Bang & Olufsen a/s

Welcome to Bang & Olufsen Interim Report for the third quarter 2024-2025 presentation. For the first part of this call, all participants are in a listen-only mode. Afterwards, there will be a question-and-answer session. To ask a question, please press 5-star on your telephone keypad. This call is being recorded. I will now hand the call over to your speakers. Please begin.

Hello, everyone, and welcome. Thank you for taking the time to join us today. Here with me is our CFO, Nikolaj Wendelbo. I will begin by outlining our key highlights and providing an overview of our business performance. Following that, Nikolaj will present a more detailed review of the financials, and I will then offer some closing remarks before we open the session for questions. Please move to slide four. Let us begin by looking at our Q3 performance. We are pleased with the performance in Q3. Revenue grew by 2%, led by EMEA and a strong performance in the Americas. We also achieved a record high gross margin of 55.4%, an EBIT margin of 3.8% and a positive free cash flow of 18 million. Like for like, sellout grew by 15%, driven by growth of 21% in branded channels. In addition, sellout growth for our win cities collectively grew by a substantial 36%. We are pleased to see growth in the areas our strategy is focused on. All in all, we are progressing as planned, and with only two months left of the financial year, we are narrowing the ranges within the original outlook. During the last few weeks, your political uncertainties have increased in light of the recently announced tariffs and the possibility of further tariff changes. What I will also stress is that while monitoring developments closely, and if needed, we will make adjustments accordingly, we are continuing our strategic transition by investing the proceeds of our recent capital raise in future profitable growth. Nikolaj will provide further details on this. so please move to the next page please in february we launched atelier inviting clients to co-create custom-made products with our master artisans instructor denmark this milestone celebrates our legacy of exceptional sound and craftsmanship while enabling personal expression through unique customizable creations A standout launch was our fifth collaboration with Saint Laurent, including 10 restored Biogram 4000 series turntables from the 1970s, each encased in solid circuit-cut wood, individually numbered and finished with refined aluminum. Please move to the next page. Moving to our channel development, where I'll take you through some of the highlights for the quarter. During the quarter, we signed agreements to open new partner stores in Milan, which opened on April 7th, and a new company-owned store in Paris, expected to open in the next financial year. In London, we have agreed to expand our Harrods store and upgrade it to our new store design. And in Zurich Airport, we have launched a pop-up store. Our expansion in the US is also continuing. In California, we plan to open three stores in the next financial year. The wind cities collectively reported sell-out growth of 36%, which comprises sell-out across channels in all cities. All cities reported growth. New York, London and Paris reported double-digit growth. New York was positively impacted by low comparables as one of stores was in ramp-up phase after beginning closed for relocation in October. 2023. Hong Kong reported single digit growth year on year. The solid growth rates underpin the planned expansions. In addition, we have initiated the first phase of the Wind City concept to support and accelerate growth in Los Angeles and Tokyo. In terms of multi-brand, we continue to be more selective with our distribution. In EMEA, we decided to discontinue our cooperation with selected multi-brand partners in accordance with our efforts to optimize our presence in the channel. We are pleased to see that the channel is supporting double-digit growth despite the reduction of more than 400 doors year on year. Finally, as part of the investment in future growth, we have initiated next steps towards operating Chinese Tmall online flagship store directly. By end of April, we will take over the online flagship store on the e-tail platform and hereby operating the two largest e-tail platforms in China directly. Please move to the next page. Before I hand over to Nikolaj, let me elaborate on our recent product launches. Our Beoplay 100 launched in September and continued to perform well in Q3, while the recently launched Beoplay 11 also got off to a good start. The Bang & Olufsen Atelier brings our luxury timeless technology strategy to life, offering clients a level of customization unmatched in the luxury audio space. Rooted in our heritage of craftsmanship and innovation, Atelier allows customers to co-create with master artisans in Struve, Denmark, blending iconic design with personal expression. Three offerings define the Atelier experience. Atelier bespoke for one-of-a-kind pieces made in direct collaborations with our artisans. Atelier Catalogue, offering over 500,000 combinations of fabric, wood and aluminum finishes. Atelier Editions, limited runs of iconic products reimagined with exceptional detail. The Atelier offering is commanding a price premium of 10% to 50%, which reflects the value of the true customization and craftsmanship, supporting higher margins while deepening brand desirability and loyalty. During the quarter, the Biolab 8 and Biosound Theatre received cradle-to-cradle certification at bronze level, bringing the total number of products with cradle-to-cradle certification in our product portfolio to five. Notably, BO Sound Theater is the first soundbar in the world to be cradle-to-cradle certified, highlighting our role in leading the movement towards more circular product designs and manufacturing. And in March 2025, Formula One season began with Ferrari's new F1 car once again carrying B&O branding, a symbol of our ongoing presence in global culture and performance. And with this, I will hand over to Nikolaj.

