Gn Store Nord A/S Adr

Hello everyone, and welcome to GN's conference call in relation to our Q1 results. Participating in today's call is Group CEO Peter Karlstrømmer, Group CFO Søren Hedlert, and myself, Rune Sander, Head of Investor Relations. The presentation is expected to last about 15 minutes, after which we will turn to the Q&A session. And with that, I'm happy to hand over to Peter, starting with Group Highlights.

Thank you, Rune, and thank you all for joining us today. I'm pleased to say that we had a solid start to the year thanks to focused execution across our three divisions and our functions of scale. On a group level, we delivered 5% organic growth leading to a reported EBITDA margin of 12.5%, which is up 6.5% at this point compared to last year. The strong improvement in earnings led to positive free cash flow in the quarter, despite the normal seasonality headwinds, including tax and bonus payments. The encouraging performance in the first quarter is supported by a one-year integration, which led to around 90 million Danish kroner of realized synergies, slightly ahead of plan. As a result, we are happy to confirm our financial guidance for the year across revenue, EBITDA and cash flow. With this high-level summary of the quarter, let's now take a look at the performance in each of the divisions. I'm starting with Hearing. In Q1, our hearing division continued to drive market share gains, supported by the successful rollout of Resound Nexia. As a result of a robust market environment and our strong execution, we grew organically by 14%, which comes on top of the 15% we grew in Q1-23. The gross margin increased slightly more than 1% at this point, despite the disposal of Bellarico. This was driven by the group operations synergies as well as the success of Resound Nexia. The development and sales and marketing costs were supported by the disposal of Bellota Cow, as well as the reversal of an earlier recognized pension provision. All in all, the year started slightly better than anticipated, leading to healthy growth and a divisional profit margin of 34.5%. Reason Nexia's success in the market supports hearing-strong performance, which lead me to slide seven and a little bit more detail. The positive reception of Reason Nexia family has continued in the quarter. As you know, we launched first Nexia in the US, which also by now has the best set of reliable data to analyze. These slides give you an overview of the Reason Nexia rollout seen throughout the US commercial business lens. When we evaluate the success across our product launches, there are three main financial KPIs we're tracking carefully. The first one is the reach of the product. A good customer-centric hearing aid will allow us to open new doors. As you likely remember, Reason Omnia was a very successful launch which regained our credibility in the market and therefore effectively opened many new accounts. With the early success of Nexia, we can now see that we are continuing to serve even more customers. We have managed to increase the point of sales by more than 5% compared to pre-launch. Secondly, the depth of our commercial partnership is also important. We strive to, in parallel with opening new accounts, also increase our share of wallet in existing accounts. Compared to pre-launch, we have seen our units per point of sales increase by more than 5%, which is pleasing and a testimony to the appreciation of Nexia. Finally, on top of the volume growth, we have been able to follow a normal launch pattern leading to higher ASPs in the commercial market in the U.S., despite the continued negative channel mix from the increasing share of managed care. Overall, we are confident in our ability of a reasonable next-year family to continue to deliver strong value to our customers and users, which if nothing unforeseen happens, will support our ambition to further grow market shares. With this brief overview of the hearing division, let's now move on to the enterprise division. The enterprise division delivered revenues in line with last year in an enterprise market that is continuing to gradually stabilize while still slightly down in the quarter. Gross margin improved by five percentage points year-over-year driven by group operations synergies, a positive product mix, as well as a normalization of freight rates. Our sales and marketing costs reduced slightly, primarily due to some phasing of marketing activities. As a result, our division of profit margin increased by almost 6% this point in the quarter. If we move to slide 10, we can see our current assessment of the enterprise market. Our key messages and assumptions are fully in line with how we previously have communicated. The market is continuing to stabilize as early expected. The overall enterprise market was slightly down in the quarter, driven by call-centric headsets and speaker phones, while the market growth in knowledge worker headsets was flat. We did well and gained some market shares during the quarter, which led to the flat result. If we look to adjacent enterprise categories, we continue to see positive leading indicators. As an example, Gartner estimates PCs to have grown by 1% in the quarter, and they forecast overall IT device spend to increase by 4% for 24 as a whole. The spend across device categories are uncertain, but it is encouraging to see the current supportive outlook to spend levels in aggregate. These data points, as well as our own channel checks, continue to lean support towards our overall assumption that our market will return to positive year-over-year growth sometime this year, most likely in the second half. While the specific timing is still difficult to estimate, we continue to be cautiously optimistic about our ability to show growth later in the year. Finally, let's take a look at the gaming and consumer division. In our gaming and consumer division, we deliver revenues in line with the first quarter of 2023 due to a demanding comparison base, as the division grew 70% last year. The broader markets are supported by less promotional activities in general, which lend support to overall ASP levels. Our gross margin increased by almost six percentage points compared to the first quarter of last year. In combination with less promotional activities, the gross margin is also supported by the group-wide operations synergies. We did some deliberate investment into sales and marketing in the quarter as we're preparing for the market to further recover throughout the year. In total, the divisional profit increased almost four percentage points compared to the first quarter of last year. We are still not satisfied with the current profit levels in the division and we remain very focused on driving margin expansion during the rest of the year, supported by a healthier market, product innovation and group operations images. I'm moving to slide 13 to share some additional call on the business. Our investment in the software continues to show strong progress. SteelSeries GG, which is a platform that helps gamers enhance a gaming experience, continue to experience strong momentum. SteelSeries Moment, which is designed for gamers to capture and share the most exciting gameplay moments, exceeded one billion clips since the launch. SteelSeries Sonar, which is our software tool to optimize the gaming sound experience, crossed 2 million active users in the quarter. We know that software is an important link between us and the gamers, so it's encouraging to see this continuous strong software growth, which enhances the gaming experience and the appeal for SteelSeries among gamers around the world. In the quarter, we have also expanded our retail footprint with new distribution across many countries. As for Jabra consumer, we continue to experience strong review of our recent launch premium true wireless earbuds, the Elite 8 Active and the Elite 10. As for consumer, in summary, we are making progress to improve the business. And what is encouraging is that the consumer business and the gaming business together, the core categories grew in mid single digit in the quarter. And with that, I'm happy to hand over to Cern.

