Bang & Olufsen A/S

CSE:BO

Earnings Call Transcript 2020-Q4

[Operator]

Ladies and gentlemen, welcome to the Bang & Olufsen Annual Report 2019/2020. [Operator Instructions]Speakers, please begin your meeting.

[Kristian Teär, CEO & Member of the Executive Board]

So hi, everybody, this is Kristian Teär speaking, and I will start the presentation. So thank you very much for joining the call.I will start today's presentation by summarizing the year and the Q4 results. Afterwards, Nikolaj, our CFO, will take you through the financials. Then I will go through our strategy and outlook for 2021 before we open up for questions. Our Head of Design, Creation & Fulfilment, Snorre; and our Head of Marketing & Digital Experience, Christian, is also here with us and will take part in the Q&A session.So if we go to Slide #4, it was a disappointing year for Bang & Olufsen as our revenue declined by 29%. The EBIT margin before special items declined to minus 15% and our free cash flow was negative with DKK 234 million. However, the latter was an improvement compared to last year, thanks to strict management of working capital. Our financial results were primarily impacted by the lack of progress with the ongoing transformation from a wholesale to a demand-driven retail model as well as higher-than-expected sales from unauthorized channels and of course, the COVID-19 pandemic.We launched several initiatives to address these challenges, including strengthening and focusing on our global sales and marketing organization. But just as we were starting to see the first results of these efforts, we were hit by the COVID-19 pandemic and the lockdown of countries around the world and we had to readjust our plans.In December, we initiated a strategy process that was completed in April. The main purpose of the new strategy is to fix the fundamental issues in our core business, which will enable us to become profitable again in the short and medium term. Simultaneously, we will reorientate our business towards a scalable growth model for the long term. As one of our key short-term initiatives, we launched our cost reduction program, targeting DKK 175 million in savings when fully implemented.The COVID-19 crisis had a major adverse impact on our financial performance in the fourth quarter and we had to downgrade our financial outlook in the beginning of March. However, we delivered on this revised outlook. Early on, it was evident for us that the COVID-19 would continue to impact markets and consumer behavior for some time. Therefore, we had to strengthen our capital. And on 1st of July, we successfully completed a capital increase of approximately DKK 409 million that will enable us to get through the COVID-19 crisis and continue to execute on the strategy. The uncertainty related to COVID-19 is also reflected in our outlook for 2021. We do expect to deliver growth this financial year, but we also expect both EBIT and free cash flow to be negative by DKK 100 million and DKK 200 million, respectively.Launching new innovative products is critical for Bang & Olufsen. Going into this year, we, therefore, have the ambition to launch more products compared to last year.If we move to Page #5, in '19/'20, we launched several innovative products that were true manifestation of our core capabilities of sound, design and craft. In September, we announced the Beosound Stage, our first-ever soundbar, and we can now offer our signature sound to any TV. We also launched our new TV, Beovision Harmony, in both 65 and 77 and recently also in the 88-inch version and with several different options on color and material.In the fourth quarter, we introduced our Flexible Living speaker, Beosound Balance, to the market, and we got outstanding reviews. We also continue to reinvigorate existing products by adding new features, technology, update design or by offering a broader palette of colors. For instance, the third generation of our E18 ear headphone was launched. And in May, we revealed the second generation of our iconic A1 Bluetooth speaker in a slimmer design and with significantly improved performance. The sound quality is amazing and it is waterproof.Overall, we have increased the number of product launches this year and we received several awards and best-in-class reviews in all categories, which is a testimony to our ability to build amazing products and that underlines that Bang & Olufsen continues to be on the forefront of innovation and relevant for consumers across the use cases.This year, we launched the first products on our new technology platforms. The new platforms will enable us to improve the user experience and become more efficient in terms of product development and financial performance as it allows us to continue to improve our time to market and maintain the high frequency of launches.So if we move to Page #6, as mentioned in the beginning, the Q4 financial results were heavily impacted by the COVID-19 crisis. Despite launching mitigation actions, our revenue declined by 39% to DKK 377 million, while our EBIT margin before special items was minus 30% and the free cash flow was minus DKK 99 million.Many of our stores were temporarily closed during the period and more than 60% of the stores around the world were closed at one point. For the stores that remained open, traffic was low as people in most countries were urged to stay at home. We made several changes to our online setup to adapt to these changes in consumer behavior. We changed our digital approach and enabled consumers to buy the complete product range online. And to support our monobrand partners, we temporarily increased our revenue sharing from eCom in this period. We also focused most of our marketing efforts to online activation.COVID-19 did not materially impact our product availability in '19/'20. Logistics were impacted by travel restrictions as we have been shipping goods by air freight. Going forward, we will be using sea freight to a larger extent and also to reduce costs and the environmental impact.We have had a strict cost and cash flow focus since the COVID-19 outbreak. Several government relief packages have been established. And in Q4, this supported us with DKK 26 million and we were also able to postpone certain tax payments. We're grateful for the support we have received and proud to see how our employees and partners and consumers have adapted to this unprecedented situation.And with this, I would like to turn over to Nikolaj, who will take you through the financial performance in Q4 in more detail.

