Earnings Call: Q2 2021

Jan 12, 2021

So hello, everyone, and thank you for joining the call. Due to the COVID-nineteen, we're not sitting together as we normally do. So this will be our first to be apart at different locations. Today, I will start by going through the highlights of the quarter and provide an update on how we are progressing on execution of our strategy. Afterwards, Nikolaj Windelboe, our CFO, will take you through our financials in more detail. Then I will go through the outlook for 2021 before we open up for questions. Our Head of Marketing and Digital Customer Experience, Christian Britt is also with us today and will take part in the Q and A session later. So if we move to slide 4, we announced the preliminary numbers for Q2 on the December 15, where we also communicated our increased outlook for the year. Those numbers are unchanged with the exception of the Q2 growth in local currencies, which ended at 12% instead of 11% as we had estimated in the preliminary numbers. Overall, we are pleased with the 2nd quarter results. As communicated in December, we delivered a positive EBIT as well as a double digit growth the 2nd consecutive quarter and the positive cash flow. We achieved growth in all regions and the results were primarily driven by strong execution on our key strategy priorities, successful product launches and higher consumer demand for home entertainment products. We did experience headwind related to COVID-nineteen with lockdowns impacting markets across the world as well as higher logistics and component costs. I will go into more details on how we have worked to mitigate that on the next slide. An important part of making the company profitable again is our cost program, launched in March and with targeted annual savings of €175,000,000 I'm pleased that this program is progressing. We achieved a positive free cash flow SEK 139 1,000,000 in Q2 and we go into Q3 with SEK582 1,000,000 in available liquidity, which allows us to continue to execute on our strategy and get through the current wave of COVID-nineteen. Based on our performance in the first half of our financial year, We increased our outlook in December. We now expect revenue to be between SEK 2,300,000,000 SEK 2,500,000,000. Here, before special items to be negative SEK 50,000,000 to positive SEK 25,000,000 and free cash flow to be between negative SEK 50,000,000 to positive SEK 100,000,000. So please turn to the next page. We have seen COVID-nineteen impacting our business in 3 key areas during Q2. First, we have seen lockdowns in a number of our markets. By the end of Q2, 82 stores in France, United Kingdom, Belgium, Among others, we're closed and currently 160 stores out of our 467 Monobrand stores are closed. Many stores can still transact and run installations, but it does of course impact daily operations. During Q2, we worked closely with our monobrand partners to mitigate these challenges. We increased the focus on existing consumer base who already has a relationship with the local dealers. We significantly increased our digital efforts to increase awareness. And finally, we adjusted our e commerce revenue sharing in those markets impacted by lockdowns. Secondly, we saw a more unstable supply situation. Scarcity on components in the consumer electronic industry led to higher prices on some components and problems meeting demand on some products, which was higher than anticipated. We also experienced challenges to production due to reduced labor capacity in regions severely impacted by COVID-nineteen. We have increased our focus on supply chain management and added more resources internally to solve these together with our global supply partners. Thirdly, as other consumer brands, we were impacted by reduced global logistic capacity. To meet demand, we increased the use of airfreight, which together with higher freight rates led to higher logistic costs. When the supply situation normalizes, we will again return to Morsi and rail freight, which will help to bring costs down. Are still a lot of uncertainties related to COVID-nineteen and we do expect this global pandemic to impact our business in the coming quarters. We continue to work diligently with both retail and supply partners to mitigate the challenges related to this. We can move on to next slide. We have shown our strategy house in previous earnings calls, but I want to reemphasize that our strategy is on how we are executing on our strategy. Currently, we're in the first phase where our focus is on fixing the basics and becoming profitable again. With our current progress, which is also reflected in our outlook, we are within reach of being profitable this financial year. We still have a lot of work ahead, but I'm encouraged by the progress we have made both financially and in the underlying business despite the challenges related to the COVID-nineteen. We have made significant improvements in many areas in Q2, and I will give you an update on some of those focus areas on the next couple of slides. If we move to the next slide. In our strategy, we have identified 8 core markets where we want to win before we scale our business. In Europe, the 6 core markets realized 13% growth driven by Mona brand and our own e commerce. Multi brand stagnated and this was mainly due to delays in some changes to strengthen the operating model, COVID-nineteen impacting travel retail and a softer participation in Black Friday sales compared to last year. We have made changes to our multi brand channel to ensure a stronger foundation for future growth. This included a new commercial framework as well as the onboarding of several new partners. Among others, we have onboarded both Ingram Micro and Tech Data as new distribution partners in Europe. We expect this to improve our sales performance already in Q3 and Q4. MONO Brands continue to perform well To strengthen our relationship with the partners and to further improve sales, we completed a comprehensive partner survey during the quarter to strengthen our collaboration and partnership with the dealer network. This will now form the basis for future initiatives in this channel. In Q2, we also took over 2 Monobrand stores in London to gain more control of the brand experience and ensure the right activation in the city as a whole. The stores are targeting the high net worth individual