Hello. Welcome all to GN's Q1 2021 Conference Call following our release this morning, Danish Time. Thank you all for dialing in. It's great to have you on the call. Participating on the call is Guy de Oboe, CEO of GIAN Hearing Rene Svensson Thune, CEO of GEO Audio Peter Gomesen, CFO of GEO Store Nord and myself, Henridde Wennigke, Head of IR and Treasury.
Today's conference call is expected to last about an hour, where I will go through the presentation we have uploaded on our website, jean.com. The agenda for the presentation itself is that Peter will start out with the group With the group highlights, then Gide will provide an update on JN Hearing, and they will provide an update on JN Audio. Afterwards, we'll go back to Peter for financial update and guidance. After that, we hand over to Q and A with Christian from the queue. And with that very brief introduction, I'm very happy hand over to Peter.
Thank you, Henne Edel. Good morning, everybody, and thanks for joining our call today. As you know, we pre released our headline numbers For the GN Group on April 14 and subsequently upgraded our financial guidance for GN Audio organic revenue growth And EPS. But it is a pleasure to give a little more color on the strong quarter today. Starting on Slide 4 and a snapshot Of our strong performance in the Q1 of 2021, the group reached DKK 4,100,000,000 in revenue, which represent the largest quarter in GN's history And Equals and Organic Growth of 46%, with 82% growth in GN Audio and 1% growth in GN Hearing.
EBITA grew 151% compared to last year, while EPS grew to DKK3.66. We paid out dividend of slightly more than DKK 200,000,000 in the quarter and the leverage ended at DKK 1,600,000,000 while we earlier this morning Initiated a new share buyback program where we intend to buy back shares worth DKK 2,500,000,000 until the AGM in March next year. So all in all, a very strong start to the year with strong execution across the company. With that short introduction, I would like to hand over to Gide for an update on GN Hearing.
Thank you, Peter. Before going into the specific developments in the quarter, I would like to share a few reflections on the state of the business. First of all, following Q1, it's important for me to stress that we are performing according to our plan. We are still only at the base camp on our climb towards the top, but we are exactly where we want to be and therefore can confirm our guidance for the year. Secondly, we are starting to see the positive impact from the global vaccination programs on the hearing aid markets.
Specifically in the U. S, The market activity seen in March was the highest level ever during the pandemic. Thirdly, we continue to see a strong performance of ReSound 1 and ReSound Key across the independent markets, which bodes well for the uptake of the in the remainder of the year when hearing aid markets are expected to normalize. Let's move to Slide 6 and our financial highlights. So even though we do see light at the end of the tunnel, the hearing aid market continued to be impacted by COVID-nineteen in Q1, Especially in January February where restrictions were tightened across many of our markets.
However, as we entered March, we saw a clear impact from the Rollout. All in all, this led to an organic growth of 1% for the Q1. Compared to 2019 levels, This would translate into around minus 13% organic growth, so still lower than normalized levels, But clearly much better for March. This is also the case for April. The gross margin was 62.3%, which was slightly lower than Q1 2020, primarily driven by mix effects as U.
S. Was more impacted by COVID-nineteen compared to last year and also impacted by the fixed part of our production costs. As a result of our continued and strict Focus on OpEx management, we delivered an EBITA margin of 7.9%, which was almost 4 percentage points Higher compared to Q1 2020 on top of significant investments into R and D and IT. While we clearly continue to take a prudent approach to the cost side, I want to stress that we are currently focusing preparing and investing for growth as markets reopen. The free cash flow of minus DKK 204 1,000,000 was a result of higher than normal level of inventories due to sourcing of specific components and traditional seasonality.
Moving to Slide 7 and the regional development in the quarter. Some of you have asked for more disclosure regarding the growth composition across our regions. So we have now included the different growth components in our quarterly Report on Page 14. In U. S, we continue to see a solid performance in the independent market, driven by our leading product Portfolio, which led to an organic growth of minus 7% for the region as a whole.
In Europe, the market development continues to vary Cross countries dependent on the degree of local restrictions, leading to an organic growth of minus 5%. In our Rest of World region, the organic growth ended at 27% on top of a significant decline in Q1 2020 as the pandemic started in Asia early Q1 last year. And that leads me to Slide 8 And a snapshot of how we see the current state of the hearing aid markets. The market recovery continued to vary across regions, countries and channels, all dependent on local restrictions. In North America, the recovery has been pretty strong by the end of the quarter and also going into April, which we believe is correlated with the strong vaccine rollout in the U.
S. As I mentioned in the beginning, the market activity in March was at the highest level since the start of the pandemic. In Europe, the picture continues to be very scattered. Countries like Germany and the Nordic have gone through some pretty tough months in terms of COVID, whereas especially U. K.
And the Southern European countries are currently seeing An encouraging recovery. France is nationally very positively impacted by the recent implementation of the health care reform. In our Rest of World region, the picture also continues to be scattered. We saw a particularly strong recovery in ANZ and China, Whereas local restrictions are currently impacting Japan, countries like Brazil and India continue to be severely impacted by the pandemic. So the hearing aid market is currently still impacted by the global pandemic and most likely will continue to be in the next months, But we do see light at the end of the tunnel.
