Interim Report Q1 2019 Conference call presentation, May 1, 2019 - - PowerPoint PPT Presentation

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Interim Report Q1 2019 Conference call presentation, May 1, 2019 - - PowerPoint PPT Presentation

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Interim Report Q1 2019 Conference call presentation, May 1, 2019 Safe Harbor Statement The forward-looking statements in this report reflect the management's current expectations of certain future events and financial results. Statements

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Interim Report Q1 2019 – Conference call presentation, May 1, 2019

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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

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Group highlights Q1 2019 GN Hearing update GN Audio update Financial outlook

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Group financial highlights Q1 2019

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

Continued strong momentum with 19% organic growth and 25% EPS increase

  • Organic growth was 19%. Revenue growth was 24%

including an impact of around 3% from FX and around 1% from M&A

  • Continued solid gross profit increase driven by strong

business performance

  • EBITA increased by 24%, driven by strong execution

across GN Hearing and GN Audio

  • Net profit reached DKK 262 million, a 23% increase

compared to Q1 2018

  • EPS growth of 25%
  • Flat development in ROIC, driven by increased

earnings level as well as strict focus on balance sheet items during the last years, but off-set primarily by the Altia acquisition and to some extent the implementation

  • f IFRS 16

DKK million Q1 2019 Q1 2018 Growth Revenue 2,840 2,296 +24% Organic growth 19% 10% Gross profit 1,754 1,425 +23% Gross margin 61.8% 62.1% (0.3)%p EBITA 439 354 +24% EBITA margin 15.5% 15.4% +0.1%p Profit before tax 342 274 +25% Net profit 262 213 +23% EPS 1.96 1.57 +25% ROIC* 22% 22%

  • Free cash flow excl. M&A

(13) 177 (190) NIBD/EBITDA 2.3x 1.8x

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Cash flow impacted by seasonality and current growth momentum

5

GN Hearing GN Audio GN Store Nord

DKKm DKKm DKKm
  • Strong development in operating cash flow

based on the strong top-line growth

  • Change in working capital negatively impacted

by strong growth momentum across GN Hearing and GN Audio

  • Cash flow from investing activities* at same

levels as in Q1 2018

  • Cash flow from tax negatively impacted by timing

in GN Hearing

  • Free cash flow levels weaker than Q1 2018,

primarily driven by timing effects – will improve during the year. The first quarter of the year is traditionally impacted by payment of corporate tax as well as bonus payouts

  • Three year average cash conversion of 65%
  • 200
  • 100
100 200 300 400 Operating cash flow before working capital Change in working capital Investing activities* Tax and financial items Free cash flow excl M&A
  • 150
  • 50
50 150 250 Operating cash flow before working capital Change in working capital Investing activities* Tax and financial items Free cash flow excl M&A
  • 300
  • 100
100 300 500 700 Operating cash flow before working capital Change in working capital Investing activities* Tax and financial items Free cash flow excl M&A

Q1 18 Q1 19

*Excluding M&A
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SLIDE 6

Creating shareholder value through efficient capital structure

6

NIBD / EBITDA development

DKKm

  • End Q1 2019, the net interest-bearing debt was 2.3x

EBITDA

  • DKK 641 million cash outflow related to the Altia

acquisition

  • DKK 197 million dividend was paid out in March 2019

(DKK 1.35 per share)

  • DKK 345 million share buybacks
  • As of January 1, 2019 IFRS 16 (Leasing) has been

implemented, which has an impact of DKK 496 million on net interest-bearing debt end March 2019

  • Excluding the changes from the IFRS implementation

the NIBD / EBITDA would have been 2.05x

  • New DKK 1 billion share buyback initiated this

morning

1,631 2,212 3,377 3,035 3,234 5,162 1.1x 1.4x 1.9x 1.6x 1.5x 2.3x

0x 1x 2x 3x 4x 5x 6x 7x

1,000 2,000 3,000 4,000 5,000 6,000 2014 2015 2016 2017 2018 Q1 2019 NIBD IFRS 16 NIBD/EBITDA

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Agenda

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Group highlights Q1 2019 GN Hearing update GN Audio update Financial outlook

