Audientes, which develops and produces hearing aids for third world countries, has adjusted its strategy towards more profitable operations and is therefore significantly lowering its growth expectations.

Given the current situation on the capital and equity markets, Audientes has dropped its intention to raise DKK 50 million within one to two years. As a result, the planned marketing activities are reduced and the revenue expectations for this year are lowered from DKK 23-27 m to DKK 9-12 m. However, the impact on EBITDA is smaller and Audientes expects EBITDA this year of DKK -10 to -12 m compared to the previous DKK -13 to -15 m. The investment case for Audientes remains a long-term roll-out of quality hearing aids targeting the lowest income groups in the world, but with a relatively low growth this year, the stock will probably be under pressure in the short term.

30 hearing aids per store

In the first full quarter of sales (Q2), Audientes generated revenue of DKK 1 million from India, the company’s focus market. With less capital for marketing than estimated, sales and marketing efforts will be focused on the B2B segment and Audientes’ network of currently over 350 outlets (hearing clinics) in India. Second half sales this year of DKK 8-11m we estimate will require average second half sales per outlet in the region of 30 units – or approximately 1 unit per week.

New hearing aid for the big US market?

Part of Audientes’ investment case is the launch of a hearing aid for the US OTC market for hearing aids that do not require adjustment by an audiologist/clinic. Since there is no general subsidy for hearing aids in the US, as is the case in Denmark, for example, there is a large market for relatively inexpensive quality hearing aids costing in the range of a few thousand DKK, as opposed to the expensive hearing aids from e.g. Demant, which cost over 10 times as much. Initially, Audientes expects to launch a general “hearing aid” that does not require FDA approval in the 4th quarter of this year, which will be called “Companion”. Thus, the launch of an FDA-approved hearing aid for the OTC market appears to be postponed until next year.

Capital injection of approximately DKK 15 million this year

With expected negative cash flow from operations of DKK 10-12 million and a convertible loan totalling approximately DKK 8 million maturing on 20 November this year, we estimate that Audientes will need a total capital injection in the region of DKK 15 million this year. The company has not announced when and how it expects to make one or more capital injections. As the company is changing its stock exchange listing from First North Denmark to Spotlight in mid-September this year, it would be natural for an offering of new shares to be made in this connection – either via a private placement or a public offering. In particular, a public offering could take the form of a rights issue at below the market price of the share. If the situation on the capital and equity markets continues as at present, the successful completion of an offering is likely to have a positive impact on the share price.

Downward adjustment already factored into share price