Moving on to Slide 9 and a short update on our Beltone transformation, which I'm often asked about. We've previously highlighted some of the key strategic initiatives that we are executing on in Beltone, including a new management team, Optimization of the network and our ownership in transition portfolio. Looking back through the last couple of years, We've been executing strongly on these initiatives. With a new leadership team in place, with extensive industry experience, We have reduced the number of stores in ownership transition from around 250 points of sales to now around 100. These points of sales are now back in the network where we are seeing strong performance from the new owners.
Based on the strong execution and focus on continuously delivering sales growth, our market shares have performed strongly throughout the pandemic And we've attracted a substantial number of new dispensers to the network. We're not prepared to declare victory yet in Belgium, But we are certainly moving in the right direction. This leads me to Slide 10 and our focus on the sales execution. Based on our organic hearing philosophy, we now have a full product portfolio covering all form factors and price points, Effectively utilizing the same fitting software, this is a major and very important milestone as we are making the fitting process much easier for Hearing Care Professionals around the world. We're continuing to do cross functional projects in order to streamline and to do best Practice sharing across the Hearing Care Professionals.
The pandemic has enabled much smoother virtual teams and training sessions, which we are currently exploiting to the maximum. I'm also happy to see that the amount of physical customer visits Standing end user feedback from users that have been fitted with Resound 1, and I'm very happy with the uptake we see in the independent markets. So with the market slowly but steadily opening, we are strongly represented on the forefront, executing on our sales efforts to give our customers the best possible hearing aid experience. And with that, I would like to hand over to Rene and an update on GN Audio.
Thank you, Gideon, and hello to all of you. So I'm pleased now to take you through the For Q1 of 2021. And let's move to Slide 12. So Q1 of 2021 was yet again a very strong quarter for GE and Ager With a record high revenue and earnings level. The organic revenue growth of 82% was a result of continued very strong enterprise demand For our innovative world leading office products, but also strong consumer demand for our True Wireless products.
In the quarter, we have seen a flawless supply chain execution. And let me add here that this execution would not have been possible if we hadn't placed some last orders of certain components More than a year ago. The outcome is a result of the data driven supply chain we have been building for some time now with a very close link between sales And the supply chain. This is indeed crucial for the outcome. So let me turn to the gross margin.
Gross margin was up 1.5 percentage points compared to Q1 of 2020. This was driven by positive impact from product mix And foreign exchange, but partly offset by increased freight and production cost due to COVID-nineteen. EBITA increased by 148 percent, equal to an EBITA margin of 24.8%, which was 7.4 percentage points Higher than the year before. Next to the top line effect, the strong levers naturally also reflects the timing of investments and phasing of OpEx. Free cash flow was at DKK438 1,000,000 in Q1 of 2021, and this includes the traditional seasonality.
All in all, very strong start to the year, which clearly bodes well for the remaining quarters of 2021, where we expect To continue to deliver solid growth every quarter. Let's go to slide 13. And here we have an overview of our performance across regions. We continue to see a strong double digit organic growth Across all three regions and across enterprise and consumer. In North America, we delivered 59% organic growth By strong performance across enterprise and consumer, and this was again led by our industry leading product lineup and strong commercial execution by our North America team.
In Europe, we continue to execute strongly and Europe was once again our fastest growing region With 130 percent organic growth, with particular strong performance in Germany and France. In our Rest of World region, we delivered an organic growth of 40%, driven by several strong performing countries, including Australia, New Zealand and Japan. And with this strong broad based performance, we continue to take market shares on a global scale. So let's move to Slide 14 and our market segment overview, which I also showed last quarter. And with our recent product introduction in the Video segment, I would like to spend a few minutes on the collaboration segment to which the Video systems belong.
Leading me to Slide 15. Our Collaboration segment is essentially plug and play conference call and videoconference call solutions For home offices and huddle rooms, and it includes our Jabra Speak series as well as our Jabra PanaCast video products. The audio USB part of the market is worth around US300 $1,000,000 where we have a market share of roughly 50%. This segment has increased significantly during the pandemic. And based on external market estimates, this segment is expected to grow around 10% per year in the years to come.
If we now move to the USB Room Devices segment. This is a segment we entered a few years ago with our PanaCast solution and where we are now launching Jabra PanaCast 50. This segment is growing from a low base with very low penetration and this segment is expected to grow by more than 30% in the years to come As employees are expected to return partly to the office. This will require solutions for conducting efficient video calls. Today, we have a mid single digit market share in this rapidly growing segment.
But like in any other segment we operate, we expect to gain share quarter by quarter. Then we have the Personal Communication Devices segment, which is mainly consisting of personal cameras. This is clearly also a segment that has experienced tremendous growth during the pandemic. And we strongly believe that this trend We'll continue, which is why we have been investing strongly into R and D to launch a superior solution to address the needs of this specific market. On the right hand side of this slide, we have the room based segment where we are not operating.
This is a segment that is growing a lot less than the other segment And which is actually donating growth and share to the USB Room segment. All in all, we are Sposed to a US1.75 billion dollars collaboration market, which is expected to grow 30% per year in the years to come. So it's truly an attractive space. And this leads me to slide 16 and our recent announcement of our PanaCast expansion. And I'm really thrilled to share our latest product news in this video segment.
So last week, we announced 2 new video products, The PanaCast 50, which is the 1st new normal ready intelligent video bar and the PanaCast 20, which is our first intelligent personal camera. The PANACAS 50 is the 1st integrated video and soundbar Utilizing a unique 180 degree view of the room using 3 high definition cameras. On top of this, We have included dedicated compute power that utilizes artificial intelligence, generating a large amount of background data That can be of huge benefit for enterprises. This could be people count, room occupancy data, Automatic Zoom, etcetera, etcetera. Like the rest of our product portfolio, this is natural plug and play And the product is system agnostic, integrating up against all leading user vendors with an additional layer of on device security.
