Interim Report Q2 2019 Conference call presentation, August 22, 2019 - - PowerPoint PPT Presentation

Interim Report Q2 2019 – Conference call presentation, August 22, 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 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 2019 GN Hearing update GN Audio update Financial outlook

Group financial highlights Q2 2019

Strong group performance with 16% organic growth

• Organic growth was 16%. Revenue growth was 19%

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

• Continued solid gross profit increase driven by strong

business performance

• EBITA increased by 16%, driven by strong execution

across GN Hearing and GN Audio

• Net profit reached DKK 305 million, a 7% increase

compared to Q2 2018

• EPS growth of 9% – H1 2019 growth of 15%
• Cash conversion of 90% in Q2 2019
• NIBD/EBITDA at 2.3x – slightly higher than long term

target due to timing effects, but is expected to decrease during the year due to strong business performance

DKK million Q2 2019 Q2 2018 Growth Revenue 3,051 2,564 +19% Organic grow th 16% 11% Gross profit 1,835 1,597 +15% Gross margin 60.1% 62.3% (2.2)%p EBITA 523 452 +16% EBITA margin 17.1% 17.6% (0.5)%p Profit before tax 398 366 +9% Net profit 305 284 +7% EPS 2.29 2.11 +9% ROIC* 23% 22% +1%p Free cash flow excl. M&A 472 338 +40% Cash conversion 90% 75% +15%p NIBD/EBITDA 2.3x 1.7x

Strong cash flow generation

GN Hearing GN Audio GN Store Nord

• Continued strong development in operating

cash flow based on the strong top-line growth

• Strong development in net working capital in GN

Hearing, whereas GN Audio is negatively impacted by strong growth momentum

• Investing activities* less cash intensive than in

Q2 2018, primarily driven by lower FSA activity in GN Hearing

• Significant increase in free cash flow, leading

to a cash conversion of 90% compared to 75% in Q2 2018

379

• 27
• 224
• 22

106 427 23

• 109
• 51

290

271 77

• 58
• 1

289 340

• 20
• 72
• 16

232

628 49

• 302
• 37

338 740

• 1
• 206
• 61

472

Q2 18 Q2 19

Exploiting attractive market conditions and de-risking the balance sheet

2,549 112 112 559 112 745 955 2020 250 June 2019 2019 2021 2022 2,000 2023 2024 ~7,300*

Maturity profile (DKKm)

• Refinancing of Convertible Bond

resulted in extended debt profile, locked in zero coupons, raised strike price to DKK 474 and reduced equity dilution with roughly 1 million shares

• Diversified funding profile with mid-

term maturity that provides flexibility based on strong cash-generative businesses

• Sufficient flexibility achieved allowing

for ongoing investments and the ongoing shareholder distributions

Agenda

Group highlights Q2 2019 GN Hearing update GN Audio update Financial outlook

GN Hearing financial highlights Q2 2019

Strong performance across regions

• Organic growth of 8% driven by continued strong

performance of ReSound LiNX Quattro across regions. Revenue growth of 11%, including impact of around 2% from FX and an insignificant impact from M&A

• Gross margin at same level as in Q2 2018
• The EBITA margin reached at 18.9% – slightly down

compared to Q2 2018 driven by an adverse development in foreign exchange rates and ongoing infrastructure investments

• Free cash flow excl. M&A grew to DKK 290 million in

Q2 2019, primarily driven by relatively lower FSA activity and a strong development in the net working capital as expected

DKK million Q2 2019 Q2 2018 Growth Revenue 1,585 1,433 +11% Organic grow th 8% 6% Gross profit 1,090 988 +10% Gross margin 68.8% 68.9% (0.1)%p EBITA 299 278 +8% EBITA margin 18.9% 19.4% (0.5)%p ROIC* 18% 19% (1)%p Free cash flow excl. M&A 290 106 +174% Cash conversion 97% 38% +59%p

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 performance across the region with particular strong performance in Germany, Spain and UK North America Strong performance across channels, partly off-set by the loss

• f one larger customer. Significant
• rganic growth in the VA

Rest of World Continued strong growth with China and Japan as the main drivers

Share gains driven by structured commercial execution

• Organization driving a data-driven commercial

excellence implementation with a clear focus on increasing effectiveness and efficiency of the sales force

• Market leading technology supporting customer

satisfaction

• GN delivered strong double-digit organic growth in

Q2 2019

Case study – Japan (日本)

*Rough numbers based on market statistics from JHIMA

World’s 3rd largest ~ 600k annual units ~ 4% of global units ~ 7% of global value High ASP market Market growth in units (CAGR) of ~1% 2015-2018 ~3% H1 2019 GN market share ~20%

Market characteristics*

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 more than 50 countries world-wide

(incl. Australia, France, Germany, Italy, Japan, UK, US, Spain)

• Strong customer feedback focusing on

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

• In the VA, ReSound LiNX Quattro has a market

share of 23% in the rechargeable category as

• f July 2019; underpinning the strong product
• ffering

”This is better than anything I’ve heard in a long time. What I’ve got is a more complete auditory

• environment. This is pretty

impressive.”

