Hello. Welcome all to GN's full year 2020 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 Oebo, CEO of GIAN Hearing Rene Svensson Thune, CEO of GN Audio Peter Gormsen, CFO of GN Store Nord and myself, Nader Wencken, Head of IR and Treasury.
Today's conference call is expected to last about an hour, where we'll go through the presentation We have uploaded on our website, gian.com. The agenda for the presentation itself is that Peter will start up with group highlights, Then Gide will provide an update on GIAN Hearing. Rene will provide an update on GIAN Audio. After which, we'll go back to Peter for a financial update and guidance. After that, we hand over to Q and A with questions from the queue.
And with that brief introduction, I'm very happy to hand over to Peter.
Thank you, Henne Elle. Good morning, everybody, and thanks for joining our call today. Today, we have released our 2020 annual report along with our corporate governance report, remuneration report And our sustainability report, which include ambitious 2025 goals. All the reports are uploaded at our website, gn.com. Starting on Slide 4.
I'm very pleased to see the performance of GN in a very challenging year. The results are clear We have delivered on our updated guidance across all parameters with minus 24% organic growth in GN Hearing And 42 percent organic growth in GN Audio, resulting in a revenue of DKK 13,400,000,000. Group EBITDA ended at DKK1.9 billion, which includes a positive EBITDA margin in GN Hearing And an EBITDA margin of DKK 21.6 in GN Audio, excluding gain from legal settlements and litigation, both within our guidance. EPS ended at DKK9.72, while we distributed around DKK350 1,000,000 back to shareholders In early spring before the pandemic. Despite the severe impact from the pandemic, we delivered very strong cash flows, which drove our leverage down to 1.8 times EBITDA within our long term capital structure policy.
So all in all, a very strong set of numbers in a very different year and a good offset going into 2021. With that short introduction, I would like to hand over to
Thank you, Peter. Starting on Slide 6 and our financial highlights, I would like to take a step back And share a few reflections with you before digging into the numbers. 2020 was indeed an extreme year. Extreme things happened across the world, In our industry and in DN Hearing, I'm pleased with the internal execution in DN Hearing. We launched a new strategy.
We successfully launched breakthrough technology with ReSound 1, and we completed our product portfolio We with our ReSound Key launch earlier this month, positioning us with leading technology across our portfolio. And in addition to these achievements, we took decisive action to cut costs and repositioned year endearing on the cost side. While the pandemic turned our industry upside down in a way that has not been seen before. It was important for me to share these reflections It's clear that 2020 turned out very differently compared to what we expected when we entered the year. GN Hearing was, as expected, off to a good start in January February.
But due to the spread of the pandemic and the consequences That had to our industry, we saw negative organic growth in the remaining months of 2020. DN Hearing ended The last quarter of the year with a negative organic growth of 16%, leading to an organic revenue growth for the full year 2020 of negative 24%. What an extreme year. But I think we managed to do well on the things that we could control, and I'm really proud of that. Shifting gears.
The gross margin ended at 61.5 percent for 2020, driven by the lower revenue level, Fixed cost coverage, onetime costs and mix effects. Despite the decrease in revenue and gross margin, We were able to deliver a positive EBITA and cash flow for the full year due to our cost measures. As our end markets are intact in the mid- to long term, we continue to invest into the business. Consequently, in Q4, we invested Significantly in R and D and IT. On top of these investments, we had onetime costs related to bad debt of roughly DKK 30,000,000 in the quarter.
While we clearly have taken a prudent approach to cost To the cost side during 2020, I want to stress that we are also focused on being able to drive growth once the markets reopen. And that leads me to Slide 7 and the sales pattern throughout 2020. After the low point in April with a run rate in the 20s of percentages to last year, we saw emerging recovery during the summer. October sales were at around index 90 to last year, but in the latter part of the month, the momentum softened. This softening continued into the quarter as a consequence of the surge in global COVID-nineteen infection rates.
The market recovery continues to vary across regions, countries and channels, all dependent on local restrictions. In North America, the recovery has, in general, been slower than in Europe and Rest of World, but also with large differences across states and across channels. In Europe, we saw a strong recovery, especially in Germany and Southern Europe, while the UK remained heavily impacted by continued restrictions during the year. In our Rest of World region, the picture continues to be scattered. We saw a particularly strong recovery in China, Japan and South Korea at the end of 2020, but we have now in the beginning of 20 21 seen a resurgence of COVID-nineteen in, among other, Japan.
Now let's turn to Slide 8 And remind ourselves that even though the pandemic has had a severe impact on the global hearing aid market, the market remains very attractive. And has the last decades been robust with stable growth rates? Driven by various macro trends, increased wealth And demographic development, the underlying market still looks very attractive in the mid- to long term, pandemic or not. Market estimations call for a CAGR of 4% to 6% unit growth, in line with the historical growth. Furthermore, overall penetration is still at a low level, especially for less severe hearing loss, making a significant room For penetration growth and most importantly, a significant opportunity for us to give more people back the ability to hear with their own ears.
I am, all in all, very optimistic on the market outlook in the mid- to long term. Now moving to Slide 9 and our full and updated ReSound portfolio. Let me start by giving you some color on the ReSound 1 performance before putting some words Around our newly launched product, ReSound Key. The ReSound ONE reception and feedback has been overwhelmingly positive. Audioologists around the world truly appreciate the technology technological breakthrough and the user benefits that entails.
Resound 1 really performs great in the open market, and I'm very pleased with the uptake across geographies. In the VA channel, the product uptake has been slower than what we had hoped for and honestly somewhat disappointing. Under normal circumstances, VA is a channel that easily adapts new groundbreaking technology like RESOUND 1. But under the current circumstances, where VA has a backlog of patients and our inability to visit the clinics due to restrictions, The uptake has been slower than anticipated. And now let me put a few words around our newly launched essential product family, ReSound Key, which constitute a full lineup covering 10 different form factors from custom hearing aids to superpower hearing aids.
ReSound Key include a rechargeable option as well as a state of the art streaming options covering both iOS and Android. ReSound Key joins ReSound 1 and ReSound LiNX Quattro in the strongest and broadest ReSound portfolio ever, All products inspired by our organic hearing philosophy and with access to the industry leading portfolio of accessories and services. The last time we did a complete refresh of our Essential portfolio was more than 5 years ago. This is another great example of our continued commitment And with this slide, I would actually like to circle back to where I started my presentation. In a challenging year like 2020, I am truly Proud of all the great innovations we've brought to market and the portfolio of products we now can offer to customers and users around the world.
Our technology is Clearly groundbreaking. The launch of ReSound 1 in the autumn, which I'm extremely happy about, came After the accelerated launch of ReSound Assist Live in the spring, which helped our customers through the difficult period of the pandemic, Being able to now add the launch of ReSound Key is really a testament to our strong R and D engine. All the mentioned areas were part of our agenda going into 2020, but I'm thrilled to see the accomplishments amid the severe impact from the pandemic. With 2020 behind us, now let me put some words to our thinking around 2021. As you know, 2020 ended with negative minus 16 percent organic growth in Q4 And we see that 2021 begins at the same momentum with continued significant variations across countries and channels.
