Earnings Call: Q4 2021

Jul 7, 2021

Welcome to the Bang and Olufsen Q4 Annual Report 202021. For the first half of this call, all participants will be in listen only mode and afterwards there will be a question and answer session. Today, I'm pleased to present Christian Tier. Please begin your meeting. Hello, everyone, and thank you for joining the call. It's great to have you with us today. After the travel restrictions have been lifted, we are finally sitting together again in our offices in Denmark. We have all been getting used to working remotely, but it's great to be back in the office again. I will begin by going through the financial highlights and results of our strategy execution in 2021. Then our CFO, Nikolay, will take you through the financials for Q4 and the year in more detail. After that, I will give you an update on the next phase of our strategy and go through the outlook before opening up for questions. Our Head of Marketing and Digital and Customer Experience, Christian Bjerk, is also with us today and will take part in the Q and A session later on. So if we move on to Slide number 4. We had a strong finish to the year. As you know, We released our estimated numbers on June 1, and our performance was within these estimates. We grew by 31 percent to SEK 2,600,000,000. EBIT before special items was positive at CHF38 1,000,000 and we delivered a positive free cash flow of CHF119 1,000,000. Looking at our results, it's worth reminding ourselves that we started the year expecting SEK2.2 billion in revenue, A negative EBIT before special items of around CHF 100,000,000 and a negative free cash flow of around CHF 200,000,000 It's evident that our strategy is working despite all the headwind from the pandemic. We have completed the first phase of our turnaround by becoming profitable again. We have seen solid performance across the region's channels and product categories. Within product categories, we have seen growth from both existing products and high demand for our new products. As in the past two quarters, the global component scarcity resulted in supply constraints. The component scarcity impacted margins negatively as prices increased and the subsequent supply constraints meant that we had to fly more of our products instead of using train or sea freight. I would like to use this opportunity to extend my thanks and gratitude to all our colleagues and partners around the world. They have shown their incredible expertise, resilience and passion throughout this extraordinary year with store closures working remotely challenges with supply and logistics while working to turn around the company. We're now ready for Phase 2 of our strategy, where we will be focusing on building robustness, and I will go through what that second phase entails more in detail shortly. For 2021 2022, we expect to deliver another year with double digit growth, building on the momentum from last year. At the same time, we expect to improve our EBIT margin before special items and deliver another year with positive free cash flow. So if you please turn to the next page. Our financial performance was driven by solid strategy execution despite the headwind from the pandemic. We saw a solid growth in our 6 core European markets and 2 core Asian markets, which grew by 26% 50%, respectively. These eight markets account for 2 thirds of our revenue from product sales. We have strengthened our local teams in all core markets, adding new capabilities to ensure better execution and to improve our sales and marketing. Since the start of the pandemic, we have focused on our digital capabilities, scaling our direct to consumer e commerce and driving demand through existing and new customer propositions. We have made strong progress, and among others, we have seen our own e commerce channel grow by 71%. We have reignited our marketing, and we have become more data- and insight driven. This has enabled us to improve our targeting and to increased brand awareness in our target audiences. We have also seen a 53% increase in the number of registered customers, back to profitability and invest in new capabilities to support revenue growth. Despite challenges arising from the component situation, We managed to exceed our ambition, achieving a run rate cost reduction of SEK 202,000,000 compared to our target of SEK 175,000,000. Another cornerstone in our strategy was to make our product portfolio fit for the future. We managed to launch 14 products, to a number of collaborations and released several software upgrades to existing products. In addition, we made strong progress with building our product platforms, which has significantly strengthened our product portfolio. Finally, we wanted to scale our business with partners, and we managed to add 7 brand and technology partnerships. To support our entry into gaming, we partnered with Xbox and Australis. Later in the year, we launched our gaming headphone, Beopay Portal, which was kept a key part in our entry into Best Buy in the U. S. We also engaged with new distribution partners in Europe and in the U. S. Our new partners are adding scale and execution power within multi brand and the B2B space. All in all, we are in a stronger position as we enter the second phase of to the strategy. And with that, I would like to turn you over to Nikolay, who will take you through the financial development in Q4 and for the year. Thank you, Christian. Please turn to Page 7. Looking at Q4 compared to last year, we grew by 109% driven by product sales, which was up by 118% and Brand Partnering, which grew by 27%. These exceptional growth rates are, to a large extent, the result of the severe COVID-nineteen impact and major lockdowns we experienced in Q4 last year. To better understand the performance in the quarter, I will also focus on the development