Interim Report Q2 2017 Conference call August 17, 2017 2 Safe - - PowerPoint PPT Presentation

Interim Report Q2 2017 Conference call August 17, 2017

Safe Harbor Statement

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The forward-looking statements in this interim 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.

Agenda

Group highlights Q2 2017 GN Hearing update GN Audio update Financial outlook

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• GN delivered 15% revenue growth in Q2 2017 driven by

strong performance across GN Hearing and GN Audio

• Gross profit increase and margin expansion
• GN Hearing development driven by Audigy and product mix
• GN Audio development driven by product mix
• EBITA grew 15% reflecting solid operational execution as well

as product launch costs and previously communicated investments in growth as part of the 2017 – 2019 strategy

• Very strong EPS growth of 25%
• Continued strong FCF generation

Group financial highlights Q2 2017

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

Q2 2017 Q2 2016 Growth DKK million Revenue 2,393 2,089 +15% Organic growth 7% 9% Gross profit 1,494 1,275 +17% Gross margin 62.4% 61.0% +1.4%p EBITA 386 336 +15% EBITA margin 16.1% 16.1% 0.0%p Profit before tax 346 303 +14% Net profit 268 228 +18% EPS 1.92 1.53 +25% ROIC* 21% 20% +1%p Free cash flow excl. M&A 345 414 (17)% NIBD/EBITDA 1.7 1.6

139% 78% Q2 2016 Q2 2017 123% 89% Q2 16 Q2 17 117% 105% Q2 16 Q2 17 414 345 Q2 16 Q2 17 160 131 Q2 16 Q2 17 279 267 Q2 16 Q2 17

Continued strong cash generation

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Free cash flow excl. M&A (DKK million) Cash conversion (FCF ex. M&A / reported EBITA)

GN Hearing GN Audio GN Store Nord GN Hearing GN Audio GN Store Nord

(18)%p

• GN’s focus on cash conversion continues
• In H1 2017, cash conversion was 69%, in line with the

high level of 70% in H1 2016

• In Q2 2017, cash conversion was 89%, compared to

123% in Q2 2016

• Focused and prudent management of net working

capital continues

(12)%p (34)%p (4)%p (17)%p (61)%p

Q2 17 Q2 16

Diversification of funding sources

• De-risking company profile
• Free up banking debt
• The CB further diversifies GN’s funding profile

Strong investor appetite

• 6x oversubscription: Total orders of EUR 1.5bn
• Book covered within 60 minutes
• Final loan amount of EUR 225 million, above initially targeted level

Attractive terms

• Zero coupon locked in for 5 years
• Positive impact on group cash interest payments

Conversion premium

• f 40%
• Conversion premium of 40% achieved, at the top of the marketed 27.5%-

40.0% range

• Strike price of DKK 269.46
• If the CB is exercised, GN will settle with already issued Treasury shares

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Successful issue of convertible bond

Agenda

Group highlights Q2 2017 GN Hearing update GN Audio update Financial outlook

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GN Hearing key highlights Q2 2017

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Solid revenue growth Strong gross profit increase Strong growth in EBITA ReSound LiNX 3D launched 12% revenue growth, 5% organically 16% increase in gross profit 7% increase in EBITA Strong global launch of 5th generation 2.4 GHz, full family hearing aids

• Strong revenue development in Q2 2017
• GN Hearing’s revenue increased 12% in Q2 2017
• Organic growth of 5% on a comparison base, with 10%
• rganic growth in Q2 2016
• The newly launched ReSound LiNX 3D generating strong
• momentum. Double digit organic growth since launch
• Strong gross profit increase driven by Audigy and

product mix

• 7% increase in EBITA reflecting solid revenue growth
• EBITA margin decrease in the quarter reflecting product

launch costs and investments in growth as part of the 2017 – 2019 strategy

GN Hearing financial highlights Q2 2017

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* Reported EBITA (rolling four quarters) / avg. invested capital Note: continued operations

Q2 2017 Q2 2016 Growth DKK million Revenue 1,415 1,265 +12% Organic growth 5% 10% Gross profit 975 840 +16% Gross margin 68.9% 66.4% +2.5%p EBITA 255 239 +7% EBITA margin 18.0% 18.9% (0.9)%p ROIC* 19% 17% +2%p Free cash flow excl. M&A 267 279 (12)

Leading technology and commercial excellence driving growth

Great market presence and momentum to take advantage of the newly launched ReSound LiNX 3D

Well-balanced growth in Q2 2017

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North America

• Strong performance especially

in the US commercial market driven by ReSound LiNX 3D and Beltone Trust

Europe

• GN Hearing continued to gain

market share in several important markets, including Southern Europe

Rest of World

• Strong growth driven by, e.g.,

China and Distributor Sales

ReSound LiNX 3D

• The future of Smart Hearing

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Hear more than you ever thought possible