[Nikolaj Wendelboe]

Thank you, Kristian. Now please turn to Page 8. So as Kristian said, COVID-19 is the overarching explanation for the development in our financial performance in Q4. Compared with the year before, revenue in Q4 declined by 39% to DKK 377 million. Monobrand and multibrand declined 40% and 70%, respectively. Some monobrand stores, although, were able to remain partly open, if they adhered to certain precautionary measures. As stores closed, more purchases moved to our online platform, which we also promoted through our online activation. Revenue from our own eCom platform, therefore, more than doubled in Q4, representing approximately 6% of group revenue.Seen across our product categories, On-the-go was impacted the most, declining by 56%, whereas Staged and Flexible Living declined by 32% and 25%, respectively.Gross margin declined by 9.1 points to 39.4%. As with the previous 3 quarters, last year benefited from currency hedges. And excluding this, gross margin declined by 6 points. Government relief packages reduced our cost of goods sold by DKK 6 million, which is equivalent to a gross margin impact of 1.6 points. So the decline was mainly related to sales of end-of-life products, allocation of product-related capacity costs, which impact gross margin relatively more when revenue is low and higher revenue sharing with our monobrand partners on eCom sales from our own platform.The EBIT margin before special items was minus 30% in Q4. The development was driven by the decline in revenue and gross margin. On the positive side, capacity costs declined, partly supported by government relief packages reducing our capacity costs by DKK 18 million and EBIT by DKK 24 million.Please turn to the next page, where I will go through the development in our regions. As I said earlier, all parts of the business were affected by COVID-19. The On-the-go category was especially impacted by travel restrictions globally and locally and avoidance of public transportation.Between the 3 geographical regions, EMEA was least impacted compared to last year with a decline of 28%. The decline was predominantly related to Staged and On-the-go categories. Especially, U.K. and Southern Europe was impacted by COVID-19 as more than 90% of the monobrand stores have been temporarily closed. We did see some growth in eCom revenue. All in all, EMEA recovered better through May than expected, driven by the Northern European markets. Americas was the last region to be impacted by COVID-19. Revenue declined by 45%, which was almost exclusively related to the On-the-go category. The On-the-go category accounted for 70% of revenue in Americas. Asia revenue declined by 60% compared to last year. As we also saw it in Americas, the decline was almost notably On-the-go -- in the On-the-go category. Even though China was the first major market to reopen, the normalization of sell-in to retail partners was slower than expected.Finally, our Brand Partnering & Other Activities segment declined by 22% in the quarter. The decline was linked to license income from HARMAN as car manufacturing was severely impacted by COVID-19.Please turn to the next page. Overall, we have been prudent on costs due to the corona uncertainty, but kept our product development efforts unchanged. Development costs declined by 26%, which was due to a combination of higher capitalizations and lower amortizations. Incurred development costs were at the same level as last year. Government relief packages reduced development costs by DKK 7 million, whereas special items related to the cost reduction program increased costs by DKK 2 million.Distribution and marketing costs declined by 23%. As previously mentioned, marketing activities were adjusted to match the changes in the market, which meant focusing on online activation and postponing retail marketing and distribution development activities. Special items related to the cost reduction program increased costs by DKK 9 million, whereas government relief packages related to COVID-19 reduced costs by DKK 6 million.Our administration costs increased by 5%, which was related to special items of DKK 13 million for the cost reduction program. Adjusted for special items, administration costs declined by DKK 11 million compared to last year, which was related to general savings.Please turn to the next page. CapEx was slightly higher than Q4 last year. Investments were primarily related to development of new products and technology platforms and hence, partly driven by higher capitalizations.Our net working capital declined by DKK 38 million, driven by our continuous focus on working capital management. At the end of the year, we have a special composition of working capital due to COVID-19. I'll go more in details on working capital in a minute.Free cash flow was negative DKK 99 million, which was mainly related to EBITDA, which was negative DKK 92 million. On the positive side, our net working capital declined, as just mentioned, which supported our cash flow. Due to the negative development in free cash flow, our net cash position declined in Q4.IFRS 16 relating to leases impacted the net cash position with DKK 153 million in the quarter. Our cash position was DKK 215 million, which was DKK 112 million lower than in Q3. This was, of course, before the rights issue with net proceeds of approximately DKK 356 million. Hence, with the capital increase, we entered a new financial year with some DKK 571 million in cash.Please turn to Page 12. Working capital management has been a very high priority for us this year and in Q4, even more so due to COVID-19. Inventory declined to DKK 457 million. We have focused on ensuring alignment between production and sales to avoid inventory buildup. We have this year seen a much better control. And even in Q4, despite the rapid changes in market condition this quarter, we did not see a buildup of inventory. Trade payables declined to DKK 430 million, which was a direct consequence of reduced production and COVID-19.Finally, our trade receivables declined to DKK 290 million, mainly due to lower sales following COVID-19.We have this year restricted our use of extended credit compared to previous years. In Q4, it increased to 14% of revenue. However, COVID-19's impact on sales meant that revenue from sell-in of in-store display units related to recent product launches was accounting for a higher share of revenue. On average for the year, 9% of group revenue was in extended credit as opposed to 29% last year.As a measure of prudency, year-over-year impairments related to receivables has been increased by DKK 22 million as overdue receivables increased by DKK 43 million. Due to the current situation, close monitoring on the development in trade receivables is a priority.And with that, I would like to hand it back to you, Kristian.