And I'm really proud that we've been able to launch such an exciting leading product to the market only a few years after we bought into this technology. Now moving to Panekas 20, our new dedicated personal camera. This was not part of our road map when we acquired the technology a few years back, but the pandemic has changed our working habits and we see a strong future demand for high quality Personal cameras, which in combination with our headsets and speakerphone increases the efficiency of virtual meetings. The new PanaCast 20 comes with intelligent zoom, automatic lightning correction and picture in picture functionality. All features are Dedicated directly on the device itself, which will increase speed, accuracy and thereby overall quality of the device When utilizing it on the different UC platforms.
All in all, I think we are strongly positioned to capture market shares in this interesting market the years to come. And we will be utilizing our highly efficient supply chain and our traditional sales execution machinery to gain share. So let's turn to Slide 17 and a quick update on our progress of our sustainability agenda And especially our ambitious 2025 goals, which includes an ambition to use 100% sustainable packaging. The recent launch of Jabra Evolve 2 30 is setting a new standard for new and sustainable packaging. The packaging has FCS approval And the pouch is made of 87% recycled felt.
This product is placed in a much smaller packaging in general To minimize size and thereby shipping footprint. We will certainly continue down this road for coming product introductions, Making sure that we deliver on our ambitious ESG goals. So all in all, another very good quarter for GN Audio, where we continue to build on our strong foundation. We will continue to execute on plans to make sure that we, Also in the years to come, are taking market shares in what we believe is a 10% growing market. And with that, I'd like to hand back to Peter and the financial update and guidance.
Thank you all.
Thank you, Rene. Moving to Slide 19 and the group financial highlights. As I said in the beginning, I'm very pleased to see the performance of GN during the quarter As we delivered 46% organic growth. As a consequence of the strong leverage in GN Audio and continued prudent cost management in GN Hearing, EBITA increased 151%, while EPS increased 3 69% compared to Q1 of last year. Our balance sheet remains sound and we have ample sources of liquidity.
This leads me to Slide 22 and the cash flow generation. GN Hearing's lower free cash flow compared to Q1 2020 was reflecting a negative development in working capital, Driven by higher than normal level of inventories due to sourcing of specific components and traditional seasonality. In addition, Q1 2020 Was impacted by reduced level of trade receivables due to COVID-nineteen, which is naturally also impacting the year over year comparison. In GN Audio, we saw a strong development in operating profits due to the continued leverage in the business. While we're keeping investments at a high level, we were able deliver more than DKK 400,000,000 in free cash flow for the quarter.
Moving to Slide 21 and our capital structure. In March, we distributed DKK 206,000,000 in dividends. And in the middle of April, we effectively canceled 4,000,000 treasury shares. As a result of the strong execution across the business, the leverage ended at 1.6 by the end of the quarter, well within our targeted level. Based on the leverage profile, we initiated a new share buyback program this morning with the intention to buy back shares was DKK 2,500,000,000 until March 2022.
Finally, let's turn to Slide 22 and the financial guidance, Which we upgraded when we pre released our numbers on April 14. First of all, it's important for me to stress that the basic assumptions behind the guidance for 2021 Remains significantly more uncertain than normal due to COVID-nineteen. Recently, certain components have been in global shortage impacting many different industries. GN has commitment from component suppliers to deliver on the upgraded guidance. This is based on an assumption that the GN suppliers will not face unexpected reductions in access to raw materials.
So, let me start with GN Hearing. Our fundamental assumptions behind the financial guidance for GN Hearing are the same as we said back in February, when we released our annual report. Based on the expected market conditions and our ambition to continue to take market share, This result in organic revenue growth guidance for 2021 of more than 25%. We expect an EBITA margin of more than 16% in 20 21 reflecting the expected top line development and continued investments in maintaining our innovation leadership and improving the IT infrastructure. Moving to GN Audio.
As Rene mentioned earlier, we continue to see positive market trends and continued demand for collaboration solutions from enterprises And organizations. Consequently, GN Audio expects an organic revenue growth for 2021 of more than 25%. It is clear that the organic revenue growth in the first half of twenty twenty one will be significantly higher than in the second half of twenty twenty one due to the difference in the comparison base. However, we still expect to generate solid positive growth in the 3 remaining quarters of the year. We expect an EBITDA margin of more than 21% in 2021.
EBITDA and other is expected to be around negative DKK 185 1,000,000. And as a result of the strong growth across the company, we expect to deliver an EPS growth of more than 60% for 2021. So with those final remarks on the guidance, let me just Summarize the performance in the quarter. Firstly, we have announced new and very exciting products across DN Hearing and DN Audio to fuel the future growth. Secondly, we've just upgraded the guidance for GN Audio and we are right on plan for GN Hearing.
And finally, we have this morning started a new share buyback program. So all in all, a very strong start to the year, which bodes well for the rest of 2021. And with that, I would like to hand over to Hena Eder for the Q and A.
Thank you to Guido, Rene and Peter for the update. With that, I'm handing over to the operator for Q and A. And please limit your question to 2 at a time.
Thank you. The The first question comes from the line of Janik Denholm from ABG. Please go ahead.