• Strong and documented audiological benefits:
• Superior Sound Quality
• Most advanced surround sound
• Best speech recognition in noise

Enhanced hearing and fitting experience

• Fast, easy to use
• On-the-go personalization
• Available on Android and iOS incl. Apple Watch

Hearing care wherever you are

• New cloud based technology
• Remote care comparable to that offered in clinic
• Flexibility, ease and convenience for both user

and hearing care professional

Strong launch of ReSound LiNX 3D

• Global launch
• First launched in US on April 29. Since then launched in all major

countries, including Austria, Canada, Denmark, France, Germany, Italy, Korea, Netherlands, Norway, Spain, Sweden, Switzerland and UK

• First shipments made ahead of plan to accommodate

extraordinarily high interest from customers

• Launched as a full product family
• Launched in Top and Plus performance levels
• Launched at a price premium to ReSound LiNX2
• Best initial media coverage
• 50% more original stories reached1
• 2x markets reached by media coverage1

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1: First eight weeks following launch. Compared to ReSound LiNX2

Feedback focuses on improved Sound Quality

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Even the subtlest sounds in the office were audible and the tiring sound of the water feature did not distract me from what I was doing. It was then that I knew I was experiencing the very best hearing correction I have ever worn… In all situations I heard very well and my conclusion was I was hearing like I remembered the way I heard 15 years ago … this is the best there has ever been ...

• yet. You know we all are expecting closer to perfection but in the meantime you are almost there

– Hearing care professional, Colorado, US

I had to take a moment to write this email to you … the new 3D technology has been most impressive …the patients that I upgraded from LiNX2 to 3D have sung its praises. The positive - more accurately - glowing responses from my patients have been almost immediate! ... I have even received emails after they went home and wore it for a few days reiterating their first impressions. It was evident that ReSound 3D technology had unearthed what many have asked for - more clarity, better speech in noise and spatial sense

– Hearing care professional, Georgia, US

“ “

Strong sales uptake

• In the first 9 weeks of the launch, ReSound

LiNX 3D has performed stronger than ReSound LiNX2 globally

• Launch plans facilitating strong uptake of

ReSound LiNX 3D (see next slide)

• Feedback focuses on improved sound quality

Positive ASP development

• Global ASP increase like-for-like
• Price point upselling compared to ReSound

LiNX2

Remote fine-tuning very well-received by dispensers and end- users

• Very positive response from dispensers
• Strong increase of end-user registrations
• Double up number of downloads of ReSound

SMART 3D app vs ReSound SMART app

Unit sales1 App downloads (accumulated)

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Strong launch KPIs – exceeding those of ReSound LiNX2

Weeks

ASP increase like-for-like

1 2 3 4 5 6 7 8 9

ReSound LiNX 3D ReSound LiNX2 1: Global unit sales per day following launch, including Beltone Trust and Beltone Legend. ReSound LiNX2 number upwards adjusted due to larger market in general as well as stronger market share for GN Hearing

Launch planning facilitates a strong unit uptake

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Unit sales development1

Announcement, April 3 Launch, April 29 Time

Average unit sales before announcement Average unit sales between announcement and launch Average unit sales after launch

Units

1: Combined sale of ReSound LiNX2 and ReSound LiNX 3D (and corresponding Beltone products). From 4 months before announcement and until end of June

• Launch execution

planning, in line with traditional product cycle in hearing aid industry

• Limited time between

announcement and launch, in order to minimize traditionally lower sales in intermediary period

• Double digit organic

growth since launch

Agenda

Group highlights Q2 2017 GN Hearing update GN Audio update Financial outlook

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GN Audio key highlights Q2 2017

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Solid organic growth Very strong EBITA increase Strong EBITA margin growth VXi integration progressing as planned 19% revenue growth, 12% organically 46% increase in EBITA 3.2%pts increase in EBITA margin VXi has strengthened GN Audio’s position on the important North American market

• 19% revenue growth in Q2 2017, with organic growth
• f 12%
• The growth was also in Q2 2017 driven by strong

CC&O performance across regions and channels

• In the quarter, GN Audio continued to take important

steps in the repositioning of the consumer segment

• EBITA increased by 46% reflecting the strong revenue

growth

• Strong EBITA margin increase compared to Q2 2016

reflecting well executed commercialization as well as

• perational leverage

GN Audio financial highlights Q2 2017

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

Q2 2017 Q2 2016 Growth DKK million Revenue 978 824 +19% Organic growth 12% 9% Gross profit 519 435 +19% Gross margin 53.1% 52.8% +0.3%p EBITA 168 115 +46% EBITA margin 17.2% 14.0% +3.2%p ROIC* 44% 44% 0%p Free cash flow excl. M&A 131 160 (29)