[Kristian Teär, CEO & Member of the Executive Board]

Thank you, Nikolaj. I would like to spend the next couple of minutes on our new strategy and talk about what we already have done and what we are focusing on going forward.So if we move to the next slide. In April, we presented our new strategy. What you see here is our strategy house that outlines our priorities for the short term and medium term, priorities that will enable us to make Bang & Olufsen profitable again and bring the company safely into the future.And on the next couple of slides, I will give you a short update on our focus on how we are executing on those priorities in 2021.So if we move on to the next slide. In March, we initiated a cost reduction program to adapt our cost base to the expected run rate on revenue. The program identifies savings through optimization of a number of areas, including administration, organizational simplification, non-product-related spend, cost of goods sold and R&D efficiency. The cost reduction program has targeted annual savings of DKK 175 million when fully implemented in '21 and '22 and a large part of the cost reduction is expected to be realized this year. We already have executed on parts of the program. The headcount reduction has been completed and we are progressing well with outsourcing of finance and IT. Also, the organizational simplification has now been fully implemented and we have established a new procurement model to support the entire organization.In the next phase, we become more efficient and effective and optimize our activities in line with our core market focus as well as deep dive into product-related costs and R&D. This will include a full portfolio review and an assessment of how we best utilize our new platforms to shorten time to market and improve our overall utilization of our R&D resources. Although we have outsourced our production, we are very focused on choices made regarding components and materials for our products. This also includes ensuring that engineering choices we make provide value to the consumers.If we move to the next slide, a key element in our strategy is to continue to launch innovative and competitive products across the product categories and we have planned for more than 10 new products this year. This includes both new products, product upgrades, color material finishes versions, limited editions, bespoke versions and classic programs. We have already announced our new E8 Sport, which will be available from this Thursday.Utilizing partnership and collaborations to develop our portfolio continues to be a priority. Most recently, we have announced our partnerships with Xbox on a gaming proposition where we see untapped potential for our brand. We also begin systematic product tiering to ensure stronger fit to the preferences of the newly identified target audiences. This will include a good, better, best approach to our product offering. In addition, we aim to leverage on our core capabilities and assets to offer our consumers limited and bespoke programs that will help us to drive our brand awareness and to ensure market differentiation. We have already begun this work and the first bespoke products have been produced.Finally, we have earmarked resources for improvements to the existing product portfolio. As a luxury brand, it's critical that we deliver the right quality and user experience to ensure repeat consumer purchase and brand loyalty. While we are addressing known pain points on our products, we're also working to improve the services experiences as this goes hand-in-hand with strengthening the full customer experience.If we move to Page 17, to ensure we provide the desired customer experience, we are also strengthening our customer services with several significant changes in the setup. We have implemented a 24/7/365 customer support that include proactive social media outreach to customers who experience issues with products or have questions.We're also developing a new digital service front end on our website to improve the overall customer experience. To support our retail partners, we now offer support around the clock, 7 days a week, all year, so we are available also outside normal opening hours. In addition, we have established a new product health center that enables our retail partners to remotely access products and solve issues.Finally, we have changed the warranty policies for On-the-go products and expanded our services policy to ensure faster response time and improve the customer experience.Operating in the space between consumer electronics and luxury, it is essential that we offer good after-sales service and support. And with these changes, we are already seeing solid progress on our customer satisfaction score.Move to Page #18. For too long, Bang & Olufsen has lacked focus in our global sales and marketing execution and we have tried to succeed in too many markets at the same time. With the new strategy, we will concentrate our resources in 6 European and 2 Asian must-win markets. These 8 markets account for 66% of our revenue, if we exclude Brand Partnering and licensing and other activities. We believe that by zooming in