from Q3 to Q4. Q4 was a strong finish to the year. We maintained the growth momentum from the previous quarters, which we experienced across all regions and product categories. And Q4 ended as the revenue wise biggest quarter of the year. We managed to secure product deliveries by the end of the quarter, but sales continued to be adversely impacted by supply constraints related to company and scarcity. We therefore still have a larger than normal backlog going into Q1 of the current fiscal year. We saw our core channels performing well. Growth in the multi brand channel was driven by the changed operating model for multi brand in the core European markets and by the partnerships with Verizon and Best Buy in the U. S. If we look at our product categories, then the biggest absolute growth was in our stage The growth was driven by more supplies and also by the launch of Beallab 28. There was a solid development across the portfolio in flexible living, 3rd gen in China and clearing an inventory as part of our product roadmap for 'twenty one, 'twenty two. Across all regions, we delivered quarter on quarter growth. The growth in Asia was primarily driven by the B2B orders and inventory clearing. Please turn to the next page. We delivered our 3rd consecutive quarter with positive EBIT margin despite experiencing significant headwind from higher component and logistics costs. Compared to last year, our EBIT margin for special items increased substantially in both Q4 and for the full year, as last year was impacted by the severe drop in sales due to lockdowns. Compared to last year, the increase was driven by higher product sales and a 1.7 percentage point better gross margin despite increased company and Compared to Q3, the EBIT margin declined by 3 percentage points to 1.9%. Component and logistic cost impacted product gross margin 3 percentage points more in Q4 than in Q3. Furthermore, the EBIT margin was adversely impacted by higher capacity costs. Looking at gross margin per product category, please be aware that we have revised the allocation key for product related capacity cost in Q3. Compared to what we presented in Q3, the gross margin in the stage category has increased to 44.6% and Q3 gross margin in the On the Go category has decreased to 23%. The gross margin in flexible living is largely unchanged. All product categories were impacted by higher company and logistics costs. The stage category was furthermore negatively impacted by higher partner bonuses, reflecting the sales performance for the year. Flexible Living was impacted by the performance in B2B orders and On the Go was adversely impacted by the inventory clearing. Please turn to the next page. Capacity costs grew by 8% compared to last year. And excluding special items, capacity costs grew by 11%. However, Q4 last year was positively impacted by COVID-nineteen packages, reducing capacity cash by $18,000,000 If we exclude this effect, then capacity cash grew by 4% compared to last year. We completed our cost reduction program in Q4. We realized DKK156 1,000,000 in savings this year with a full year run rate of 202,000,000. That means that we exceeded our target by 27,000,000. The cost savings achieved in Q4 was driven by indirect procurement, retail and marketing initiatives and some product related costs. Hence, our general cost level has overall been reduced throughout the year. Investments into sales, marketing, Product development and provisions for employee bonuses are offsetting the cost reductions. Last year, bonuses were, to a large extent, canceled due to the lack of financial performance. Going into the different cost categories. We can see that our development costs are up by 9% year on year. This increase was related to last year's COVID-nineteen packages. Adjusting for this effect, costs were stable and incurred development costs were at the same level as last year. Distribution and marketing costs were again at the same level as last year if we exclude last year's COVID-nineteen packages. This reflects the positive benefit of the cost reduction program offset by higher employer bonuses, which I mentioned before. Our administrative cost declined by 14%. However, excluding special items, administrative cost increased by 10%. This increase was again driven by bonus accruals. Please turn to the next page. Free cash flow was positive by $34,000,000 which again was better than last year. Compared to Q3, free cash flow improved by 6,000,000 driven by net working capital improvements, partly offset by higher investments. EBITDA was in line with Q3 at 61,000,000 Net working capital declined by €45,000,000 in the quarter, driven by reduced inventory, increased payables due to late delivery of products and partly offset by high receivables due to higher sales towards the end of the quarter. Our inventory is at this point lower than we would ideally have it. We hope we can increase our inventory, which will also help us with more cost efficient logistics. Capital expenditures was €8,000,000 higher than in Q3. Investments are mainly in intangible assets relating to product development and software platforms. Our available liquidity was at the end of May, dollars 593,000,000, which is DKK378 1,000,000 more than a year ago. The increase was mainly related to the rights issue, which contributed DKK3 €59,000,000 and our positive free cash flow for the full year. And with that, I would like to hand the word back to Christian. Thank you, Nikolay. So if you please turn to Page 12. In our strategy launched last year, we outlined 3 phases of transformation with the aim of bringing the company safely into the future. We're now back in black and ready to proceed with the 2nd wave, which is about building robustness in our business to make Bang and Olufsen resilient and ready for scalable growth. While we