GN Q1 2021 - Seeking Alpha

May 6, 2021

Interim Report Q1 2021 – Conference call presentation

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Safe harbor statement

The forward-looking statements in this report reflect the management's current expectations of certain future events and

financial results. Statements regarding the future are, naturally, subject to risks and uncertainties, which may result in

considerable deviations from the outlook set forth. Furthermore, some of these expectations are based on assumptions

regarding future events, which may prove incorrect.

Factors that may cause actual results to deviate materially from expectations include – but are not limited to – general

economic developments and developments in the financial markets, technological developments, changes and

amendments to legislation and regulations governing GN’s markets, changes in the demand for GN's products,

competition, fluctuations in sub-contractor supplies and developments in ongoing litigation (including but not limited to class

action and patent infringement litigation in the United States).

This presentation should not be considered an offer to sell or buy securities in GN Store Nord.

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Agenda

Group highlights

GN Hearing update

GN Audio update

Financial update and guidance

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Group highlights Q1 2021

EBITA (DKK)

753m+151%

EPS (DKK)

3.66+369%

Financial

leverage

1.6xNIBD / EBITDA

Dividend (DKK)

206m

New share

buyback program

initiated (DKK)

2.5bn Until March, 2022

Revenue (DKK)

4.1bn+46% organic

growth

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Agenda

Group highlights

GN Hearing update

GN Audio update


DKK million Q1 2021 Q1 2020 Growth

Revenue 1,234 1,314 -6%

Organic growth 1% -14%

Gross profit 769 841 -9%

Gross margin 62.3% 64.0% -1.7%p

EBITA 98 55 +78%

EBITA margin 7.9% 4.2% +3.7%p

ROIC* 1% 15% -14%p

Free cash flow excl. M&A -204 -66 -138

Cash conversion -208% -120% -88%p

Number of employees** 4,458 4,444 +0%

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GN Hearing financial highlights Q1 2021

In Q1 2021, GN Hearing delivered 1% organic growth in a

market continuously impacted by the pandemic

• Organic revenue growth of 1% in Q1 2021. Revenue growth of

-6%, including impact of around -6% from FX and around -1%

impact from M&A

• Market continuously impacted by the pandemic but with signs

of market recovery towards the end of the quarter

• Gross margin impacted by mix effects and fixed part of

production costs

• EBITA margin of 7.9% supported by sustainable quarterly cost

savings and prudent cost management on top of investments

into R&D and IT

• Free cash flow excl. M&A of DKK -204 million, reflecting

traditional seasonality and a negative development in net

working capital

* EBITA (rolling four quarters) / avg. invested capital

** Number of employees, end of period

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Regions continued to be impacted differently by the pandemic throughout the quarter

Strongly positioned for market normalization

Europe

Organic revenue growth of -5%.

Encouraging performance in the

Southern European countries

North America

Organic revenue growth of -7%.

Solid performance in the

independent market driven by

latest product launches

Rest of World

Organic revenue growth of 27%.

Encouraging performance in ANZ

and China as the main drivers

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Light at the end of the tunnel for the hearing aid market

New Year

Jan/Feb 2020

End of March 2021

* indicative

US market data (units)

Net units sold (excl. VA)*

People fully vaccinated (%)*

Hearing aid market recovery and COVID-19 impact is continuously a scattered picture

9

Strategic initiatives communicated in 2019:

Beltone transformation well on track

Leadership and new network members with

extensive industry experience

Optimizing and significantly reduced portfolio of

“ownership in transition stores”

Practice management system upgrade

Driving commercial excellence transformation

through best practice sharing and stronger culture

Around 1,500 points-

of-sale in North

America

Recognized brand

among US hearing

aid users

Founded in 1940,

acquired by GN in

2000

100% share of

wallet

Key facts about Beltone

New dispensers being attracted to the network, and

Beltone’s market share has started to pick up

Relentless focus on sales execution enabled by leading product portfolio

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Preperation for market normalization: Key strategic actions

ReSound ONEAnnounced August 2020

ReSound LiNX QuattroAnnounced August 2018

ReSound ENZO QAnnounced February 2020

ReSound KeyAnnounced February 2021

Premium

Advanced

Essential10 models

10 models 2 models

3 models

✓ Launch of ReSound Key enabling a full updated fresh product

portfolio across all price points

✓ One fitting software with relentless focus on a user-friendly and

customer centric fitting experience, covering the entire updated

ReSound portfolio

✓ Best practice sharing across the hearing care professionals

ensuring a seamless experience with the fitting of ReSound ONE

and M&RIE

✓ Physical customer visits steadily increasing with the recovery of

the hearing aid markets

✓ Outstanding end-user feedback

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Agenda

Group highlights

GN Hearing update

GN Audio update



Revenue 2,876 1,653 +74%

Organic growth 82% 22%

Gross profit 1,480 827 +79%

Gross margin 51.5% 50.0% +1.5%p

EBITA 714 288 +148%

EBITA margin 24.8% 17.4% +7.4%p

ROIC* 86% 46% +40%p

Free cash flow excl. M&A 438 -67 +505

Cash conversion 61% -23% +84%p


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GN Audio financial highlights Q1 2021

