Bang & Olufsen a/s

Welcome to this Arne and Olufsen Annual Report 2025-26. Today's call is being recorded. If you have any objections, please disconnect at this time. All participants will be in a listen-only mode throughout the presentation, and afterwards, there will be a question-and-answer session. I would now like to introduce Interim CEO and CFO, Nicolai Lembo, Nikolaj, you may now begin.

Hello everyone and thank you for joining today's webcast. I will start by taking you through the highlights of the past year and provide an overview of the developments across the business. I will then walk through the financial performance with focus on the fourth quarter as well as our outlook for the coming year. Before we open the line up for questions, please move to slide 3. Let us begin by looking at our full year performance and how the financial year progressed. In 2025-26, we continued to drive transformation, improving our retail network and operating model while adapting to a challenging macroeconomic environment. The financial year 2025-26 marked our centenary, a proud milestone celebrating our legacy and centrally long commitment to sound design and craftsmanship while shaping the future as a global leader in luxury audio. We delivered another record high gross margin and the highest gross profit in eight years and we advanced in key strategic initiatives. During the first half of the year we launched three product innovations. The earpieces Bill Grace showcased Bang & Olufsen at its best and a strong commercial performance that validated market demand. In parallel, the introduction of the Reload program reinforced our leadership in circular design and the sold-out monthly drops confirmed strong client interest. In contrast, the launch of the soundbar Beosound Premier was challenged and highlighted improvements were needed in the commercial operating model. We ended the year with a clear ambition to continue investing in the development of the business. As the year progressed, external market conditions became more challenging than expected, and that, in combination with sales of EOSAM Premier being significantly lowered than anticipated, we adjusted our full year outlook in March 26. At the same time, we withdrew our mid-term ambitions to 2028. All in all, revenue for the year was 2.5 billion, corresponding to a decline of 1.6% in local currencies in line with the adjusted outlook. EBIT margin before special items was negative 0.5% and free cash flow was negative 141 million. The development in EBIT margin before special items was impacted by the planned strategic investments in retail optimization, development of the product portfolio and marketing investments. In Q2, we had extraordinary marketing costs of around 38 million for activation across the globe, celebrating our centennial. During the second half of the financial year, we adjusted elements of our strategic execution and implemented efficiency and cost measures. This also included an adjustment of the cost base, and I will come back to these topics later in the presentation. Finally, as stated in our annual report, the Board expects to announce a permanent CEO during Q1-26-27, and today we will have no further comments regarding this topic. Please move to the next slide. During the year, we launched three product innovations. In November 25, we launched the BioGrace earpieces. Bill Grace marks a new expression of Bang & Olufsen in ear design, crafted from hand polished aluminum and built on our proprietary Amadeus software platform. The product was well received and sales performance has been strong, driving double-digit growth in the earphone revenue. In December 25, we launched Biosound Premier, adding a soundbar to the portfolio designed for TVs from 42 inches and above and centered on spatial audio and system connectivity. The sales performance of Biosom Premier was lower than anticipated and the product was re-launched in March 26 with two additional colorways, with improved in-store display and a revised lower price point. Sales performance improved during Q4, although still at a lower than expected level. In October 25, we launched a re-launch program offering expected, refurbished and certified pre-owned products with a Bang & Olufsen warranty through our own e-commerce channel. The launch was successful. Across eight monthly drops from October to May, all products sold out before the next drop and some were sold out within 24 hours. In addition to our new product innovations, we also presented our outdoor product in development, the speaker Build Sound Haven, expected to launch in 27. This offering underpins our vision to provide fully integrated solutions for our clients' homes. bringing the Bang & Olufsen experience from indoors to outdoors. Please move to the next page. In addition to our product innovations, we also engage in several product collaborations, which, in addition to being revenue drivers, also cement our brand presence in different parts of the world. This year, we engaged with three partners and launched limited editions of selected products. The partners were Tokyo-based design studio Fragment Design, the Korean-based global artist G-Dragon, and the British-based design house Volleybak. Throughout the year, we cemented our global brand presence through a curated program of marketing activations, collaborations, partnerships, cultural initiatives, and centenary celebrations, reinforcing our brand's positions at the intersection of craftsmanship, innovation, and culture. The program was activated globally, spanning window takes over in Harrods in London digital out-of-home exhibitions in Times Square, New York, and our centennial exhibition, 100 Years and Counting, which premiered in Shanghai and attracted more than 10,000 visitors, alongside activities in Copenhagen, Tokyo, Hong Kong, London, and many other cities worldwide. A reinterpretation of one of our most iconic speakers from 2015, the Beulah 90, was introduced in five Atelier Anniversary editions. all featured distinctive materials and color expressions by preserving our signature acoustic excellence. The