Great. Thanks, guys. It's Janik from ABG. Two questions. One's for you, Kide and one for you, Rene.
First, Kide, can you provide a little more flavor on the Riesland 1 You have previously shown and spoken to, you can say, the uptake versus the QUATTRO. Can you remind us Where we stand now and also maybe a little flavor on the U. S. Market dynamics, I. E, Costco, VA, etcetera, would be great.
And for you, Rene, can you provide a little more you can say granularity on the split on the audio performance, I. E, video versus consumer versus enterprise? So any flavor on how much you can say your already existing Panacast portfolio has performed? And where is the sky the limit in this video collaboration? If we look at recent video collaboration peers, they are seeing excessively strong numbers.
So how could VIC in this video part become of the business?
Thank you for the question. I'm certainly happy to speak about Resound 1. We continue to get very positive response on ReSound 1 both from end users and from audiologists. And there's no doubt that Vision 1 plays a key role in our ability to sustain or grow our market share In the market overall. And let me, on that note, specifically address the VA.
I've spoken to that before. But obviously, when we launched the Resound 1 into the VA channel, we had Expected to see a more positive outcome than what we've achieved so far because normally the VA channel is a channel that accepts new technology really well. And also, normally, VA is a good proxy for what is happening in the markets or how a new product is received in the market. This is not The case this time around unfortunately. I think in the VA, we've hit an unfortunate cocktail of The channel still being slower to open up than the rest of the market, which means that There's a huge backlog of patients, leading to a big time pressure on the audiologists.
That, combined with the fact that with VSAN ONE, we are bringing New technology. We're the first to put microphone and receiver in the ear canal in an open fit. And last but not least, We continue to be unable to visit the VA channel physically and actually won't be able to until July. So that unfortunate cocktail haven't led to the uptake we would have liked to see with VASAN 1 in VA. But if I look at the rest of the markets or disregard the VA for a second, we actually see a very positive response.
I've previously shared With you, the uptake in some of our key markets like Japan, Germany and U. S, excluding VA. And we continue to see that strong momentum compared to what we saw with Quattro. So that is obviously really positive. In terms of COSCO, we haven't yet Put our newest technology into COSCO, but that is obviously going to happen sooner or later And we'll be part of our, if you like, confidence that we will see a strong performance in COSCO in second half of this year.
So I hope that answered your question.
Somewhat. Thanks.
So Rene here, and thanks for that question. So I think so For the dynamics, I mean, if you look at the growth rates of the 3 categories, video, professional headsets and speakers and the consumer business, then What we have seen in the Q1 of this year, but also last quarter of last year is that the highest growth is on Video. However, from small numbers, I guess you all understand. So we are coming late to this market, followed by our classic professional business, the headset And speakerphone business. And then finally, with the lowest of the high growth on the consumer side, that's I think maybe one comment to add to this is that, obviously, the Q1 was also affected by, let's say, A build down of the order backlog and which mainly affected the professional headset and speakerphone Part and some, we can come back to that maybe, channel refill that has been going on, which is also mainly on the professional Speakerphone and headset side.
So but still beyond that, video is the fastest professional headsets after and consumer is slowest, if you can say so.
Thank you. The next question comes from the line of Martin Parkhoi from Danske Bank. Please go ahead.
Hello, Marcin Parker, Danske Bank. I will just continue on that one, Renier, Because as I can understand that as you also said that you have seen a reduced order backlog in Q1 and you also have started To make some filling into the channel, can you maybe try to say, if you look at the 82% organic growth you saw in the Q1 Jan, how much has that been driven by demand? And how much has been driven by that you have been able To supply more. So what is the underlying demand, Ben? And then back to Guyder as well.
Maybe you can quantify a bit. You say that you continue to say that you're doing better than the independent segment. But could you elaborate a little bit about how much have you actually seen the independent segment grow in the first And how much have Tien Heering been growing in the independent segment in the Q1? And then just On VA, because as I can understand it now, face to face meetings between VA clinics And sales reps have now been postponed to July. Does that also mean that we should not put any hope up for For Siemens from Vision 1, showing in the kind of a live NDA on this side of the summer?
So Rene, back here. So I think I mean, the first comment, of course, is that Q1 was a Supply driven quarter in many ways because we had this backlog and so forth. We have not specified how this breaks down, but I can say the demand has been strong and does take up a significant part of whatever happened Q1 and actually, so I think it's implicit from what we have said about first half is also continuing into 2nd quarter with a Solid April, so there is we see solid demand out there.
How many weeks of inventory have the channel now compared To what we'd like them to ask?
We haven't said that. Competition would love to know exactly where we are. So I'm sorry, We cannot tell that. This, of course, this is a market that is very much supply driven for the moment. We have been, I think, doing very well in that aspect And gained market share this way, but we have not told the world exactly where we stand.
I guess just one last comment to that. I just want to say it is a good thing that we are starting to get some products back in the channel Because when they have her products on the shelves, they sell more.
So coming back to our overall performance. Maybe this It's a good segue for me to speak a little bit on how we see the market development region by region. And I think one of our competitors have been out talking about how they see the performance region by region. And overall, we recognize The picture, however, we are probably a little bit more positive on Rest of the World. But in North America, the market growth in units was 9% versus last year in Q1.