segment in particular, which is one of our key consumer segments. In the 2 Asian core markets, we grew revenue by 6%. Our sales in Asia has benefited from higher demand for home entertainment products as we have successfully adjusted our go to market approach to cater for this demand. A consequence As a consequence, the flexible living category grew more than 75% in the 2 core Asian markets in Q2. A large share of our revenue in Asia has historically been generated from on the go products. So in Asia, we were particularly challenged by the impact of COVID-nineteen on travel retail. We decided to make changes to the Greater China region management in December to further accelerate the growth and strengthen our capabilities across the channels. We expect to add more resources to the team like we have done in Europe in the coming quarters to help realize the growth potential we see in China and South Korea both short and long term. If we move to the next slide, please. Innovative products are the heart of Bang and Olufsen and it has been a key priority for us to maintain a high frequency of launches this financial year. We launched 7 new or upgraded products in the 1st 6 months and that's contributed to the positive development in our financial performance. The products have been well received by our consumers and many of them are best in class in the category. And we expect to launch more than 5 new or upgraded products in the next two quarters to add to our already strong portfolio. In December, we launched the 2nd generation Eclipse 65 inches TV. In Q2, we launched 2 new products, BRO Remote Halo and BRO Vision Contour, 2 upgraded products in BRO V20 and BRO Vision Eclipse 2nd generation as well as the Golden collection to celebrate our 95th anniversary and the Rafa E8 sports collaboration. The launch of Viovision Contour was a testament to our agile development capabilities. Since the launch of our strategy, Part of our focus has been to launch a smaller sized TV proposition to respond to 2nd room and second home demand with a lower price proposition. This demand was highlighted also by our monobrand partners and we are proud that we brought this product to market in a record breaking short period of time. In Q2, we also revealed the first product in our classic editions program, the Viagra M 4000 C, which has been very well received among Bang and Oolos and consumers and highlighted the longevity of our products. The Classic Editions program is one of the 3 new product initiatives, which also include limited editions and bespoke programs that we have introduced to boost brand awareness and differentiation in the marketplace. The new technical platform first introduced in the Beosound Balance and Beosound A1 second generation continue to perform well in Q2, but we also released several software updates for our old platform. To improve the user experience on these platforms, we have added new features, solved known connectivity issues and updated Apple AirPlay and Google Cast software. We continue to see our products being rated best in class and receive awards. Our Beosound A1 second generation, which has already received several awards, got the 5 out of 5 star rating by Watch High 5. In November, We received an honorary prize by Lead and Build in recognition of our ability to continue to innovate and bring new iconic products to the market even after 95 years. So let's move to the next page. In line with our strategy, we continue to develop and launched several new initiatives in Q2 to further strengthen our digital platforms. On our own e com platform, we continue to invest and expand the e com functionality into our apps, social media platforms and create retail network enablers like Pick and Collect Pilot now launched in the U. K. With people facing restrictions due to COVID-nineteen lockdowns, Our augmented reality or AR experience app allow customers to place our speakers and TVs in their home virtually. And we have seen increase in traffic to this app in Q2. We also launched a new functionality to now allow customers to try on their favorite headphone style virtually and place their orders directly through the app. Providing the best possible consumer and customer experience is a significant focus for us. We now have an internally built system, which by combining a range of internal and external data sources allows us to see where our customers are facing certain pain points. Related to that, we have built tools for customers customer services to diagnose product remotely and deploy any fixes needed. All of these initiatives help to serve our customers better. We see that this leads to higher performance on our own e com, which grew by 74% compared to Q2 last year, but also to drive a better customer experience and our data indicates increasing customer satisfaction across all product categories. And with that, I would like to turn over to you, Nikolay, to take us through the financial development. Thank you, Christian. Now please turn to Page 11. As Christian said, we have delivered our 2nd consecutive quarter with double digit growth, and this was also the 1st quarter with positive EBIT since we launched Our new strategy. Revenue increased by 12% in local currency. Like in Q1, The revenue growth was related to home entertainment products and especially flexible living performed well growing by 61% in the quarter. We saw this trend in all regions. All regions delivered year on year growth. Compared to last year, Product launches had a positive effect on growth. In the stage product category, we did see a small decline in Q2 compared to last year. This decline was expected as we in Q2 last year launched a new TV, Real Vision Harmony and our soundbar, Real Vision Stage, Driving sell in in that quarter. For the first half of the year, the stage category was up by more than 20%. Looking at our channels, the main driver behind the growth was the Monobrand channel, but also our online sales platform performed well. As Christian mentioned, our own e commerce platform grew 74%, and we are also seeing our e tail partners growing. Revenue from the multi brand channel declined in Q2, which was related to the work of changing the operating model of the channel in Europe that Christian mentioned before. Multi brand is, of course, also impacted negatively by the decline