Exceptionally strong momentum continued into 2021, with

GN Audio delivered outstanding 82% organic revenue

growth in Q1 2021

• Organic revenue growth of 82% in Q1 2021 on top of 22%

organic growth in Q1 2020. Revenue growth of 74%,

including impact of around -8% from FX

• Flawless supply chain execution and continued close

collaboration with suppliers of components to address

immediate and future demand

• Gross margin increase driven by product mix and FX partly

offset by increased freight and production costs due to

COVID-19

• EBITA increased 148% equaling an EBITA margin of 24.8%,

reflecting strong growth but also phasing of OPEX

• Free cash flow excl. M&A of DKK 438 million, reflecting the

strong growth in earnings partly offset by traditional

seasonality



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Outstanding broad-based organic growth across Enterprise and Consumer driven

by attractive markets, leading technology and relentless execution

GN Audio continues to gain market share

Europe

Outstanding organic revenue

growth of 113%, with particular

strong performance in France and

Germany

North America

Strong organic revenue growth

of 59% driven by Enterprise

and Consumer

Rest of World

Strong organic revenue growth of

40% driven by Enterprise in

among others ANZ and Japan

GN Audio is strongly positioned in an attractive portfolio of markets

14Source: Company estimates | *Indicative

Market driver

Market trend

Characteristics

Collaboration

Plug-and-play

collaboration

Enterprise

Consumer

Preference for

great calls,

music and an

active lifestyle

From built-in legacy

equipment to UC&C-enabled

plug-and-play solutions

From corded headbands to

True Wireless as the

preferred form factor

Market share*

Gross margins*

Market size (USD)* ~20bn, double-digit growth

Office

Office-based

knowledge

workers

From desk-phone telephony in

private offices to UC&C in

open offices

#1Market position Differs by segment Differs by segments

~1.8bn, ~10% growth ~1.75bn, ~30% growth

Contact Center

“Calls for a living“

From desk-phones using on-

premise infrastructure to

laptop-based cloud calling

#2

Share of GN Audio

revenue*

Market value

(USDm) and

penetration

GN Audio is expanding the presence in the rapid growing

collaboration segments

15Source: Frost and Sullivan, NPD, and Company Estimates| *Indicative

Product

Personal Communication Devices

PanaCast 20

Room based

GNA market share*

Total market 2020

(USD)*

Audio USB

Speak

USB Room Devices

PanaCast

PanaCast 50

Attributes

Built in systems

~1.75bn, ~30% growth

Built-in compute powerUC&C-platform agnostic,

high A/V quality, wide

field-of-view

UC&C-platform agnostic,

plug-and-play, superior call

quality

UC&C system agnostic, plug-

and-play, robust and high-

quality devices

Video market

27%

2018 2020

15%

2025

~300

+52%

+10%

Penetration rate

Value (USDm)

20202018

30%

8%

2025

~750

+67%

+35%

2018

7%

2020

40%

2025

~700

+144%

+25%

8%

2018 2020

30%

2025

~1,900

-3%

+10%

CAGR

~1.9bn, ~10% growth

Collaboration

PanaCast 50

• The world’s first new-normal-ready intelligent video bar

• Three 13-megapixel cameras mounted in a high-precision multi-camera

array creating an immersive 180° field of view covering the full room

• Architecture enables the intelligent video bar to carry out real-time integration

of audio, video and data allowing for Intelligent Zoom feature

• Safety Capacity, Room Usage and People Count generating anonymous

room occupancy data

• Plug-and-play solution with an advanced security layer integrating up against

all leading UC vendors

PanaCast 20

• Jabra’s first intelligent personal camera

• 4K Ultra HD Video as well as personalized Intelligent Zoom and automatic

lighting correction

• Built-in presentation features like the new Picture-in-Picture mode

• All the experiences are powered on the device itself, significantly minimizing

the risk of security breaches, maximizing speed, accuracy, and quality

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Intelligent camera line up for insight driven collaboration in the hybrid working spaceIntroducing Jabra PanaCast 50 & 20