But keep in mind that the market was positively impacted by a large stocking order to a big customer. And excluding that, we estimate the market growth to be around 5%. And again, as I've spoken to before compared to Q1 2020, we have lost share in VA and in COSCO, as I've already talked to. Furthermore, these two channels, VA and Cosco, did take up a larger Share of the market if we compare Q1 2020 to Q1 2021. So all in all, our organic growth It was minus 7% in the quarter.
And consequently, if you look at us outside VA and COSCO, we've either sustained or grown our share in the commercial markets. So actually, a strong performance in the U. S. Europe market growth in units was 10% versus last year. But the market was positively impacted by continued implementation of the health care reform, as I talked to, in France.
And excluding that, we estimate that we probably have mid single digit Excluding France, we estimate that the market probably decreased slightly in Europe. And in France specifically, we have a market share that is mid single digits. So Obviously, we also saw a positive impact on the Healthcare reform. It just doesn't impact us that much. Our organic growth in the quarter in Europe was minus 5 And I think when we announced the annual report, we also mentioned that we have discontinued an agreement with a large It's a retailer primarily operating in UK and Australia, and this has impacted our Growth percentage was around 2% for the total company.
And the impact was obviously even higher in Europe given the focus on UK. So as a result, we actually again believe that we have maintained or even gained market share Across the European markets during the quarter. And then let me move to Rest of the World. I know that one of our competitors were estimating the market growth to be flat versus 2020. We don't recognize that picture.
According to our estimates, we think the market growth in rest of world was double digits. And as you've seen, we have delivered organic growth of 27% in Rest of World And therefore, believe that we have significantly gained market share. So I think that covers our performance as such. So again, Outside the in COSCO, we are either sustaining or growing our market share and that bodes for a really good Performance of Resound 1. And then your question specifically on VA and visit in July.
I guess it's a fair assumption that we are into the summer before we'll see any change.
Thank you. The next question comes from the line of Christian Rehan from Nordea. Please go ahead.
Hi, good morning and thank you for taking my questions. I have 2, please, one for audio and one for hearing. So Rene, first on audio. Can you sort of elaborate a little bit on your thinking around guidance? Because when I look at the 25 Percent threshold of 25% that you're guiding for.
This seems to imply that the next quarter should see a A fairly substantial step down relative to the €2,900,000,000 in sales you had here in Q1. Why is that? That sort of a matter of inventory filling? Is it a matter of you just being cautious in what the out how exactly the market will develop in the second half? What are your thinking here?
And then my second question is for Hearing. And as I read your guidance. You continue to expect that the market for the first half as a whole here in 2021 Will be below first half of twenty nineteen. Does that also go for The Q2 because my impression based on what your peers have been reporting is that the market right now is actually Back to growth or at least very close to being back to growth versus 2019 levels? Thank you.
So to your question on guidance, of course, I understand the question. I think there are 2 or 3 Comments to put to that. I mean, if you take the Q1, of course, it has an element of, Let's call it recovery or whatever you want to cover. I mean, there's some refilling of the channel that goes along with the building down the order backlog. That's one component that you have to, you can say I wouldn't say deduct it, but of course, it is a different order backlog we have now, but it's still there.
So There's still work to do. We have said that we will have growth for Every quarter for the rest of the year, we have not said exactly how this will spread. But the way we think about the market is that we are somehow We came into this situation with this 10% market growth. We think we will come out of this situation with 10% market growth but on a higher base. Everything It's bigger.
What, of course, is a big question for all of us is what is second half going to look like? I mean, how exactly is this going to fold Evolve and when will people come back to the offices? I guess, we're out of this little bit panic mode Of the overall business and the way enterprises behave. So I think for me, it's also Fair to be a little bit cautious on how we look at the whole. Think like always, we will do everything to beat our guidance, but we think this is a meaningful guidance So for now and of course, if you add that on top of the 42% we did last year, it's a lot of headsets And cameras and speakerphones that have to come out of the machine to make that happen.
So Q1 is a special quarter, but demand is there. How exactly it will unfold And the timing and so forth, of course, is a speculation, but we are quite optimistic.
Okay. Thank you.
In terms of the assumptions for our guidance, I mean, I don't want to give specific guidance for Q2, but I can confirm that our overall assumption is that we see markets start to normalize from Q3 and onwards. And I actually think we have even stronger reasons to believe that now because we've seen What is happening in the U. S. As soon as a meaningful part of the population is vaccinated, we really saw very strong momentum in March, Actually the strongest since the impact of the pandemic, and that picture continues into April. So I think, overall, our assumption that we'll See a market that normalizes once vaccine starts to have an impact not only in the U.
S. But across the world It's holding true and that is what we expect we'll see from Q3 and onwards.
Okay, great. Thank you.
Thank you. The next question comes from
the line of Maja Pataky from Kepler Cheuvreux. Please go ahead. Yes, good morning. Thanks for taking my questions. I'd like to focus on hearing for the time being.
It is The first question is with regards to the trial that you're conducting or you're starting to conduct in May, I believe, On the self fitting hearing aid in the form of a hearable, can you maybe shed some light whether a product like that Would need to see an OTC regulation or whether you could actually somehow fit it together in markets where you have a Is the approach allowed? And the second question is with regards to VA and Costco. Understandable that VA market share is difficult to turn around if you can't visit in person. But do you believe Costco will be sufficient to introduce your latest technology. Why are you waiting until later in the year To introduce it and therefore, please some more.
And don't you think it would might maybe be A good opportunity for GN Hearing to start challenging the industry or channels in a different approach,
Thank you.