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GN Hearing financial highlights Q1 2019

Strong performance across regions:

  • Organic growth of 8% driven by strong performance of

ReSound LiNX Quattro and ReSound LiNX 3D. Revenue growth of 10%, including impact of around 2% from FX and an insignificant impact from M&A

  • Gross margin increased 1.4 percentage points

reflecting mix effects

  • The EBITA margin reached at 18.7% – slightly down

compared to Q1 2018 driven by the strong gross margin increase, but more than off-set by the development in foreign exchange rates

  • Free cash flow excl. M&A was DKK (37) million in Q1

2019, impacted by traditional seasonality and higher level of trade receivables and inventories due to the successful ReSound LiNX Quattro

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

DKK million Q1 2019 Q1 2018 Growth Revenue 1,507 1,365 +10% Organic growth 8% 5% Gross profit 1,047 929 +13% Gross margin 69.5% 68.1% +1.4%p EBITA 282 262 +8% EBITA margin 18.7% 19.2% (0.5)%p ROIC* 18% 18%

  • Free cash flow excl. M&A

(37) 103 (140)

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The strong organic growth of 8% was driven across regions and countries

Leading technology and commercial excellence driving growth in 2019 Strongly positioned for the rest of the year Europe Strong momentum from Q4 2018 continued in Q1 2019 – particular strong performance in Italy, Spain and the Nordic countries North America Continued strong growth within independents – partly off-set by the loss of one larger customer. Strong pick-up in VA. Normalized growth in Beltone Rest of World Continued strong growth with China and Japan as the main drivers

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GN Hearing now #1 in VA

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 GN Hearing Competitor 1 Competitor 2 Competitor 3 Competitor 4 Competitor 5

VA marked share development (value)

#1

GN Hearing is now the preferred supplier in VA for the first time ever

  • In Q1 2019, VA accounted for roughly 20% of

the total US market in volumes

  • Since the introduction of ReSound LiNX

Quattro in VA in November 2018, GN Hearing’s market share has more than doubled from 13% to 28%

  • Strong development driven by unique

product features of ReSound LiNX Quattro and focused customer centric approach from sales and marketing teams

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ReSound LiNX Quattro roll-out practically completed

  • ReSound LiNX Quattro, and corresponding

Beltone Amaze, first shipped in August 2018

  • Global roll-out practically completed
  • Available in slightly more than 50

countries world-wide (incl. US, UK, Germany, France, Spain, Italy, Japan and Australia)

  • Strong customer feedback focusing on

superior sound quality and a state-of-the- art rechargeable solution

  • Available in VA from November 2018
11
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Leader in Connectivity: Apple Cooperation/Google Partnership

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Deliver with purpose

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Agenda

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Group highlights Q1 2019 GN Hearing update GN Audio update Financial outlook

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GN Audio financial highlights Q1 2019

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GN Audio delivered 36% organic growth in Q1 2019, driven by exceptionally strong performance in both the CC&O business and the consumer business

  • Organic growth of 36%. Revenue growth of 43%,

including impact of around 5% from FX and around 2% from M&A

  • Strong performance across CC&O and consumer
  • Gross margin slightly down driven by mix effects
  • EBITA increased 53% after transaction related costs

reflecting strong revenue growth and operational leverage, partly off-set by continued investment into the business and the development in FX. EBITA margin of 14.5% compared to 13.5% in Q1 2018 (17.9% before transaction related costs)

  • In Q1 2019, the free cash flow excl. M&A was DKK 78

million, compared to DKK 99 million in Q1 2018

* EBITA (rolling four quarters) / avg. invested capital DKK million Q1 2019 Q1 2018 Growth Revenue 1,333 931 +43% Organic growth 36% 17% Gross profit 707 496 +43% Gross margin 53.0% 53.3% (0.3)%p EBITA 193 126 +53% EBITA margin 14.5% 13.5% +1.0%p Transaction related costs (45) EBITA before transaction related costs 238 126 +89% EBITA margin before transaction related costs 17.9% 13.5% +4.4%p ROIC* 48% 49% (1)%p Free cash flow excl. M&A 78 99 (21)