in travel and lockdowns in certain countries as, for example, the U. K. This impacted our On the Go category. But it's important to mention that our newly launched products like Beosound A1 second generation, VIO D20 and VIO PLAY H95 are doing well, and revenue from Bluetooth speakers and headphones increased compared to last year. Brand partnering and other activities grew by 13% in Q2. PC sales is still doing well. Furthermore, car manufacturing has normalized in the quarter. The gross margin increased by 2.1 percentage points. Last year, we made a provision for company and liability, which had a negative impact on the margin that year of approximately 4 percentage points. Adjusting for this, we saw a decline in gross margin of approximately 2 percentage points. This was mainly due to higher component costs and logistic costs, especially logistic costs increased as a result of more products being moved by air to ensure deliveries to partners in a situation with a tight supply chain. The cost was further accelerated by freight rates increasing following capacity being lower. The EBIT margin before special items increased by 13.9 percentage points to 4.1%. The improvement was driven by the revenue growth and the higher gross profit as well as lower capacity costs. The lower cost being a result of Cost reduction program yielding savings of DKK32 1,000,000 in the quarter. Please turn to the next page. As I mentioned, all regions delivered year on year growth in Q2. Home entertainment products were the main driver With all types of speaker categories growing, but especially flexible living products drove the growth. In EMEA, Revenue grew by 13% in local currency. The monobrand and e commerce channels were the main growth drivers. The multi brand channel was impacted negatively by the work we're The growth came from Flexible Living and On the Go products. Flexible Living was driven by most products in the category. Within On the Go, the growth was driven by newly launched products like H95, BOL20 and A1 second generation. The decline in the stage category was related to the TV portfolio and impacted by the product launches last year, and the decline was, as mentioned before, expected. Sales of speakers increased but was restricted by availability of products due to the global company's shortage in the industry. Americas increased by 29% in reported figures but 41% in local currency. The growth was seen across all channels and all product categories. The growth in the stage category was mainly driven by speaker sales, but again limited by product availability. Flexible living grew across most products in the category. It was also supported by some multi brand partners expanding the product range they offer to consumer. The On the Go category grew in both speakers, headphones and earphones and mainly driven by newly launched products like A1 second generation, BIOLET-twenty, H95 and Sport. In Asia, revenue Increased by 5% in local currency, driven by flexible living and mainly related to the monobrand channel. The growth in the flexible living category came from all speakers. As with the other regions, the decline in the stage category was related to TVs where speakers delivered growth. The decline in international travel activity impacted On the Go. Because the On the Go category accounts for More in Asia than in other regions, the decline in international travel affects Asia relatively more. Finally, brand partnering and other activities grew by 16% in local currency. The increase was related to both HP and Harman, driven by PC sales and a normalization of car manufacturing. Please turn to the next page. Our capacity cost declined by 17% in the quarter and 14% excluding special items. We saw a cost decline in all three cost categories. The cost reduction program yielded $32,000,000 in savings in Q2, bringing total cost savings to to $3,000,000 in the first half of the year. The cost savings are mainly related to non product related cost and headcount reductions in administrative functions. The savings in Q2 are only slightly more than in Q1. The reason for this is related to the supply chain challenges seen in Q2, which means that the cost reduction ambition and product related cost was delayed. We have focused on securing supply and competence slowing down the work with reducing product related costs. These temporary challenges have not changed our targeted cost savings. Our development costs declined by 14%. This was related to lower amortization, where the incurred development costs were 1% higher than last year, reflecting our continued focus on product development. Our distribution and marketing costs declined by 11% compared to last year. The decline was partly driven by the cost Production program, but also postponement of planned in store marketing activities due to COVID-nineteen. Instead, we invested in building brand awareness and online activation. Finally, administration costs declined by $25,000,000 or 45%. Excluding special items, administration costs declined by $9,000,000 or 23%, which was mainly related to the cost reduction program. Please turn to the next page. Capacity or CapEx was CHF 12,000,000 lower than in Q2 last year. The decline was mainly related to lower investments in retail due to COVID-nineteen. Investments in product development and technology platforms We're at the same level as last year. Our net working capital decreased by $108,000,000 in the quarter, mainly driven by higher trade Payables and other liabilities. Net working capital to the last 12 months revenue was 11.4%, which is 5.4 percentage points lower than Q2 last year. The increase in other liabilities was related to accruals on employee cost, Taxes, VAT and holiday allowances. I will return to net working capital in a moment. Free cash flow positive by $139,000,000 impacted by net working capital and EBITDA being positive $74,000,000 compared to negative $22,000,000 last year. We have introduced a new term in this quarter, namely available liquidity. We want to mitigate the effects of having a large cash position and facing negative interest rates. We have therefore invested $450,000,000 in AAA rated Danish mortgage bonds. To maintain our financial flexibility, we enter into repo transactions, whereby we can assess Intraday financing if needed. By the end of Q2, we had borrowed $25,000,000 Available liquidity consists of Cash and bonds minus repo borrowing. Our available liquidity position increased to $582,000,000 in the quarter compared to €497,000,000 by the end of Q1. We have in Q2 also purchased own shares for an amount of €42,000,000 to hedge our share based Long term incentive program. Please turn to Page 15. Maintaining control with our working capital continues to be a very high priority for us. Inventory was at the same level as Q1 but significantly lower than Q2 last year. We have since Q2 last year reduced inventory with $142,000,000 With increasing demand experienced at the moment, we are ramping up production capacity with our partners. Trade payables increased to $481,000,000 which was $154,000,000 higher than Q1. The increase was related to the ramp up of production in Q2. Finally, our trade receivables increased to 417,000,000 mainly due to higher sales compared to Q1. Sales with extended credit was 5% in revenue and related to new product launches And also the Golden Collection. Overdue trade receivables continues to be at a satisfactory level. And with that, I would like to hand it back to Christian. Thank you, Nikkorai. Before opening for questions, I will just briefly go through the outlook and the highlights. So please move to the next page. The outlook for 2021 is unchanged compared to the updated outlook presented on December 15 when we increased our expectations for the year. The outlook for 2021 depends on numerous factors. I will not go through them all, but just highlight some of the main ones. I will refer you to the report for a full description of the assumptions. We expect revenue to be between SEK2.3 billion and SEK2.5 billion. We assume that the impact of COVID-nineteen in the second half of the year will not be materially different from what we saw in the first half. Furthermore, we expect to launch more than 5 new and upgraded products in the second half of the year. We expect the EBIT before special items to be between minus SEK50 1,000,000 and plus SEK25 1,000,000. Components and logistic costs are expected to remain at the higher than normal level experienced in Q2. Finally, free cash flow is expected to be between minus SEK50 1,000,000 and plus SEK100 1,000,000. The outlook on free cash flow reflects the revenue and EBIT expectations and CapEx expected to continue reflecting the product launch plan. So please turn to the next page. So to summarize, we had another strong quarter. First of all, the strategy we launched in April last year is working and our focus on core markets is paying off. We have launched 7 new and upgraded products in the first half of the year, which have all been well received by the market. And we have plan to launch more than 5 new and upgraded products in the second half of the year, of which we already launched the first in December. We have onboarded new distribution partners in Europe and the U. S. To strengthen the multi brand and B2B performance. We have accelerated our efforts on digital and e commerce, and it is progressing very well. This has also been one of the mitigating actions we have taken to mitigate the impact of COVID-nineteen and the lockdowns on our business. Our available liquidity increased further in Q2, and we are now at NOK586 1,000,000 driven by our performance on free cash flow. Finally, and before going to the Q and A, I just want to take the opportunity to again thank the whole BNO team, all our employees who have been working extremely hard on executing on our strategy during these difficult and uncertain times. And with that, we will open up for questions. Thank you. Do. There will be a brief pause as we wait for questions to be registered. Our first question comes from Paul Tushin from Deutsche Bank. Please go ahead. Thank you and congratulations for a good performance so far this year. I have a few questions about the sourcing. There's both the component issue, but then I guess there's also the issues in Czech Republic with corona right now. Do you have an indication on how much The capacity has been reduced at the factory at Symphony. Secondly, how much missed Sales you have had in the quarter due to lack of products, a number of products which are sold out. Second question is about the distribution agreements in Europe. If you could put some words on the tech data and the engram, Why are they adding what is changing and also that on the IGRA agreement for the U. S. And then the final for now is on the TV. Can you elaborate on the impact From the change in business model, where mono brand stores have to source it directly from LG On the TV, how much has that impacted the TV sales for either the first 2nd quarter for the first half. Thank you. Thank you, Paul. Maybe I start and then I will pass I want to Nikolay to fill in with further details. So if we start with the demand side, any of our products had higher demand than we expected, which is in the pocket here for us. And then of course, to be able to produce that, we have had challenges to find components. And we have been working extremely hard to find the mission components. And the team in procurement has had, of course, headwinds to mitigate this and to work with this. But so far, we have been able to meet our plans and continue to deliver according to our plans. But we do recognize that it is difficult and we We're working in headwind and we expect this difficulty to continue for a while. And we also have to pay, as we said, a bit more for the components than we normally would have to do to secure the capacity. Also on the capacity side, the factories and our partners have been able to perform despite the difficult times that they have had. And like you say, Paul, Symphony in Czech. And Czech has been really hard hit in particularly that region where Symphony has a factory located. But they have also implemented a lot of initiatives to do tests and to have different shifts and making sure that people are not mixed together on different shifts. So they have been able actually to keep on the production surprisingly, I would say, well, despite the challenges and also learned how to cope with it. We know that we have been sold out on quite a few products in the world because of high demand and because of component shortages. I can't give you We'll not be able to give you a precise number. But