on a few selective markets, we will be able to ensure that our go-to-market execution is right and scalable, which will then also allow us to win in more markets.We have already started to execute on the strategy. In Europe, we have reorganized our global sales and marketing setup. We have appointed a new Vice President -- we have appointed a new Vice President for Europe, a new Country Manager for U.K., Switzerland, Eastern Europe and also for the 3 countries, Sweden, Norway and Finland. We have also appointed a new Vice President for North America.Furthermore, we have strengthened sales capabilities in several markets and we continue to do so. And we have moved the full channel responsibility to the regional managers. Most recently, we have added resources to support multibrand in Germany to ensure the right level of interaction with our partners.In China and South Korea, our ambition is to build a foundation for accelerated growth. And to support this effort, we have now established a Chinese Advisory Board, where we will utilize the strong competencies that we have in our Board of Directors and we have strengthened the team with new capabilities. We will also be looking into establishing a new partnership and further strengthen our distribution.In our non-core markets, we will continue pursuing opportunities where we can engage with distribution partners who can help us to gain scale and help to penetrate markets faster and better. As announced in May, we have already partnered up with a global distributor, ASBIS in Eastern Europe, who have the right capabilities and local resources to succeed.We will continue to explore similar partner opportunities in other markets. And U.S. continues to be an important market for us, but we will only succeed if we get the right partners to support our business and that remains a key priority.If we move to Slide 19. To accelerate our digital transformation and reignite our marketing efforts, we have already executed a number of changes. First, we're in the process of strengthening the insights into our newly defined consumer segments to ensure that we improve targeting of sales and marketing efforts. This will help us to optimize marketing spending and relevance of campaigns and communications. Secondly, we will digitalize large parts of the content creation process, which will allow us to create higher-quality marketing assets faster and more cost efficiently. Also, we will initiate a new influencer program that reflects our new consumer segments as well as launching activities targeting high net worth individuals, a segment where we see growth opportunities for Bang & Olufsen if executed in the right way. Thirdly, we will continue to invest in our product app, experience app and eCom platform to further improve the customer experience and functionalities. In order to accelerate our digital transformation, we aim at adding more resources to our digital team by leveraging the capabilities of an agency partner. Finally, we will strengthen the omnichannel focus in all our core markets. We will do that through localized marketing plans and focus our marketing spend to drive traffic, both to physical stores and online.So moving on to Page 20. Before opening for questions, I will just briefly go through the outlook. The outlook for 2021 is unchanged compared to the preliminary guidance we gave to the market on May 12 when we announced our intention to issue new shares. Given the continued extraordinary circumstances related to COVID-19, it is worth just restating that an outlook by definition is sensitive to a large number of assumptions and this is even more the case for the 2021 financial year due to the increased uncertainties and lack of transparency arising from COVID-19.The outlook for 2021 depends on numerous factors, including the duration of the COVID-19 pandemic in relevant markets, timing and speed of reopening of key markets, impact on economies and countries around the world and the financial and operational impact on our business partners.Based on a balanced view of potential scenarios for mentioned risks and implications, our outlook for the financial year 2021 is as follows then: so revenue, approximately DKK 2.2 billion; EBIT before special items, approximately negative DKK 100 million; free cash flow, approximately negative DKK 200 million. Revenue is assumed to be bolstered by more than 10 new product launches and upgrades as well as new CMF versions of existing products. The EBIT before special items and free cash flow is further impacted by the cost reduction program we launched in March.Our management of working capital and use of government relief packages in '19/'20 will adversely impact cash flow in especially the first quarter of 2021. As also mentioned in our previous communication, we have considered the impact of an adverse scenario and an alternative scenario where the implications of COVID-19 are less severe.So if we move to Page 21, you can see that we are on track to fix the basics and regain strength and we are following the 3 waves, go back to black and then to start growing the business again.So with that, we will open up for questions.