Well, thank you for those two questions. Now In terms of the clinical trial, as you alluded to, obviously, I think It's evident that we are a company that focused on innovation and wanting to be 1st in the industry with new innovation. And I think we've also said it out very loud and clear That we strongly believe in constantly improving the customer experience, both from the audiology perspective but certainly also from the end user. And I think one of the things we've talked about before is this sort of conundrum, if you like, that Despite the great innovations over the last decade, certainly from GN, but actually also from our competitors, the penetration rate of hearing aids have not really changed. So clearly, there are opportunities to further make the innovations easy to use for both hearing care Professionals as well as end users.
So obviously, you will see us continue having ongoing Clinical trials. Now the self fitting regulation specifically in the U. S, just to be clear, that is actually Regulation that has been around for some time. And it's a regulation, despite the word self fitting, that still requires an audiologist To be involved and to be part of the delivery chain. But yes, again, we drive innovation, and we will continue to do that.
In terms of moving on to your question Jen, regarding VA and COSCO, and maybe I should, this time around, focus on COSCO. I think we have already taken some steps in COSCO. I mean, I don't want to hide that, obviously, we did participate in the KS10 Centre, and we didn't win. I think that is probably obvious by now. And I think there's a tradition in COSCO that often you reward The same supplier 2 times in a row.
Nevertheless, we did compete, we didn't win. What we've done in March, as I'm sure you've also noticed, We followed our competition and lowered our price in the branded segment. We still have the highest price in the branded segment, but nevertheless, And then as you alluded to, we do not yet have our newest technology into COSCO, but obviously, that's an ongoing conversation. In addition to a larger conversation about what additional services can you provide, what brand and so on, so obviously, There are more to it, I guess, than the product, as you also alluded to by your question, in winning in the channel. And we are obviously exploring all those opportunities.
Thank you.
Thank you. The next question comes from the line of Michael Jungling from Morgan Stanley. Please go ahead.
Thank you, and good morning. I have 2 hearing questions. Firstly, if I look at
the F1 from key.com, you
can see it's a fast growing business around 25% per annum or higher. So we're using this online lead generation and it's Perhaps evidence that the world is changing the way that the customers do business. Is this something that you need to do as well? And would this be beneficial for your customer base, especially the independent segment? And then secondly, on tele audiology, can I ask What's your view is around that clinic in a box offering and why you have not offered something similar to your customer base and It helps build an even stronger relationship with your independence?
Thank you.
Yes. I'm certainly happy to speak to that. Again, I think I just kind of alluded to that I strongly believe penetration rates of hearing aids are way too low. And I agree to that one of the ways to encourage or inspire more people to go and get a hearing aid It's definitely also taking online measures to generate leads to go into the hearing clinic. So I think we all see the trends happening not only in the hearing space, but in telehealth as such as a way To reach find new ways to reach users.
And yes, I believe that's An interesting way forward to both improve our business, but certainly also Drive more leads into the office of the health care practitioners. And on that note, TELO Audiology, I mean, we do provide The ReSound Assist Live, which is actually an opportunity where you can do both the hearing test and The first fit of a hearing aid remotely. So we do offer, if you like, a full fledged package for the Allergies to do everything remotely. And we did we actually accelerated that innovation last year and put it into the market in April due To, I mean, the pandemic and so on. But I am convinced that this is a service that is also relevant way beyond the pandemic Because a lot of the users we serve are not that mobile.
So the ability To provide a choice for the user whether you want to be serviced in your home or go down to the clinic, I think, is here to stay. And So yes, we support that, of course, and in the partnership with the HCPs.
Okay. That's great. And maybe one follow-up question on Audio. When you gave the revised guidance For this year on organic sales growth, there really wasn't much noticeable impact on your margins. Greater than 21% wasn't changed.
Is that because you are trying to sort of evaluate what the operating leverage is? Or is there just little chance of seeing operating leverage Even now that the organic sales growth is higher, why not lift it to more than 22 or more than 23? That's pretty much the question.
Sure. I think the answer to that is the same as we have had, you can say, many years for now is that We are in a space where there is a constant opportunity for excessive growth, and we are sort of looking for that and investing into that. And I think we have proven that it's good waiting. Actually, of course, we understand the leverage point and we drive that when we can. But there is a bigger upside by driving aggressive investments, and we still reserve the right to do that as we somehow find these pockets, and that's both on the marketing and sales side, but of course, also on the innovation side that if you take an example here, we have been pushing Investments into V2 strongly.
And now here, we have the first sort of accelerated Personal camera in the market are actually with record speed. But of course, it has a price on the innovation cost. But it's clear, we think that is a better way to go. So that is the rationale for the sustained guidance on Liberates, basically. We will try to spend the money clearly.
Great. Thank you.
Thank you. The next question comes from the line of Niels Leth from Carnegie. Please go ahead.
Thank you. Two questions for GN Audio. So first one, what proportion of sales in GN Audio It came from your video business before the launch of your new video products. And my second question would be about the Competitive situation on the U. S.
Market. It seems that you're growing much faster in Europe. Is that a Reflection of competition growing in the U. S. Thank you.
So on the first question, on the video share of the revenues, we have not given that number. So I think the only number we have out there is that And this is because in the space, we have a single mid digit market share in hot room or small and medium room type cameras. But the absolute number, we have not Number we have not brought forward at this point of time and don't expect To come right now, we think we are now at a sort of in attack mode here where it's good to be a little bit sort of in disguise. So we will not bring that number out, but of course, it's more relative. On the EU, U.