Thank you, Christian. Now please move to page number nine. So before we go into the financials, I want to give you a bit of detail on how we see the current tariff levels impacting our business. Bearing in mind, of course, that these days are a moving target. But we try to include also recent announcements on the tariff from China being increased to 104%. and of course the tariff of 20% on European products that was implemented also or announced last week. So please bear in mind that these numbers are estimates, but should indicate sort of the level that we are looking at. So year to date, our revenue in America was 240 million and around 13% of total revenue. And our production spans globally with the majority of production in China, Europe and a small share in Thailand. Looking at the America's revenue, we can estimate around a third of the sale from products produced in Europe and two thirds produced in China. which leads to an estimated cost impact of around 70 million on an annual basis or around 2.5 percentage points on the gross margin. The 70 million is of course calculated as all else being equal. Prior to the last tariff announcement of the additional 50% on the China tariff, the estimated cost impact was around 40 million or 1.5 percentage points on the gross margin. We have already mitigated some of this impact through price increases that will be implemented on May 1st. And at the same time, we are looking into further price adjustments to mitigate further, but we're also considering other handles, such as looking at the supply chain, logistics, and our general cost structure. And just to be clear, we do not have any production in the US. Please move to the next page. So let me now start by going through sellout for Q3. Our like-for-like sellout grew by 15% compared to last year. For branded channels, like-for-like sellout grew 21%, and for our wind cities, sellout grew by 36%, and we are pleased with the strong performance in sellout. Like-for-like sellout in EMEA grew by 18%. Branded channels all generated double-digit like-for-like seller growth, supported by successful campaigns. In EMEA, the monobrand channel improved inventory cycles during the quarter. Sellout in the Americas grew by 49%. The branded channels combined reported a high double-digit increase year-on-year, driven by solid growth in all channels. Company-owned stores were positively impacted by low comparables in Q3 last year due to ramp up after relocation in Q2-23-24, while the monobrand channel was positively affected by campaigns and the execution of project sales. Also note that the like-for-like seller growth excludes the California stores, while they are included in the comparison figures on revenue growth. For the APAC region, like-for-like sellout declined by 3%, driven by a double-digit decline in the ETL channel. The branded channels reported double-digit growth year-on-year, driven by growth across the channels. In China, like-for-like sellout declined by 13%. This was mainly due to a decline in the e-tail channel as sellout for the monobrand channel grew year on year. Excluding China, sellout in APAC experienced single-digit growth. Across regions, our stage category grew by 24%, while the flexible living category declined by 7% and the undergo category grew by 19%. This mainly reflected the change in channel mix towards our branded channels as well as new launches in the undergo category. Now please go to the next page. Reported revenue for the quarter was 631 million. This was an increase of 2% in local currencies compared to Q3 of last year and in line with our expectations. The increase in reported revenue related to an increase in product sales of 3% while brand partnering and other activities experienced a modest decline of 1 million to 70 million or minus 2% in local currencies. Breaking product revenue Down into categories, the stage category grew by 6%. Flexible living declined 8%. The decline was mainly due to declining APAC across products. Revenue from the flexible living category grew in EMEA and the undergo category increased by 7%. Grow was mainly driven by the successful launch of BeoPlay H100 and BeoPlay 11. The modest decline to 70 million in brand partnering and other activities was mainly due to an expected fall in license income from HP, partly offset by increased revenue from automotive. License revenue from TCL is ramping up as expected. Please turn to the next page. Let me go into more details on revenue per region. Revenue from the EMEA region grew 6% in local currencies and growth reported across all branded channels in the region and across most of the European markets. Moreover, average revenue per multi-branded store increased, with the channel reporting double