However, spring is nearby and the vaccination programs are running at full speed around the world, and we therefore expect That market will reset and normalize in the second half of twenty twenty one and thereby be on par with the second half of twenty nineteen overall. Of course, provided that the pandemic does not bring even more negative surprises to our industry, I would like to stress The visibility is still low and therefore we continue to work with different scenarios in our financial management of the company. And with that, I would like to hand over to Rene and an update on GN Audio.
Thank you, Gide, And hello to all of you. So it's now my pleasure to take you through GEA and Audio's results for the full year of 2020. And let's move to Slide 12. 2020 was a fantastic year for GN Audio. We continued the exceptional growth of 42% organic revenue growth for the year On top of the 26% we delivered in 2019, we took significant market share driven by our leading product portfolio And continued strong execution across the organization.
The growth was driven by continued strong enterprise demand For office and home office products across regions, the demand was positively impacted by enterprises who invested In supporting the employees who are currently working fully or partly from home due to the COVID-nineteen situation. The consumer business returned to double digit organic growth in the second half of twenty twenty, following a first half impacted negatively by retail stores being closed for some time. The year ended with a gross margin slightly below 2019, driven by increased freight and production costs due to COVID-nineteen And tariffs related to the U. S.-China situation. EBITA increased by 68%, Including gain from legal settlements and litigation, excluding the DKK 114,000,000 gain, EBITA grew 58% compared to last year.
This corresponds to an EBITA margin of 21.6%, A margin expansion of more than 2 percentage points, which reflects the continued leverage in our business. Free cash flow, including the gain from legal settlements and litigation, was at an impressive level of DKK 1,700,000,000 In 2020, corresponding to a cash conversion of 86%. All in all, I think a very strong financial performance yet again In g and audio and a strong foundation going into 2021. So speaking about 2021. Let's turn to Slide 13 and an updated overview of our portfolio and market segments.
This is a slide you've all seen before but now updated with market estimates for 2020. Let me briefly touch upon 2 of our growth segments, the Collaboration and the Office businesses. Starting with the Collaboration segment, Which is essentially plug and play conference call and video conference call solutions for home offices and hotel rooms, And it does include our Jabra Speak series as well as Jabra PanaCast video products. In this market, which is estimated to around USD 1,000,000,000 We have a relatively small market share, but we expect this to be a high growth segment where we can gain share in the years to come. In the Office segment, on the other hand, we are a clear market leader.
The market is growing very strongly based on continued headset adoption And new demand from the work from home phenomena. So let's turn to next slide where I would like to give a A bit more color on the professional headset market. Slide 14. So the current professional headset market is worth around US1.8 billion dollars This market has been growing with around 7% annually in the Past few years. However, past year, the market is estimated to have grown around 25%.
The growth is both a result of increased penetration in the office workers segment but also due to increased penetration in new segments like the educational sector, Public sector, public administration and the health sector. We estimate that the market will continue to grow with around 10% per year in the years And that the penetration will steadily increase from around today's 17% and towards 30% in 2025. This estimate is based on some of the positive acceleration trends, which we have mentioned in the recent quarters. 1st, The work from home phenomena, either fully or in a more hybrid format, we think is here to stay. We hear from our customers and partners that more and more enterprises across the world prepare for Flexible work from home initiatives to support their employees and their business also after COVID-nineteen.
Secondly, as people are working in more flexible ways, the need for privacy and removing local noise is increasing And people do acknowledge the benefits of high quality professional headsets and video equipment. And last, People are adapting to new ways of working using the UC platforms in their daily work and life to a much larger extent than in the past, Which brings me to the next slide, on Slide 15. The amount of people using UC platforms Like Microsoft Teams or Zoom in their daily work and life has dramatically increased over recent 12 months. As an example, the daily active users of Microsoft Teams are up 6x, while the daily active participants of Zoom are up even 30x during the pandemic. The growth these UC platforms have experienced in 2020 is way above and beyond the growth of professional headset market or V2 market, which I mentioned, we estimate to around 25%.
This is huge opportunity for us in the coming years As true business partners for these leading UC providers combined with our leading product portfolio. And talking about market leading products, let's turn to Slide 16. The New the hybrid new working model, which I have talked to a number of times, calls for superior technology that cater for different ways of working. Different working spaces come with different surroundings and user needs, which our products can adapt to. As an example of this is our We have our recently launched, the Evolv 2 85.
All features of this new product are based on specific user needs. It could be the superior battery, it could be the active noise cancellation or the antenna design, all delivering outstanding call quality even though you are at home with a lot of background noise. Product features and design are crucial elements for capturing The market growth going forward as people and corporates realize the benefits of high quality professional headsets and video equipment, as I mentioned. So finally, let's move to Slide 17 and a quick update On GEA and Audeo's strategy execution for 2020 and beyond. From a commercial point of view, it's evident that 2020 has been another fantastic year for GEA and Audeo.
However, this has only been possible due to the strong foundation we have built last many years. In 2020, we brought again great new innovations to the market. EVO 2 was last in spring, and late in the year, we launched Elite 85T. This is building in active noise cancellation to a strong lineup of true wireless earbuds. We Did also work intensely with our supply chain during the year to drive scalability and flexibility.
And last but not least, we have taken an important step forward in terms of our sustainability agenda and initiatives. But I'm very pleased with the fact that we now set specific EST targets for the years to come. All in all, another great year for Gen Audio, continuing to build a strong foundation for the years to come. And with that, I would 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 in a very challenging year. All in all, GN Store Noor delivered an organic growth of 9% for 2020 And an EBITDA margin of 14%. Our balance sheet remains sound, and we have ample sources of liquidity.
As we have delivered A free cash flow of almost DKK 2,000,000,000 during the year, we have been able to significantly reduce our net interest bearing debt. And as a result, our leverage ended within our capital structure policy. This leads me to Slide 20 and the cash flow generation. GN Hearing's lower free cash flow compared to 2019 is reflected by the lower revenue level and channel investments, but to some extent, offset by prudent In GN Audio, we saw a strong development in operating profit, reflecting the very strong revenue and the onetime gain from legal settlements and litigation. On top of this, we had a positive development in working capital.
And as a result, we delivered DKK 1,700,000,000 In free cash flow, while we invested significantly into R and D and growth opportunities. Moving to Slide 21 and our capital structure. In early spring 2020, GN distributed around DKK350,000,000 back to shareholders through dividends and share buybacks. As I mentioned earlier, we have been able to reduce our net interest bearing debt with more than DKK 1,000,000,000, leading to a leverage of DKK 1.8 Despite the decrease in EBITDA. GN has a solid financial foundation, why we intend to propose a dividend of DKK 1.45 per share At our upcoming Annual General Meeting in line with last year.
Furthermore, it is our clear ambition to reinitiate share buybacks, Of course, subject to AGM approval. Given the current leverage profile, you should expect us to buy back shares in line with the levels seen historically. And we will propose to cancel around 4,000,000 treasury shares. Let's turn to Slide 22 and the midterm guidance. Let me start by reemphasizing that our midterm guidance, as we announced a year ago, is fully intact on all parameters.