[Operator]

[Operator Instructions] Our first question comes from Poul Ernst, Danske Bank.

[Poul Ernst Jessen, Senior Analyst]

I have a number of questions, but I'll just start with a few ones. The comments you made on EMEA and Asia on the fourth quarter and I'm thinking about in EMEA that it recovered better than you had expected and in Asia, where you talk about a slower start. Can you just say something about what is driving you? And in China, you say there are excess inventories. Is there no end-user demand? Or what's the issue up there?

[Kristian Teär, CEO & Member of the Executive Board]

Thank you, Poul. I'll start, and then I'll pass on to Nikolaj in a second. But China opened up earlier, and we also maintained our business going there for longer. We have our distribution center in China as well. So we, of course, can ship in very late in the quarters and we did so in quarter 3. Then when everything opened up, the demand has been there and the people are buying the products. Then we have a delay in -- on how we kind of replenish and fill up in distribution. Europe came back in a little bit later fashion, but also kept the business going, I think, quite well during Q4. The online activities that we did here helped in that respect and also the replenishment then took place a little bit earlier than expected. But I wouldn't read too much into this difference between Europe and China.

[Nikolaj Wendelboe]

No. No. I can echo what Kristian said and just maybe mention that in Europe, what we saw was basically a Northern European reopening, which did spur some more business than what we had actually anticipated when we gave sort of the outlook for the year that just -- that we just went out of. So that was positive. But I think we still need to be mindful that we're still in a corona situation. So it was better than expected, but it's not like we can say that we don't have a corona impact, just to clarify that.

[Poul Ernst Jessen, Senior Analyst]

As I understand it, at least from the Danish franchisees, and they say that some of them kept business open and was actually surprised by the amount of spending by consumers, maybe because the people were surprised that they had a lot of money, that they didn't have to go on -- internationally on vacation. But is Denmark exceptional here or have you seen that in other markets as well? And then in China, when you say about replenishing of stores, has that been an issue with you or had they simply too much inventory?

[Kristian Teär, CEO & Member of the Executive Board]

So I think we see -- and there are places where you see different consumer behaviors. People stay at home, they obviously then want to experience -- better experience on music and on picture and also have some money to spend. So we, therefore, together with our partners, addressed this opportunity through digital efforts and reaching out e-mail-wise. Many of the partners have really good and strong relations to the customers and obviously, they keep the business running by doing that. And some have been more successful than others. So I think that is -- was probably a surprise for us on the positive side. And that was also the case in China. Then we kept China going longer, like I said, in Q3. So I don't see any buildup of inventory in any other place as we have strict inventory control everywhere in the channel and in our own warehouses. So it's more, like I said, things falling between quarters and -- yes, sometimes we fall into the quarter, sometimes fall out of the quarter.

[Poul Ernst Jessen, Senior Analyst]

Okay. And then on the online, where you say it grew quite strong, but it's still only 6% of group. Do you have any insight into how it is in other online channels like Amazon and Tmall or should we assume that the majority of revenues in the quarter actually was online?