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Strong and broad-based organic growth in CC&O continues

Leading technology and commercial excellence drives growth across geographies in Q1 2019 GN Audio’s professional business continues its strong momentum. Europe Strong organic growth across countries, but with particular strong performance in the Nordic countries and Germany. Fastest growing region in Q1 2019 North America Solid organic growth driven by GN Audio’s strong professional product portfolio Rest of World Strong organic growth across several countries incl. India and ANZ

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Integration of Altia Systems well underway

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  • On February 19, GN Audio announced the acquisition
  • f Altia Systems to expand into integrated audio and

video UC communication, offering solutions that increase companies’ productivity and allow companies to work smarter

  • On March 11, 2019 all necessary conditions were met

and GN Audio completed the acquisition

  • With the acquisition of Altia Systems GN Audio has

taken a major step towards bringing best-in-class audiovisual systems to support plug-and-play video conferencing for the rapidly growing segment of small meeting rooms

  • Founded in 2011
  • Headquartered in Cupertino, California, USA
  • Leading innovative developer of premium

video communication solutions

PanaCast 2 PanaCast 3 (to come)

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GN Audio is strongly positioned in a very attractive portfolio of markets

Call-centric

Enterprise Consumer

Task-based BT stereo* (incl. sports)

“Calls for a living“ (e.g., contact centers, customer service, traders) Office-based knowledge workers Preference for great calls, music and an active lifestyle

#2

Small in fragmented market

#1

Segment Characteristics Market development Relative market size (indicative) and market share (indicative) Market position

Total relevant market of > DKK 60bn growing at close to 10% per year

Primary product

  • ffering

Jabra Engage Jabra Evolve Jabra Speak PanaCast Jabra Elite

* Jabra Elite now accounts for the majority of the consumer business

”True wireless”

#3

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SLIDE 19

Powered by

Sound+

Calls & Music like never before including Active Noise Cancellation and superior battery life

  • SmartSound. Audio that adapts

automatically to surroundings based on Artificial Intelligence Engineered for the best wireless calls, and music experience with SmartSound

Launch of Jabra Elite 85h

100% Hands-free Voice Assistant Control

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Agenda

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Group highlights Q1 2019 GN Hearing update GN Audio update Financial outlook

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22% 25% 22% ~23% 2016 2017 2018 2019

Financial guidance for 2019*

GN Hearing

  • Organic growth is expected to be around 7%
  • The EBITA margin is expected to be more than 20%. GN

Hearing will continue to invest in future growth

  • pportunities, as described in the strategy for 2017-2019

GN Audio

  • Organic growth is expected to be more than 19%
  • The EBITA margin is expected to be around 20% before

transaction related costs associated with the Altia

  • acquisition. GN Audio expects continued operational

leverage, however partly offset by continued investments in future growth opportunities GN Store Nord

  • EBITA in Other is expected to be DKK (150) million

related to Group Functions, continued investments in new business opportunities and research projects on a corporate level

  • GN expects an effective tax rate around 23%
  • GN Store Nord targets a double-digit percent increase

in earnings per share (EPS)

1) Including “Other”

GN Hearing revenue (DKKm) GN Hearing EBITA margin GN Store Nord tax rate (%)1) GN Audio EBITA margin GN Audio revenue (DKKm) 0.0%p

US tax reform net of related items (3.1%pts)

(0.1)%p +0.8%p 7% 6% 21% 10% (3)%p +3%p

Organic growth

~7%

Organic growth

>19%

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5,156 5,615 5,833 2016 2017 2018 2019 20.6% 20.5% 20.5% >20% 2016 2017 2018 2019 3,495 3,970 4,774 2016 2017 2018 2019 17.1% 18.2% 19.0% ~ 20% 2016 2017 2018 2019 GN Store Nord EPS1) 7.34 8.07 9.25 2016 2017 2018 2019 +1.1%p +10% +15% >10%

* The financial guidance was upgraded on April 12, 2019
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Q&A

www.gn.com E-mail: investor@gn.com Peter Justesen, VP, IR & Treasury, Tel.: +45 4575 8716 Rune Sandager, Senior IR Manager, Tel.: +45 4575 9257