Andrew Hugill on ReSound LiNX Quattro

Composer and musicologist

Leader in Connectivity: Google continues to push the importance of connectivity

Agenda

Group highlights Q2 2019 GN Hearing update GN Audio update Financial outlook

GN Audio financial highlights Q2 2019

GN Audio delivered 26% organic growth in Q2 2019, driven by exceptionally strong performance in both the CC&O business and the consumer business

• Organic growth of 26%. Revenue growth of 30%,

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

• Strong performance across CC&O and consumer
• Gross margin down driven by mix effects and FX
• EBITA increased 29% after transaction related costs

reflecting strong revenue growth and operational

• leverage. Strong underlying development despite

continued investments in future growth opportunities

• In Q2 2019, the free cash flow excl. M&A was DKK 232

million, compared to DKK 289 million in Q2 2018

* EBITA (rolling four quarters) / avg. invested capital DKK million Q2 2019 Q2 2018 Growth Revenue 1,466 1,131 +30% Organic grow th 26% 19% Gross profit 745 609 +22% Gross margin 50.8% 53.8% (3.0)%p EBITA (reported) 268 207 +29% EBITA margin (reported) 18.3% 18.3%

• Transaction related costs

(7) EBITA (before transaction related costs) 275 207 +33% EBITA margin (before transaction related costs) 18.8% 18.3% +0.5%p ROIC* 51% 51%

• Free cash flow excl. M&A

232 289 (20)% Cash conversion 87% 140% (53)%p

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

Leading technology and commercial excellence drives growth across geographies in Q2 2019 GN Audio’s professional business continues its strong momentum Europe Continued strong organic growth across the region. Fastest growing region in Q2 2019 North America Solid organic growth driven by GN Audio’s strong professional product portfolio Rest of World Strong organic growth across countries

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

Call-centric

CC&O 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

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

Jabra Engage Jabra Evolve Jabra Speak Jabra PanaCast Jabra Elite

”True wireless”

#3

Market position Relative market size** and market share** Market development Primary product

• ffering

Characteristics Segment Gross margins** Replacement cycles**

~ 5 years ~ 2 years ~ 3-4 years

Jabra PanaCast – first step to position GN Audio in the fast-growing huddle room video conferencing market

• In August 2019, Jabra started shipment of

Jabra PanaCast, engineered to be the world’s first smart Panoramic-4k Plug- and-Play video solution

• Jabra PanaCast’s leading-edge cameras and

microphones, fourth-generation stitching technology and Intelligent Vision software work as one to ensure optimal performance

• The solution is compatible with popular

cloud-based solutions including Microsoft Teams, Skype, Zoom, Cisco WebEx, Slack, Google Hangouts, GoToMeeting, Unify Circuit, BlueJeans and more

Improving meeting efficiency Strong growth Substantial cost savings and carbon food print reduction

Encouraging initial feedback from Jabra Elite 85h

• During Q2 2019, GN Audio started shipment of the Jabra

Elite 85h headphones - engineered with Jabra SmartSound, based on audEERING context intelligence technology and include Jabra’s Active Noise Cancellation (ANC)

• The Jabra Elite 85h headphones set new standards

across the board, with up to 36-hour battery life (with ANC activated), crystal-clear sound with advanced 6- microphone call technology, 40mm custom-engineered distortion-reducing speakers for top-quality acoustic experience and industry-leading durability

• The initial feedback, including the important product

reviews, is encouraging

“It's really a no-brainer to go out and purchase the Jabra Elite 85h. Audio quality is excellent, ANC works very well, you can make and receive calls without much compromise, and you can trust Jabra to keep the headphones updated with the latest and greatest functionality.” “Jabra’s new noise-cancelers last longer, sound better, and cost less.”

Agenda

Group highlights Q2 2019 GN Hearing update GN Audio update Financial outlook

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 around 24%
• 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 around 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)

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

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

~7%

~24%

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%

Investor and analyst meeting

64nd International Congress of Hearing Aid Acousticians

Save the date – EUHA 2019

Nürnberg 9.00 am, October 17, 2019

Q&A

www.gn.com E-mail: investor@gn.com Morten P. Toft, VP - IR & Treasury, Tel.: +45 4575 4607 Rune Sandager, Senior Manager - IR, Tel.: +45 4575 9257

Appendix

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

People excellence Commercial excellence Innovation excellence

GN Audio’s strategic focus areas 2017 – 2019

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

GN Store Nord – five-year performance

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% 21% 24% Free cash flow excl. M&A 561 607 1,179 1,134 1,100 Cash conversion* 47% 44% 74% 65% 57% EPS 4.61 4.79 7.34 8.07 9.25

GN Hearing – five-year performance

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%

GN Audio – five-year performance

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%

Share price development (5 years) Financial calendar

GN Store Nord share overview

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 November 7, 2019 Q3 2019

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