Company announcement no. 28-2024
August 29, 2024
Summary
In Q2 2024, Audientes made considerable progress towards expanding its global market presence, focusing on the new markets in China and Japan, but recognized less than expected sales revenue of just TDKK 12. Although revenue from new product sales in these markets has yet to be recognized, over 1,000 fully localized Companion products were prepared and shipped to Japan, where the initial online marketing campaign is slated for late Q3 2024, followed by retail availability in Q4. Simultaneously, preparations for shipping the localized Chinese Companion product named `ZhiYinYou' to the Greater China market has begun. Audientes agreed a joint venture with Shenzhen Hengtong Partner Co. in China, which will become the first licensee of the company's smart hearing product software platform. In India, Audientes advanced its turnaround strategy by securing a frame supply agreement with SimplyJITH Investment Corporation, encompassing regions such as India, the Middle East, Africa, and Asia, for the supply of Ven™ and Companion products.
Operating Highlights Q2 2024
Audientes focused in Q2 2024 on expanding its market presence in China and Japan through establishing strategic partnerships and collaborations with local entities.
Audientes announced in April 2024 a joint venture with its distributor in China, Shenzhen Hengtong Partner Co., who is also an investor in the Company, and completed on August 14, 2024, a definitive agreement to establish a jointly owned company with the aim to create and distribute innovative hearing products for the Greater Chinese and export markets. Audientes will have a 40% shareholding in the new company, as announced (https://news.cision.com/audientes/r/audientes-a-s-signs-definitive-agreement-with-shenzhen-hengtong-partner-co--ltd--to-establish-joint-,c4024225).
The joint venture will become the first licensee partner of Audientes software platform for smart hearing products, which is anticipated to become a significant component of Audientes' future business model. Besides being a shareholder in the joint venture company, Audientes will provide a range of billable product creation services.
Progressed turn-around plan in India and secured a frame supply agreement with new Indian partner, SimplyJITH Investment Corporation, who is engaged in India and other countries in the Middle East, Africa, and Asia, initially concerning the supply of Ven™ and Companion products for online and retail channels.
Financial highlights for Q2 2024/Half-year 2024
+------------------+-----------+----------+-----------+----------+----------+
|TDKK              |Q2 2024    |Q2 2023   |H1 2024    |H1 2023   |2023      |
+------------------+-----------+----------+-----------+----------+----------+
|Revenue           |12         |1,042     |27         |1,253     |1,266     |
+------------------+-----------+----------+-----------+----------+----------+
|Other operating   |214        |752       |428        |966       |1,395     |
|income            |           |          |           |          |          |
+------------------+-----------+----------+-----------+----------+----------+
|EBITDA            |-1,713     |-1,838    |-3,029     |-4,334    |-7,299    |
+------------------+-----------+----------+-----------+----------+----------+
|Profit/loss for   |-3,139     |-3,603    |-5,740     |-7,325    |-13,405   |
|the period        |           |          |           |          |          |
+------------------+-----------+----------+-----------+----------+----------+
|Cash and cash     |47         |1,682     |47         |1,682     |434       |
|equivalents       |           |          |           |          |          |
+------------------+-----------+----------+-----------+----------+----------+
|Equity            |3,491      |7,275     |3,491      |7,275     |4,020     |
+------------------+-----------+----------+-----------+----------+----------+
|Equity ratio (%)  |30.9%      |36.2%     |30.9%      |36.2%     |27.9%     |
+------------------+-----------+----------+-----------+----------+----------+
|Earnings per share|-0.02      |-0.11     |-0.04      |-0.22     |-0.30     |
|(DKK)             |           |          |           |          |          |
+------------------+-----------+----------+-----------+----------+----------+
|No. of shares     |69,384,118 |28,747,024|59,384,318 |28,747,024|28,747,024|
|beginning of the  |           |          |           |          |          |
|period            |           |          |           |          |          |
+------------------+-----------+----------+-----------+----------+----------+
|No. of shares end |200,392,676|39,150,472|200,392,676|39,150,472|59,384,318|
|of period         |           |          |           |          |          |
+------------------+-----------+----------+-----------+----------+----------+
|Average number of |134,888,397|33,948,748|129,888,497|33,948,748|44,065,671|
|shares            |           |          |           |          |          |
+------------------+-----------+----------+-----------+----------+----------+
In April 2024, the nominal value per share was reduced from DKK 0,10 to DKK 0,01 DKK. At the same time, the nominal share capital was reduced by DKK 6,244,589 corresponding 624,458,900 shares of a nominal value per share of DKK 0,01. This reduction was aimed at covering deficits as reported. In June 2024, the nominal share capital was increased by DKK 1,310,104 corresponding 131,010,396 shares of a nominal value of DKK 0,01 per share.