continue to drive profit double growth. We want to build robustness by improving our processes, putting the right systems and tools in place and strengthen our teams. We also want to create repeatability in what we do, building on best practices across our value chain from how we bring our products to life and on to how we win new customers and how we sell a second, a third and a fourth product to our current customers. It's about maturing what we do and how we do it, and it's about making it scalable. But our robustness ambitions It's not only about fixing, optimizing or maturing internal elements. It's also about connecting us much better to our existing and new customers. So please turn to the next page. We want to become a customer love brand. We want customers to know us, to love us, to buy our products, to stay with us and to share great stories about us. We want them to be emotionally connected with us. If we want to scale in the future, we need more than swift love affairs. We need everlasting love relationships. Our Love brand ambition is intended to start the dedicated customer orientation across our business, and we want all our teams to adopt a clear customer mindset. Overall, we want to create a desire for customers and fans to engage with our brand and to own our products. To do so, we will need to understand how we can reach and serve them better. We want to give them an unparalleled experience in both physical and digital environments across all customer touch points. We also want our current customers to buy more products and expand their base of B and O products. Our product platform is a key enabler to ensure that the products work seamlessly and better together. We want our customers to hear, see and feel the full benefits of having multiple Bang and Olufsen products. Lastly, We want to make our customers happy and loyal brand advocates. We would like them to become ambassadors and advocates for our brand to their friends and their families. Ultimately, we believe this will help to create a strong pull effect for our brand, which together with internal robustness building will position us well for the 3rd phase of our strategy. Please turn to the next page. With business robustness and love brand ambitions in mind, we have simplified our strategy house from last year. The house is now constructed in 3 levels: a robust foundation with focus on people, processes and profitability The second phase is on developing a model for scale. And the third phase is for continued focus on growth pillars. I will now go through the different layers in our house. So if you move to the next page. The first level of our house is aimed for securing a strong business backbone. We want to further improve our profitability through value engineering and by finding smarter ways of constructing our products. Also by continuing I had a jump here. Sorry for that. Also by continuing our strategic pricing efforts and by assessing our gross margin structures. Also, we want to become the best place to work for our people. Our people are our single most important ingredient for success, and we will continue building a purposeful workplace where our people and talent thrive. We will also strengthen our organizational capabilities by hiring more resources further to support our transformation. Please turn to the next page. The second level of our house and chores, we have a proven and scalable growth formula. Here we strive for 3 things continuously launching a great product and platform innovations, executing impactful sales and marketing and continue developing the go to market model. Firstly, we continue building a product portfolio that is fit for the future. We plan to launch more than 7 products and platform innovations for the year. We will expand software features and functionality and continue to build on and improve the platforms we already have in the market to support Our longevity ambition. Ultimately, we want to create an ecosystem of seamlessly connected products with an uncompromised customer experience and we are in full execution mode on this. Secondly, we want to amplify demand for our products and our brand. The Bangloressen brand continues to be strong and distinct, yet we want to set a clear forward looking brand direction that supports our love brand position. This will be translated into marketing across relevant platforms, for example, social media, and we will onboard brand ambassadors across the world to reach more customers. We will strengthen local marketing teams to accelerate our execution. We will also work with improving and reimagining our customer experience both before, during and after purchase across channels and platforms. Lastly, We will accelerate our digital efforts further to build on the good momentum from last fiscal year and the growing online sales trends globally. Our digital ecosystem is a key component of our multichannel go to market model. We want to continue to inspire and engage with customers through digital experiences across platforms and channels. We will continue building digital assets and improving our e commerce channels. Overall, We want to grow online sales and create a stronger balance between online and offline experiences. Please turn to the next page. The 3rd level of our house is where we concentrate our go to market resources. We will maintain our focus on resource allocation to winning in 6 European 2 Asian core markets, which we're also focused on in the first phase of the strategy. We will continue our emphasis on strategic partnerships, attracting new and working more proactive with existing strategic partners. The extension of our HP partnership, which we announced last week, is the testament to this focus. With all of these efforts, we are starting the transition from back in black to the big red