[Kristian Teär, CEO & Member of the Executive Board]

So let me start, and then I'll pass on to Christian Birk as well, who can give you some more data points on how, actually, well we have been doing in our digital effort. But we definitely doubled down on digital marketing and also some of the reasons why we have had relatively small digital sales in the past has been the unauthorized sales and the pricing inconsistencies in the world. And during the COVID-19 crisis, we actually as well adjusted some of our own pricing on our own web page, which we have never done before, to basically help to meet the demands. And then as you may be aware, we also support our partners with our web page and help them to sell online-wise. So that definitely helped and drove significant uplift on our own eCom platform, albeit, like you say, from a relative low number.Then multibrand online, everybody, including China, did -- and also monobrand in China, did activities -- digital activities to keep business going and activated in a different way, obviously, on different platforms in China, but that has been the recipe for most of the world.I'll hand over to Christian Birk, who can give you even more detailed insights into what we did.

[Christian Birk]

Yes. Thank you for the question, Poul. So to add, as Kristian said, we have seen growth, as most of the world have, of course, on consumers going more online, both on eCom and on e-tailers across all main markets, pretty much.One of the things worth noting is we allowed customers to buy the Staged category, so TVs and speakers, as part of this, which is not reported in the eCom numbers you've seen. So we have actually quite successfully managed to sell both speakers and TVs while stores have been closed in some of these markets as a result of it. So further details, I think we can discuss sort of separately in the key markets. But overall, we have seen growth and as Kristian said, mainly driven by change of online behavior and us doing certain pushes in our e-tailer and own eCom universe.

[Poul Ernst Jessen, Senior Analyst]

So you have no idea of the majority of revenues actually were online by one channel or the other?

[Nikolaj Wendelboe]

When you're talking from a general perspective, we have seen some more online sales in the channel, of course, relatively in the markets. But I think, as Kristian also said, in monobrand in Europe, I think many of the partners have actually been good at maintaining a level of business during the lockdowns due to project sales and sort of the -- sort of customer. They have already in their sort of clienteles that they could work on projects and different kind of revenue-driving activities. So we don't see like a major change on the e-tailing part.

[Poul Ernst Jessen, Senior Analyst]

Okay. Final one for me for now. I might come back. End-of-life products continue to have an impact on your margins. If I look at your full year balance sheet and finished products on inventory, 2 years ago, it was DKK 220 million. Then last year, it was up at DKK 500 million and now you're down at DKK 387 million. Where should we see a level of finished goods going forward? And how much do you still have, which you have to discount to get, yes, inventory to a level where you think it's more current products?

[Kristian Teär, CEO & Member of the Executive Board]

Yes. So if I can start and maybe Snorre can add a little bit. So we ended up the year with a level of DKK 457 million in inventory. And I think, ideally, we would have liked that number to be a little bit lower this year. But due to corona and slower sales, we actually think we have done pretty good in reducing inventory further from Q2 to -- Q3 to Q4.I think the level of inventory that we saw 2 years ago was very low. It's not our ambition to get to that lower number necessarily again. We still have some products on inventory that is sort of what I would call legacy from past years, overproduction of certain products. And some of these products are getting end-of-life this year. So we should see a further depletion of inventory. However, we also need to be mindful that we are launching new products this year and last year. And we also need to make sure that we have an inventory that can support the sales ambitions that we have. So we will keep that balance as we've done in the past. And then we'll need to find a healthy balance in the inventory on that. But do not expect us to go as low as we've been 2 years ago.

[Poul Ernst Jessen, Senior Analyst]

So somewhere between DKK 300 million and the current level?

[Kristian Teär, CEO & Member of the Executive Board]

Yes. DKK 300 million would be on the low side.

[Poul Ernst Jessen, Senior Analyst]

Okay.

[Snorre Kjesbu, Executive Officer]

And if I can add just -- if I can just add -- if I can just add 2 comments on it, Poul, we have close collaboration with our ODM and JDM partners to fine-tune inventory and also making sure that depending on SKU, that we have a different type of inventory levels in there, so that we could support the sales initiatives that are happening, but without building inventory further. So I think that the process we've seen now is working and getting us into a better place.

[Operator]

[Operator Instructions] Seems like there is another question from Poul, so I'll put Poul back.

[Poul Ernst Jessen, Senior Analyst]

I'll then just take the rest of my questions then. On the fourth quarter, you're right, that Balance has an impact of DKK 13 million. On the revenues, is that total impact sell-in and sell-out or is that sell-in only?