  
Less than expected sales revenue of TDKK 12 recognized in Q2 2024, partly due to changed timing of product deliveries to China and the product orders from Japan, both now expected to take place in the second half of 2024 and thus missing in the Q2 2024 results. Revenue for the first half of 2024 amounted to TDKK 27 compared with TDKK 1,253 in the same period in 2023.
Revenue of approximately DKK 0.6 million from pre-paid products ordered by the Chinese distributor Shenzhen Hengtong Partner Company Ltd. is now expected to be recognized in Q3 2024.
EBITDA in Q2 2024 realized at TDKK -1,713 (TDKK -3,029 for H1 2024), compared with TDKK -1,838 in Q2 2023 (TDKK -4,334 for H1 2023). EBITDA in Q2 was somewhat lower than expected due to production related charges incurred already in Q2 coupled with the lower sales revenue recognized in the period.
On May 14, 2024, Audientes announced that the board of directors had resolved on an issue of shares with pre-emptive rights for existing shareholders (the "rights issue"), for which the subscription period started on May 22, 2024, and remained open for subscription until June 4, 2024.
The rights issue amounted to DKK 4.6 million before transaction-related costs of approximately TDKK -314. Cash flow resulting from the financing in Q2 comprise of DKK 1.8 million in cash proceeds and DKK 2.8 million related to conversion of debt (incl. DKK 1.4 million of existing convertible loans).
Free cash flow amounted in Q2 2024 to TDKK -2,768 including the partly conversion of TKK 1,318 in trade payables.
At the extraordinary general meeting held on April 29, 2024, it was resolved to reduce the nominal value per share from DKK 0.1 to DKK 0.01, and to reduce the share capital in Audientes A/S by a nominal amount of TDKK 6,245 from TDKK 6,939 to TDKK 694. This change was aimed at reducing deficits as reported. 
The total equity at the end of the first half of 2024 stood at TDKK 3,491, equivalent to an equity ratio of 30.9%.
Operating Highlights after Q2 2024
Audientes prepared and shipped over 1,000 fully localized Japanese Companion products to the subsidiary in Japan, where the initial crowd-based online marketing campaign is slated to commence in late Q3 2024, followed by retail product availability in Q4 2024.
Audientes will now also prepare and ship the first batch of fully localized Chinese `ZhiYinYou' products (based on the Companion product) destined for the Greater China market to deliver on the initial pre-paid product order from its Chinese distributor, Hengtong.
Outlook 2024
Ven™ as a medical grade hearing aid for the Chinese market is under development as part of the joint venture collaboration with Hengtong; market entry expected in mid-2025.
Audientes will progress the new project to develop a 'Behind-the-Ear' (BTE) hearing aid in the 'Receiver in Canal' (RIC) style, which is expected to be introduced in 2025 to expand the company's market presence into the mainstream hearing aid segment. The initial target market is India, but the product is also aimed at other countries.  
Audientes continues to advance the software licensing strategy and associated product development services as part of new Ven and BTE/RIC hearing aid projects.
With the change in sales start in our new markets China and Japan, recognition of some of the expected sales likely will happen in early 2025 instead. The Company now aims at recognizing sales of an estimated 3,500-4,500 units of the Companion/ZhiYinYou and Ven products in 2024 (previously estimated 5,000-6,000 units), distributed amongst the primary markets of India, Japan, and China, with a minor number in Europe and the Rest of the World.
Correspondingly, product sales together with product development services to licensee partners is expected generate sales revenue in the range of DKK 3.8-4.8 million (previously expected from DKK 5-6 million).
The operating result (EBITDA) for the financial year 2024 is now expected to be in the range of DKK -4.0 to -5.0 million (previously expected from DKK -3.5 to -4.5 million).
Financial calendar
The Company's financial calendar is unchanged, as follows:
+-----------------+-------------------------------+
|Date             |Event                          |
+-----------------+-------------------------------+
|November 21, 2024|Q3 2024 reporting              |
+-----------------+-------------------------------+
|February 26, 2025|Q4 / end of year 2024 reporting|
+-----------------+-------------------------------+
For further information, please contact:
Steen Thygesen,CEO, Audientes A/S
Phone: ‭+45 77 34 16 80‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬
Email:st@audientes.com
About Audientes A/S
Audientes A/S is a Danish hearing health company specializing in smart, self-fitting and affordable hearing aids and advanced hearables. Audientes' unique hearing aid solution, Ven™ by Audientes, is available for purchase in the Indian and Nepalese markets and will be introduced in other markets in the coming years. Companion by Audientes is an advanced hearable, a consumer electronics product, that is commercially available in Europe and later in 2024 in Japan, China, and other markets.
Audientes' mission is to make high-quality hearing aids and hearables for hearing improvement or hearing enhancement accessible to everyone who needs them globally. Audientes is listed on Spotlight Stock Market Denmark (AUDNTS) and headquartered in Copenhagen, Denmark with subsidiaries in Hyderabad, India and in Tokyo, Japan.
For additional information please refer to the company's websites, www.audientes.com, www.audientes.eu or www.audientes.in.