We will grow faster than the respective markets in which we operate, and we will deliver an EBITDA margin across GN Hearing and GN Audio of at least 20% in the midterm. This leads me to our financial guidance for 2021 on Slide 23. First of all, it's important for me to stress That the basic assumptions behind the guidance for 2021 remain significantly more uncertain than normal due to the ongoing COVID-nineteen pandemic. The COVID-nineteen situation has and will not only strongly impact GN's operational performance in 2021, but it will also impact predictability And visibility across GN's markets, channels and supply chain. Please also bear in mind that this guidance is contingent on a gradual reopening of society.
Let me start with GN Hearing. 2020 has clearly shown how unpredictable the pandemic is and the severe impact it can have on the hearing aid industry. As Gide mentioned, visibility is still low and we continue to work with different scenarios in our financial management of the company as we have done throughout the pandemic. Our fundamental assumptions behind the financial guidance for GN Hearing are that the global hearing aid market in the first half of twenty twenty one Will remain impacted by COVID-nineteen and the regional and local restrictions, resulting in markets being below the first half of twenty nineteen level. As hearing care professionals and end users will have access to the vaccine throughout the first half of twenty twenty one, the current expectation is that the market We'll reset and normalize in the second half of twenty twenty one.
Based on the mentioned market conditions and our ambition to continue to take market share, This results in an organic revenue growth guidance for 2021 of more than 25%. We expect an EBITDA margin of more than 16% in 2021, Reflecting the expected top line development and continued investments in maintaining our innovation leadership and improving the IT infrastructure. We do expect that the EBITDA margin in a more normalized market in the second half of twenty twenty one is recovering to our midterm targets of more than 20%. Moving to GN Audio. As Rune mentioned earlier, we continue to see positive market trends and continued demand for collaboration Solutions from Enterprises and Organizations.
We expect the market to grow around 10% in 2021. And with our innovation leadership and commercial execution, we aim to continue to outgrow the market. Consequently, GN Audio Expects an organic revenue growth for 2021 of more than 20%. Based on our current momentum in the market as well as comparison base from 2020, 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. This will naturally be even more pronounced for Q1 of 2021.
We expect an EBITA margin of more than 21 Percent in 2021 and in line with our strategy, we will continue to invest across the company in future growth opportunities. EBITA in other is expected to be around negative DKK 185 1,000,000. As a result of the strong growth across the company, we expect Deliver an EPS growth of more than 50% for 2021. With that, I would like to hand over to Hena Eir for the Q and A.
Thank you, Gide, Rene and Peter for the update. With that, I'm handing over to the operator for Q and A. And please limit your questions to 2 at a time.
Thank
Our Our first question comes from the line of Janik Denholm of ABG. Please go ahead. Your line is open.
It's Janik from ABG. Thanks for taking my questions. So first one for Dieter on hearing guidance. So just to clarify, your expectations of the market normalization into second half of twenty twenty one, that's against second half of twenty nineteen. So in essence, is that against the market growth?
And also how does that compare to your own absolute numbers that you occurred back then? So basically, it means that no Stock growth from 2019 over 2021. And then by that, you don't assume any pent up demand whatsoever this year. We know that some of your Have included some kind of pent up demand into second half of
twenty twenty one? That would be my first question, please.
Thank you for that. And I'm obviously happy to speak about that. So looking at 2021, Clearly, our assumption is for the first half that we continue to be impacted by COVID-nineteen or continue to see a hearing aid market impacted by COVID-nineteen. And then our assumption is that as we move into second half of twenty twenty one and assuming vaccination programs Ron, as we expect, that we'll see a return to normal market conditions, meaning that we expect second half of twenty twenty one To be at the level of 2019, should we see A significant impact or meaningful impact from pent up demand, as you alluded to. Obviously, that will also benefit us.
But Our main scenario is that we'll see second half of twenty twenty one on par with what we saw in 2019. So that's the basis basic assumption for the guidance we've given of overall organic growth of 25% for the year.
And that would also include whatever expectations you currently have for the Rizhub 1 launch, which you also alluded to, It's slower than anticipated in BA. So no pent up included in that either.
Well, I think I mean, looking at it overall, it's It's definitely a prerequisite for our guidance also for 2021 that we want to grow our share and outgrow the market. So that's Also an underlying assumption. Specifically on the Resound 1 and VA, it's It's clear that under normal circumstances, VA is a channel we all observe. I mean, the numbers are publicly available. And it's also, under normal circumstances, a proxy for how a new hearing aid is perceived in the market.
However, this time around, that is not the case. VA is has a significant backlog of patients, which obviously means a significant time pressure For the audiologists in the VA channel, and also we are completely prohibited from visiting the channel. And then adding to that, that with Resound 1, we are launching completely new and groundbreaking technology. So that cocktail It just means that the uptake of Resound 1 hasn't been as we anticipated. Obviously, once markets normalize, we expect that picture to change.
And looking outside The VA channel, we actually do see a good uptake of ReSound 1 and are Getting really, really positive feedback, both from audiologists and from end users. So this time around, VA is not A good proxy for how the product has been received into the market.
Okay. Thanks. So my second question then that would be to you. On Audio growth outlook obviously you expect maybe conservatively a market growth of plus 10% again for the coming year, Even though as you said, you saw what 25% growth in the prior year, what is your expectations? So obviously, the office headsets is But how do you view the consumer channel as well?
And can you talk a little bit about the mix between the consumer element and the Well, both now, but also going forward, will that, you could say, be even greater spend across time? Or do you expect the consumer to Come back somewhat a little bit to what prior levels are, what, 20%, 25% of the total?
Yes. Thanks for that question. I think starting with the last The part of your question, it is evident that in 2020, the enterprise growth was superior. So in that sense, it put some pressure back in the spread between the 2. So when we normally talk about this 25% consumer, 75 And Enterprise, there was a lower share of consumers, especially in the first half.
But also, I think, whereas it was in second half, Enterprise outgrew the consumer business. If you look at the consumer market in general, Then I think there are 2 things to say. 1 is that actually, after a sort of a challenged first half, the consumer market has been actually coming nicely back. What is different now is that the True Wireless share of that market is very dominant. So you can say what happens with True Wireless is more like also defining The consumer headset market is such.
It is a very large market Today, after a couple of years of massive growth, much led by one specific player from Cupertino, But also, of course, other have been able to contribute to that market expansion that we have seen there. I think we don't have much more to say about the market growth in general, the enterprise. I mean, we talked to this 10% that we have talked to Earlier, would it be can we create a bigger market? We'll try for sure. I mean, you can say in this space, We have had the opportunity, and I guess also last year because of our ability to scale supply and so forth, we were able to Great.
Also the market growth. So of course, we will attempt to play into the market and see if we can drive higher market growth. But for now, The 10%, we think is a very meaningful number to work from and try to beat.
Great. Thanks, Alstorp.
Thank you. And our next question comes from the line of Veronika Dubajova of Goldman Sachs. Please go ahead. Your line is open.
Yes. Hi, good morning and thank you for taking my questions. I have 2, please, 1 on hearing and 1 on audio. On hearing, can I just kind of get a better sense for the building blocks for the EBITA margin guidance that you've seen in particular? I'm a little surprised that if we are going to see revenues that are within a couple of percentage points of the 2019 baseline, At least on my math, we are talking about sort of a compression in margin of 400 plus basis points.