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Appendix

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GN Hearing’s strategic focus areas 2017 – 2019

Innovation excellence focusing on user needs, core technology and time to market optimization Commercial excellence through expansion in the open market, continuation of successful partnerships and engaging users digitally People excellence by empowering leaders to deliver on strategy, implement GN values and develop talents

Hear more, Do more, Be more

Innovation excellence Commercial excellence People excellence

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People excellence Commercial excellence Innovation excellence

GN Audio’s strategic focus areas 2017 – 2019

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Hear More, Do More, Be More

  • Accelerate the call-centric category
  • Expand Unified Communication (UC) strength for office
  • Grow share in focus markets
  • Cloud & digital first
  • Grow consumer profitably
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GN Store Nord – five-year performance

26 * Free cash flow excluding M&A / reported EBITA

DKK million 2014 2015 2016 2017 2018 GN Store Nord Revenue 6,763 7,755 8,651 9,585 10,607 Organic growth 9% 6% 6% 8% 13% Gross margin 62.4% 61.2% 62.4% 62.7% 62.0% EBITA 1,196 1,383 1,583 1,744 1,956 EBITA margin 17.7% 17.8% 18.3% 18.2% 18.4% Operating profit 1,132 1,149 1,445 1,558 1,796 Financial items (80) (138) (52) (60) (203) Profit before tax 1,057 1,016 1,395 1,504 1,606 Effective tax rate 29% 26% 22% 25% 22% Net profit 749 747 1,086 1,122 1,247 ROIC (EBITA/Invested capital) 19% 20% 20% 22% 24% Free cash flow excl. M&A 561 607 1179 1134 110 Cash conversion* 47% 44% 74% 65% 57% EPS 4.61 4.79 7.34 8.07 9.25

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GN Hearing – five-year performance

27 * Free cash flow excluding M&A / reported EBITA

DKK million 2014 2015 2016 2017 2018 GN Hearing Revenue 3,892 4,526 5,156 5,615 5,833 Organic growth 8% 9% 6% 6% 7% Gross margin 68.8% 67.4% 69.0% 69.4% 69.2% EBITA 833 921 1,062 1,153 1,194 EBITA margin 21.4% 20.3% 20.6% 20.5% 20.5% ROIC (EBITA/Invested capital) 16% 16% 17% 18% 19% Free cash flow excl. M&A 368 456 704 866 574 Cash conversion* 44% 50% 66% 75% 48%

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GN Audio – five-year performance

28 * Free cash flow excluding M&A / reported EBITA

DKK million 2014 2015 2016 2017 2018 GN Audio Revenue 2,871 3,229 3,495 3,970 4,774 Organic growth 11% 2% 7% 10% 21% Gross margin 53.6% 52.6% 52.7% 53.2% 53.2% EBITA 521 540 597 721 905 EBITA margin 18.1% 16.7% 17.1% 18.2% 19.0% ROIC (EBITA/Invested capital) 57% 47% 41% 46% 59% Free cash flow excl. M&A 340 271 523 481 798 Cash conversion* 65% 50% 88% 67% 88%

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Share price development (5 years) Financial calendar

GN Store Nord share overview

29

Share information

  • GN has a share capital of DKK 569,072,400, which consist of

142,268,100 shares, each carrying four votes. GN has one share class, and there are no restrictions on ownership or voting rights

  • GN is, among others, included in the C25 and Large Cap

indexes on Nasdaq Copenhagen as well as the Stoxx Europe 600 index

  • Ticker symbols: GN:DC (Bloomberg) and GN.CO (Reuters)
  • Number of registered shareholders: Around 25,000 (2018)
  • Treasury shares: 13,107,872. 9.0% of share capital (2018)
  • Market cap: DKK 32 billion (2018)
  • Largest shareholders:
  • APG Asset Management N.V. (>5%)
  • NN Group N.V. (>5%)

Date Event August 22, 2019 Q2 2019 November 7, 2019 Q3 2019

Index: 30-12-2013 = 100

80 130 180 230 30-12-2013 30-12-2014 30-12-2015 30-12-2016 30-12-2017 30-12-2018

GN C25 CAP Stoxx 600