collection was unveiled through activations across global cities, including London and San Francisco, creating immersive experiences that combine sound design and storytelling to elevate client engagement and emotional connections with our brand. Please move to the next slide. Our Wind City concept was implemented in Tokyo, San Francisco and Los Angeles, increasing the total number of active Wind Cities to 7 by year end. The Wind Cities delivered double-digit seller growth of 18% while further elevating the brand experience. We are pleased to report double-digit Wind City seller growth for 8 consecutive quarters. Our latest brand equities results also support this. The direction was further supported by flagship openings in Paris, San Francisco and Los Angeles. We continue our ambitious retail plan in the coming year. In addition to these openings, we expanded our presence with the opening of a new store in Hamburg, and by upgrading the first two stores in Asia to a culture store concept. Across our network, we are strengthening our position in high potential locations by relocating selected stores and opening new sites in key cities and districts, while closing underperforming locations that are not aligned with our brand ambition. In parallel, we are enhancing our distribution model through closer collaboration with like-minded monobrand partners, combining the strengths of company-owned stores with a strong partner network. We are improving store productivity by driving consistency in retail execution. This includes optimized visual merchandising and store design, focused sales training and a more structured approach to client-telling. As a result, we aim to deliver increasingly personalized client experiences and drive engagement across our global network through a clearly defined and seamless client journey. to support the client journey throughout the store network, re-implementing a new retail IT platform to replace current systems. In 2016-2017, the platform will be rolled out across all company-owned stores, and the first two stores have been piloted during the last month. In summary, during the year, we made more than 65 retail footprint adjustments, and our ambitions for the coming year are as ambitious. Now please turn to the next slide. To secure continued investment in the development of the business for future profitable growth, we have in the second half of the financial year adjusted elements of our strategic execution and implemented efficiency and cost measures. In addition to the retail focus I have just outlined on the previous page, the adjustments initiated covers both go-to-market and product development. We are evolving our commercial operating model and have significantly improved the coordination of marketing, planning and investments, retail execution and product launches during the second half of this financial year. We expect this to enhance our go-to-market execution across both existing products and new launches. Entering 26-27, our operating model is better equipped to support our targeted marketing position. At the same time, we are reallocating our cultural partnerships towards music in line with our ambition to deliver beautiful sound and elevating our heritage and brand distinctiveness. I am pleased that we have recently signed an agreement with a global brand ambassador which we will announce shortly. We have revised our product development model and had, amongst others, rebalanced the use of external suppliers Olufsen a.s. and we trust the new ways of working will be effectively led by our newly appointed Chief Product Officer Janne Jacobsen and Chief Marketing Officer Peter Hobold Jensen. In the last part of the year changes have been made to simplify the organization and focus efforts on particularly important areas. Efficiency measures have reduced our underlying cost base and includes amongst many initiatives a right-sizing of the organization. This has resulted in a workforce reduction across the organization of around 60 people corresponding to around 5% of the total number of employees. Saying goodbye to dedicated and talented people is certainly not easy, and we do so with gratitude for their valuable contributions. All in all, with the changes introduced during the last six months, we have cleaned up, we have regrouped and we have put the company in a better position to drive long-term profitable growth. I will not go further into the details on our Q4 numbers, if you move to the following slide. Starting with sell-out, we delivered positive like-for-like growth of 11% at group level. This led to a full year like-for-like seller growth of 4%. For the quarter, positive seller growth was reported across regions, and 13% growth was reported for our branded channels. For both EMEA and Americas, like-for-like sellout grew by 4%. Branded channels reported growth in both regions driven by company-owned stores. Sellout reported from the retail channel declined in both regions. It is encouraging to see positive like-for-like sellout, while revenue growth in these two regions was negative. In general, the difference between sellout and sell-in was caused by inventory depletion among our partners. For APAC, sell-out grew by 28% and like-for-life sell-out for China grew by 14%. The strong growth in the region was in general reflecting growth across all channels and supported by double-digit growth in branded channels. In addition, double-digit sell-out growth was reported for e-tail and multibranding in China as our own operations have delivered improved commercial impact on JD and Tmall. As highlighted earlier, our active win cities consisting of New York, London, Paris, Hong Kong and now Tokyo continue to perform strongly, delivering double-digit sell-out growth for the eighth executive quarter. Please move to the next page. Turning to group performance, revenue decreased by 3.1% in local currencies, while reported revenue declined by 3.8%. While the sales performance of Beosan Premier improved after the relaunch and price adjustment, its performance continued at a lower than expected level and was the primary reason for