I guess, I mean, that would suggest you're seeing a 100% drop through on the revenues that have lost. And I guess in particular in the context of lower selling and marketing expenses, less travel, etcetera, I'm just finding that a little bit Pricing. So maybe, Peter, you can help us out, maybe you can get to that 60% EBITA margin, given the revenue guidance. My first question, on Audio, Renee, just curious, I mean, you discussed the 25% market growth. And curious, what do you think that number would have If there had enough product available to meet the demand, and any comments you can share on kind of component shortages?
I know Not necessarily in your space, but we're picking that up, in terms of some of the electronic components coming out of China that there are some manufacturing delays. Is that something that's impacting you? And if so, to what extent? Thank you.
So thank you, Ronneke. I will actually take the question on EBITA margin. It's Peter speaking. So when you look at our overall guidance for the EBITA margin for GN Hearing, Important points I want to point out that we are guiding an EBITDA margin above 16%. And when we look at the second half, where we expect markets to return to normal, it's also our assumption that we see our margins return to normal, if you like, so above 20%.
So I guess the way to think about it in the period in between is that right now we are kind of running a company That is suppressed on the revenue line due to COVID-nineteen, but we kind of run the company with the capacity built For a higher revenue level, that entails that we invest into R and D as if we were at a normal revenue level because we think this It's really, really important in order to ensure that we're competitive going forward. It also entails that we keep our full production capacity afloat So that we are ready to supply the market once we see the increase in demand. So obviously, that has An impact on our cost level, not least the fact that we continue to invest at a very high level into R and D. So I think that's the way to think about it. And again, I just want to underline that when we look into the second half of the year, Our EBITDA margin will be back at above 20%, assuming that market returns to normal, which is our assumption for the guidance.
Can I just quickly follow-up on that before May talks to audio? Just I mean, I look at your And they've managed to their profitability looks a lot better through the second half of the year than you have. What's the difference you think? I appreciate the revenue.
We have a hard time hearing you, Veronika. Your line is breaking up right now. Can you try again? Otherwise, we'll just go to audio and then see if your line is better. Afterwards, we can follow-up on hearing.
Yes. Why don't we go to audio?
Thanks for that question. I guess on the supply situation and the market growth of last year, It's evident that we talked to you about order backlog out of 2nd quarter, order backlog out of 3rd quarter, And we go into the Q1 with a backlog beyond the normal. So we could have sold more, and the same was the case For competition, despite the fact that we actually think our model proved very scalable throughout the last year. So I don't want to give percentage points what more would have added to the 25% growth here. But you're right, there could have been an upside.
On the component situation, I mean, of course, our scalability links to not only manufacturing capacity and logistics capacity And the demand, but also access to components. Of course, in the guidance we're giving, it Includes our sort of ability to have to secure sufficient amount of components. There is a component pressure In the market now, as you can read in the newspapers, as you speak to, and we see that, too. So far, so good. We are able to find what we need.
But it's clear that this is something that is a factor that we have to deal with and something that, of course, for Sometimes bigger commitments on our side to make sure that we are in the right place in the queue. But it is there. It is fully included in And so far, we have been able to secure all the components we need.
Thank you. And our next question comes from the line of Annette Luk of Handelsbanken. Please go ahead. Your line is open.
Thank you so much. My first questions will be to Oryo. I'm simply just trying to understand the components behind your EBITA forecast for next year for this year of at least 21%. If we look at marketing, you increased those Close to €1,600,000,000 How should we see that in 2021? It's still hard to travel.
And could you maybe say a little bit more about what we should expect of the gross margin compared to last year, so We can sort of compound because I find it hard to just be slightly above 21%. Then on BA, I'd like to follow-up, Kite, on the momentum in this channel. It seems that the Starkey have won a lot of market shares there with their completely in the canal hearing aids. Do you think this will disappear as the pandemic gets behind us and mask is no longer warm? Or do you think this style will continue to be successful in the channel?
And would that mean that you would After sort of reaping some of your launch programs there. Thank you so much.
So this is Rene here. So on the EBITA, I hear your question. I think if we start with the margin, I guess the mix we are foreseeing into next year is plusminus what we know. The right now, as you know, The gross margin is under pressure for 2 I mean, 2 or 3 reasons. One is that the logistic costs are very high.
I'm not April to somehow forecast exactly when that will change or what capacity will come back into the market. So we are assuming right now that the logistic cost will remain high, at least for some time. In a similar way, we are still investing in increasing manufacturing capacity and so forth. So for us, Supply right now and ability to grow is has a higher priority than the last gross margin point. So we are pushing In that sense, forward.
I think we have said all the time that we think it's a better deal for everyone That if we can find extraordinary growth rather than drive better leverage, it is a better deal. So we are Assuming again that we will find ways to grow the company and invest in that, we understand the leverage point, of course, too. So I think this is a we think it's a very healthy starting point to for the year. So we will invest aggressively again Unless we see something in the market we don't like and you can say these gross margin points, It's hard to now say that this will all go away.
And in respect to OpEx for investment in, for example, market Would you assume that you could get completely back to normal in 2021? Or will we see some less spending in the first half?
We are actually spending And brand building and marketing at a quite high level as we speak. So we have taken the opportunity when there is such a momentum in the business To actually push a bit harder than we have normally done. So right now, the assumption is that we keep a high Quite high marketing pressure across the segments and also across the world. So don't expect us to somehow slow that down right now.
So coming back to your question on the momentum in VA. So overall, if we look at the results So the performance in January, VA was down 22%. And if we adjust for the number of business days, then it's down 14%, so probably slightly still below the market. So I think we've seen throughout the pandemic that VA has been slower In opening up then what we see what we've seen in the commercial channel, if I can put it like that, And especially on customs rechargeable, there's no doubt that I think the custom form factor as such Due to the fact that people need to wear a mask, obviously, has an advantage. I think also going forward, what we'll See in all form factors is that rechargeability is a feature that people really appreciate.
So I think from that perspective, rechargeability across all form factors is a relevant feature also beyond the pandemic.
Yes. My question is more if you think you need a custom made rechargeable hearing aid as well And also if maybe customers get used to those From different preferences, maybe cosmetic or something, you expect Starkey And continues their strong momentum.
Well, I think if you look at the VA channel as such, I think the ITs have Been under indexed, and obviously, that's it's also reflecting that. And then, yes, I think There is a room for custom hearing aids. I guess the ideal hearing aid, if you like, would be completely invisible And with all the features you could possibly imagine. So I guess that's what we all strive to deliver.
Okay. Thank
you. Thank you. Our next question comes from the line of Michael Jungling of Morgan Stanley, please go ahead. Your line is open.
Thank you. And I have and good morning all. I have two questions, both on audio. Firstly, And why did you show such relatively poor growth performance in North America versus Europe? The growth rates really are quite stark.
I mean, Flat growth or flattish growth for
the U. S. And sort of 70% growth in Europe. Just to me, As we reconcile, that's question number 1. Question number 2, on the audio guidance, the organic sales growth was more than 20%.
And can I just confirm what you mean by stronger first half versus second half? Do you foresee that your second half will actually grow, That you will show positive organic sales growth in the second half of this year. Thank you.
Thanks for that. To the Q2, yes, indeed, we do foresee that we will grow in the second half against what we also understand is a tough comparison base, Clearly. So on the North America versus Other parts of the world growth pattern, you can say this UC phenomena simply is stronger Right now, outside of U. S, of course, I guess the next question, did we lose market share in North America? No, we did not Actually, so there is a pattern difference also a bit on the consumer side.