heart symbolizing our love for our customers and their love for our brand. Please turn to the next page. With our strategy in place, we are expecting to deliver solid performance across revenue, EBIT and free cash flow in 2020 onetwenty two. We expect revenue to be between SEK 2,900,000,000 and SEK 3,100,000,000, which is equivalent to another year with double digit revenue growth. Growth will mainly come from products, and you should expect growth to be front end loaded as we have tougher comparables in the second half of the year. It will also be in the first half of the year that we will see the biggest benefit from products we launched in the second half of twenty twenty one. We plan to launch more than 7 product innovations, which will include Our customer focus also translates into our ambition for customer base growth. We expect to grow our customer base by another double digit figure. Our EBIT margin before special items is expected to be between 2% 4%, which is higher than what we achieved in 2021. The improvement is driven by the expected revenue performance and the full effect of our cost reduction program. Adversely impacting the margin development is component and logistic costs, which we expect will remain at the level we saw in Q4. We will also be investing more in demand creation and product development. Finally, we will see the full year effect of the stores that we took over in 2021. Free cash flow is expected to remain positive this year and to be up to SEK 100,000,000. Cash flow is, of course, affected by the development in revenue and EBIT. Furthermore, we plan to invest more in product and retail development. For revenue, EBIT and free cash flow, our outlook is dependent on how the global component situation evolves. The outlook is based on assumptions that we will not see things worsening compared to what we saw in Q4, which relates to both availability of component and prices. Our guidance is also dependent on future lockdowns not having a materially different impact on our business than what we have experienced last year. We will still face a lot of uncertainty related to the pandemic, and we continue to work to mitigate for that. So if we move to next page. We return to profitability, completing the first phase of our turnaround. The second phase has commenced with the ambition to build robustness. We want to become a customer love brand to win more customers, to more repeat business and build more brand loyalty. We expect to deliver double digit growth and improve profitability in 2021, 2022. And with that, I would like to open up for questions. Thank you. Our first question comes from the line of Paul Jenson of Danske Bank. Please go ahead. Your line is open. Yes. Thank you. And I have a few questions. First of all, more from Looking at individual markets, I was wondering if you could give some insight into what makes the different performance between the markets here. I'm thinking about if you look at Denmark, China, U. S, France, Spain, they are doing very, very well year over year performance for the full year. And on the other side, you have markets like U. K. And Germany growing single digit, where the others growing between 30% 60% year over year. Are there is it COVID related and the Lockdown related or are there any differences? Because traditionally, UK and Germany are large B and O markets. That's the first question. So maybe I start, Paul, and then I'll pass on to Nikolay as well. And I think you already alluded to Parts of the answer. The markets are very different and our go to market model is also quite different in different places. And in Germany, if you take that in particular, The multi brand channel, and if you take one specific example like MediaMarkt has basically been MediaMarkt has been shut down between December 16 and just reopened 5th July. So that channel has been unavailable for us. And a similar case with the U. K. Where also many of the Brand Partners and Partners have had store closures. So I think that's part of the answer COVID related and different lockdowns and different pandemic situations. Then, of course, also our own go to market model and the strength in different channels is also a bit different across the different same places in the U. S. We are working with the monogram partners and been doing So we have expanded with Verizon, working with them and with Best Buy and with Amazon. So We have a different situation than we have in many of the other countries as well. And in China, We also have, of course, a different situation with a large portion of the sales going through Tmall and jd.com, where it has also been open and where we also have strengthened, I think, our position over the last couple of months with the new management in place and also with focusing even harder on the digital side. But I'll give let Nikolay give some flavor in addition to what I just said. Yes. So I think the only thing I would add, Because it's correct that U. K. Has been hard hit by the lockdowns. In Germany, it's actually performing well. The reason why you see different growth rates is that in Europe, e commerce, Ownecommerce has in the past been attributed to Germany in the way the e commerce setup has in the same. And this year, we have actually split e commerce out on the right countries. So that's why you see some differences in the growth rates between the countries. But Europe is Europe, so combined, The numbers are correct. So that's another explanation, Paul, on Germany. Okay. Okay. Because Germany is one of your most important markets and they are clearly underperforming. Two other questions to the markets. China and the Certainly not end of life products within earphones, how much are we talking about in PKK for the quarter. Maybe I start before I pass on to Nikolay as well. So Our digital efforts that