the decline. In terms of channel performance, the decline was driven by the monobrand channel in EMEA, and within branded channels, revenue declined by 3.7% in local currencies. While our company-owned stores delivered double to the growth, it was more than offset by the performance in the monobrand channel. E-commerce was largely on par with last year. Gross margin continued its positive trajectory, improving to 58.7% in Q4, up 2.9 percentage points year-on-year. A refund of paid U.S. tariffs had a positive impact of $20 million. Overall, gross margins improved across regions. EBIT margin before special items was 5.7%, reflecting the higher quality of revenue and a positive impact of the mentioned $20 million from tariff refunds. Special items related to EBIT amounted to negative 30 million, mainly comprising the reorganization announced during the quarter. Please turn to the next page. Product revenue declined by 2.7% in local currencies. In AMERICAS, revenue declined by 11.9% and 5% in local currencies, respectively. In APAC, revenue increased by 15.5% in local currencies, given by strong momentum in China, especially from ETAIL, and continued growth across branded channels in the entire region. Gross margin improved across regions. In the Americas, gross margin was 78.5% in the quarter. This reflected a tariff refund of $20 million related to the US tariffs. When excluding the refund, the gross margin was 50.1%, which was an increase of 1.4% compared to last year. In APAC, we continue to see a positive effect on the gross margin from the direct operation of the T-Mall flagship store, which had a positive impact of around 1% on the gross margin for the APAC region. Finally, revenue from brand partnering and other activities declined year-on-year. HPE license income was discontinued as expected, and TCL barely declined year-on-year due to quarterly fluctuations. The TCL partnership is ramping up as planned on a full-year basis. Please move to the next slide. Turning to cash flow and working capital. Free cash flow for the quarter was positive at 5 million, reflecting improved operating performance and a lower level of operational investments, partly offset by working capital developments. Networking capital increased by $78 million to $349 million during by lower payables and higher receivables, with the receivables increase related to the U.S. Tariff Fund and higher sales than in Q3. Inventory has entered the quarter at $418 million down by $33 million compared to the end of Q3. That decrease reflects our continued focus on inventory management and It is partly upsetting the effect of payables and receivables on net working capital. Capital resources amounted 294 million at the end of the quarter compared to 262 million at the end of Q3. Of the 294 million capital resources, the available liquidity was 94 million, which is 18 million lowered at the end of last quarter. While available liquidity decreased, the undrawn portion of our committed credit facility rose by 50 million during the quarter, which led to an increase of 32 million in capital resources. Before I present the outlook for 26-27, I would like to give a better detail on how we currently see the membership situation impacting our business. Memory chips, or more specific DDR4 RAMs, are currently facing critical supply constraints driven by sustained demand growth from AI and data center applications. At the same time, three of our four suppliers have scaled back or seized DDR4 production to prioritize higher margin DDR5 capacity. This dynamic is tightening overall memory supply and materially constrained global production capacity. We are in the process of securing supply to cloud production and maintain operations for products where DDR4 RAM are required, and we have initiated the development of an upgraded Mozart hardware platform. The impact on cost is partly mitigated by price adjustments July 1st, reducing the net impact on the gross margin to approximately 0.5% at this point. An expected cash impact of around 35 to 45 million is included in the outlook for next year. And let's move to the next page. Turning to the outlook for the full financial year. While uncertainty persists in the external environment, our differentiated strategy and ongoing transformation position as well for the future. Our focus remain on executing our strategy through improving our go-to-market operating model, implementing our new product development methods, reshaping our retail execution and footprint, and continue to focus on prudency and cost, capex, and cash management. Revenue growth is expected to be in the range of 1-5%. Avid market and portfolio items is expected to range from 1% to 3% and the free cash flow is expected to be in the range of 25-100 million. Our recent prioritizations and efficiency measures have allowed us to fund continual investments in the business while managing the overall cost base. In 26-27 that investment goes into a retail network, both new openings and the upgrades of existing stores, the rollout of our new IT platform for retail and our product pipeline. As a result, we expect capital expenditure to increase to around 270 to 310 million, while capacity costs are expected to remain broadly flat compared to 2025-26. On retail specifically, we expect a positive contribution next year from openings and upgrades. The plan we laid out in 2024-25 is unchanged and remains the right one. a.s. On tariffs and the outlook for the U.S. market in particular, we are currently seeing some hesitance and caution among our monobrand partners. The broader geopolitical backdrop, including the wars in Ukraine and in the Middle East, adds to that uncertainty. On a related note, the U.S. tariff refund has not yet been received, so there is a cash timing effect still to come. Finally on products, within our outlook we assume the launch of three or more products during the financial year. The first, the recreated classic was launched in June and we expect the remaining product launches no earlier than the fourth quarter impacting seasonality over the year. And with that I will open up for questions.

