Gn Store Nord A/S Adr

Hello, everyone, and welcome to GN's conference call in relation to our Q3 results announced yesterday. Participating in today's call is Group CEO Peter Carlstrømmer, Group CFO Søren Jelert, and Marcel Frohne-Sanner, Head of Advanced Stabilizations. The presentation is expected to last about 20 minutes, after which we'll turn to the Q&A session. The presentation is already uploaded on GN.com. And with that, I'm happy to hand over to Peter for some opening remarks.

Thank you, Rune, and thank you all for joining us today. In the third quarter, we have continued to execute in line with the strategic direction we put forward at our Capital and Markets Day in May. We are happy to see the benefits to margins and cash flow as expected, but saw a top line that was weaker than what we anticipated. In hearing, we continue to deliver very strong performance, both in terms of growth and profitability. They live in continued double-digit organic revenue growth and further improvement of profit margins, even on a high comparison base from last year. With this strong execution, we are now back at historical healthy margin levels, highlighted by our 21% EBITDA margin in the core business in the quarter. In enterprise, we are navigating in a difficult European market currently impacted by some economic pressure in parts of the region, including Germany and France, that is putting pressure to our selling numbers. On the positive side, we are seeing good developments of the US market and the APEC region and are globally defending our market leading position well. Despite the selling challenges and top line, we see continued benefits from the company-wide synergies as well as pricing discipline leading to continuous strong profit margins. As for the sellout, this was stronger than the sellout in the quarter, which will provide support for our business as we move forward. In gaming and consumer, we delivered well on the lead and talk wind-on process, making us comfortable that we will be concluding this by year-end within the estimates we have given. In the steel series, we experienced a temporary slowdown in growth, which was a result of a slightly declining market and some quarterly fluctuations, including some delay in order deliveries. We have been adding steel series to our common operations and IT system setup, which most likely have caused some delays. With what we have seen so far in October, we are comfortable that we will be back in growth again in Q4, even though end markets continue to be somewhat challenged. We have also launched our first gaming earbuds and our new keyboards that will support our growth in Q4 and onwards. Despite the temporary slowdown on the growth, our margins were fairly strong in the quarter as a function of the well-controlled wind-down and company-wide synergies. On group level, the 1GN transformation continues to develop favourably, and in the quarter we delivered another 150 million Danish kroner in company-wide synergies. In summary, we saw uneven growth across our divisions, but we are pleased to see the company transformation continue well. We're in the quarter delivering margins improvements and a free cash flow of 786 million Danish kronor, further reducing our leverage. With this introduction, I'm happy to hand it over to Søren for further details on the group performance during the quarter.

Thank you, Peter, and thank you all for joining us today. On a group level, we delivered a minus 4% organic growth. And if we exclude the wind down, organic revenue growth would have been flat. Despite the decline in top line, our strong cost focus and company-wide synergies led to a 29% increase in EBITDA. In terms of margins, this translates into an EBITDA margin of 13.3%, which is 3.6% higher than the same quarter last year. So in summary, despite a mixed quarter for the top line, we delivered a substantial margin expansion, all leading to a free cash flow of 786 million Danish kroner, excluding M&A, and a further reduction in our leverage. Moving into financial details on slide 6. Despite the negative development on the top line, our strong focus on cost and synergy realization resulted in a gross margin of 54.8% compared to 50.1% in Q3 of 23. R&D was slightly up year over year, which was primarily a reflection of ongoing investments in consumer-centric innovation and in driving synergies across the R&D organization. Management and administrative costs decreased, while sales and marketing costs were essentially flat compared to Q3 of last year. Consequently, EBITDA grew 29% equal to an EBITDA margin of 13.3%. The strong improvement in margin reflects the gross margin improvement and some leverage on OPEX despite the top line development. Our solid earnings level led to a substantial positive cash flow generation of 786 million driving a further reduction of our adjusted leverage, which ended at 3.5 in the quarter. With that, let's move to slide 7 and more details on the free cash flow generation. As mentioned, the free cash flow ended at 786 million in the quarter, reflecting a solid earnings level, but also a positive impact from change in working capital, mainly due to the decrease in trade receivables, which is partly offset by a one-off impact from the wind-down of the elite and torque product lines. Moreover, we did see somewhat lower investment levels across R&D as a result of timing of product launches. The cash flow generation of 786 million marks the strongest third quarter cash flow ever for the group, which underpins our strong focus on cash flows and margins in general. With the solid cash flow generation, our adjusted leverage ended at 3.5 times, another important step in our deleveraging plan. Moving on to slide eight and a brief status on the 1GN transformation. We remain on track to deliver around 600 million DKK in cost synergies by 26, of which around 400 million expected in 24 alone. And during the quarter, we managed to realize synergies of around 115 million. Year to date, We have thus realized total synergies of slightly more than 300 million and are therefore on track to deliver as expected for 2024. We remain confident about our ambitions for 2026, which mainly involves the realization of further improvements in efficiencies and processes, which should further de-risk the company's profile over the coming years. Moving to slide 9, we would like to give you a snapshot of the development in our supply chain. As you might recall, at our Capital Markets Day in May, we provided an overview of our operations strategy for the coming years. We have continued to execute on this agenda. Due to the strong recent growth in HEARING and to support future growth and automatizations, we are in the process of relocating to larger and more streamlined facilities across US, Australia and Malaysia. In addition, we have now moved SteelSeries to the same system and product flows as Enterprise, which will further support company scale. Moreover, as illustrated by 1GN progress, we are continuing to see strong benefits across our operations team to drive margins by ongoing supplier consolidation. While we are certainly happy With the development so far, we have also been executing well on our diversification strategy, which allow us to be competitive in the future. And with those group highlights, I'm happy to hand you over to Peter for some additional color on the three divisions.