[Nikolaj Wendelboe]

That's sell-in only. And of course -- I mean just to add, so of course, we would have [ dealer ] expected Balance to drive more sell-in and sell-out in the quarter, but this is an in-store purchase. So due to corona, it has not had the numbers that we would ideally have seen. But I guess -- I mean a few of our products did have the numbers that we will see -- we would have wanted to see in Q4 due to corona. So there's no sort of special impact from Balance that we haven't seen in other product types.

[Poul Ernst Jessen, Senior Analyst]

And the Brand Partnering, of course, you should be hit by the automotives and HARMAN. But on the other hand, with HP and laptops, shouldn't we have seen a significant increase there as well as the laptop business has been quite well in general?

[Nikolaj Wendelboe]

We have seen an increase in HP income also in the quarter, but not enough -- far from enough to offset income from HARMAN. So I think, especially in April, May, there was more or less a complete shutdown of many car factories globally and that hit license income on the car manufacturing side significantly. So there is an offsetting part from HP, but not enough to counter the impact on the car industry.

[Poul Ernst Jessen, Senior Analyst]

Can you update on the reporting here when you recognize it, what is the delay versus the car manufacturing? Is it a 1-month delay or is it quarterly that you're getting paid? Or how does it work?

[Nikolaj Wendelboe]

So it's -- we recognize on our best knowledge on a monthly basis, but we get the settlement, you can say, quarterly, for sure. But we have some dialogue, of course, with HARMAN on how they see their business development and how it spill over on our business. But it's a quarterly settlement.

[Poul Ernst Jessen, Senior Analyst]

So if the factory is closed down by, let's say, April 13 -- end of April, when will you see that in your numbers?

[Nikolaj Wendelboe]

So the closedown of factories in our Q4 is in our numbers in Q4. So we account for our expectations on when we earn the license income. We earn -- technically, we earn the license income when the car is produced.

[Poul Ernst Jessen, Senior Analyst]

Yes. Okay. So it's based on an expected number and not on HARMAN telling you that they sold 10,000 units in the month?

[Nikolaj Wendelboe]

Yes. It's based on HARMAN's, what they have told us they have done and what we have, together with them, agreed is the right expectations for the months that are not closed. Yes. So it's a pretty precise number.

[Poul Ernst Jessen, Senior Analyst]

Okay. Then on the product pipeline, you said 10-plus products. I've been a little uncertain if that's new products, if it's upgraded products or if it's just changed colors. As I understand it, is you say 10-plus and that's all inclusive. Can you give an indication on how many new products or upgraded products that you're planning for? Is that 10-plus as well?

[Kristian Teär, CEO & Member of the Executive Board]

We don't reveal what exactly the mix is on that, but you can be sure there's new products coming. And of course, a large portion of that is new products.

[Poul Ernst Jessen, Senior Analyst]

And you won't give any timing of when we should expect the financial impact of the new products? Is it H2 -- calendar H2 or is it somewhere in the end of your financial year that we should expect the measure?

[Kristian Teär, CEO & Member of the Executive Board]

I wish I could tell you, but we don't do that also. I'm sorry for that. We will come back when -- when we announce, we announce. But of course, we are developing full speed on the product portfolio and a product plan and you saw last year what we did and what our capabilities were. And obviously, we still have the same capabilities and continue to drive that even harder. So we'll be better for this year than we were last year.

[Snorre Kjesbu, Executive Officer]

And the first one is already out, E8 Sport, which was launched in June.

[Poul Ernst Jessen, Senior Analyst]

Yes. And then on the store closures, how much or how many of the stores are still closed around the globe? Or are you up and running fully, apart from the U.S.?

[Kristian Teär, CEO & Member of the Executive Board]

We're basically up and running everywhere except for the U.S. U.S. is the challenge. I don't have the exact number, but majority of the stores are up and running. U.S. is the challenging part, where we, of course, have the least stores as well. So we're least impacted in the U.S.

[Poul Ernst Jessen, Senior Analyst]

But in the fourth quarter on the multibrand side, there was a closure of about 255 point-of-sales. Is that one partner that has been closed down? And if so, which?

[Kristian Teär, CEO & Member of the Executive Board]

I don't know the number from the top of my head. We need to come back.