Pouch made from 100%

recycled felt, estimated to

save up to 76% of carbon

emissions*

Jabra Evolve2 30: Setting the standard for new

and sustainable packaging

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Compact size to minimize

shipping footprint

Printed with eco-friendly water-

based and soy oil-based inks

100% sourced from FSC-

certified sustainably

managed forests

*Compared to standard, leatherette pouch. Based on internal calculations

87% of pouch is made of

recycled PET, estimated to

save up to 76% of carbon

emissions*

Compact size to minimize

shipping footprint

Printed with eco-friendly soy oil-

based inks

100% sourced from FSC-

certified sustainably

managed forests

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Agenda

Group highlights

GN Hearing update

GN Audio update



Revenue 4,110 2,967 +39%

Organic growth 46% 3%

Gross profit 2,249 1,668 +35%

Gross margin 54.7% 56.2% -1.5%p

EBITA 753 300 +151%

EBITA margin 18.3% 10.1% +8.2%p

Profit before tax 612 139 +340%

Net profit 482 106 +355%

EPS 3.66 0.78 +369%

ROIC* 23% 21% +2%p

Free cash flow excl. M&A -22 -160 +138

Cash conversion -3% -53% +50%p

NIBD/EBITDA 1.6x 2.3x


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Group financial highlights Q1 2021

Strong performance with 46% organic revenue growth

• Organic revenue growth of 46% driven by outstanding

performance in GN Audio and continued recovery in GN

Hearing

• Strong revenue growth combined with a continued prudent

focus on cost, led to 151% growth in EBITA and an EBITA

margin of 18.3%

• EPS growth of 369%

• Strong free cash flow on top of traditional seasonality and

investments into growth opportunities

Sound balance sheet

• Leverage decreased from 1.8x by the end of 2020 to 1.6x,

on top of the annual dividend payment in March

• Balance sheet remains sound with ample sources of

liquidity



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Strong cash flow generation offset by traditional seasonality

• GN Hearing’s free cash flow excl. M&A in Q1 2021

was driven by traditional seasonality and increase in

net working capital

‒ Growth in earnings and prudent cost control

‒ Increase in inventories and trade receivables

‒ Yearly corporate tax payment

• GN Audio’s free cash flow excl. M&A in Q1 2021

reflects the scalable business model

‒ Continuous leverage

‒ Investment activities ongoing

‒ Yearly corporate tax payment

• Focused and prudent management of cash flow

continues

GN Audio

GN Hearing

DKKm

DKKm

*Excluding M&A activities

176

-27

-126-89 -66

232

-230

-84-122

-204

Tax and financial items

Free cash flow excl. M&A

Operating cash flow before

working capital

Change in working capital

Investing activities*

356

-282

-78 -63 -67

897

-251-125 -83

438

Change in working capital

Operating cash flow before

working capital

Investing activities* Tax and financial items

Free cash flow excl. M&A

Q1 2020 Q1 2021

Creating shareholder value through efficient capital structure

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Shareholder distributionDKKm

• GN distributed DKK 206 million to shareholders through

the annual ordinary dividend in March 2021

• By the end of Q1 2021, net interest-bearing debt was

1.6x to EBITDA, a decrease from 1.8x by the end of 2020

driven by strong cash generation in GN Audio and prudent

cost management in GN Hearing

• Cancelation of 4,092,118 treasury shares completed on

April 15, 2021

• New share buyback program initiated with the ambition

to buy back shares worth DKK 2.5 billion until AGM 2022

0

1,000

2,000

3,000

2020

1,443

2017 2018

1,168

356

2019 2021

1,392

Share buyback Dividends

3,035 3,234

5,303

4,198 4,334

0

2,000

4,000

6,000

2.0x1.6x 1.5x

2017 2018 2019

1.8x

2020

1.6x

Q1 2021

NIBD/EBITDA NIBD

DKKm Net interest-bearing debt

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Financial guidance upgraded on April 14, 2021, is confirmed

COVID-19 risksDue to the ongoing COVID-19 pandemic – which impacts GN in many ways – it must be stressed that the basic assumptions behind the guidance remain significantly more uncertain than normal. The COVID-19 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. Recently, certain components have been in global shortage impacting many different industries. GN has commitment from component suppliers to deliver on the upgraded guidance. This is based on an assumption that the GN suppliers will not face unexpected reductions in access to raw materials. The financial guidance is contingent on a gradual reopening of society and no major disruptions in the supply chain

GN Hearing The fundamental assumptions behind the financial guidance for GN Hearing are that the global hearing aid market in H1 2021 will remain heavily impacted by COVID-19 and the consequential volatile regional and local restrictions, resulting in markets being below the H1 2019 level. As hearing care professionals and end-users in our main markets will have access to the vaccine throughout H1 2021, the current expectation is that in H2 2021 the market will reset and normalize. GN Hearing will continuously aim to outgrow the market and invest in maintaining its innovation leadership and improving the IT infrastructure.

For full year 2021, GN Hearing expects an organic revenue growth of more than 25% and an EBITA margin of more than 16%. It is expected that the EBITA margin in a more normalized market in H2 2021 is recovering to our mid-term targets of more than 20%.