we started with in February have started to create much more demand On E8, we have seen that demand increasing and still increasing. And therefore, we have also, Of course, shipped in more products as well, and then we're preparing for future product launches in China. But we have really good momentum On the E8 in China currently, in the sellout. And that's, of course, also why we did a larger sell in, in Q4. Nikolay? Yes. So if you compare if you look at the APAC or Asia growth from Q3 to Q4, Roughly half of that growth number in absolute values is from the earphone sales and the good traction we And that is at discounted prices? That is at a small discounted prices, yes. Okay. And the final one on the markets, U. S, you have an increase of 2,000 point of sales quarter to quarter. That can't be Best Buy only. What's going on there? So we're expanding our partnership with both Best Buy and with Verizon. Verizon is taking more products and kind of increasing the portfolio that they carry and also the point of distribution for the portfolio that they carry. So It's a combination of Best Buy and Verizon. So Verizon is no longer online only? That's correct. Okay. Yes. I'll see if there are others. Otherwise, I'll come back. So I'll stand back again. Thank you. Thank you. Currently, we have one other line in the queue. And our next question comes from the line of Benjamin Silverstone at ABG Sample Collier. Please go ahead. Your line is open. Thank you very much. Hi, Christian, Nibel, hi, Christian. I hope you are well and congratulations on the full year report. I have a few questions, if that's okay. The first question is in terms of the U. S, as Paul just mentioned before. In terms of this Best Buy, I was wondering if there is any sort of details you can give us on the portal sales through Best Buy. How's the portal sales been compared to other headphone launches? And also if there's any indication of whether or not this buyer will potentially be taking in a larger BNO assortment. That's the first question. Thank you. So maybe I'll start here as well. So we have, like we say, renewed our relationship and engagement with Best Buy and it has been very positive from a relationship point of view and the way that they want to distribute our products. And like you say, they have been A partner for Portal and the Portal products and we're doing well with them. Portal is one of the products where we have Struggled to meet the demand and supply shortages have been affecting our sales and we're working hard of actually, Yes, sourcing more components on portal, but that's one of the products where we have struggled to fulfill the needs and demands of the markets. Yes. So in addition to that, we know that they are selling out everything that we can give them at the moment on portal. So the traction is super good. And I think we can also say that we are expanding with Best Buy with new products that they are taking in Explore as well the same project, both in online and in physical retail. Thank you very much for the question, Nilay. My second question is in terms of your guidance for next year. So obviously, you are assuming that the component and logistic cost will stay relatively similar to Q4 levels. How much sort of insight do you have into your forecasting? So in terms of contracts, have you already sort of settled on these prices for the next year? Or are they more quarterly running? How are you actually already now seeing next year's costs? So just to simplify that question, When you assume that these costs are going to stay at Q4 levels for next year, is that based on contracts already in place? Or how long is your forecasting period here? Thank you. Yes. So The assumption that carbon and logistic costs will stay at same level as in Q4 throughout next fiscal year. It's partly based on contracts that we have for many of the products and sub suppliers that we're working with, but partly also on assumptions of what pricing we need to go out and secure companies on in what we call spot buys. So we know that in order to fulfill Our supply chain, we need to go out and buy components on the spot market. And the pricing here is not fixed in any way and can be quite volatile. So this is an assumption In our outlook for the year, this component spot bias will not change compared to what we saw in Q4 on a per unit basis. And that assumption is definitely associated with higher than normal uncertainty. Thank you, Nikolaj. My last question will be in terms of your new strategic step to sort of build robustness. In terms of scalability, when we're looking at next year, if any, where do you see the most possibility to really build some more scale and also help the gross margin. If you look at this year, I mean, you have seen quite a good growth in most segments except Staged. So just how should we look at that for next year? Are there any specific segments that you are looking at to have a higher potential for scalability in terms of better gross margins or how should we see that? Thank you. I'll start and then see if Nikolay tags on. But we will continue to focus on the 8 core markets, like 6 in Europe and the 2 in Asia. We know we have more opportunity there. We have opportunity in other places as well, but we have definitely not exploited all the opportunity in our core markets. And It goes across the channels to continue to build on mono brand, continue to build on multi brand, continue to work with e tailers, with our own e commerce and also with the enterprise and B2B space. So we're definitely not exhausted that Not in terms of opportunity and not in terms of putting all resource and processes in place either. Then What is impacting us a little bit and making this past year a bit extraordinary is that We have lockdowns. We have supply challenges. Even though we kind of stay