[Nikolaj Wendelboe]

Yes, so -- but that's mainly related to Apple retailing in North America, which we're not in anymore based on a decision by Apple not to carry any competing brands in their stores.

[Poul Ernst Jessen, Senior Analyst]

So they have none third-party products anymore?

[Nikolaj Wendelboe]

At least they don't have Bang & Olufsen products. And to my knowledge, they don't have any third-party products that are competing with their own products. So they probably do have third-party products in other areas.

[Poul Ernst Jessen, Senior Analyst]

Okay. And then on the guidance, Brand Partnering, you wrote both in the prospectus and -- again, that you expect new opportunities. Are there any kind of update on what kind we should look for here? Is it minor deals or is it larger deals? And are they very likely or is it early stage?

[Kristian Teär, CEO & Member of the Executive Board]

So like I said and will say in my final remarks, we are progressing very well on execution of the strategy and that includes Brand Partnering and brand licensing as well. And we have, as we have said before as well, worked for quite some time with a sales funnel in this respect, and that includes bigger partners and smaller partners. I can again, of course, not give any guidance here on that, but it's an essential part of our future strategy and we are working hard in this field and we have a very strong brand that is appreciative of -- from many. So more to come here when we announce it, Poul.

[Poul Ernst Jessen, Senior Analyst]

Okay. I have 3 small questions left. One is on the receivables. Increase of overdue payments is, of course, increasing. Everybody understands why, but do you see any risk of -- that you have to do the write-down on those receivables?

[Nikolaj Wendelboe]

So actually, not a big risk, to be honest. So of course, it can be difficult to predict on your total sort of composition of receivables. We have many small partners. And the contact we have with them actually seems like they're doing okay and will get through the crisis. But of course, we cannot sort of rule out that there will be somebody who doesn't make it. But I think we try to be prudent going out of Q4 and actually doing some extra provisioning impairments for receivables.So I think we should be covered in a -- to a pretty large extent, if anything happens in this year, by provisioning from last year. So I think we feel that we are in pretty good control of the receivables side right now.

[Poul Ernst Jessen, Senior Analyst]

Okay. And on the government support that you have got, there is a positive impact in the fourth quarter from taxes and so on. How much should we see reversed in the current year and should it come in the first quarter?

[Nikolaj Wendelboe]

Yes. So most of it will come in the first quarter. And it's a fairly big amount of postponed VAT and tax payments that will come in the first quarter of, I think it's between DKK 60 million and DKK 80 million, that would be reversed.

[Poul Ernst Jessen, Senior Analyst]

Okay. And then final question, I guess, that's for Snorre, the new platforms that were in place at the beginning of the year and which you have the Balance, these 2 platforms, are they finally completed and that means that the new products coming this year will be based on those or are there still work to be done?

[Snorre Kjesbu, Executive Officer]

Yes. So the new products coming this year will be based on those platforms. So the platforms are where they should be. They will not be finally completed until their end-of-life type of thing. That is the point to a platform, is you get up and then the platform will get new features and new software updates throughout their lifetime, which is exactly what you would expect. So to answer your question sort of directly, yes, the new products that are coming, are coming on the new platforms. And then at the same time, we are also developing the platforms, which means that products that have been shipped will also get new features as you go along. And I think that is part of that value that Bang & Olufsen can provide in this space.

[Kristian Teär, CEO & Member of the Executive Board]

Obviously, it's in the market as well.

[Snorre Kjesbu, Executive Officer]

Yes. Both are in the market, yes, for sure.

[Operator]

Thank you. As there appears to be no other questions, I will hand back to Kristian Teär for any other remarks.

[Kristian Teär, CEO & Member of the Executive Board]

So thank you. So we're making good progress on fixing the basics and regaining strength. So the strategy that we have announced, we're executing full speed on that one. Step-by-step, we are putting the right pieces in place. We have a strong product portfolio and many launches coming up. We have strengthened our global sales and marketing focus and added capabilities to these teams and we will focus on these 8 core markets and utilize partners to build scale and succeed in non-core markets and online. So I'm more convinced than ever that we will succeed with the new strategy, to get back in black and bring Bang & Olufsen safely into the future.So on my behalf, and Christian, Snorre and Nikolaj, I will thank you for joining today's call and wish you all a great day and a great summer. Thank you.