Leading technology and commercial excellence drives growth across geographies

Strong organic growth in CC&O continues

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North America

• Strong organic growth in Q2 2017
• n a tough comparison base

Europe

• Very solid double digit organic

growth in Q2 2017 driven by several countries

Rest of World

• Very strong double digit growth

continued in Q2 2017 across several different countries GN Audio’s professional business continues its strong current momentum

• Since it’s launch in late 2010, Jabra Speak has been a game changer, not only for GN Audio, but for the entire enterprise

audio solution industry

• The Evolve series was introduced in 2014 and has been a massive success across regions and channels. In the last year, the

Evolve series has doubled its sales

• The two new product introductions Jabra Speak 710 and Jabra Evolve 75 are strengthening an already strong UC portfolio

Strengthening already strong UC portfolio

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Jabra Speak 710 Jabra Evolve 75

Premium UC products with stellar sound

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The high-definition sound quality is nothing short of astonishing. I’ve become hooked on making phone calls with it. It seriously sounds as if the person you’re talking with is right next to you. And unprovoked, the first two phone calls I made with it, the person on the other end marveled over how clear the sound was. No one would ever even think of bringing that up in a typical conversation, so I know this product is a difference-maker. It may be premature, but I’m willing to go on a limb here and declare this as one of my favorite new products this year. As Carly Simon and I are currently belting out, nobody does it better

– Forbes Magazine, review on Jabra Evolve 75

There’s an option for a portable speaker system that can provide you with great audio for music and phone calls. The round device provides stellar audio for phone calls, is easy to set up, yet is also small enough to carry with you on your journeys. I was quite impressed with the design of the round speaker system – it lets you place it flat on the ground for omni-directional audio (in case you’re in a small conference room with multiple people needing to speak), but also includes a built-in metal stand on its back that makes it look more like a typical speaker system. This comes in handy when you want to switch over from a phone call into more of an entertainment system (music and movies)

• Network World Magazine, review on Jabra Speak 710

“ “

Integration of VXi progressing well

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• In October 2016, GN Audio acquired VXi

Corporation to further strengthen GN Audio’s position in the important North American market

• The integration of VXi is progressing as

planned and the VXi business has now been fully merged into GN Audio

• VXi performance as planned. Channels and

customers recognize the combination of Jabra VXi and Blueparrott brands as a differentiator in the market

Agenda

Group highlights Q2 2017 GN Hearing update GN Audio update Financial outlook

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• GN Hearing expects continued solid revenue growth again in 2017, in line with the 2017 – 2019 strategy
• Reflecting product launches during the year, GN Hearing expects organic growth rates and earnings levels to be lower in the

first half of 2017 compared to the second half, also as a reflection of the comparison base in 2016

• GN Audio expects to continue to deliver strong growth rates, in line with the 2017 – 2019 strategy
• 2017 is, as in previous years, expected to show a seasonal pattern with revenue and EBITA expected to be skewed towards

the second half of the year – particularly in Q4

Financial guidance for 2017 confirmed

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Financial guidance 2017

Organic revenue growth GN Hearing GN Audio > 6% EBITA margin Effective tax rate1 > 6% > 20% > 17% ~22%

Note 1: GN Store Nord

• EBITA in Other is expected to be around DKK (125) million in 2017
• GN Store Nord expects a mid-teens percent increase in earnings per share (EPS) in 2017

Investor and analyst meeting

62nd International Congress of Hearing Aid Acousticians Nürnberg 9.00 am, October 19, 2017

Save the date – EUHA 2017

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Q&A

www.gn.com E-mail: investor@gn.com Peter Justesen, VP IR & Treasury, Dir.: +45 4575 8716

Appendix

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

Hear more, Do more, Be more People excellence Innovation excellence Commercial excellence

GN Hearing’s strategic focus areas 2017 – 2019

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GN Audio’s strategic focus areas 2017 – 2019

Hear More, Do More, Be More

Innovation excellence Commercial excellence People excellence

• 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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Strong profitable growth to continue in coming years

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2016 2019 CAGR: +20% 1,583 6432 2011 2011 5,174 8,651 2019 2016

+6-8% +6-9%

Financial targets 2017 - 2019 Revenue development (DKKm)1 EBITA development (DKKm)1

CAGR: +11% CAGR: +11%

Financial targets 2017 - 2019

Margin: 20-22% Margin: 17-19%

Note 1: All numbers excluding Otometrics Note 2: Excl. income received from the legal dispute with Telekomunikacja Polska (TPSA)