the demand is continuously strong, and we are working hard, of course, then to fulfill that demand and to supply our customers with products. And we hope that we will be able to do so in quarter 3. On Tech Data and Ingram Micro. So we have terminated our current partner for multi brand in Europe. And we have assigned Tech Data and Ingram Micro to help us to do the fulfillment of multi brand in Europe. It took a bit longer time to finalize these agreements than we would have liked. So we have a bit of delay in that execution. Then in addition to this, we have moved away from the kind of sell in model. In the previous model, we had an upfront margin that we gave to the distributor wireless with Ingram and Tech Data. We work on a sell out allowance model instead. And that will help us, I think, to perform much better and be much more focused on sellout and provide the right experiences for our customers. We will also and we have also together with them on the whole selling process and meeting with customers and starting to build customer relations and signed up Several of the big multi brand customers that Ingram and Tech Data is, of course, already working with as well also for our products. So we get scale from them. We get relationships from them. We get sell out data from them and efficiency from them that we didn't get before and also then with a new business model. Unfortunately, it took a bit of time and the COVID-nineteen situation also didn't make it easier, but We're ready to go now in this quarter. So we're looking forward to that. On the TV business models and the TV sales, There's a mix of different things here that makes it quite complicated probably to explain. So I'll defer that to Nikolay to see if you can sharing a light on that. But as you know, we started to we don't include the revenue from our from screens anymore into our revenue because our partners are buying the screens directly from LG. Wireless, there's one exception for that, which is Contour, where we actually have bought on a temporary basis, the screens in order to fulfill demand and be able to supply to our partners. But maybe Nikolay can give you more details on that. So I'll pass on to you, Nikolay, to add in anything that we may have missed, and then we'll see whether the Board I'll ask further questions, Sandeep. Yes. Thank you, Christian. And so On the TV side, I think the relevant question here is to look at the Vision Eclipse 2nd generation that we launched In November, where we compared to last year with the 1st generation, now have a different business model where The screens are sourced directly by the partners. And in Q2, that lost revenue It's approximately DKK10 1,000,000. And of course, when we go into Q3 In Q4, that number will, of course, increase because then you have a full quarter impact in Q3 of that. But it's CHF 10,000,000 in Q2, Paul. So I hope that answers your questions. And you should take the Contour on top of that. That should also be taken as the horizon was on the old model, I guess. The Kontoor, as Christian said, Kontoor It's also going to be sourced by the partners, the screen. But for the first Units that we are selling out in Q2, Q3 and partly Q4, but at least Q2 and Q3, We have actually purchased a number of screens directly from LG in order to secure supply because there was a global shortage of 48 inches screens in the market. So if we were going to launch this product effectively here in November, we had to go and secure the supply. So we did that. So actually, the Kontoor screens are part of our numbers in Q2. We didn't sell that many The contours in Q2, so the numbers are quite small. We launched quite late in the quarter. But It is actually going through our books with no margin because it's a screen sourced directly from LG. So that will change to the new normal business model Doing Q3. Okay. And coming back to Christian on Europe and The distribution agreement, you're also right about the headwinds from multi brand stores and that you are changing the model there. Could you put A little more on, is it reducing the number of retailers? Is it reducing the number of stores per retailer? And how far are you in the changes there? So if we start with, we had a number of Re sellers too many resellers in the countries before that have been appointed by Our master dealers in different countries, we have, for instance, in Switzerland terminated quite a few of them. They didn't contribute significantly to any revenue for us. But we're frequently discounting our products and selling them, yes, indeed in not satisfactory ways in terms of consumer experiences. So we have terminated quite a few of those. And then like I said on Tech Data and Ingram Micro, we have signed them up because they do deal with The bigger partners that we also want to deal with like Medjamaar, Elkhart, Inglis, Snak, Amazon and others, They're helping us to fulfill that. But on a different model, like I said, where we basically give them more of a commission and then we control the sellout Margin and sellout allowance together with our partner at the end of the day when the sellout has been completed. So This will give us a much more and higher focus on sellout with the right experiences. And it took a while, like I said, to put this in place. So It's not like we have kind of shut multi brand partners down and are losing revenue because of that. I think on the contrary, we will see growth coming from this area with this new setup, And we actually do see it already being successfully implemented in Switzerland, but it also requires a rollout in Germany, France, Spain. And there has been more lockdown, as you know, in the U. K. So the U. K. Market is a little bit behind in this respect. But We have seen good signs of this working and expect that to be executed now in quarter 3. Okay. Thank you. I'll step back and see if there are those questions. Thank you. Thank you. Our next question comes from Neil Tunde from Carnegie. Please go ahead. Yes, hello. So my first question would be about the corona lockdowns. So how many stores Are currently closed? And how many more weeks of lockdowns would you be able to tolerate In order to meet your guidance for the second half? Thank you, Niels. I may start and then probably pass on to Christian Birk as well who can share more insights on what we're doing