firm to the strategy and the strategy is working, we make adjustments And we have to rechange launches and marketing efforts. So I think we have demonstrated good agility, but also You don't get full traction of your efforts when you keep on adjusting and changing. So we expect to kind of continue to drive that focus for the next year as well in these markets and hope that the plans will be more stable for the next 12 months. Yes. And I think I can add, if you look at our if our gross margin has increased by 41.1% to 43.3% last year compared to the year before, right? That's even though We've had headwinds on components on logistic costs this year of around 3 percentage points, right? So we are definitely on the right trajectory to work with our gross margin and get more profitability out of the products we are selling. And this is, of course, the journey that we will continue into next year. And we have a number of different things we are working on, pricing being one of them, as we talked about before. But also looking at our margin structure with Monobrand dealers and specifically being quite focused on the way we are using discounts in our sort of campaigning and pricing and go to market model. So despite seeing headwinds still on company and logistics costs, we are also working diligently with things that would have a positive impact on the margin side during this year. Thank you very much, Christian and Nikolay. I will jump back into queue. Okay. Benjamin, it seems no one's in front of you in the queue, so I'll reopen your line for further questions. Thank you very much. And my last question was actually just in terms of your new product launches to your guidance here too. So you mentioned that you are looking to introduce 7 new products or updates this year. I was just wondering if you could give us some nuances to this. Are they already in the pipeline? Or does this sort of rough guidance also account for some leverage or some room in terms of a potential quick new product launch, Such as we saw with your, I think it was the Contour, which came from idea to launch within 6 months or something. So just how firm is this sort of 7 product launches. And which categories are you most interested in? Thank you. So it's a good question. But we say 7 plus and 7 is the number and then plus could mean something. But what we feel good about, if I give some more context to that, is that we did put out 14 products last year and We have, as you know, most of these product launches last year was done on the new platform. And that platform is the same platform we are using for for the 7 new launches that are coming out. So we're keeping on developing on those and we keep on improving the user experience on those platforms adding new features and functionality to of course the new products, but also into the old products that have been launched before. So I feel we have a really, really strong portfolio in what was launched last year. And with The upgrade possibilities of software drops and also then supported by our positioning with longevity as well and making sure that our products stay current and new features are added. Then also like we say in the strategy section of today Is that we want our products to become better together. So you buy 1 and then you will have a better experience if you buy the second one and the third one. So it is simply seamlessly connected is something we're working on already and of course it will be announced in due time, but we are building this ecosystem of products up based on the same platform and I think that will create more amazing experience, more amazing products, but it's really a tribute to the platforms that we are using and the capability of those platforms That will create the new customer experience for this year. Thank you very much, Christian. My last question is just a sort of an understanding question. You mentioned the customer base growth where you wish double digit growth. How is the customer base quantified internally? Enbir will take that. Thanks for the question, Benjamin. So we look in our customer base of registered users that come through our app and we actually specifically look people who have products associated with that. And as you also see in the annual report, we have had that as a huge focus this both to serve our customers, existing customers in a better way as Christian pointed to, but also to attract more customers. Having said that, we also know that we have a lot more new customers that don't necessarily register in the app. So the number we see here is what we track, but we have more customers out there and also attracted more customers than what we point to in this number. Thank you very much, Christian. The final question is just a quick recap on What you mentioned, I think, last time in terms of these experience centers, are there any updates to those? No, that is still part of the plan and we're working on it. And we are searching for locations and evaluating locations, but I've not Successfully locked anything in at this point in time. All right. Thank you very much. That's all for me. Thanks. Thank you. And we've got a follow-up from Paul Janssen at Danske Bank. Please go ahead. Your line is open. Yes. Thank you. I have a few questions left. Coming back to the component situation and the guidance, just want to be sure. You talk about spot prices, but the guidance you have given by up to 18% growth, the components needed for that, have they been secured? That's one part of it. And the second is the more financial one. On you have 5.5% headwind in Q4 and close to 3% for the full year. How should we look at that For the coming years, should we look at the 5.5% being the headwind in your guidance for the next year or in case that logistics come down or components improves, then it could be