Actually, we have higher growth Then we have also in the second half than we have had in North America. And that has just something to do with The retail pattern and how that actually works and how we set up online and so forth. So these matters and then, of Also, foreign exchange play a role as well in that overall pattern.
Okay. Can I just follow-up please on this on your comment around market shares? I mean, if I look at what's happened over the past years, it's fair to say that you materially outgrew the market. The Plantronics numbers look pretty impressive. And as a result, for you to grow twice the market, are you assuming that Your main competitor, Plantronics, is not experiencing any material improvement in their execution.
Could you just confirm that in relation to that?
I think you Okay. So of course, we have seen we saw strong results from competition in the last quarter. That's a reality. I guess we come from different bases. Of course, there's also an absolute A piece here that we need to remember if you compare the sizes of the business.
And of course, you probably have the answer to some more. But Ivan, we have a huge respect for our competitors all the time. We have been doing clearly better, and we intend to Keep it like that. But definitely, I totally respect that everybody had a strong Q4 or last quarter.
So your guidance of 20%, does it assume that a major competitor starts to improve more and more Or that it was more of a coincidence or it was more of a one off that this competitor showed such strong I'm trying to understand what that 20% twice as far as the market actually means in relation to your major competitor.
Our assumption is that we are able to take market share in a significant way across the globe. And if I look at the Second half of last year and look at the share of wallet with key distribution and resellers, we have taken share also in That period as a whole. So I mean, it's clear that competition is there, and we'll be doing everything they can to But we think we have the tools in terms of innovation, the products, lineup and of course, also marketing muscle and channel access To keep taking share, that's our assumption, and it has worked for us so far. And Of course, it takes all these bit these three pieces basically. It takes the innovation power and the right products in the market.
It takes Channel exit, we need to reach the customers and have the pull out there. And of course, the supply chain needs to be fully in shape. And so far, so good.
Thank you.
Thank you. Our next question comes from the line of Martin Borcaughey Of Danske Bank. Please go ahead. Your line is open.
Thank you very much, Maarten Parker at Danske Bank. Then since Michael only asked about audio, then I will only ask about GEA and Hearing. GEA, now you have And a vision of growing your market share every year. So can you talk a little bit about how that went in 2020? And in that context, maybe you could address a bit the regional growth rate that you're seeing in 2020 and of course, Particular in the Q4.
And maybe you can go a little bit about the little bit of detail with your Performance in North America, where you were down 24% year on year, about some 18% in local currencies, which I see is significantly The worse than the market. So could you maybe elaborate a bit on the growth in each of your segments in U. S? And you can skip VA, we know that. But in Belgium, in larger chains, Costco, of course, and then in your own independent channel.
And then second question, then just on product launches. You're now launching the Essential line. That's pretty close to the year and I'll say a little bit Unusual to launch such a line so close to a high price launch, which is less than 6 months ago. So can you just Elaborate a bit on that.
Yes, I'm happy to do that. So First of all, let me maybe give a little bit of context around how the overall market developed In 2020 and the different regions were impacted, then I'll speak about Our growth rate in Q4 overall and certainly also our market shares. So I think when you look at the market development overall And starting from the region where we saw less least impact of COVID-nineteen, that was APAC, Then Europe and then the U. S. So that's how the market was impacted overall.
In terms of Market share development, you've already pointed to VA that I didn't need to comment on that. But then if we deep dive on the U. S, I think I've spoken about that also when we announced our Q3 results that When you look at our performance overall in the U. S, we have lost share in VA, And we have also equally lost share in COSCO. Now keep in mind The VA, under normal circumstances, account for 20% of the market.
Costco around 15% of the market. The manufacturing owned retail, 10% of the market and then the commercial market is the remaining 55%. And in the commercial market in the U. S. And the rest of the market worldwide, we have either sustained or grown our share.
So that's important for me to underline that apart from VA and Costco, we have sustained or grown our market share in 2020. And then in terms of the growth rate we see in Q4, where we see a growth rate of Minus 16%. And let me maybe add a little bit color to that. When we compare with Q4 2019, without maybe going into too much details, we are up against a tough Comparison. And I also want to add that we have consciously decided to enter collaboration with a larger account That is mainly focused on the UK and Australia and New Zealand.
That accounts For around 1% of our sales, but when we look specifically at Q4, it actually impacts our growth rate with minus with around 2 percentage points. So that maybe gave you a little bit color specifically on our growth rate in Q4 and also our market share development. And then with that, I want to move on to your second question on our launch of ReSound Key following the launch of ReSound 1. I think that to your point, I mean, it really speaks to, if you like, the productivity and the quality of our R and D engine That in addition to putting a new groundbreaking technology out there, as we've done with VASAN 1, we are Also at the same time, able to completely renew our essential line with Resound Key. And I actually think that gives us a really, really Strong portfolio in the market right now and also makes me feel quite confident that we are in a strong position, especially when the market normalizes in which We expect it to do in the second half of twenty nineteen or second half of twenty twenty one.
Okay. Can I just follow-up, Guido, just on key accounts in general? Why have you seen And loss of share to key accounts, of course, including VA, Costco and I think also your share at Ampliform has been going down. Why do you think that?
Well, I don't recognize the picture you paint there. IFE VA, I'm happy to speak to that again. And COSCO, I've also spoken to, but the rest, I don't recognize.
You said you're losing share, but you did not say why you think you're losing share?
So in terms of VA, obviously, When we look throughout the year of 2020, I guess until 1st November, our technology was not the newest in the channel. Now, 1st November, we launched the RESOUND 1 into the VA channel. And as we've spoken to Throughout with VESAN 1, we are bringing really new and groundbreaking technology into the market with the Marie and everything. And this is at a time point where we cannot visit the VA channel and also where there's a huge backlog of patients putting a lot Pressure on the channel. So that just turned out to be a really tough cocktail that has Prevented us from seeing the normal uptake of a new product into the VA channel.
So obviously, that is disappointing, especially As the VA channel is often seen as a proxy for how new technology is received into the market, so let me just underline that this time around, The VA is not a good proxy for how Resound 1 has been received into the market, on the contrary.
I agree. I was just a little bit curious about the other channels as well. But I think I'll go back to line.
Thank you. Our next question comes from the line of Neil Flepp at Carnegie. Please go ahead. Your line is open.
So good morning. My first question would be on the audio business. Could you talk around the volume and ASP The effect on your guided revenue for 2021, so would ASP increases contribute a substantial part to the 20% or more than 20% growth. Second question would be around the collaboration category. So is it fair to assume that you would we should expect Kind of the step change in your revenue contribution from collaboration in 2021, and that will contribute a meaningful part of the growth For this year.
Thank you.
Thanks, Nils. On the ASP side, actually, the reality is that for Quite many years. There has been a certain contribution from ASP to the growth of the company. So we Constantly designing and launching products into the market with somewhat higher price points, and we did that also This year I mean, in 2020 with the Evol 2 product line. So but it's not dominant, I think.
So we should understand, the business is mainly driven by volume growth, but there is an element. And I guess with the shift of Classic EVOLVE and into EVOLVE 2, we will see some element of that also in 2021, but it's nothing new. So it is as it normally is. On the collaboration side, we have promised the market that at some point of time, we will broaden the category. We have not shown our Hans Jett, so everybody will have to stay tuned on that.