to avoid what you just described. So we have 168 stores that are currently closed out of 468. But the difference this time compared to the first time around is that, Like I said, they are still able to transact. They are working with their installed base. They are working on new leads generated from the digital efforts that we are doing and they are doing. And they're becoming, I think, more entrepreneurial in the way of selling and interacting with old customers and new customers. So therefore, We're not too concerned about the fact that they are closed as long as they can keep this Installations up that they're currently able to do and they're currently able also to transact with them on the digital platforms that we have. But I'll let Christian Birk as well show a little bit more light on what we are doing to generate this awareness and convert new customers and old customers into sales despite the lockdown. Thank you, Christian, and thanks for the question. So as Christian alluded to, we have a series of focus areas during the lockdown. A lot of these was actually connected to the original strategy. So I would say, first of all, to the question of how do we navigate and how do we activate And you can say the wider channel network. We're doing very specific things across the digital initiatives, but also marketing initiatives. What we see is we have managed to grow for quite some quarters now the customer base, which we are incredibly pleased with. That is a growth of new customers into the Bang and Olufsen ecosystem. And beyond that, we, of course, focus on Getting a dialogue with existing customers, both through our mono brand network, but also through our marketing efforts to get them and exposed to our new exciting products and the existing portfolio that we think would be relevant for them. Secondly, we have done a lot on the new marketing direction as we announced in the strategy. We saw a need for a new brand and marketing direction, and we really see that paying off now. All of our data is indicating that. We see a massive opportunity, as you also saw in the flexible category that we are growing. People start realizing and we start communicating better that we actually can. When you Getting better that we actually can when you can connect several banknotes and speakers, you actually have a way greater experience and that is also part of The reasons here, simple things like previously, people was looking for driving directions to certain stores when they were Going there, we sort of have new tactics in place, so we expose them to phone numbers. We have very pragmatic initiatives like live chat And we have video sessions, other things coming up. So we want to ensure we can maintain the dialogues with our customers and onboard new customers despite the lockdown. And in our own humble opinion, we feel we have done that quite successfully in the previous So with your new initiatives, What level of activity would stores be able to maintain on average moving To the click and collect and ship from store options while being in these lockdowns, Are they able to maintain like half of their normal business activity or what kind of success rate do you have with your new activities? I think it's a very fast start. Maybe it's a very difficult question to answer Neil because we have 468 partners and they're a little bit different. But we know that some of our partners have had the best months in a long, long, long, long period of time, maybe best ever. So I think it's a testimony to the products that we have built and the new marketing that we are doing. And then of course their own ability to still transact and operate during the lockdown. So I don't think it's like one answer. So some of them are doing really, really well despite this lockdown situation. Okay. And then just a financial question here. Could you update us on how many of your stores are owned and operated By you and what was the effect on your revenue growth from internalizing the ownership of some of your stores in the quarter? So maybe I'll start and then pass on to you, Nikolay. So we added 2 stores. We actually have added 3 stores to our own cocoa kind of only operated and controlled stores during the quarter. So We've added Harrods and we have added Selfridges in London and we have opened in Vistel Village Collection, which is an outlet mall outside of London. So we have those 3 in addition to the number we had before, which I think was around 6 or 7 if I'm not mistaken. But you need to help me here Nikolay with the exact Yes. So we have 10, company owned, company operated stores now. And to answer the question and the 3 additions that Christian just mentioned is the new additions here in Q2. 2, to answer the growth question, so 2 of those stores are actually takeover of stores from a partner. So On a like for like basis, so to speak, is the same stores as we had previously. Of course, we believe that we are operating them a little bit better. That's why we took them over. So and the Bisterville store was Actually not open until December. So there's no impact on that in Q2. Okay. And then just finally, what was the share of revenue coming from your own e comm business in the quarter? It was 3% from own ecom. So that's 3.0? 3.0 percent, yes. Thank you. Okay. Thank you. Our next question comes from Benjamin Silverstone from ABG Sontoor Collier, please go ahead with your question. Thank you. Hi, Sachin, you've got a question. Firstly, congratulations on the quarter. I have a quick follow-up question on Nelsa's question in regards to how the lockdowns are impacting the sales. You do mention now that your Sales from e commerce is roughly 3%. But could you perhaps elaborate a bit on how you've seen, for example, the traffic to your web page going? I also know that you focus a lot on social media. So perhaps there has been some additional traffic coming from these sites as well. Lastly, I was wondering if you could perhaps give some nuances to the fact that you do have a large liquidity at the moment And low debt levels. Would it be possible for you to accelerate your strategy by increasing your cash burn And perhaps give some feedback on why this would not be a good idea or why this would be a good idea for you guys. Thank you. So thank you, Benjamin, and thanks for the encouragement. Maybe start with Birk