less. Maybe I'll just start with a quick one on the components secured. We make long term commitments with our partners for our portfolio and for the components that we believe are going to be in scarcity and critical. So we made those long term commitments. But again, the word situation is also changing. So even though we have made a commitment and we have received the confirmation back on that commitment, It doesn't necessarily mean that everything is going to play out the way that it has been planned, but we have certainly done all efforts on the long term commitment. We We're also looking at on how we can redesign and increase our agility on the PCB side as well of putting other components in place should there be shortages. So I think we have done what we can do in that respect. I'll let Nikolay answer on the cost side. Yes. So On the sort of assumptions built in, in the outlook for next year, you could view the 5.5% sort of as the going rate of headwind that we'll also experience into next year. We do expect some improvements on the logistics side in the latter part of the year. So it's not 5.5% exactly. It's a little bit less, but it's in that area. Okay. Then there is a comment about provisions for warranties where you have extended the warranty period. Is that material number? Yes. It's a material number. It's above DKK 10,000,000. And was the Q4 or throughout the year? That was primarily in the Q4 due to extended warranty, high sales. So the warranty is built on 12 months rolling sales. So when you have a quarter that Significant higher than Q4 last year, then the warranty provision automatically increases. Okay. And where sell in and sell out dates, is it fair to assume that they are equal in the quarter? Yes, it's fair to assume that all Selena set out that our consumer facing is equal in the quarter. So from that aspect, you can assume that we have had Due to very late deliveries, we've had a number of speakers in the and vision that came in very, very late in the quarter to our dealers. So they are selling out in June, but we can see that already. So there can be Some differences over the cutoff date, but largely they are in line. Yes. Yes, Paul, on the warranty question. In terms of product quality and the platform quality, we see a significant improvement internally on number of faults that are coming with The new platforms and the new product launches. So that is definitely going in the right direction. So it's not anything that is arriving from that. It's, on the contrary, getting better and better. Okay. I have two questions for the HP extension that you announced a few weeks ago, Has there been any you're right in that message that it's on unchanged conditions, but Has there been any thoughts about expanding to other products or broader part of the HP product line? Or is it just business as usual? We have ongoing conversations with HP on how we can work more together. I can't reveal, of course, any details on it. But first, let me say that we have a very, very good relation with them. And I think the expansion or extension of the agreement is a testimony to that as well. Now it's up to us to Continue with that relationship building and grab the opportunities. I think there are many, many more opportunities together with HP that We see, but we will announce them in due course. Yes. And is there anything to comment or add on a pipeline of other partnerships. I think a year ago, it was said that the guidance for last year was including way. New partners. And I think that was not only the massage chair. We have a pipeline of partnerships and yes, we will announce them when we announce them, Paul. But we have also made Quite some changes in this team and upgraded, I think, this team as well as such. So more to come here. And then finally about this digital ecosystems that you want to operate, I assume that it's going to be continue to be based on Apple and Google ecosystems. So what I don't know if it's too early to talk about, but what are we talking about? Is it your user interfaces on how I integrate products on my iPad or smartphone or what is what's going to change here? I'll start and then I'll pass over to Christian Birk as well. We will continue to work with other ecosystems, but we also want our own ecosystem, the B and O way. And since we have same platforms now across the portfolio, we have In super interesting opportunities to build things and create our own ecosystem in addition to the other ecosystems that we will be part to the I'll let Christian Berg explain a little bit more as well. Yes. Just adding to that. I think we, of course, look to how do we serve our customers better and What's needed to serve also the new customers that we're looking to attract. So we are definitely seeing this beyond the Apple and Google ecosystem given We also have China and South Korea and other markets as a huge focus here. So what you should expect is exactly what Christian pointed to. Beyond what we have today, and we have some really exciting opportunities to bring our own proprietary technologies to a new place, as Christian alluded to. So both Critical focus areas for us. But are you considering going all the way like Sonos on trading your own proprietary part? Yes. We will build a Bang and Oozan ecosystem. Okay. Interesting. Okay. Thank you. That's all for me. Thank you. And as there are no further questions in the queue at this time, I'll hand back to our speakers for the closing comments. Okay. So thank you everybody for joining today. But good having you here and we're proud and pleased that we Managed to close the year with back in black numbers and now we're on to next quarter and the next year and Try to grow that double digit and of course and do even better numbers. So thank you for joining and see you soon again and have a good summer.