Thank you. If you wish to ask a question, please press five star on your telephone keypad. To withdraw your question, you may do so by pressing five star again. We will have a brief pause while questions are being registered. As a reminder, please press five star to ask a question. We will have a brief pause while questions are being registered. The first question comes from the line of Paul Jensen. I'm sorry, comes from the line of Paul Jensen from Danske Bank. Please go ahead. Your line will now be unmuted.

Thank you for taking my question. Thank you for taking my question. I have a few one. If you come back to the organizational changes you made in May, can you put a little more color on what you changed and in what kind of functions that you have taken out the 60 positions?

Yes, most certainly, if I should take that question immediately, so it's fairly broad-based, so we've been looking at at our strategy and prioritizing to continue to invest and have the right level of capacity in the areas of retail, execution, our cocoa stores that we're opening more. We'll also see more headcounts coming in. So we have reduced across the board in sort of the more back end related functions. We have reduced also as part of our Olufsen a decided to use external suppliers in a different way. So we are also reducing the number of headcounts in parts of our product development organization. And then we are, as part of reviewing our go-to-market operating model, we also adjusted specifically on the marketing side on a number of positions globally. It's quite broad-based across the company.

A question on product development. You're changing the way you're using external partners. Does it mean that you are doing more external partnerships now than doing in-house development and why?

It means that we are adjusting on specific product offerings, especially within the Bluetooth category. We are adjusting the split of work between our in-house development functions and the development functions of the partners. and we are doing that because we want to achieve a faster development cycle in Bluetooth products and we want to achieve a lower cost of developing and our analysis has shown us that if we adjust the split of work between us and our suppliers we will be able to achieve this.

Has this temporarily meant that you have longer development processes? I'm just thinking about Haven. I think earlier it was indicated that it would come to the mark this year, and now you say 27, so...

I think Haven is not a particular... No, so Haven is really not a very good example of that, because it's a different type of product, but if we look at the Bluetooth category, which includes headphones, earphones and Bluetooth speakers, here we have seen quite long development cycles in our in-house development model, and this is what we want to shorten in the future.

If we then come to the European market, is the business as usual what we've seen the last 12 months or has there been any changes during the last quarter? And also, I can see now you've reduced number of European brand restore from 280 to 220 over two years. Where do you see it flattening out before you'll have a net increase or a stable situation?

No, I expect for the coming years that we will still see a small decrease in the European store network net-net. We will not reduce with as many stores as we have done this year, but there will still be a little bit of a reduction. But at the same time we are also opening next year flagship stores in really, really key locations across the world, but especially also in Europe. So we will have a much stronger network when we are looking one year ahead than we have today.

And the market sentiment?

sentiment in Europe has been challenging for the most of this financial year. It's still very centered around the sort of northern central European So it's business as usual for the last four months. broadly, it's business as usual.

Okay. Then about the new IT platform that you're going to roll out in stores, you say 27 Cocoa stores, then you still have more than 300 where it's not to be rolled out. When will it be? I guess it's not voluntary, so when will it be across all stores? And secondly, what is it going to give you off? new opportunities?

So, first of all on the timing, we will probably roll it out to the most important markets first. So we are taking probably a staggered approach to rolling out so we focus on the high potential markets and key partners in rolling it out. We are doing COCO as I said this year in 26, 27 and then we will after that and after having you know, taking our own medicine and make sure that the platform works exactly as it should, we will roll it out to the Monobank partners afterwards. What it will give us is one point of sale system across the stores, it will give us one unified CRM system across the stores, it will enhance the operations in the stores, so The store staff will use much less time on admin work and can spend more time on client-facing work. It will enable proper CRM and client-telling activities in the stores, as we will have a much more unified view on all our clients. And it will also enable, when we have it rolled out to the monobrand partners, a seamless reporting of the important key metrics that we need to have in order to run a retail and luxury business. For instance, sell out inventory data, traffic data, CRM data, client data. So it will create a basis for really professionalizing the retail operations of our business.