to share on what is happening on the digital side and the metrics that we're using And Nikolay to help us well with the numbers. And then I can give my perspective on your last question Finally. So Christian Birk? Yes. Thanks for the question, Benjamin. So we don't typically disclose traffic numbers externally. But to give you a few pointers and what's, of course, important when we talk about our e comm share The total revenue is a large part of our stage portfolio is not transacted on the ecom P and L, but is when we provide leads into our monobrand network as such. But we have seen growth, I would say, when you look at our customer funnel from Awareness, the traffic we bring in, evaluation, people considering buying and to purchase numbers And of course, the loyalty metrics we look at, we have seen growth across all four aspects in the last quarter. In terms of traffic, We focus on a few different metrics here. 1 is the incremental traffic we managed to drive into our stores, into our Digital touch points could be our apps, social media touch points, our own bank in olsun.com. Again, we see growth across here. But more importantly, we also look at what's the growth we managed to gain in the market or in the categories. So we look at what's our share towards competition basically. And here we have also seen great traction and still many you can say eyeballs in market Sure. From a marketing perspective in the last quarter. Okay? Thank you, Christian. Nicolai, anything is out or shall I go to the last one? No, I think you can go directly to the last one, Christian. Yes. So In the strategy, Benjamin, we outlined that we have like this first get back to black and then create robustness and then kind of start to scale. I think even though we have now made 2 quarters with growth, 1 quarter with positive EBIT and cash flow, It's too early to kind of, I think, change to this robustness or scaling phase. So I think we want to put Q3 Q4 and the full year where we really feel that we have fixed The basics that still remains to be fixed. I think we have made a lot of progress in many, many areas, but there's also a lot of things that we still want to do before we really start to scale it and accelerate it. And I think as well what we see in the strategy together with the current partners, together with the current footprint That it is still possible to grow that quite significantly. And the products that we have and have announced new ones are doing very, very well. So I don't think there's an immediate kind of need either to do that in order to find the opportunities in the market. So a few more quarters in the inspect to black for sure. And then we'll And we are constantly asking ourselves the same question, so make no mistake about it. But I think this is not the time. It's going to be a while before we get there. Hope that answers your questions, Benjamin. Yes. Thank you very much. Maybe I can just add, Benjamin, that we're also stating clearly that we don't expect Our cash flow in the second half of the year to be significant. Thank you. Thank you. Our next question comes from Paul Jolson from Danske Bank. Please go ahead. Yes, thank you. I have a few follow-up questions. In China, You say that you had a management change. So just wondering if you also are planning any strategic or structure changes out there or if We are underway or if it's only the management that your changes. Then on the brand partnership, you said, I think, When you gave the guidance for the full year, that included expectations from additional partnerships to be signed this year. Is that still the case? On the owned and operated stores, should we expect you Planning to take over more stores in the future. And then finally, you mentioned that Products launched in the last 12 months is 1 third of revenue. How has that been in the past? Is it increasing? Or is it more or less stable? Thank you. Now the final one is you also had in the prospectus that the LG partnership It should be or it's expiring in the spring. Has that been extended? Or should we just See that as a normal procedure, but it will be extended. Thank you. Yes. Thanks, Paul. All very good questions. So maybe I start and then pass on to Nikolay when it comes to the revenue from new products and I'll cover the LG questions before that as well. But On China and on South Korea, we feel we have a lot of opportunity and we haven't been able to grow and accelerate that growth to the extent that we wanted to do. So therefore, we have changed the management and we're bringing in additional resources on the commercial side, on the marketing side, on product management side and on the science side. We still maintain the same strategy in China. So there's nothing kind of different from that perspective. We Also we will do pretty much what we have done. Like I said in my webcast as well, the same things that we have done in Europe to strengthen with country managers and strengthen with account management that is knowledgeable from consumer electronics and from these local markets. So there is more resources going in there. At the same time, we have also kind of cleaned up a little bit in the regions because our operating structure was a bit different than our regional structure. So now we have through our regions. So we have formed the Asia Pacific region and that's now headed up by Arnor. Jeshutte, who previously was doing omnichannel and come from within the company. Then he previously had Eastern Europe and we had emerging markets as his responsibility in Japan. So in order to serve these Social of China and Shanghai to start with better. He has moved and relocated to Shanghai and we are building up our regional hub in Shanghai to serve the Chinese market and the region in a better way and by putting more resources in there and to accelerate the growth. At the same time, we have taken the omnichannel organization that we are now setting up in Europe predominantly and integrated that into our European organization and formed an EMEA organization. And the reason for doing that is to have more execution power and to execute faster on the whole retail experience and retail rollout and retail activities that we have planned for. So Orkla is now what's been heading up the 6 European markets, also now heading up EMEA and all these resources are reporting in