GN Audio The fundamental assumption behind the financial guidance for GN Audio is that the demand for collaboration solutions from enterprises and organizations will continue in 2021 and beyond. It is expected that the GN Audio organic revenue growth will be significantly higher in H1 2021 than in H2 2021, mainly due to difference in comparison base. GN Audio will continuously aim to outgrow the market and invest in future growth opportunities.

For full year 2021, GN Audio expects organic revenue growth to be more than 25% and an EBITA margin of more than 21%. GN Audio expects to continue to deliver solid growth in the remaining quarters of 2021, on top of the significant growth rates delivered in Q2-Q4 2020.

Other and EPS

For full year 2021, EBITA in “Other” is expected to be around DKK -185 million

GN Store Nord expects a growth in EPS of more than 60% for full year 2021

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www.gn.com

E-mail: [email protected]

Henriette Wennicke, VP – IR & Treasury, Tel.: +45 4575 0333

Rune Sandager, Director – IR & Treasury, Tel.: +45 4575 9257Q&A

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Appendix

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GN’s investment case is intact

Clear strategy underpinned by deep technology expertise and

strategic global partnerships

Strong cash conversion and asset light business model

Focused growth model, dedicated developer, manufacturer and

distributor, refraining from vertical integration

Profitability in line with or better than peers

Focused innovation within sound processing in selected market segments

Leading positions in attractive markets with high entry barriers

http://www.gn.com/

DKK million 2016 2017 2018 2019 2020

GN Store Nord

Revenue 8,651 9,585 10,607 12,574 13,449

Organic growth 6% 8% 13% 15% 9%

Gross margin 62.4% 62.7% 62.0% 60.3% 54.3%

EBITA 1,583 1,744 1,956 2,321 1,866

EBITA margin 18.3% 18.2% 18.4% 18.5% 13.9%

Operating profit 1,445 1,558 1,796 2,002 1,627

Financial items -52 -60 -203 -92 -6

Profit before tax 1,395 1,504 1,606 1,913 1,612

Effective tax rate 22% 25% 22% 23% 21%

Net profit 1,086 1,122 1,247 1,468 1,269

ROIC (EBITA/Invested capital) 20% 21% 24% 25% 19%

Free cash flow excl. M&A 1,179 1,134 1,110 1,296 1,865

Cash conversion* 74% 65% 57% 56% 100%

EPS 7.34 8.07 9.25 11.12 9.72

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GN Store Nord – five-year performance

* Free cash flow excl. M&A / EBITA

DKK million 2016 2017 2018 2019 2020

GN Hearing

Revenue 5,156 5,615 5,833 6,351 4,725

Organic growth 6% 6% 7% 7% -24%

Gross margin 69.0% 69.4% 69.2% 69.0% 61.5%

EBITA 1,062 1,153 1,194 1,284 41

EBITA margin 20.6% 20.5% 20.5% 20.2% 0.9%


Free cash flow excl. M&A 704 866 574 672 127

Cash conversion* 66% 75% 48% 52% 310%

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GN Hearing – five-year performance


DKK million 2016 2017 2018 2019 2020

GN Audio

Revenue 3,495 3,970 4,774 6,223 8,724

Organic growth 7% 10% 21% 26% 42%

Gross margin 52.7% 53.2% 53.2% 51.5% 50.4%

EBITA 597 721 905 1,192 2,002

EBITA margin 17.1% 18.2% 19.0% 19.2% 22.9%


Free cash flow excl. M&A 523 481 798 849 1,729

Cash conversion* 88% 67% 88% 71% 86%

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GN Audio – five-year performance


Share price development (3 years)

Financial calendar

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GN Store Nord share overview

Date Event

August 19, 2021 Q2 2021

October 29, 2021 Q3 2021

Index: 30-12-2017 = 100

Share information

• GN has a share capital of DKK 552,703,928 (April 2021) which is

consisting of 138,175,982 shares, each carrying four votes. GN

has one share class, and there are no restrictions on ownership or

voting rights

• GN is, among other indices, included in the C25 index and Large

Cap index on Nasdaq Copenhagen, as well as the Stoxx Europe

600 index, the Stoxx Europe Sustainability index and the MSCI

Europe mid cap index

• Ticker symbols: GN:DC (Bloomberg) and GN.CO (Reuters)

• Number of registered shareholders: Around 30,000 (End Q1 2021)

• Treasury shares: 8,299,342. 6.0% of share capital (April 2021)

• Market cap: DKK 65 billion (End Q1 2021)

• Largest shareholders:

• APG Asset Management N.V. (>5%)

• BlackRock, Inc. (>5%)

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GN C25 CAP Stoxx 600

GN Q1 2021 - Seeking Alpha

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