But it's clear that our ambition is that We can do more in this space. As we have written, we did well. I mean, we saw not only, You can say the video market in general pick up and actually also segments like education was a very good segment for us And somehow saved the day as the hotel room phenomena was in dire Straight after the close down, the people were sent back home. So very clear, we will expand the portfolio and with that,
And can you elaborate on how much collaboration
We have not said that. And so competition is guessing all So I don't want to give them too much help here. So it is meaningful and with very strong growth, But we have not given a number.
Okay. Thank you.
Thank you. And our next question comes from the line of Christian Riem of Nordea Markets. Please go ahead. Your line is open.
Hi, this is Christian from Nordea. I have two questions, one for audio and one for hearing. So first on the audio, When we look at your Q4 sales and compare to Q3, I would assume that part of the increase In revenues due to seasonality in the consumer business, can you elaborate on whether enterprise Revenues increased from Q3 to Q4 or whether they were yes, whether there were an increase In Enterprise revenues. And my second question is to GN Hearing and whether you can elaborate a bit on the Gross margin here in the Q4 also compared to the Q3. So we can see the gross margin is down by around 2 percentage points Despite revenues being up relative to the Q3, what explains This development.
Thank you.
So Rene here. So I think on the specific question on Enterprise Q3 to Q4, we did see higher revenues on Enterprise in Q4 than Q3. You should remember that in these 2020 quarters, the revenues are, to some extent, supply driven that because we were working on this backlog situation. So But we increased the output in Q4, and it's higher than Q3. And there was, of course, some seasonality on the consumer side As always, but less so, you can say, on the enterprise where it has been a different year.
So in terms of the slight decline in gross profit margin or the decline of 2 percentage Fine. It's actually driven by a mix effect. So it's a combination of geography, Of channels and of products that lead to that change in the margin.
And can you just maybe elaborate on the product side because the one could speculate here, of course, that You're seeing higher or lower high end sales and that, that might indicate weakness for the new For the new ReSound 1 product, so what is exactly this product component in the mix that adversely impacts the gross margin?
Yes. Well, actually, I mean, in that regards, we are benchmarking the Take of ReSound 1 compared to when we launched ReSound Linx Quattro. And we actually see the same Share of our revenue going to resound 1 as we did with resoundings quarter, which I also believe I shared in more Specific numbers on when we looked at the Q3 results. So we see that same mix. But obviously, that's the overall comment.
But obviously, there can be variations from 1 quarter to the next Also in terms of tender supplies and so on. So that's more how to think about it.
Okay. Thank you.
Thank you. Our next question comes from the line of Carsten Lundboil of CB, please go ahead. Your line is open.
Thank you very much. Another question to the U. S. Performance, Good evening, because I think this is not the Q1 where we're discussing this. It seems to be sort of Turning topic over the last couple of years with us having an impression of GM not performing as expected in the U.
S. Market And apart from drilling further into the organic growth rates, etcetera, so then what can you actually do about this? Is this just a matter of hoping that The recent one was solved, I think, for you. What else will you change in terms of priorities in the U. S.
Market to get back into gear? Also for Hearing, I was just looking at administration costs in Hearing Day at a very high level. In fact, you can It's the only cost item that's all time high levels, which to me doesn't make so much sense in the terms of During a pandemic, maybe R and D cost would make sense, but not the administration cost. So what's going on here? Then the final question to Bjerg Gormsen on the share buyback intentions.
If it has to be at the same level as what you have done historically, Then what will you do with the rest of the money? Because we on the back of the guidance you're setting up for the company, EBITDA would Be much higher in 2021 than 2020 and bring back your leverage or bring down your leverage significantly in that. There should be room To increase the share buyback further than historical levels, I would say. Thank you.
Thanks. So let me start out with commenting on the administration costs. We are in the process Implementing a new ERP system in the DN hearing, and we paused that actually in Q2 when we saw the impact of COVID-nineteen and then we reinitiated that in the autumn. So what you see really impacting our Admin costs in Q4 is IT Investments. Now in terms of U.
S. Performance, I think I've already addressed VA performance. So let me speak to the commercial market. And you asked also about Beltone and I guess resound outside Costco. So in the commercial market, which is more than half of the market, Around 55%.
We have, again, with the caveat that probably one should be careful speaking about Market shares in these times, we have actually either sustained or grown our share in that part of the market. We have, for a very long time, been struggling in our Beltone network and retail. And I think finally, we begin to see that our strategy is working as intended. As you know, we've been diminishing our own retail and actually got to a point around 100 retail Stores as we exited 2020, and we probably would like to take that a little bit further down, but that is, I guess between 50 to 100 retail stores is the magnitude of retail stores you'll see us Own also in the future as we consider this ownership in transition. And we really see and have seen good performance in our Bell's own network, and I certainly expect that to continue and further solidify as we go into 2021.
So I actually think in terms of the commercial part of our U. S. Organization, we are doing well.
Garsten, it's Peter. So you are right that we are in a very strong cash Slow situation. And as I also said, we have room for doing a share buyback, Still topic to AGM approval, as stated. You're right. If we did it at the same level, there will be room For more cash, and I think as we have stated earlier also, we are looking at opportunities, and let's see if something comes across.
But for now, we of We would like to keep it this way and have the flexibility.
Thank you.
Thank you. Our next question comes from the line of David Atkinson at JPMorgan. Please go ahead. Your line is open.
Good morning, chaps. So a couple of questions. Just circling back on audio, on Michael's question around the Q4 growth in the U. S, just wondering, any sort of Color in terms of really what was happening there. It sounded like there was some channel shift not channel shifts, but shipments, stocking shifts, whatever you want to call it.
Was that a pull forward of stuff from 2021 into sorry, from Q4 into Q3? Or should we expect there have been some delays in Q4 into 2021? To get some further color on that would be useful, please. And then just some boring modeling questions. I have some questions, please.
So I just wondered if we could get your thoughts around foreign exchange headwinds And then, Balen, the line item still interested in tax, please.
So Rene, on the North America thing, I don't think I can give a lot more details on this than I already did. The phenomena is stronger outside. There is some allocation matters also on where we send our products. There is an FX matter here. So I mean, we are we have to play with the tools we have, and this mix has Worked best for us basically.
So there's no you can say there's no sort of orchestrated shift Other than that, of course, when you are supply restricted, there is an allocation part as well.
Yes. And this is Peter. On the FX, of course, looking into 2021, the key Currency, we look at it, of course, the USD, and we expect to be of course, continue to be negatively impacted in the first half. And then let's see, Right now, we expect second half to be more limited. So overall, at Around 2% negative impact is what we're looking at right now on the top line.
Thanks. And interest in cash expectations.
Sorry, once again, David?
And any expectations, any guidance around interest and tax?
Sorry. Yes. On tax, you saw this year, we lowered our tax rate. And of course, we're not guiding on tax per se, but I guess right now, we're looking at a somewhat similar level for 2021 on the tax.
Thank you. Our next question comes from the line of Kitley at Jefferies. Please go ahead. Your line is open.
Good morning. Thanks for taking my questions.