12% 18% CAGR: +11%

GN Store Nord – five year performance

31 * Excl. SMART restructuring costs ** Free cash flow excluding M&A / reported EBITA

DKK million 2012 2013 2014 2015 2016 H1 2017 GN Store Nord Revenue 5,778 6,248 6,763 7,755 8,651 4,626 Organic growth 6% 13% 9% 6% 6% 6% Gross margin* 58.3% 60.3% 62.4% 61.2% 62.4% 62.1% EBITA* 798 1,217 1,196 1,383 1,583 706 EBITA margin* 13.8% 19.5% 17.7% 17.8% 18.3% 15.3% EBITA reported 568 1,113 1,196 1,383 1,583 706 Operating profit reported 480 1,050 1,132 1,149 1,445 632 Financial items (62) (81) (80) (138) (52) (31) Profit before tax reported 420 968 1,057 1,016 1,395 601 Effective tax rate 31% 28% 29% 26% 22% 22% Profit for the year reported 290 695 749 747 1,086 467 ROIC (EBITA/Invested capital) 8% 20% 19% 20% 20% 21% Free cash flow excl. M&A 2,765 96 561 607 1,179 487 Cash conversion** 487% 9% 47% 44% 74% 69%

GN Hearing – five year performance

32 * Excl. SMART restructuring costs ** Free cash flow excluding M&A / reported EBITA

DKK million 2012 2013 2014 2015 2016 H1 2017 GN Hearing Revenue 3,423 3,636 3,892 4,526 5,156 2,791 Organic growth 5% 10% 8% 9% 6% 4% Gross margin* 61.1% 65.8% 68.8% 67.4% 69.0% 68.5% EBITA* 503 775 833 921 1,062 500 EBITA margin* 14.7% 21.3% 21.4% 20.3% 20.6% 17.9% EBITA reported 273 671 833 921 1,062 500 ROIC (EBITA/Invested capital) 6% 14% 16% 16% 17% 19% Free cash flow excl. M&A 108 50 368 456 704 353 Cash conversion** 40% 7% 44% 50% 66% 71%

GN Audio – five year performance

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

DKK million 2012 2013 2014 2015 2016 H1 2017 GN Audio Revenue 2,355 2,612 2,871 3,229 3,495 1,835 Organic growth 7% 18% 11% 2% 7% 10% Gross margin 54.2% 52.7% 53.6% 52.6% 52.7% 52.3% EBITA 362 472 521 540 597 271 EBITA margin 15.4% 18.1% 18.1% 16.7% 17.1% 14.8% EBITA reported 362 472 521 540 597 271 ROIC (EBITA/Invested capital) 57% 65% 57% 47% 41% 44% Free cash flow excl. M&A 236 178 340 271 523 209 Cash conversion* 65% 38% 65% 50% 88% 77%

• During 2017, GN has distributed DKK 955 million to

shareholders via share buybacks and dividends

• Total dividend of DKK 178 million was paid out

during March 2017 (DKK 1.15 per share)

• During H1 2017, DKK 777 million has been

distributed by means of the concluded share buyback program

• On April 12, 2017 GN cancelled 9,103,715 shares as

approved on the Annual General Meeting in 2017

• By the end of March 2017, the net interest bearing

debt ratio was 1.7x EBITDA

• Ongoing DKK 1 billion share buyback program. To

be concluded no later then March 12, 2018

Creating shareholder value through efficient capital structure

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Shareholder distribution

749 894 1,198 1,364 955 500 1,000 1,500 2013 2014 2015 2016 2017 YTD Dividends Share buybacks

+22%

CAGR * 12 month rolling

173 168 162 155 146 120 140 160 180 2013 2014 2015 2016 2017 Outstanding shares

Total shares outstanding

(3)% (3)% (5)% (6)%

Million DKKm

90 140 190 240 290

01-08-2012 01-08-2013 01-08-2014 01-08-2015 01-08-2016 01-08-2017

GN C20 CAP Stoxx 600

Share information

• GN has a share capital of DKK 582,736,856, which is consisting of

145,684,214 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 C20 Cap 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 (Dec. 31 2016)
• Treasury shares: 7,520,759 – 5.2% of share capital (Aug. 17, 2017)
• Market cap: DKK 26.4 billion (Jun. 30, 2017)
• Largest shareholders:
• T. Rowe Price Associates Inc. (>5%)
• Marathon Asset Management LLP (>5%)
• APG Asset Management N.V. (>5%)
• NN Group N.V. (>5%)

GN Store Nord share overview

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Share price development (5 years) Financial calendar

Date Event November 2, 2017 Interim Report Q3 2017

Index: 01-08-2012 = 100 259 238 143