digital growth combined with a reduction of more than $400 year-on-year. The gross margin was up 1.3 percentage points to 51%. In the Americas, a strong performance was driven by double digital growth across all branded channels and with fewer stores in the multi-branded channel year-on-year. As Christian mentioned, we continue with our US expansion plans. Revenue from the multibrand channel was very limited in absolute value and in line with the reduced presence of the channel in the US. The change in channel mix also contributed to an increased gross margin of 49.6% up from 45.9%. Revenue in APAC was 164 million, which was a decrease of 8% in local currencies. The APAC region reported negative growth mainly due to challenges in China, which declined 11% in local currencies and experienced negative growth in the e-tail channel. As Christian mentioned, we have initiated the next step in the planned structural change of the e-tail channels and will in the near future operate the T-mail flagship store directly in the same way as we are today operating JD.com ourselves. Revenue from our monobank channel in China grew year-on-year. Revenue from South Korea and Taiwan grew, while Japan declined due to currency impact. Adjusted for the currency impact, revenue from Japan grew year-on-year. Overall for the APAC region, the gross margin grew to 55.7% from 50.8%. Please move to the next page. On group level, The gross margin rose to a record high 55.4% and was up 2.2 percentage points compared to last year. The margin was positively impacted by improved gross margins across product categories and a change in product mix towards higher margin products. The reported gross margin has been above 50% for the past eight executive quarters, which strengthens the financial foundation for our strategic acceleration and for navigating the geopolitical turmoil. This quarter, The gross margin for brand partnering declined to 81.1% from 84.5% in Q3 of last year. Due to the change in mix between license and product sales, the level fluctuates across quarters depending on the underlying mix. In previous quarter Q2, we reported a gross margin of 94.4%. Avian margin before special items was 3.8% compared to 1.8% in Q3 last year. The improvement was driven by the higher reported revenue and gross margin and partly offset by higher capacity cost. Please turn to the next page. Moving on to capacity cost and networking capital. Capacity cost increased by 12 million year-on-year. Looking at the composition of the capacity cost, development cost increased by 6 million. The incurred development cost before capitalization ratio was 13.4% compared to 12% last year. Distribution and marketing cost decreased by 4 million and our marketing cost ratio was 6.5% compared to 8.6% last year. Administrative costs increased by 6 million driven by one-offs. Networking capital increased by 5 million during the quarter to 255 million. Trade receivables decreased by 79 million and payables decreased by 105 million due to seasonality and timing. Inventories decreased by 13 million during the quarter to 413 million. At quarter end, we reported the lowest inventory level in more than three years with an improved composition and aging profile within finished goods. Please turn to the next page. Free cash flow for Q3 was up 13 million to 18 million supported by increased cash flow from operating activities. CapEx was 59 million for Q3 and mainly related to new products and platforms. As mentioned before, the increased level is expected and going forward we expect further increases and with more retail related CapEx in the mix. Capital resources amounted to 552 million at the end of Q3, of which available liquidity was 372 million. This was driven by the directed issue of net 270 million received in December 2024. Please turn to the next page. To conclude, we will narrow the ranges within the outlook for the full year 2024-2025. Revenue growth is expected to be in the lower end of the minus 3 to plus 3% range due to persistent challenges in APAC. EBIT margin before special items is expected to be in the mid-range mainly due to the positive development of the gross margin. Finally, the free cash flow is expected to be in the higher end of the range mainly due to the development in networking capital and secondly timing of capex investments. As we have stated, 2024-25 is a transition year. With the proceeds from the capital raise, we can now initiate the investment program of our strategic execution according to our mid-term plan. This means that KB is expected to increase to around 250 million and capacity costs are expected to increase as well with around 100 million compared to 2023-24. And with those words, I will hand it back to Christian.