Thanks, Peter. To conclude on group level, GN delivered a healthy 5% organic revenue growth as a result of our strong execution across our three divisions. Course margin ended the quarter at 52.9%, reflecting a 4.1 percentage point increase compared to first quarter of 23, supported by business mix, group synergies and easing freight costs while partly being offset by the beloved cow disposal. The divisional profit margin increased by 6.4 percentage points following the gross margin increase as well as operating leverage on sales and marketing costs. R&D investments were slightly down year-over-year, which was primarily a reflection of timing effects of product roadmaps and group synergies. Management and administrative costs increased slightly reflecting continued investments into IT and upfront costs associated with the new financial service center currently being established in Poland. To conclude, on the EBITDA level, the EBITDA margin increased by 6.5 percentage points compared to Q1 of 2023. Our solid earnings levels combined with strong focus on working capital led to a positive cash flow and a further reduction of adjusted leverage, which ended at 4.0 compared to 4.5 a quarter ago. Let's move to slide 16 for more details on the free cash flow generation. As Peter mentioned in the beginning, we were able to offset the traditional cash flow seasonality with a strong absolute earnings levels leading to a positive free cash flow in the quarter. A year ago, we experienced a cash burn of almost 600 million DKK, but as a result of the strong execution across the company, we turned this deficit into a positive cash flow figure for the quarter. This strong focus on cash flow generation in general has now resulted in four consecutive quarters of positive cash flow. Going forward, our focus on cash flow generation will continue as we remain fully committed to delivering even further. Moving on to slide 17 and the brief status on the 1GN integration. We remain on track to deliver around 600 million DKK in cost synergies by 2026, of which around 400 million is expected in 2024. We are tracking slightly ahead of the original plan, and during the quarter we managed to realize synergies of around 90 million DKK. This is encouraging to see our run rate leaving the quarter, and we remain confident about the ambition for 2024 as well as 2026, which should further de-risk the company's profile over the coming years. Moving to our financial guidance for 2024. Q1 ended, broadly speaking, slightly better than we had anticipated across growth and margins. We are confirming our financial guidance for the year, and you should see the strong execution in the first quarter, including the before-mentioned synergies, as a further de-risk of the performance. We know that there is still a lot of work to be done during the rest of the year, but we are definitely on the right track. For 2024, we still expect organic revenue growth of 2-8%, driven by robust performance across all three divisions. We also continue to expect a reported EBITDA margin of 12-14% for the year. Finally, we continue to expect free cash flow excluding M&A of more than 700 million for the year. And with that, I'm happy to hand you back to Rune.