S. Side, I think The reality is perhaps more on first of all, we have a very strong market position in Europe and also stronger than we have in North America. So we say we have more upside in North America. But so in that sense, the cover certainly catching the growth in Europe We are very good at that. I think the other one is that the UC leverage, I mean, of these platforms It's very strong in Europe.
And also, if you look at what happened on public sector, you also saw public sector in Europe across actually take These tools into use to a larger extent than we have seen in other parts of the world. That's part of the so there is a behavior Among private and public sector enterprises here, that is a bit different. You could assume that U. S. Would always be ahead Because these technologies comes from U.
S, but Europe is actually very fast in adoption. So I think that's the main reason.
Okay. Thank you.
Thank you. The next question comes from the line of Carsten Lundborg from SEB. Please go ahead.
Thank you very much. Karl from SEB here. First question for you, Rene. When you break down the personal communications device market, so the Pentacast 20 market, you assess it to around $700,000,000 But I was wondering since Panacast 'twenty is pretty high end in terms of pricing at least, probably also quality, I'm sure, Video cam, webcam. Is the market also Massively fragmented.
And do you have a sort of a guesstimate on how much of the $700,000,000 market is the high end market? And then second question also maybe to you, Rene, because in Danish Media, GN Audio is Being promoted a lot and you're also being promoted a lot for hiring a ton of new R and D guys to help bring the company further. When you hire people here, are you then hiring within the sort of core franchise, sound, video? Or How are you prioritizing? Are there also completely new endeavors in the future that you are hiring people for?
And the DKK 199,000,000 in R and D cost in Q1, is that sustainable for the rest of the year?
Right. Thanks for that. I think the it's correct that we start at the high end of the personal camera market very deliberately. We say I think we have this philosophy. If we want to have a massive impact on this whole space, we need to get ahead of the market.
So we have deliberately tried to put Products out there are in front of what is possible out there in the market. That also means that we are positioned at the high end. I think the we have a view, but I don't want to give exactly our breakdown. But I think there is also a market making exercise here That it is probably up to us because we have a very strong position with enterprise in general and also to increasing the education sector and so on To actually to build a market like we have done on the headset side, you can say the office market in headsets, Of course, this has happened, but it's partly created by us. So I think we have the same philosophy here That we can impact, we think, the depth and the height of that market.
So But it has to happen first. On the R and D side, you can say we are recruiting Across. We have more ideas than we can execute, both from a people and, of course, also from A money point of view. So a lot goes into software. So we are now, we can say, building experiences on top of a better and better hardware all the time.
And that moves, you can say, spent towards AI type of implementations that you have seen now coming out with the PANELcast 50, But also experiences that we bring on top of conference speakers and headsets for that sake. So A lot goes into core product development, but also increasing amount to, let's say, The value add that we bring on some of the hardware. On the R and D spend sorry, go on.
Alsto, thinking whether in the future, not the near term future but a long term future, is there a software stand alone business For GM
in the making, potentially?
We have not guided anything like that. But you know, for instance, it's not a secret that we acquired ourselves into the German Odeering a while back, and that is a software business. It is also not a secret that we are working with that technology On driving propositions out. And of course, to the extent that will turn into products, that will be a software business. But we don't have a communicative software business strategy out there, clear now.
On the R and D spend, I think we are The R and D spend we planned for and put out there is totally within our guidance and business plan. So This one is exactly as we had wanted it to be, and we have strong plans for the rest of the year. We are sort of we are, you can say, quite active on in the communication around recruitment for the same reason that we need the best And we want to somehow make some noise around this.
Excellent. Thanks.
Thank you. Next question comes from the line of Lisa Clive from Bernstein Research. Please go ahead.
Hi. Just a question about your expansion into the collaboration segment of the audio market. So my understanding was within office and contact center really driven by the adoption of UC That, you have very high market share in part because the barriers to entry are quite high because you have to have collaborations directly with the likes of Microsoft, Cisco, etcetera. How does this work in with the products that you're selling more into the home office setting and within the collaboration segment more broadly and then sort of how does that change the competitive dynamics? And Then just a question on Beltone.
Thank you for the detail on the sort of turnaround of that. But Could you just give an idea of in terms of sort of the margins for that business? Several years ago, I think a lot of the stores were Needed to be refurbed and it just seems like the whole business wasn't as well run as it needed to be and you've obviously done a lot of change since then, but it's been probably masked So is that business performing at its profit level that you think is where it needs to be? Or how should that evolution look over the next 2 to 3 years?
So Rene here. So I think thanks for that good question, yes. I think if you take The way we build our business, basically, we are building our business on the transition from traditional proprietary systems. Earlier, they were telephony systems for offices and contact center and so forth. Now you say you have these more proprietary Video systems that are shifting to UC platform, a unified communication platform based systems, meaning there's Teams, Zoom and Whatever comes from Google and so forth.
And so you have an Internet infrastructure, Far cheaper, way more flexible and so forth. You can say so the classic technologies are the donors Of revenue streams that are already there that are being taken over by the UC. So in that sense, from a video collaboration perspective, it's exactly the same game. So it is about partnering with the key platform mentors on UC side and then bring Best leverage of that UC phenomenon that is whatever is out there. So you can say here, whatever happened on the headset UC side is repeating itself On the video side.