Final question from my side on the guidance. You narrowed it. You say that it's still a high uncertainty, but you narrowed the revenue growth range to the spread of four points from earlier six to ten points in previous years. How should we look at this? You're more certain or you just take the conservative view and give the range there and then potentially could be better? Or how should we look at

I mean, we felt it was the right thing to be more precise in our information to the market. With the wide range that we had in the past, we also received some feedback on having a very wide range, so we have been diligent in doing our estimations for the coming year and would like to be as precise as possible for letting our investors and shareholders know what we are expecting for the next year.

And in the recent years, we've seen that your partners have reduced inventories. What kind of assumption do you put in on the difference between selling and sell-out and that outlook? Is it stable inventory in the channel or is it still?

Yeah, our assumptions sort of in the outlook is focusing on the sell-out performance and with a stable inventory. That's our key assumption in making that assessment.

And then a final one just for clarification. You say that the RAM impact would be half the present points on your gross margin. That's about $4 million. But you have a cash flow impact of $35 to $45 million. So what's the difference here?

The difference is that what we are working on right now is to secure enough supply for the next two years at one go. So it's kind of buying an insurance on the supply of RAM. So we have ample time to develop a new hardware platform that is not constrained by DDR4 RAMs. So that's why the cash flow impact is bigger than the margin impact. Another element to the margin impact is that we are also increasing our prices here 1st of July, which covers around half of the sort of gross impact on the elevated cost for this year in the COGS. Okay, thank you. You're welcome.

The next question comes from the line of Nils Lett from G&T Carnegie. Niels, please go ahead. Your line will now be unmuted.

And also,

Hello, can you hear me?

Yeah, now we hear you. Please go ahead. Thank you. So my first question is on the effect of store closures in fiscal 27. Can you talk about what is the expected effect of store closures in the coming year? You recorded a negative effect of minus 1.5 percentage point in fiscal 26. Also, Would you have any material receivables built up in your balance sheet related to the stores that you have closed? I have a few more questions, but for the past we can start here.

Yeah, so we expect the effect from store closures next year to be smaller than the impact that we've seen this year, because we are closing fewer stores. So less than the 1.5%, which is an all is equal calculation, assuming that the revenue is not picked up elsewhere. So it will be smaller next year, that's our assumptions. We do not have any material provisions for store closures on the banner sheet. We have a pretty good model of how we handle these closures without incurring any kind of losses on bad debtors.

Okay, and then secondly, can you talk about your assumptions behind tariff payments for fiscal 27? Have you included any reoccurrence of tariffs to the US in your guidance for 27 and would you still have the tariff refunds that you will book in fiscal 27 as you did here in quarter 4?

So our assumption is that the tariff refund is booked in Q4 and will have a cash effect next year. We have not included any expectations to get additional tariff refunds. It's not impossible that there will be more to come, but the process on next tariff refunds is much more complicated because it's around Some rules they have in the US around the timing of when you incur the tariffs and the longer it dates back the more complicated it is to get the returns. Our expectation of tariffs for next year is more or less falling back to the expectations or to the tariff situation before Liberation Day in April. So these IEEPA tariffs are void, but it is still a minor tariff on certain products from China in the area, and I will just double check, but as I recall, it's around 7.5% that we're paying on certain tariff products. We did that, we've done that basically since, the current president's first presidential term because those tariffs were never removed under Biden. So in a way, it's back to business as usual.

And then finally, could you just talk about the facing of growth and profitability in the year to come? Do you expect normal seasonality or some kind of back and loading? How does that look like?

We expect back in loading and maybe to a higher degree than normal and the reason for that as I said, the product launches that we still have to come are planned for the fourth quarter, so late in the year. And that will of course have an impact on seasonality.

And how about the cost reductions that you have implemented in Q4? How is that going to feed into fiscal 2017?

yesterday I they are feeding in from the the from the the from one is from from the beginning and we we will see a probably the biggest impact on the the distribution the cost lying the as a lot of the cost reduction buys for them the within she's and marketing the as we've taken a number of initiatives that is beyond the headcount reduction within this area to really optimize our spending in sales and marketing in relation to a new go-to-market operating model.

Great, thank you.

As no one else has lined up the questions in this call, I will now hand it back to Nikolaj for closing remarks.