business.

So those are some of the elements in the high end. And then, of course, the fundamental performance run rate in Hearing Care, which, as we have said, is up and with that also some timing of holidays, et cetera, which will drive a stronger organic growth ahead of us than in the first quarter. So yes, it's the -- some of the above that, of course, can take us in the upper end of the range, which, yes, mathematically leads to 10% organic growth for the business in the last 3 quarters. :

Martin Brenoe: Okay. That's very clear. And the second question is actually for René, I guess, you can also try if you want to. But on the share buyback, you do almost DKK 750 million in Q1. And that's quite ahead of what we would expect if you were going to do share buybacks of around DKK 2 billion. Is it -- is this the run rate we should anticipate for the rest of the year? Or is there any considerations we should take into account?

René Schneider: Yes. So first of all, the guidance is not around DKK 2 billion. It is at least DKK 2 billion, so we are likely going to end a little above the DKK 2 billion, as per the run rate currently. And no, there's no particular view to the run rate going forward other than for the full year, we aim to end somewhat above the DKK 2 billion.

Martin Brenoe: Okay. And is there anything in terms of leverage that you need to take into account here? Or should we just expect this sort of trajectory unless any major acquisitions come down?

René Schneider: Well, we know the acquisition level will be above the normal given what we have already concluded on so far this year. It could be, say, double the normal. Normally, we guide DKK 600 million to DKK 800 million. This year, it could be around the double of debt. But as you know, share buyback is triangulated between acquisition, operating profit and cash flow generation. So it's something that we calibrate along the way during the year. And we need to just, you can say, end within our guidance range of 2% to 2.5%, and we are in good shape when it comes to that.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

Peter Pudselykke: Perfect. Thank you so much, operator, and thanks to everybody for joining the call. If you have any further questions, you know how to reach us, and we look forward to seeing a lot of you on the road in the coming weeks. Have a good rest of the day. Thank you.