The first one is just
a follow-up on GMT Rain. I think 4Q in Europe Sales declined by 14%, while the market was flat. I know you mentioned the termination of a Partnership with one of the retailers. But I think the gap has been pretty wide versus the market. Can you just explain
What are the factors? Is this mostly
a function of your country mix? Or is there any other reason for that gap in performance? And my second question is just around the freight cost increase. What was the impact
in gross margin for Q2020? Thank you.
Yes. So in terms of European performance, I think when you look at the performance overall, clearly, as I pointed to, the account with which we have consciously terminated our relationship and maybe I should have We terminated our relationship, and maybe I should have added at the time that we've done that because we Do no longer feel that we are strategically aligned, but that obviously has a more heavy weight towards Europe. And then in addition to that, actually Europe overall has seen quite a different development from one country to the next. And I think One of the markets that has done really well in Europe is Germany, where I wish GN was stronger, and we aim to be. But obviously, that kind of skews the picture a little bit when you look at Europe overall, U.
K. At the other end of the scale, obviously, was almost in lockdown the entire year. And obviously, that
This is Peter. So on the freight, as Rene also alluded to, it's Still a very tight freight market we are having. So of course, it had a big impact on our 2020, and it was approximately 2% It's point impact on the gross margin in 2020.
Okay. That's great. Thank you.
Thank you. Our next question comes from the line of Oliver Metzger of Commerzbank. Please go ahead. Your line is open.
Hi. Thanks for taking my questions. 2 I have. 1 is also a follow-up on the recent key essential technology. You said that it has also some meaningful technologies like streaming.
So How to avoid cannibalization as in particular, availability of features like streaming has been one of the Differentiator of Industry between the different hearing aid classes. That's the first question. The second one is Also on the hearing aid business, so with the pandemic as a catalyst for alternative distribution channels, So in the beginning of the pandemic, you talked a lot about remote opportunities. Now we haven't talked on that for a while, it's just an indication that's The progress you could you have achieved is not so big as you had expected before?
So I'm happy to talk about that. So On ReSound Key compared to ReSound 1, I guess that's kind of what is built To the question, I think what really sets ReSound 1 apart, not only from ReSound Key, but from Any other hearing aid in the market is three things. It's our all access directionality, Ultra Focus Anne Marie. And with this technology, we are bringing a hearing experience to the user that is Far better than what we've seen with our previous quarter technology, but certainly also far better than our competitors In the market, and that's also what is documented in our clinical trials. So I think really that puts ReSound 1 into a league of its own.
So what we want to do with ReSound Key is basically renew our essential assortment and also with that Provide a basic charger. So we are actually now able to provide rechargeability Based on the quarter technology in more price points. So I do believe that, that has a really meaningful Impact in I was going to say our not I mean, not our larger markets, but in Global distributor sales and so on there, Nissan Key really has a meaningful impact. So and in terms of so I actually see the 2 of them kind of supplementing each other and really ensuring that At the top of the scale, we really have a hearing aid that stands out with ReSound 1. And if you like, at the lower end of the scale, we For also really great quality with ReSound Key.
In terms of remote and ReSound Assist Live, I mean, if I look at it in percentages, we've had an amazing growth in that kind of opportunity. And I think overall, we've seen online sales and online opportunities Pika, in the hearing aid industry, I mean, is it at a level where ReSound Assist Live has a meaningful impact Our sales yet, no, it isn't. And also, we didn't expect it to. But we do believe that also as we look forward and also as we look past the pandemic that This opportunity to be able to serve customers both in the clinic and at home It's something that will continue to be valued by the end user and also will Continue to be a meaningful offering, also way past the pandemic.
Okay. Thank you. Just a follow-up on my first question. So I'm completely aware that The audiological technology of 1 is much better than of the Essential Line. But if you For
a typical hearing aid user,
he is not so aware of technology. He looks about what he gets and if he Features like streaming or life rechargeability in this line, he might opt For units which are not so good. So my question is, Have you thought about these potential negative effects?
Yes. Well, I think actually I obviously understand your question and concern. But I think more so, it really Puts us in a strong competitive situation in the essential category because, I mean, whether it's supplied By Giena, one of our competitors, there is a need, if you like, for a more affordable assortment of hearing aids. And I think with ReSound Key, We really put a very competitive portfolio into the essential assortment. And then I mean, in then we have, obviously, our leading product, the ReSound 1, with an amazing audiological experience.
So I actually think We're really well positioned to grow share during 2021 with this very strong new portfolio.
Okay, great. Thank you very much.
Thank you. And our next question comes On the line of Izzy Kirby at Redburn. Please go ahead. Your line is open.
Hi, guys, and thanks for taking my question. 9 are on audio, please. Firstly, just looking at the market longer term, I was surprised to see that the penetration rate expected on Slide 14 for Headset is still to increase to around 30% by 2025. I believe this is in line with your Prior expectations before COVID and all this work from home disruption hit, if you could comment on that and whether or not you see It's actually potentially reaching 30% or even higher by 2025. That would be great.
Thank you. And then secondly, On audio, if you could talk to your ambitions in extending the audio franchise beyond collaboration and perhaps into other areas, including gaming. I think there's been some discussion about that in recent months. That will be great. Thank you.
Yes. Thanks for the questions here. So on the penetration rate, I mean, these numbers we are showing here are actually what we collect From the outside, so we try not to put our own numbers in here. The reality, of course, is that this year, we have seen a blip, But it hasn't fundamentally changed the so I mean a number of 1,000,000 extra headsets have been sold and the market would otherwise have Absorbed, I think what is the opportunity out there, of course, is that the adoption of the platforms Has gone up so dramatically. And in that sense, the adoption of headsets or speakers and video equipment up against the platform has gone down.
So you can say we have a relatively lower endpoint adoption now than we had a year back to go up against the platform users. So there is think you have a point there. So there is an opportunity we need to sell into and exploit over the coming years. But These are the adoption numbers that I think are somehow consensus in the market, and we concur with that. Sorry, I lost the second.
M and A and Gaming, sorry. I mean, we have talked about M and A for long and have Not really executed. Last year, we are always outside to find something that is part of the future and not part of the past, and That would include gaming. We have not found a good way to get into gaming yet, but we also have acknowledged that this is An interesting place to space to play, but it will require likely M and A for us to get a meaningful position In that space. So question is relevant.
We have not the solution at hand.
Thanks.
Thank you. And our next question comes from the line of Markus Golar of Stifel. Please go ahead. Your line is open. Okay.
It seems We're having technical issues, so I'll move to the next question. That is from the line of Chris Miller at Credit Suisse. Please go ahead. Your line is open.
Thank you, operator. Good morning. It's Chris. Actually now two questions left. The first is on the hearing side.
Could We've actually discussed now ASP development and units, particularly for Q4, given the launch of the new product and all these Geographic mix changes. And the second question relates to audio order. I noticed that you got sued by BARTA And I was just wondering kind of now whether you could discuss on that complaint and what's actually the worst case. I understand that, you know, it would impact quite a few of your products, essentially all the wireless elite headsets. Thank
you. Yes. So in terms of price Development and in relation to ReSound 1 and development in units. So when we launched the ReSound 1, we took a price increase compared to ReSoundings' quarter. I think more or less in line with what we did when we launched Quattro at the time.