to him. And we have also made an Americas organization and a regional Americas organization before Latin America was reporting into Anur in Copenhagen. And now Latin America is reporting in to Rick. So we have 3 distinctive kind of classical regions AMR Americas, EMEA, Europe, Middle East and Africa and then Asia Pacific with We have 3 leaders who are now going to scale that business and serve the customers locally in a better way. The country focus still remains the same. So we are not changing anything in terms of China, Korea is the main focus. That's where we're going to resource it first and continue to accelerate digital there, continue to build mono brand stores and of course continue with the e com with Tmall and jedi.com, but also integrate the Chinese organization and the Asia organization more together with activities that we have been doing and executing in Europe. And then our NOAC will be really, really good for making sure that we get that same progress in China and in Asia. On your second question, we have signed more partnerships in brand partnering. But we because many of them are long term partnerships, we are not allowed to announce them until they are announced. So I can't give you any more comment on that, but we have made progress here. And I think the scenario where We will, in due time, announce those partnerships, but we're doing well there on cocoa stores. And We I think we are served well by having partners and we're engaging more with our mono brand partners. And that's why also we did this Quite extensive survey with 150 of our Morne Brand Partners to see on how we even get closer to them, work better together, capture more opportunities. And I think we have an amazing partnership network that we will continue to work with. What we are missing in some places and that is from our agenda now is to build a few experience centers where we can really demonstrate the whole BNO experience. And we want, of course, to have one in Asia, Shanghai. We want to have one in Copenhagen, and we want to have one in the Americas to start with. So that's on the agenda in terms of next steps in retail. And then we will also see when we announce more products that there will be different retail execution more on the product by product side than complete revamping of stores because I think we have Already a lot of good things happening in retail. So that's on how we're going to proceed with that. And with LG, We also have a very, very good partnership and a good dialogue. And I expect these agreements like the other agreements that we have running to continue and to be extended as normal basically. So no change in those partnerships. We have a fantastic partnership with HP that we expect to roll on with and extend and with Harman and LG as well. So that is more business as usual. And Nikolay, then to the revenue from new product question that Paul also had. Yes. So Paul, I actually didn't Quite catch the details in your questions. And Maarten, I was sitting here discussing what we actually were asking about. So can you repeat, please? The question, I think that you're right in the report, the 1 third of revenue is generated by products launched the last 12 months. And the question is then, is the onethree is that stable up or down versus earlier Previous years, previous quarters. I'm not able to make that reorganization sort of in my head back. I think what we can say is That normally we say that a percentage of our revenue And here in Q2 is coming from products launched in the last 12 months, right? So and I think That is a figure that we see sort of quite stable on average over the coming time as well. Okay. Thank you. That's all for me. Thank you. Our next question comes from Niels Lipt from Carnegie. Please go ahead. Thank you, I have a follow-up a few follow-up questions as well. Talking about your order backlog, I know it's a difficult thing to talk about in a company like yours. But Can you give an estimate of the value of orders waiting to be delivered to end users among your B and O stores? And to what extent this is much higher than normal or where are we at this point? And Secondly, could you also give us an update on the status of the component shortages? To what extent is it getting better or worse as we Thank you. Yes. So thank you, Niels. I could give you the precise number, but I will not. But I can say this much that it's significantly higher than we normally would have on the order backlog. And we have quite a lot of orders that are waiting to be processed, but I will not disclose the number, but it's significantly better than They normally would be and has been historically as well. And on the component side, There is, like I said, a lot of work going on to meet the demand for the products. And So far, we have secured components to meet our plans that we have and to meet the guidance that we have given and outlook we have given. So we are managing it, but it also changes and corona and COVID is difficult to predict. But so far, we are managing, which I think is the most important thing. And our procurement team is doing a good job. And our Production partners and our supply planning team and logistics teams are doing an amazing job as well to get the products to the consumers. So it's not without challenges, but we have managed and managed well. And I think we'll continue to do that. Nicolas, do you want to add anything? Thanks. No, I think maybe just to add, Niels, that We normally don't operate with backlogs in our line of business. So this is a very much sort of consumer driven. And we want to be in a position where we sell into our partners when they sell out to their consumers. So we have that link. So just the fact that we have a small backlog at the moment is significant, but it's a relative Tim, as we don't have a backlog normally. Okay. Great. Thank you. Thank you. There appears to be no further questions. So I will hand back to the speakers for any of our remarks. Yes. So thank you everybody for joining the call today and for all the questions that we have received. And I think we have we are proud about what we have achieved and what the organization has achieved and what all the employees or doing despite the difficult corona times and we are managing the business in a good way. So I wish you all a great day and thank you for joining.