I think on the home, if I understand you understood your question right on the home office gear, I mean, would there be other People, I mean, is there another dynamic there? We are betting on the fact that it is a UC game, that people are sort of Subscribing to Zoom or Teams and so forth also in the home environment. And therefore, over time, they will appreciate that you need high quality endpoints Like good headsets, good video cameras and so forth. So dynamics we are betting on are the same.
And Guyde speaking, coming back to Beltone. I mean clearly part of the turnaround has It's been I mean, obviously, to grow our market share, we've been successful in doing that and reducing Our ownership of own retailer, what we call ownership, into a transition from 250 stores to Less than CHF 100,000,000 and we've been successful in that. And then obviously also with a focus on improving profitability. Now by far now, as you can imagine, the network is by far the larger part of the stores. And we have It's around 100 or less stores that we still own.
And we've seen an improvement in profitability. But as I also spoke to we don't declare victory yet. So we obviously currently work to further improve profitability in our own stores. But overall, The majority now by far is the network. And Therefore, our focus is on growing our share in the market, and that has been really successful.
Thanks.
Thank you. The next question comes from the line of David Adlington from JPMorgan. Please go ahead.
Hey guys, thanks for questions. Much of them have been answered. But maybe just quickly, Rene, on The supply chain, obviously, you've covered off a lot of demand there. I just wondered, at what point, if any, would the supply Components supply become a limiting factor to your growth? And then secondly, just Peter, in terms of the share buyback, it was a bit bigger than we were expecting.
Does that reflect a lack of potential acquisition opportunities or just the increased cash flow you're getting from the Audio business? Thank you.
Thanks. I mean, on the supply side, it's clear that the world is working In a way right now that if you don't anticipate the growth, it's hard to execute on it. And you can say we were Good or lucky. Last year, so we did anticipate that this would actually come happen very fast. And you can say we have I think what we have said is that we have secured all the components we need for the guidance we have out there.
It's clear, can we do more? We will try hard to get more components and be as flexible as possible. And I think last year and also Q1, of course, demonstrated the agility in our model that actually we are we have been able to Drive significant growth over several years now. And but of course, It's clear that the supply situation, as we all understand, is more rigid now. And so we need to make So that we have forecast and deals out there.
David, this is Peter. Thanks for the question. So it is correct, we did increase the share buyback program, the size of it. And of course, that is a direct Function of the strong performance. You saw the improvement in our leverage and the strong cash flow.
So that is a function of debt That led us to the increase. We are not disclosing our M and A plans. If we had very concrete plans, you would know about it, of course. But I'm also not saying that we are not looking at M and A. We continue to look at it, but we need to find the right fit, obviously.
Thank
you. Thank you. The
last question comes from Oliver Metzger From Commerzbank. Please go ahead.
Hi, good morning. Thanks a lot for taking my question. First is on Hearing. So if I remember right, some years ago, you acquired Audigy, and it was, to that point of time, a strongly growing network. To my understanding, it was ideal to utilize the experience From Audi G also to boost Beltone.
So now you're in the process of restructuring Beltone for a while. But Could you give a little bit more color where you are also with your former strategy to utilize Audigy in this context and Based on right now, the second question is on audio. It's about Now we're seeing a year of such a tremendous growth. It would be quite interesting to know the replacement cycle of Your product of your equipment. So what is the typical product lifetime per sub segment which you expect?
Yes. So you're absolutely right that we acquired Audigy a few years back, and one of the This was to use Audigy to drive best practice sharing across The retailers in the Beltone network. And I actually think we've been really successful on doing that. And I think it's both reflecting in our performance, the fact that we have been able to grow our share in the market, But certainly also reflecting on the fact that I mean, we have Being able to attract a number of new owners into the Beltone network, I think also that is really Important and part of this about driving best practice sharing across the network. And clearly, Audigy has played a role in that, In ensuring that we optimize our office practices, both in terms of Return rates and lead generation and everything.
So we're obviously looking at the network stores that does the best And how to copy that into other network stores. And clearly, we've been successful in that. And also on the ownership That we have ourselves, so these around 100 stores. Also there, we have improved our profitability. And again, we are not done yet.
But also here, obviously, impact from Audigy has played a major role. And you can say the current head of Beltone is actually coming out of Audigy, which Again, it shows that strong alignment between the practice management optimization in Audigy and what is going on in Belgium.
Okay. Potentially one follow-up in this context. If you look on Audacity, on a stand alone position, so Have the expansion plans you had fulfilled in this extent or But then you can comment also on this direction.
Yes. So I think without Going into too many details on Audigy specifically, we are happy with the performance of Audigy and In many ways.
So Rene here. On the replacement cycle side, we have not, at any point in time, sort of disclosed the replacement cycles in this. And what I can say is that Contact center equipment typically lasts longer, and office equipment are replaced With a faster cycle, so as office becomes more and more dominant, then of course, there is a shift to shorter cycles. That's one dimension. I think the other Is that with the innovation increasing innovation speed, I think, in this space and like in many other spaces, of course, that also drives A faster replacement, basically.
And that's, of course, what we are after with the innovation here. So far and I expect it to somehow continue. There is a, to a point, shortening replacement cycle happening in the market.
Okay, great. Thank you.
Thank you. There are no further questions, so I will pass back for closing comments.
Thank you very much, operator, and thank you, everybody, on the call. So with that, we appreciate your time today, and we see you on the virtual road. Thank you very much.