So I think we are bringing here completely new and groundbreaking technology into the market. So I think That is absolutely justified that we've taken a price increase. And then in terms of the development in units, when we Announce the Q3 results. I did show a graph kind of showing how the unit development has been over the first 50 days in the market. And as you may or may not recall, we saw strong uptake In Germany and in Japan, actually a significant above the resounding quarter.
And in the U. S, We were more or less on par with the recent LINKS quarter. And that picture more or less remains and is the same development that we continue to see in terms of unit uptake.
Actually, I was referring more to the overall business Because I guess there would be
a little bit of a
positive product mix effect from what you described. And then on the other hand, kind of A negative geographic clinic effects. And I was just wondering, so essentially kind of on a year over year basis, did ASP In the overall portfolio, move much or and is the decline over volume greater than essentially kind of?
Yes. I think that if you think of the ASP Pee, overall, and sorry for misunderstanding your question. I mean, as we've what we've seen throughout the year is actually The U. S. Or North America being more heavily impacted by the pandemic compared to Europe and APAC.
And U. S. Traditionally, we have higher ASPs. So therefore, obviously, that has led overall to A slight decline in our ASP based on the geographical development.
And that was not offset by increased product mix in Q4, for example, through higher priced Farah?
No, it wasn't because we also saw other things impacting in terms of Geography and tender business and so on. So there were a lot of different impacts happening In Q4, impacting the ASP and similar to what I spoke about on in terms of our gross profit.
Okay. Thank you.
So this is Rene here. On the VARTA Claims that there would be patent infringement. It's correct that there is a case now ongoing in North America. I think what I can say to this, of course, is with Essential Components, we have multiple suppliers, this dual supply. When we enter into a new supplier or pick a component, I mean, we have Careful due diligence that these are somehow that we have all the IP right and no issues as such.
We have our own people. We have external parties looking at this. We think we have a good case. There is nothing to come after here. But of course, the case is on.
I guess, while it's well, of course, it is a problem. I guess, in this industry, it is a bit business as usual. We are a little bit bigger now, of course, and more visible play out there. So this is coming. We are very confident that there's not a
Thank you. Our next question comes from the line of Maya Patrici of Kepler Cheuvreux. Please go ahead. Your line is open.
Yes. Two questions for me as well, please. First of all, on Hearing U. S, Guite, you have been very Helpful in trying to understand what's going on in the VA and how you think this will develop going forward. Now not a lot of Things have been said about Costco and how you are expecting or if you are Expecting to reverse your market share losses in that channel, which is quite an important channel for the U.
S.
So it will be great to get your
Plan or strategy to turn that business around? 2nd of all, I've seen in the annual report That maybe I've misread it, but the Beltone has actually started an online shop in June or something like that. Is it a full fledged online shop also selling the Beltone hearing aids online? And if yes, can you give us Just some feedback on how that has been perceived, both by customers but also by the open market. Thank you very much.
Yes. So let me just start out with Beltone. We did open an online shop, and what it sells is Basically, our accessories. So it doesn't provide a full online shop for hearing aids, But for all our accessories, you can buy them online, whether you need accessories for the television or whatever. So that's And we wanted to put that out there in June again to make it easier for our end users during the pandemic.
Now in terms of COSCO, now we are Normally not sort of discussing a client, one single client in details, But I guess I've already started that myself by speaking about our market share development in COSCO. So clearly, The overall aim we have as a company is to grow our share, and that does also apply in COSCO. So clearly, we have different plans on how to do that. And I think for competitive reason, I would refer From maybe going into detail with that, but maybe just leave it that we have had for many, many years a very strong relationship with COSCO And we continue to have that. And clearly, it is our aim to grow our share.
Understood. And I appreciate that you don't want to talk about a single client, but now it's 50% of the market. So it's a bit hard So it's a single it's a market segment. Maybe ask from a different perspective. How confident are you that you can turn around your market share losses at Costco?
And if you think Maybe you can't turn it around. Do you think you can stop the bleeding?
I am 100% confident we can turn it around.
Okay. Thank you very much.
Thank you. Our next question comes from the line of Michael Jungling of Morgan Stanley. Please go ahead. Your line is open.
Thank you. I have 2 further questions. Firstly, on the sector classification. Have you had discussions with MSCI about needing to reclassify GN away from Healthcare. Now that consumer electronics or so is vastly the bigger business and is likely to be the bigger business For the foreseeable future.
And secondly, when it comes to ReSound 1, is it possible in due course to release a next generation product That is able to increase the amplification in with the Marie technology and therefore Expand the addressable markets. I've come quite clear talking to audiologists that 70, 80 dB is not enough if you want to cater for the entire patient population. It would be nice to get it to 90 or 100. Is that possible? And is it possible to do something like this, This year.
Thank you.
Hey, Michael, it's Hamleta here. On the MSCI, no, we have not had those discussions, And no, we don't intend to discuss that. So I can confirm that is not the case.
So thank you for the question on Resound 1. I think In terms of the Marie Technology, it is Clear that it has a limitation in terms of amplification, so it is not currently fitted for The more severe hearing loss, as you also allude to. And without going into details on our Our further sort of R and D roadmap, I guess one way to think about it is that all the customers or all the users that we Convinced or win over on the ReSound 1 with Marie, and that is still by far the majority of The ReSound ONEs we sell, that is with the MAREIT technology, so keep that in mind. I have a strong feeling that they are there for life Because once you get used to that kind of hearing experience, it's hard to go back. So clearly, That also influences our thinking for future generations of hearing aids.
Okay. But if I look at the amplification position that I was just referring to, Does the current chipset allow you to do more sophistication in a way to suppress the feedback as you go up the amplification curve? Is it actually possible to do so with the current
chipset? Yes.
I think I mean, you are spot on. The limitation, if you like, is feedback suppression because obviously, when you have the microphone and receiver sitting close to each other in the air canal, There is, with our current technology overall, without sort of Pointing to one specific part, a limitation to how far or how high we can go in terms of amplification, which means That Marie is not for the more severe hearing loss. It's obviously one of the things that we would like to address going forward because Again, we really see the user response On the MAREIT technology, it's just overwhelmingly positive because people really get that Much more organically and much more natural hearing experience than they do with a traditional rig.
Thank you.
Thank you. And our final question comes from the line of David Adlington at JPMorgan. Please go ahead. Your line is open.
Thanks, guys. Thanks for the follow-up. Just on hearing actually, you talked about the market being, I think, 90% indexed in October. I presume that got worse in November and then worse in December. Just wondering how you're thinking of what you've seen in January and how we should be thinking about the Q1?
Yes. So thank you for that question. I think if we kind of combine or look at Q4 overall, you saw our sales being down with 16%. And I mean, unfortunately, no magic occurred New Year's Eve. So I think that's also the way to think about Our going into January and going into Q1, so we actually and that's also a general assumption in our Guidance for the year that we expect to continue to see a first half of twenty twenty one impacted by COVID-nineteen.
And For our start of the year, I think it's a good way to think about it is what we saw overall happening in Q1 in Q4, sorry.
Thank you. And as we have no further questions at this time, I'll hand back to our speakers for the closing comments.
Thank you very much, operator, and thank you, everybody, on the call. So with that, we appreciate your time today. I'll see you on the virtual road. Thank you very much.